How to achieve financial independence with a chronic illness

How to Achieve Financial Independence with a Chronic Illness

Financial independence for chronically ill people. Is it possible? What does it look like? What does it mean, when you’re planning for financial independence and you have an illness that will never go away? Here’s how I’m achieving financial independence with a chronic illness.

How to achieve financial independence with a chronic illness

I am a chronically ill person. It’s a little weird to say and honestly, it’s making me feel a little nervous. I feel a little anxious because there is a very big stigma around chronically ill people in the United States. I was diagnosed with Crohn’s disease in February 2023. (Here’s a little more about my story.) And I am still very much so adjusting to the diagnosis. I’m also adjusting to making this shift away from being a completely healthy person to a person that is going to have to deal with health issues for the remainder of my life. I am still figuring out my treatment options with my GI doctors, and I am now reconfiguring my plans for financial independence.

My specific chronic illness

For those who don’t know what Crohn’s is, Crohn’s is a GI illness that has no cure. It can impact your entire GI system, from your stomach to your small and large intestines, to your colon, to your anus. So it’s a very glamorous disease to have. It’s not lethal on its own, but it can lead to long term complications like a ruptured bowel, colon cancer and malnutrition. Common symptoms include vomiting, severe abdominal pain, nausea, internal inflammation, and let’s just say “bathroom issues.” To be officially diagnosed, you need to have a colonoscopy or an MRI, sometimes both. I had both.

Because there is no cure, treatment is never ending. And treatment looks a lot of different ways. There’s a lot of options. There’s lifestyle changes, diet changes, medicines, all of which you would make together with your doctor to figure out what’s best for you. I’m going to talk about how Crohn’s impacts my finances today and how it’s impacting my long term path towards financial independence.

What is Financial Independence?

First, let’s start with the lingo. There’s a term FIRE, which stands for financial independence, retire early. It’s an acronym. And this is the OG idea of financial independence. You work for a significantly shortened amount of time, instead of working from 22 to 65. You work maybe from 22 to 30, or 22 to 45. In that time, you amass enough assets or enough passive income to pay for the remainder of your life when you leave full time employment in the world of financial independence. There’s a lot of different flavors. Think of it as an ice cream shop. There’s barista fire, there’s fat fire, there’s lean fire, there’s coast fire, there’s chubby fire, there’s a lot of different sub genres of this idea. All of these are different iterations on the same main formula.

There are a lot of FIRE sub-genres.

The main difference between each sub-genre is how much money you need before you’re ready and willing to leave work full time. Now, I am a naturally low spender. I do not really get a lot of joy out of spending money. So in my original FIRE plan, I just kind of naturally geared towards lean FIRE. This is the sub-genre for people who plan to spend $30,000 or less annually in retirement. 30k is very in line with my past spending as an adult who pays for everything on her own. In past years, I have spent anywhere from $25,000 a year to $35,000 a year. And that $10,000 swing largely depends on health care and housing.

I am a renter and I am on the Affordable Care Act Plan. This means that basically every single year my housing and my health care costs change. My original financial independence number was 1.5 million as my net worth with zero debt. I plan to have roughly $1 million in my stock market investments and about $500,000 worth of home equity. Just to clarify, I do not currently own any property, so this is yet to come in my financial planning. Buying real estate has eluded me. Even though I have been saving diligently for years, my partner and I have found ourselves moving around a lot and the housing market, as many of you know, has gone totally bonkers pricing wise. So my house is still out there, I believe I’m keeping the faith, but I don’t have it yet.

How I'm achieving financial independence with a chronic illness

My real estate plan

Also, in my plan for real estate, I want to buy a primary residence that has space to add a tiny house. And I want to have this tiny house, in part, because I will probably be responsible for housing certain family members in the future. And also I want to be able to generate income from my property without having to rent out rooms in my house by having a separate additional dwelling unit (or ADU). I wouldn’t be able to generate extra income without contributing to the housing crisis, which is also really important to me. So that was the gist of my original plan.

