How would you maintain your lifestyle if you couldn’t work?

Injuries and illnesses don’t discriminate – they can happen to anyone at any time. When they strike, they also tend to bring with them unforeseen financial challenges. How would you keep your lifestyle intact and protect yourself from any financial emergencies if you were suddenly unable to work?

Income protection insurance could be very helpful if you found yourself in this situation – even for those who are self-employed. There are also other everyday things you can do  to help maintain healthy finances, such as creating and maintaining a budget, setting up an emergency fund as well as exploring the possibility of generating a passive income.

How do you create a budget and manage expenses? 

Creating a budget and managing your expenses can be a big part of financial planning, particularly if you are preparing yourself for any unforeseen events like a sudden injury or illness.

As a starting point for your budget you could review your income sources (incomings) and expenses (outgoings), such as rent or mortgage repayments, utilities, and any other personal loans or student debts, as well as groceries, takeaway, entertainment and subscription services. Don’t forget to account for emergency expenses, such as vet bills, medical bills, car or plumbing costs. Next, you could set up any savings goals and then limit your spending by tracking your discretionary spending. The good news is that there are plenty of online budgeting tools and apps that can help you create a budget and stick to it.

You may need to take time out to regularly review and tweak your budget as needed, for example, during any major life changes or if you’re in between jobs. If you want to focus on saving as much as possible for your future financial goals, consider ways to reduce spending. Examples to reduce unnecessary expenses are by cutting back on non-essentials or by speaking to suppliers about any potential reductions on your usual bills.

How do you build and maintain an emergency fund? 

You may want to begin by setting a realistic savings goal – for example, aiming for a buffer of around three to six months of living expenses, then allocating   a portion of your income towards this fund. Treating it as a ‘non-negotiable’ expense can help keep you on track.

When building your emergency fund, you can consider setting up an automatic transfer directly into your savings account on a regular basis such as every pay cycle. Using a high-interest savings account for this could really maximise returns while keeping funds easily accessible (i.e. liquid).

You can also maintain your emergency fund by adjusting your savings goals according to what’s happening in your life. For example, if planning for a major event like a holiday or starting a family, or to hit a specific financial milestone by a certain date, then you may consider adjusting your targets, in order to resist that impulse to dip into your emergency fund for everyday expenses or impulse buys. 

How do you grow your savings and passive income? 

Many Australians try to set themselves up for a more comfortable future by focusing on their superannuation and by making additional contributions into their super fund every year, or even taking advantage of things like salary sacrifice. There are also investment options that could be considered, like stocks, bonds and exchange-traded funds (ETFs) – although individuals need to factor in their risk tolerance and investment goals.

An investment portfolio can be diversified to help spread out any risk. A longer term investment option includes real estate investments, however, given the cost of living and property prices, it’s not always possible for everyone.

Other options that could be considered include investing in real estate investment trusts (REITs), which could provide a passive income stream. High-interest savings accounts, term deposits and stocks that pay out regular dividends are more options to consider. And if you want to make an immediate change to your financial situation, you may want to negotiate a pay rise or start your search for a better-paying job.

What type of insurance can offer a good safety net? 

Income protection insurance can be a safety net for loss of income, and can give you peace of mind if you aren’t able to work due to injury or illness. Income protection insurance can provide a portion of your usual income by paying you a monthly benefit for a set period of time, while you recover from your sickness or injury. This can be used to continue to pay the bills as well as cover any medical expenses that aren’t covered under a health policy or by Medicare.

What does that look like day-to-day? It means you can continue to pay your bills and take care of daily expenses while you focus on your rehabilitation, without the added stress of bills stacking up. 

Income protection insurance could be ideal for workers from all walks of life – from professionals to small business owners to self-employed workers. Income protection insurance could mean that you can ride out the challenging times and get back to where you need to be.

If you want to know more about how Guardian Income Protection Insurance can help you maintain your lifestyle if you’re unable to work, request a quote online today.