Ask Away Blog: Smart Ways To Approach Family Finances When Somebody Gets Sick

Smart Ways To Approach Family Finances When Somebody Gets Sick

Saturday, January 2, 2021

 

When somebody in your family gets sick, it can be difficult to know what to do next. All of a sudden you have to deal with your emotions and rethink your long-term financial plan. It’s not always easy.

In this post, we take a look at the smart ways to approach your family finances if somebody’s health takes a turn for the worse.

Check Your Life Insurance Policy

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Life insurance policies don’t just pay out when somebody dies; they will also often make payments for sickness, disability, and terminal illness too.

For that reason, be sure to check your current policy to see where you stand. You could potentially be owed a large payout under the terms of your agreement with the insurer - either a monthly income to replace any lost earnings or a big lump sum.

Get Paid For Care Work

Many home carers believe that they have to self-finance their care work, even if that means giving up their current job. But that’s not the case. According to a CDS guide on the subject, care workers can receive an income from the state that covers their living expenses and provides a high level of support. Caring for somebody shouldn’t lead to financial problems, so if you have an opportunity to apply to one of these programs, please do so.

Speak To Your Accountant

The next thing to do is to check if you can minimize your tax liability for the year, given your family circumstances. Sometimes, you’ll find that you’re able to cut your tax bill considerably by informing the authorities if you’ve stopped work or if you’re currently caring for somebody else in your home.

Having a conversation with your accountant also allows you to do a little tax planning. You might have to pay a considerable bill otherwise, especially if the IRS believes your income is going to be higher than it is.

Set Up A Bill-Paying Plan

Leaving family finances to chance when somebody falls ill or requires long-term care isn’t a good idea. You can often find yourself running low on cash rapidly, especially if you don’t have a regular income.

The first thing to do is to create a bill-paying plan that sets out precisely how much money you need to set aside each month for essentials. Ideally, the figure you get should be lower than your after-tax monthly income. If it’s not, then you’ll have to dip into your savings.

If possible, you might try to prepay bills in advance so that they don’t come as a shock when they finally arrive. Remember, it’s almost always better to pay early compared to late. If you pay late, you could wind up having to pay interest charges and late fees.

Downsize

If you know that your family finances are going to be out of whack for a while, then you might even consider downsizing to release a large chunk of cash to pay for your care needs. Check with your mortgage company how much equity you’ve built up in your property to get a sense of the amount of money you could potentially release.



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