When you work for someone else, you’ll generally receive sick pay when you’re too ill to work. However, when you work for yourself, you don’t have this support. This can make being ill dangerous as you may have nothing coming in to help pay the bills. Here’s how you can financially manage being your own boss and being sick.
Take out sick pay insurance
Sick pay insurance can serve as protection for when you are ill. You’ll have to pay a small monthly fee, but in exchange you’ll receive an income whenever you fall sick. You’re best taking out this insurance before you fall ill – if you try to take it out when you’re ill, you may get rejected by many insurers. Insurance rates are likely to be higher if you suffer from a chronic condition, however could be low if you’re very health. Take the time to shop around for rates in order to find the best cover option.
Set up an emergency fund
It could also be worth setting up a savings account to dip into when you are ill. Such an emergency fund could be used to help pay for other personal disasters too such as emergency car repairs, home repairs, medical bills and vet bills – just make sure that you’re only dipping into it for these emergency reasons and not splashing out on personal treats.
Emergency savings can be used in conjunction with insurance or as an alternative. It’s worth finding a high interest account to put these funds in as this could allow you to naturally increase your funds. You can also consider FSAs, which allow you to pour tax-free earnings into them.
Know what you’re legally entitled to
If you were made ill through the direct actions of someone else, it’s possible that you may be able to make a personal injury claim. This could help you to win compensation that can help fund the time off work that you need. There are personal injury lawyers out there for all kinds of specialist cases such as brain injury lawyers and dog bite lawyers – these lawyers may be better suited for helping to win your case than general personal injury lawyers.
On top of pursuing legal action, consider whether there are any government payment schemes available to you. If it’s a chronic condition or likely to be a case of long term illness, you may be eligible to some kind of disability benefit.
Find other sources of passive income
You could also consider setting up a form of passive income to help maintain a steady stream of cash coming in even when you are ill. In certain lines of work where clients pay subscriptions, you may already have this passive income. However, if your pay is determined by how many hours you personally put in, you may need to find a source of passive income outside of your current business.
Investing is the most popular form of passive income. Many people choose to invest in property, renting out a property to tenants so that a constant stream of income is coming in. This involves charging enough rent to cover the mortgage and any maintenance costs as well as giving you some money for personal earnings.
Of course, there are other modes of investment if property is too expensive. You could invest in company shares or you could look into peer to peer lending, both of which may involve paying a lot up front but can be fairly hands-off afterwards. You could even consider hiring an investment broker to help you make the right investment.
Consider a loan
Loans are the least ideal option and should be avoided unless all the other forms of income aren’t possible. Many loans will result in extra costs in the long run, which you ideally want to avoid. If you do take out a loan, make sure to shop around for one with very low interest.
There could be other forms of cash release that allow you early access to money you’re already entitled to – these could be a better option that a conventional loan in many cases. For example, you could consider an equity release on your home if you own a property. You could also consider dipping into your pension early.