CNBC's Sharon Epperson: Here's how I avoided financial disaster in my moment of medical disability – Money Perception

Loknath Das October 28, 2017 Personal Finance

A year ago, my life changed dramatically. It took a traumatic event — a brain aneurysm to be exact — for me to truly understand how important it is to be financially prepared for the unexpected.

A brain aneurysm is a bulge in an artery in the brain, and can appear with no symptoms. When it bursts, like mine did, it’s often fatal. Without warning, I was suddenly disabled, uncertain of whether or when I could ever be able to return to my career (I resumed my position at CNBC at the end of September.)

In my reporting on personal finance, I often tell readers and viewers that it is vital to have a financial plan. Now I know first-hand that advice can be life-saving, especially when an unexpected disaster changes your life.

The most important lesson I learned: Bring your loved ones up to speed on your financial life while you are well, in case you are unable to do so if you’re hit with a medical emergency or become disabled.

Thankfully, my husband and I had planned ahead, and you can, too. Here are five steps we took to avoid a financial disaster if one of us was ever hit with a medical emergency.

Get employer-based medical insurance if your job offers it. If you are a freelancer, contractor or self-employed, you can get health coverage through the individual health insurance marketplace. Also, make sure to contact an independent health insurance agent to explore your options.

“If you don’t have a comprehensive health plan that covers basically everything, you can have complications after a medical emergency that can put you into bankruptcy,” said Carolyn McClanahan, a physician, financial advisor and founder of Life Planning Partners in Jacksonville, Florida.

If your household income is no more than 400 percent of the federal poverty line, you should qualify for tax credits through the Affordable Care Act. An independent health insurance agent can walk you through the process.

Many financial advisors suggest you have a “rainy day” fund to cover at least three to six months’ worth of living expenses. Yet a medical emergency can feel more like a hurricane.

Having a larger stash of cash can save the day if there are mounting health care expenses. Still, building that emergency fund takes time, so start small.

Living within your means is essential, and you may find you have to cut some discretionary spending in order to save. Try putting aside 5 percent to 10 percent of your pay each month into a money market or savings account. Set a goal of saving enough money to cover at least one month of living expenses, then gradually work your way up.

Disability insurance payments will provide steady income when your pay check stops, or if you are too ill or injured to work.

“Your earning capability is even more important than the earning capability of your investment portfolio. So the least you can do is to insure your earnings,” said New York-based financial advisor Stacy Francis, CEO of Francis Financial and founder of Savvy Ladies, a nonprofit personal finance education and resource organization.

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