[00:00:00] Linzy: Hello and welcome back to another Feelings and Finances episode of the Money Skills for Therapist podcast. These are our short and sweet Friday episodes where I answer questions from you, the lovely therapists and health practitioners and coaches who make up our money skills for the therapists community.

[00:00:17] Today’s question is from Katie.

[00:00:19] Katie: Hi, my name is Katie Rievert. I am a therapist in private practice in Fayetteville, Arkansas. I have been working part-time at a group practice, and had my own practice for two days a week for almost a year, and I’m planning on going to full-time private practice starting this March. My question is about disability benefits and things like that.

[00:00:49] I don’t know if I need to get a short-term or long-term disability plan of any kind if I’m going to be saving for an emergency savings. I definitely don’t have as much as I want to have in there, but if for some reason I cannot work, I am the breadwinner in my family, and I don’t know if it would make sense to spend money on a plan like that or if just working on building up a large emergency savings would be a better plan. So I’d love to hear your thoughts on that, as well as any other sort of… since we don’t get benefits, what other kinds of things should we be thinking about to safeguard our finances as we are in private practice? So, yeah, that’s my question. Thanks.

[00:01:44] Linzy: This is a great question, Katie, because what your question is highlighting is when we are in practice, when we’re in business for ourselves, we have to think about all the different insurances and benefits because nobody’s supplying those for us. So we have to decide which of those are important. How do we want to create stability and security for ourselves?

[00:02:05] Basically, you’re being your own employer, right? So as your own employer, you have to think about what are the benefits that my employee, IE myself, that I need to be protected? So an important part of your picture that you’re mentioning is that you are the breadwinner in your family. So that is really important as we’re thinking about your kind of risk and exposure picture, because I’m hearing that if you stop being able to work, it’s not like there’s a bunch of money coming in from another source, right?

[00:02:22] And so that does make me think that insurance is going to be especially important for you. Insurance is something that.insurance companies, of course, would tell us that we’re all supposed to have, I have insurance.

[00:02:41] I have lots of different types of insurance, because I have things that I need to protect, right? And as I’ve gotten older, I’ve gotten more insurances as there’s kind of more to lose, and as I have more responsibility. So I personally have had disability insurance for probably about 12 years now

[00:02:57] I’ve had disability insurance. I’ve had the same $30 a month plan, which only insures me, you know, up to a certain point. But that made a lot of sense when I was younger and I had less liability, right? Like I didn’t have a mortgage. And I didn’t have just as much depending on me, that small premium made sense for the disability insurance.

[00:03:15] I’m pretty sure it covers about $3,000 a month. So recently I just went back for more insurance because now, you know, I have a mortgage. We have the business, which is our primary income source for both myself, and my partner. My spouse also works for our business part-time, so it’s a big source of income for our family.

[00:03:31] So if I was not able to work, we do have the savings in the business, but also it would be a big impact to our family if I couldn’t work for an extended period of time. Right? So for me and my picture, and I’m hearing, for your picture, certainly thinking about disability insurance makes a lot of sense. I really suggest working with an insurance broker.

[00:03:48] I’m personally working with a broker myself to get some extra insurances in place because an insurance broker, their role is to help you shop around and think about what are the options? What is the best insurance for you to make sure that you’re not overpaying, that you have the right amount of coverage, and to help you weigh out the financial piece of: okay, this much a month versus what I would get out of it…

[00:04:05] Is this a good investment for me? Right? Because different insurances are going to give you different amounts of coverage for the amount that you’re paying.

[00:04:15] So you just want to make sure that it’s good math. So working with somebody like an insurance broker is a great way to help somebody else who understands the industry think through with you. I would make sure that you’re finding an insurance broker who is not affiliated with a specific company. Ask them about how they get paid.

[00:04:31] It’s the same as when you’re looking for a financial advisor. You want to have a clear understanding of how they get paid, for the work that they do. But yes, getting help with that is highly, highly recommended, to make sure that you get the right insurance to cover you. When we are thinking about being in private practice, how do we create those safeguards for ourselves? 

[00:04:47] What benefits do we need? Disability insurance, I think, is certainly one of them. Life insurance is another one for you to look at. I also have critical illness insurance, that I’ve just added to my picture so that if I get any of the kind of major, I think it’s a top five illness list that they have, which includes cancer and heart disease and stroke,

[00:05:09] then there’s an immediate  hundred thousand dollars payout that my family would get, which would help us cover extra medical treatment if I decide that I need to travel for medical treatment. So I’m fairly insured, but that also matches my risk tolerance and it also matches the level of financial responsibility I have for my family.

[00:05:26] Right? And so those are other things that I would consider looking into in terms of insurances. The other piece of the picture in terms of benefits is, as you say, having an emergency fund built up for yourself, right? So just that cushion, that padding, so that if life “lifes”, as I like to say,

[00:05:41] you are okay, right? You can take some time off to… Maybe not just even for your own emergency, but maybe a family member becomes ill, and that way you’re able to spend time with them and be with them, while they’re in care or you’re able to take them to and from the hospital. There’s lots of situations in our lives that aren’t even about our own health that are great times when having an emergency fund, having some extra padding allows you to be present, and allows you to really show up in your life, and not be like, Ugh, you know, there’s this hard thing happening, but I really need to work so I’m not going to be there for it.

[00:06:13] ’cause those are things that we regret later. The other piece is giving yourself built-in paid time off. I’m a huge fan, Katie, of having a paycheck system in place where, in your private practice, you take a look at what are the ups and downs between the high months and the low months in terms of revenue, and like take away your business expenses.

[00:06:32] What is the average amount that you can pay yourself and pay yourself that a little bit less than that average? So you start to build up a buffer for paid time off. That is also a really important benefit that you can give yourself as a self-employed person to create some stability and ease for yourself.

[00:06:47] So I say to my students, once you have that salary account, using a system like Profit First really makes this possible, put in a certain amount every time you disperse your money. Like once a week, let’s say you put some money into that account, but still take the same paycheck amount, so that there’s money that builds up in there.

[00:07:03] And then in a month if you are sick or if you just want to take time off or a really great opportunity comes up, that means you’re going to be working less, you can still get paid the same amount.

[00:07:12] That is a really important foundation that you can build for yourself financially so that you are not going through ups and downs financially and emotionally, just because your business is going through the normal ups and downs of all businesses go through always. So those are my main thoughts on those supports.

[00:07:28] So that was the insurances, disability, and critical illness life. Those are all things to look into, having a paid time off fund for yourself, and giving yourself a salary are all ways that you can make your business a great place for you to work. So you are not only the therapist who is providing great service to your clients, but you are also a great employer who is taking care of yourself in a really thoughtful, kind way, like you would do for somebody else.

[00:07:54] So Katie, I hope that that’s a helpful place to start when it comes to building those safeguards into your private practice. If you, like Katie, also have a question that you would like me to answer on an upcoming episode of Feelings and Finances, it’s super easy. Just click on the link in the show notes.

[00:08:09] It will take you to our little speak pipe widget where you can just push a record, introduce yourself, give a little bit of context and share your question. I would be happy to answer it on an upcoming episode. Thank you so much for joining me today.