life insurance

3 Essential Tips for Financial Planning When You Have a Disability

Having a disability is not quite as rare as many people think. In fact, about 14 percent of adults around the world have a disability of some kind. This includes people who have a physical, mental, intellectual, or sensory limitation at a mild, severe, or moderate level. Also, these disabilities could have happened at birth, in old age, or anywhere in between.

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One thing that remains consistent across all forms of disability, however, is that life generally costs more money for those who have them. Normal expenses such as medical care and food, as well as additional costs such as modified housing and assistive devices and technology, can put a major burden on those with disabilities. That’s why it’s essential to have a financial plan in place. If you have a disability, these three tips will help you prepare and form the financial skills it takes to live your best life, both now and in the future.

Consider Life Insurance

One of the first things you should do when planning your finances is to look into life insurance. If you get a policy that benefits your current situation, it could provide significantly for your family if you were to pass away unexpectedly. And life insurance can help cover things like medical expenses, funeral expenses, and lost income. Moreover, shopping for life insurance is fairly straightforward nowadays, as you can easily purchase it online and use online calculators to figure out the coverage you need.

Set a Budget

Much of your financial planning comes down to making a budget. Not only will your budget serve as a guideline for your spending and saving, the process of making a budget will teach you a lot about your financial situation and the steps you can take to grow. If you’re on a fixed income, start with how much you bring in each month. If you are able to work or already have a job, where does that put your monthly income?

Once you factor in your income, write down all of your expenses; include everything you can think of. This might include normal monthly expenses such as your mortgage payment, home and auto insurance, utilities, food, entertainment, gas, etc. Also, consider your medical expenses: How much do you spend on medical care, assistive devices, or any other medical-related expenses? Furthermore, include any credit card debt you want to pay off.

Once you get these basic costs on paper, see where you stand concerning your income and expenses. Then you can determine what you can cut (entertainment, miscellaneous items, etc,) if necessary. Also, be sure to research all your options when it comes to financial assistance.

Build an Emergency Fund

As it is with anyone, saving money is important when you have a disability. Once you figure out your budget, determine how much you can put away in savings. Building an emergency fund will create a safety net in the event that something unexpected happens — whether it’s a medical incident, major home or car repair, or any other kind of sudden expense. Decide on a set amount to put into a cash jar or savings account, and stick to it as close as you can.

There may be many expenses that come with a disability, but that doesn’t mean you can’t navigate them and make a plan that meets your needs and sets you up to be cared for later in life. Work through your finances and set a budget to guide you through your spending and saving. Find the best life insurance plan for you and your family, and start building an emergency fund today. Being financially prepared will help you overcome a lot of challenges and put you in a better position to live a fulfilling life.

 Written by Ed Carter

Life Situations and Finances: FAQs

Scarsdale accountant Paul Herman has all the answers to your personal finance questions!

Personal finance faqs from westchester accountant paul herman

Save money with these handy tips!

 

The following are common “life situations” that many of us find ourselves in at one point or another. Get to know these common questions and concerns to save big!

 

The following are a few ways to lessen your bank fees:

 

  • Look into what is necessary to get free checking and free ATM usage and do it. This is typically done by having a minimum balance and only using your bank’s ATMs. Another thought is joining a credit union instead of a bank as they generally charge less for banking services.
  • Investigate how to invest in higher interest accounts. Determine how much money you would need in case of an emergency and roughly six month’s worth of expenses and keep that amount in your savings. Take the rest of you money and make it work for you.
  • Don’t order checks through your bank. Generally speaking, check printers charge less than the printers employed by the bank.
▼ What can I do to save money on my insurance costs?

These tips will help you save on all types of insurance:

  • Shop around for your life insurance policy. Take the time it takes to periodically check the prices on different policies, as it will pay off in the end. If you have recently quit smoking, you will probably be able to get better rates in a few years.
  • Evaluate your needs in terms of life insurance to see whether you are being charged too much for coverage.
  • Use the same insurer for home and auto insurance, as you will more than likely get a break.
  • Look around for auto insurance to find the best possible rate.
  • Save on your homeowner’s insurance by installing burglar alarms, smoke detectors and sprinkler systems. Consult an insurance agent to learn more.
  • Do away with private mortgage insurance. Ask your lender to cancel this as soon as you have enough equity in the home (this is required by law).
▼ What can I do to cut my utility costs?

These are a few tips to remember to help save money with utility costs:

  • See if your utility has a subsidizing program to make your home more energy-efficient. If that turns up nothing, you can still caulk your windows and check the insulation to make sure it has a high enough “R” factor.
  • Use fluorescent lights instead of incandescent bulbs for lights that are constantly on.
  • Maintain the thermostat at the highest and lowest temperature for comfort in the summer and winter, respectively.
▼ What can I do to reduce the cost of my phone bill?

There are many opportunities due to today’s cost-cutting competition among phone service providers, such as:

  • Verify that your long-distance charges are competitively priced. Research which long-distance carrier will give you the best rate and switch if you are not with that carrier.
  • Use the phone book instead of dialing “Information.”
  • If you have children at home, block all “900″ numbers.
  • Stay in touch with relatives and friends through e-mail.
▼ What can I do to reduce the cost of my mortgage?

