Why have Short-Term Disablity?

Recently at my job, we had our annual visit by our insurance broker.  This meeting is where she explains to us our health insurance options as well as life insurance and disability insurance.   As I looked around the room at the blank stars, I thought of my next blog topic!

Do I need short-term disability insurance?

If your company offers this, you might be wondering if its something you need. If you sat through a benefits meeting you may even feel guilty if you don’t want to spend the money for this insurance. 

Luckily, the math on this is actually quite simple, and I am going to use my real numbers to explain it all, since they actually gave me the specific pay amounts. 

Short-term disability insurance means if you have a major illness or accident that is going to keep you out of work for an extended period of time.  They tell you benefits kick in “immediately,” or, as it’s worded on the paperwork I sign “after 0 days injury or 0 days sickness.”  However, that’s not entirely true, because you don’t really get a check that first week. (Hopefully you have vacation or sick days that will cover that time. If not, you will be 100% unpaid that week.)

Once it does kick in, for me in week 2, I get paid for 12 weeks.  I get $378 a week, or $1512 a month.  Because my premium would be coming out pre-tax, I will be taxed on that amount, so let’s say my income will be about $1100, for three months.

It might be tempting to say, then, as long as you have $3300 in your savings, you don’t need to spend the money for short-term insurance.

However, there are two questions you must answer.  First, can I live on $1100 a month?  Second, what if this extends into long-term disability?

For me, right now, if I stop putting money into my ROTH IRA, and suspend my gym membership, and figure less fuel expense since if I am on disability I probably won’t be going out too much, then yes, it’s no trouble to live off $1100.  Of course, there may be doctor visits and prescriptions and whatnot, so you really need a bubble there.

Second, what if this extends to long-term?  For me, that means the same amount per month.  And that’s where things get tricky.  The fact of the matter is, if you need long-term disability, there’s a good chance you will have added expenses.  Whether that means buying aids for daily life or getting help around the house or, again, medical bills and prescriptions, there will be expenses. Plus, over the long term there just ARE expenses. You’ll want a new CD or DVD, you will buy birthday presents, your car will need repairs, or your wardrobe will need updating.  So you can’t drain your savings in the first 3 months. 

Now, comparatively, what does it cost to HAVE short-term disability? 

$14.36 per month. 

This means, roughly, that I would need to pay in for nearly 9 years (105 months), to pay in as much as I would get out in ONE month, let alone three months.

So many people shrug and say they don’t need short-term disability, and I would love to believe that no one I know will ever need to use this type of insurance.  But at the end of the day, the numbers show clearly that short-term disability could be one of the smartest wastes  of money you can invest in.

Rewarding yourself

Recently, I was told that in order to get myself motivated to get back to the gym, I needed to set "goals with rewards." 

You hear that a lot, if you're trying to change yourself.  In debt?  You should find "free ways to reward yourself for not spending money, for making on time payments, for paying off accounts. . ."   Find "low cost activities to enjoy, remember, just because you're broke doesn't mean life should be punishment."

It's all well and good for someone who's just got a self-help book deal to tell me that every time I lose 5 lbs I should buy a new CD, a new outfit or go to a movie (have you BEEN to a movie in the theatre recently?!?!  OMG) but in the real world, we'd all be broke long before we were fit!  

As for "free" rewards.. . .well, a long walk is fine, but not really how I wanted to celebrate paying off my car loan!

Below are a list of free or low-cost rewards I have stolen from other people over the years or made up on my own.  They are also non-food rewards. . . .even though I really think an ice cream cone for every successful hour in the gym would be AWESOME!

• Compliment yourself. Write down what you would say to anyone else who accomplished what you did.
• Create an award certificate to post on your fridge or wall proclaiming your accomplishments.  Don't waste printer ink - use your crayons, markers and stickers!
• Take a day off from any goal activities.
• Put $1 in a jar every time you meet a goal. When it gets to $50, treat yourself.
• Create a Trophy Scrapbook, where you keep mementos from your accomplishments.
• Head to the library for free movies, CDs, or even, *gasp* a book. 
• Host a movie night using said library movies and friends.
• Create a spa at home...whether it's a steaming hot bubble bath or an uninterrupted self-pedicure.
• Exchange massages with a loved one. - If you're working on getting out of debt together, you should definitely get rewarded together!
• Sit outside at sunset. 
• Watch your favorite TV show. (It's OK to lock yourself in a room to make it uninterrupted)
• Read a funny book.
• Find some time to be by yourself.
• Fly a kite.
• Dig out a CD or cassette you haven't listened to in years and rediscover it.
• Call a friend and brag about your accomplishment and what your next goal will be.
• Take your child on a picnic, even if it's just in the backyard.  After all, they've probably made sacrifices to help you reach your goals!
• If you're teamed up with a partner, set up a competition and reward each other.... ie, first one to "snowball" $100 gets...one hour of babysitting, 1 week off dish-duty, control of the remote, etc

Poll: How often do you spend?

Earlier today I was reading a blog about a 10-day "no spending" challenge.   The post included helpful hints like stocking up on things before you start the challenge and having only enough gas in the car to get to work (so that you couldn't go to a store or restaurant).

The writer of the article was a self-proclaimed "overspender" so I can see how the challenge might help her budget overall.

Personally, since it tell you to stock up prior to beginning the challenge, I am not sure how much money you would save (especially if you stock up on perishable items).

Of course, I don't spend money on the average day...generally only on the weekends, when I fill up the car, hit the grocery store and run errands.  It wouldn't be all that much of a challenge for me to consciously spend money only 1 or 2 days a week.

But I am on the opposite end of the spectrum from the blogger who posted helpful tips like removing cash, cards and checks from your purse and "hiding" them for the 10 day challenge.

So this is an informal poll.   Please post (anonymous is fine), how many days you SPEND MONEY in an average week:

For the terms of this challenge, monthly bills like rent and utilities do not count.  Retail purchases using cash, check, credit and debit cards count - from filling up the car with fuel to hitting the vending machine or the corner coffee shop.

Also let me know if you consider yourself frugal, normal, or a spender.

Thanks!