My husband has been on surgery disability for several weeks now and we’ve learned a few surprising things about the process, the first of which is that it’s really not that much of a financial strain. Of course, we earn more than we spend, so it might be more difficult for families that are on the edge.
Total Reduction in Income
My husband’s income, after taxes, is reduced by about 25%. State disability income isn’t taxable, but the 5% bonus we’re receiving through his employer’s private disability plan is. If you’re planning a disability, find out if your benefits are taxable and budget accordingly.
I’m still working, so the total reduction in monthly income is closer to 15%. It’s something, but not so much that we really feel a pinch. I will also be interested to see how this affects our Federal taxes. We planned our withholding around our full incomes. If my husband is out for three months rather than the initial six weeks we estimated, that’s a full quarter of his annual salary, which may bring us into a lower tax bracket. If that’s the case, our total reduced income will be closer to 12%.
Total Reduction in Spending
We figured we’d see some reductions in spending, but we were stunned by the size of the reduction. We’re spending anywhere from 33%-50% less on our credit cards each month. Not only is my husband not eating out at all, or driving, or getting dry-cleaning, but I’ve also been seen some of my expenses go down. I expected our grocery bill to go up a lot, but it’s only gone up $15 a week or so. In addition, we have an FSA this year, so we’re no longer paying for prescriptions or co-pays.
The weather has been relatively mild, which has helped from an energy perspective. We had to use the heat during the day for about a month, but it was only heating the house an additional 3-5 degrees, so it wasn’t a big jump.
Planning for the Reductions by Stockpiling Cash
Once we knew the surgery was coming, we immediately put all major purchases on hold. We had planned to buy furniture, have some work done on the house, and buy me a car. None of that happened. Instead we funneled all our excess income into savings. Combined with our emergency fund, we had more than enough to cover the lost income and the gap between applying for benefits and receiving them. We’d expected that to be four weeks, but it was only three.
Pre-Pay Bills Whenever Possible
Before my husband’s surgery, he scheduled most of our bills for payment through our online banking. That way I didn’t have to worry whether a bill was due while sitting in the hospital. We were very glad he did that when his computer died the day before he went into surgery. Yes, I could access online banking from other computers, but I couldn’t use Quicken or access our budget. Let me tell you, not having access to Quicken or our budget for three weeks was very upsetting for me.
Between the FSA, reduced spending, and reduced income, we’re only falling about $600 a month short of our usual budget. That means we’re saving a little less, but far more than we were expecting. Recovering from surgery is tough, but the financial aspect doesn’t have to be if you plan carefully.