The options that follow will help in reducing the cost of your mortgage:

  • Think about paying down your mortgage. This is an effective way for saving and raising net worth for many people. Make a decision to pay a specific amount more than the mortgage principal and faithfully stick to it.
  • Think about refinancing your mortgage. Determine if refinancing your mortgage will save you money. Calculate to see if the costs for refinancing are worth a reduction in your monthly payments. If you intend to remain in the house for at least five years, the common guideline is that at least two points reduction will make it worthwhile to refinance.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us if you have questions about these provisions or any other tax compliance/planning issues, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Larchmont NY, Mamaroneck NY, Bronxville NY, Scarsdale NY, Greenwich CT and beyond.

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Life Insurance: FAQs

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! The following are frequently asked questions our Westchester CPA firm receives regarding life insurance. Get to know these important facts, as well as our previous life insurance discussion, to make sure you choose the best possible life insurance for you!

▼ How are people classified for rate purposes?

To ensure that you receive the best rate possible it is useful to understand how these premiums are calculated by insurers. Firstly insurers will place people into four main categories:

  • Preferred
  • Standard
  • Substandard
  • Uninsurable

Someone who has a semi-serious illness such as diabetes or heart disease can be insured but will pay a higher premium. People with a chronic illness will be placed in the substandard category. Someone with a terminal illness will be rendered uninsurable.

People with high risk jobs or hobbies will be considered substandard as well.

The premiums that you are charged will correlate with the category that you are placed in.

Life Insurance FAQs from Scarsdale CPA

Life insurance can be a real life-saver for your dependents!

Since the categorizing is not an exact science, one company may place you in a different category than another, thus drastically changing the prices of your premiums.

Once you are approved for coverage from a company, they cannot deny you coverage for any reason unless you cease payment.

 What should I be on the lookout for when I am purchasing life insurance?

First of all, beware that many insurance salespeople work on a commission basis, and may want to persuade you to purchase the policy that brings them the largest commission, rather than getting you the policy that makes the most sense for you.

Most of all, be sure that the company you are buying from will be in existence when you need them. Make sure that you check the insurer’s rating before you consider doing business with them.

Always review the costs of any recommended policy. The commissions will be stated, and you can see exactly where the money that you contribute will go.

Ask the insurance agent to explain the different policies and why the one you agree on is the best for you considering your circumstances.

▼ How can I easily compare prices between insurance companies?

In most states there will be a set of rules laid down by a group of insurance regulators. Agents may be required to calculate two different types of indexes to aid in price shopping.

  • Net payment index
  • Surrender cost index

The net payment index calculates the cost of carrying the policy for ten to twenty years. This can be judged easily by remembering that the lower this number is, the more inexpensive the policy is. This is most helpful if you are more concerned with the death payout than the investment.

On the other hand, the surrender cost index is more useful to those who are concerned with the cash value of the investment. The lower this number is, the better.

The cash surrender value is what you will receive in return if you were to surrender the policy, which is different than the cash accumulation value. If you are checking the prices of universal life policies, if the policies have different premiums and death benefits, the policy with the higher cash surrender value would be the better investment.

▼ Why should I have life insurance? Do I really need it?

The main reason that people purchase life insurance is to know that in the event of their passing, their children and loved ones will be taken care of. Life insurance can also help with the distribution of your estate. Your payout could go to family, charity, or wherever you choose to distribute it.

The main reasons to buy life insurance would be because you have dependents that would be put in a tough position without you providing for them. For example, if you have a spouse, a child, or a parent who is dependent on your income, you should have life insurance.

If you have a spouse and young children, you will need more insurance than someone with older children, because they will be dependents for a longer amount of time than older children. If you are in a position where you and your spouse both earn for the family, then you should both be insured in proportion to the incomes that you garner.

If you have a spouse and older children or no children, you will still want to have life insurance, but you won’t need the same level of insurance as in the first example, just enough to ensure that your spouse will be provided for, to cover your burial expenses, and to settle the debts that you have accumulated.

If you don’t have children or a spouse, you will only need enough insurance to make sure that your burial expenses are covered, unless you would like to have an insurance policy in order to help in the distribution of your estate.

 What amount of life insurance should I have?

In order to figure out how much insurance you need, you will need to explore your current household expenses, debts, assets, and streams of income. If you need assistance in this, consult either your accountant or financial advisor.

The amount of money that you want to leave behind for your dependents should allow them to use some of the money to maintain their current standard of living, then reinvest another lump sum to ensure that they will be well off in the future.

When attempting to calculate the amount of money that you need to leave behind, be extremely meticulous. If you err low, your family may not receive the help that they need from the insurance company, and if you err the other way, you will be spending more than necessary in insurance premiums.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Bronxville NY, Harrison NY, Mt. Kisco NY, Larchmont NY, Scarsdale NY, Rye Brook NY, Stamford CT and beyond.

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Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.