Earlier this year, I was sick for two weeks. Unfortunately, I’ve had asthma since I was a kid. So when a respiratory illness hits, I tend to cough and suffer longer than the average person.
During COVID, my asthma flared up more often, likely due to the stress of having a baby during a pandemic.
It’s the type of breathing where you’re annoyingly conscious of every breath. You can never quite fill your lungs to 100%. In my case, it felt more like 75%.
On Wednesday, August 12, still sick, I decided to keep a previously scheduled consulting call with an FS reader. I had booked it assuming I’d be better by then. I wasn’t.
By the end of our 1 hour, 15 minute session, where I spent about 80% of the time talking, I was wiped out. My energy had dropped to maybe 30%. When you’re talking nonstop, you’re not breathing deeply or regularly. I felt like I was slowly suffocating while explaining asset allocation.
The call reminded me of the many days I felt physically drained talking to clients during my 13 years in finance. As my responsibilities and stress grew, I eventually hit a breaking point. I’d rather earn nothing and be free and healthy than keep grinding myself down.
Then My Back Gave Out
Just the other day, I couldn’t bend down to pick something up without a sharp pain shooting through my spine. I almost collapsed.
The last time I felt pain this bad was in 2023. I had spent an hour sitting on the ground signing copies of Buy This Not That for readers who donated to victims of the Maui fires. My dad is from Hawaii, and seeing thousands of lives upended overnight weighed on me. The Financial Samurai community ended up donating about $50,000. But when the signing was over, I couldn’t stand up and I called my wife for help.
My theory is that these episodes are triggered by a combination of prolonged stress and me forgetting I’m not 25 anymore.
Overdoing Physical Exercises
This time, I clearly forgot. On Sunday, I played two hours of 4.5-level pickleball, then taught my kids for another hour. On Monday, I played 1.5 hours of intense tennis with plenty of serving. Then on Tuesday, several dads in our dad bod challenge shared their gym Personal Records, so naturally I went for personal records too. Instead of my usual three sets of 10-12 reps, I did five sets with progressive loading.
Wednesday morning, my back was already grumbling. So of course I went on a hilly 30-minute walk at 7:05am before breakfast and the school drop off. Walking downhill to school, the pain returned. By the time I got home, I could no longer walk normally.
If I still had a day job, there’s no way I could have gone into the office. And if my asthma flared up at the same time, I couldn’t speak to clients for more than an hour or two a day.
Not being able to provide for my family would be a terrible thing.
What A Bad Back And Struggling Lungs Taught Me
These two episodes forced me to confront a few uncomfortable truths:
- A physical or mental disability can end your career when you least expect it. Don’t take your health for granted.
- Use your health while you still have it. Earn, build, and play hard during your healthiest years, because they are finite. You won’t be able to spend your money when old.
- Diversify how you earn. If one income stream disappears, another needs to take its place.
- Don’t commit the second biggest mistake in personal finance: extrapolating your income into the future as if it will always go up.
Some people picture disability as a dramatic car accident or a fall off a ladder. Reality is far more boring. Accidental injuries make up only about 9% to 12% of long-term disability claims, while musculoskeletal problems like back and joint pain are the leading cause, at 26% to 33% of claims.
According to the Social Security Administration (SSA), roughly one in four 20-year-olds will be out of work for at least a year because of a disabling condition before reaching normal retirement age. That’s one quarter of all 20-year-olds, not just those in high-risk occupations.
In other words, the thing that takes you out of the workforce probably won’t be a skydiving mishap. It’ll be your back after one too many weightlifting attempts.
Short-Term Disability vs. Long-Term Disability
Before getting into what to do, it’s worth understanding the two main types of disability coverage. They work very differently.
Short-term disability (STD) covers you for a temporary inability to work, like recovering from surgery, a bad back, or a serious illness. Benefits typically replace around 50% to 70% of your income and last anywhere from a few weeks to about six months. The waiting period, called the elimination period, is usually short, often one to two weeks.
Many employers provide short-term disability as a benefit. A handful of states also run their own programs, including California (SDI), New York, New Jersey, Rhode Island, and Hawaii (TDI). If you’re self-employed, you probably have nothing unless you bought it yourself.
Long-term disability (LTD) kicks in when a disability lasts longer, usually after a 90-day elimination period. It typically replaces about 60% of your income and can pay for a set number of years or until age 65. This is the coverage that actually protects your family’s financial future. Short-term disability is a speed bump. Long-term disability is a car crash.
Two details matter a lot:
- Own-occupation vs. any-occupation. An own-occupation policy pays if you can’t do your job. An any-occupation policy only pays if you can’t do any job you’re reasonably suited for. A surgeon who loses fine motor skills could still teach, so an any-occupation policy may not pay a dime. Read the fine print: many long-term disability policies use the own-occupation definition for only the first 24 to 48 months, then switch to the stricter any-occupation definition.
- Taxes. If your employer pays the premiums, benefits are generally taxable. If you pay premiums with after-tax dollars, benefits are generally tax-free. That 60% replacement rate can quickly feel like 45%.
And no, don’t count on Social Security Disability Insurance to save you. SSDI is hard to qualify for, has a five-month waiting period, and the monthly benefit is modest. It’s a floor, not a plan.
