Case Study - Greg

Achieving financial independence requires a good savings and investment strategy. However, don’t overlook the importance of a personal protection plan that looks after your income if you were suddenly unable to earn one.

Greg had always been a go getter. At school he was involved in everything from sport to music and was everybody’s friend. He studied marketing at university and later secured a job as a Junior Product Manager for a footwear and clothing company. His ability and drive quickly saw him earning an income of $65,000.

Greg was turning 26 next month and had an active social life. He played football on the weekends and enjoyed catching up with friends and going out on Saturday nights. Travel was also a passion and after holidaying in the US he had plans to visit Europe.

Although he had no formal financial plans, Greg had strong intentions of building some financial independence through property and possibly some shares. His current income allowed him to start putting some money away towards his own apartment, although he had no plans to buy in the immediate future.

Greg’s priority was enjoying life and working hard to ensure he had the funds to do just that. His employer recognised his willing attitude and had started grooming him for a higher management position. Greg had considered getting some personal insurance advice but had always thought there was plenty of time for that when he had a bit more money.

The car accident changed everything

It was a cold wet night and Greg was leaving a friend’s house. He hadn’t driven more than 2 blocks when someone stopped in front of him. He swerved to avoid the crash, skidded into the median strip and crashed. He suffered a major head trauma and it was days before he regained consciousness. While his physical injuries recovered he continued to suffer from concentration problems and the occasional black out. He eventually had to leave his job and move back in with his parents. He was able to get some part time work but was unlikely to return to his old career.

Greg faced a frustrating future. He still enjoyed going out with friends and still wanted to travel and keep as active as his medical problems would allow. However his inability to earn a decent income prevented him from doing many of these things.

What could he have done differently?

An Income Protection Plan of $4,000 per month, with benefit payments to age 65, would have protected Greg's lifestyle against illness or injury. This would have allowed him to replace 75% of his gross income after the accident and would continue to pay him monthly for as long as he unable to work, or supplement his income while working part time. With Teachers Insurance Services, Greg could have protected his income until age 65 for around $9 a week (with a 30 day wait) or $6 a week (with a 90 day wait). Income Protection is tax deductible so at the end of the financial year Greg could have claimed back the personal income tax proportion of his premiums, offsetting the cost even further.