5 Things To Do To Protect Your Finances From A Disability
1) Get Long-Term Disability Insurance, And Check The Fine Print
If you have a job with benefits, log into your HR portal today and look at your LTD coverage. Many group policies cap monthly benefits, which means high earners may only be replacing a fraction of their income.
If there’s a gap, buy a supplemental individual policy, ideally with an own-occupation rider. It’s portable, so it stays with you if you leave your job. If you’re self-employed like me, individual LTD is the only coverage you’ll have. Get quotes while you’re young and healthy, because pre-existing conditions get excluded or priced up later.
2) Build An Emergency Fund That Covers The Waiting Period
Even with great coverage, there’s a gap. Short-term disability might make you wait a week or two, and long-term disability usually makes you wait 90 days. Meanwhile, your mortgage, tuition, and Costco runs don’t pause.
Keep at least six months of living expenses in cash or Treasury bills. If you have kids, a single income household, or are self-employed, aim for 12 months. If you’re wondering where the line is between prudent and paranoid, here’s my take on how much savings is too much. The emergency fund is your bridge from healthy to covered.
3) Build Multiple Engines Of Income With Side Hustles
A single income stream is a single point of failure. If that engine stalls, the whole plane goes down. Your goal is to build a jet with at least four engines, so you can lose one and still land safely.
The best time to start a side hustle is while you still have a steady paycheck and good health. You get to experiment without pressure, and if it fails, you still eat.
I started Financial Samurai in July 2009 while working full-time in finance. I’d wake up early and write before work, then publish again on weekends. For three years, it made very little money. But by the time I left Corporate America in 2012, the site had become a real second engine alongside about $80,000 a year in passive investment income.
Without that second engine, I never would have had the courage to negotiate my way out.
Diversify Your Side Hustles Too
Here’s the key for disability planning: prioritize side hustles that don’t require your body to show up. Driving for Uber or coaching tennis stops the moment your back gives out. Writing, a blog, a YouTube channel, an online course, or a self-published ebook can keep paying while you’re flat on your back.
If you need ideas, my wife put together a list of the 20 best side hustle ideas to make extra money. If you want to go the online route, here’s how to start a blog and build your own platform. I’m biased, but owning your own corner of the internet is the gift that keeps on giving.
One engine is a job. Two engines is a cushion. Four or more engines is freedom.
4) Save Aggressively While You’re Healthy
Your peak earning years are also, conveniently, your peak health years. Don’t assume your income will keep climbing forever. Assume it could drop to zero tomorrow, then save as if that’s true.
Related: Achieving FI With A Visual Impairment
I saved over 50% of my after-tax income starting with my first job out of college because I knew I couldn’t last a lifetime working 70+ hours a week. I didn’t know my lungs and back would eventually join the protest, but the logic held up.
Front-load your savings. Max out your 401(k) and IRA, and invest the excess in a taxable brokerage account. Pay down high fixed costs where you can.
The lower your required monthly expenses, the less income replacement you need if disaster strikes. A paid-off house is one of the best disability insurance policy nobody talks about.
5) Treat Your Health Like Your Most Valuable Asset
Your ability to earn over the next 20 to 30 years is likely worth millions. Yet we manage our portfolios more carefully than our bodies.
Get annual checkups. But lock down a life insurance policy before you see a doctor for something more. Manage your stress before it manages you. Warm up, cool down, and stop trying to beat the other dads’ PRs after a weekend of nonstop racquet sports. Ask me how I know.
While you’re at it, get your paperwork in order. A will, a durable power of attorney, and a healthcare directive are the basics. But if anyone depends on your income, term life insurance is the most important piece. A disability takes away your ability to earn for a while. Death takes it away for good.
The irony is that the health problems that make you worry about disability also make life insurance more expensive, or harder to get. Lock in coverage while you’re still healthy enough to qualify. I’d compare term life quotes on Policygenius, which lets you see prices from multiple top insurers in one place.
Don’t Take Your Health For Granted
The scary thing about disability is that it rarely announces itself. One day you’re serving aces and going for gym PRs. The next, you can’t walk your kids to school.
Being unable to breathe normally or walk for a few days made me realize how fragile everything is. If you’re the provider for your family, that fragility is your responsibility to plan for.
So check your disability coverage this week. Build your cash buffer. Start a side hustle that doesn’t depend on your body showing up. And for goodness sake, stretch.
Have you ever been unable to work for an extended period due to an illness or injury? Do you know whether your employer’s long-term disability policy is own-occupation or any-occupation, and when it switches? How many engines of income do you have today, and which would keep running if you couldn’t get out of bed? Have you bought supplemental disability insurance, or do you think it’s a waste of money? And what side hustle would you start if your main income disappeared tomorrow?
Protect Your Family While You’re Still Healthy
This post is about losing your ability to earn temporarily. But the ultimate income disruption is permanent. If you have young kids, a mortgage, or a spouse who depends on your paycheck, term life insurance is one of the cheapest ways to make sure they’re OK if the worst happens.
The best time to get coverage is before your body starts sending you warning signs. Every flare-up, diagnosis, and birthday makes it more expensive. For example, I made a huge mistake and went to a sleep doctor to check out my sleep apnea. When it came time to renew by $1 million, $40/month policy, it had skyrocketed to over $440/month!
Check out Policygenius to compare term life quotes from top insurers in minutes. My back and lungs reminded me that health is never guaranteed. Lock in your rate while you still can.