One thing that I do want to note is that I created this original plan this 1.5 million number to allow for up to $50,000 spending in retirement. I know I just said that I was basing this plan off of $30,000. But I accounted for an increase in inflation, and an initial increase in health care expenses in my $1.5 million plan. Even before I knew I had Crohn’s, I assumed that health care would get more expensive, the longer I’m alive. So I wanted to build in the ability to spend more on that into my original FIRE plan.

Life in the US is not going to get cheaper

This is kind of a bummer thing to say, but I see absolutely no reason to believe that life in the United States will get cheaper in 20 years. So I think it’s a good idea for all of us to plan for our retirement years, no matter how you’re defining retirement, to be more expensive than they are now. So now that I am diagnosed with Crohn’s, I am a chronically ill person with the paperwork to prove it. What is my plan for financial independence?

My Updated Investment Plan

Well, the single biggest change is that ongoing treatment means ongoing bills. So I have to make changes to my investments, my cash savings, and my long term health care costs. However, because original Kara did build in a plan for $50,000 annual spending, I don’t have to make drastic changes. Don’t get me wrong, the number has gone up. I now think I need about $1.7 million as my net worth in order to reach financial independence. But that’s not a huge difference from $1.5. I don’t think that I need to have $10 million to retire. I believe $1.7 will do it.

In short, I see my health care costs being the biggest percentage increase year after year. Because I do need to have like I need to have so many colonoscopies in my life. It’s not fun to talk about. It’s not fun to get done. But with a GI disease like this, I have to have annual colonoscopies. Colonoscopies are expensive. And since I anticipate being on the ACA for the future, I see no path towards me coming off the ACA anytime soon. I need to account for expensive colonoscopy every single year. So where am I putting this increased savings? Where am I going to put this additional $200,000? Great question. I’m so glad you asked.

New account priorities

For the last couple of years, in fact, for the last eight years since I’ve been investing, I have prioritized my retirement accounts– my Roth IRA, my traditional IRA and my solo 401K that I have through my business. I prioritize these accounts because I started investing when I was 27. And I thought hey, it makes sense that I need to give 85 year old me as much money as possible. So let’s start putting money in the accounts that old me will use. That gives my money the best chance to compound because it will have more time in the market. I won’t start withdrawing that money until my 60s, 70s and 80s.

Healthcare is now a much larger cost

But now that I have ongoing health care costs, it’s a safe assumption that I’m going to need to withdraw money from my investments before I turn 59 and a half. So that means that I need to change which accounts I’m funding now I need to put them in more flexible and more healthcare oriented accounts such as an HSA or brokerage account. I’m also adjusting my cash holdings in my original FIRE plan. I planned to have one year of cash expenses, so $30,000 in cash. However, now I want to have healthcare specific cash savings. So I plan to have about $25,000 In a separate high yield savings account. And this will be for healthcare emergencies.

If I have to take an ambulance to the hospital, if I have to go to the ER or something like that, that can come out of this health care cash. Now you may be thinking why are you planning on going to the ER? Well, I have been to the ER five times in the last 10 years and I firmly believe that I will go again. And an ER visit is expensive. I’ve got the bills to prove it, even with insurance. Health care in this country is a nightmare. So those are the major adjustments that I am making.

How to reach financial independence even with a chronic illness

Being Chronically Ill has Made me Value my Time More

Crohn’s has definitely made FIRE more expensive and it also has made me think about my path to FIRE. What do I want to be doing in these next couple of years, both with my money and with my body? I also want more than ever before to reach financial independence. Getting Crohn’s has made financial independence more appealing to me. I really want to own my own time. I really don’t want to have to spend time working on things that annoy me, frankly. And I’m especially interested in using my one wild and precious life here on this earth of ours, to work on things that inspire me and that make me feel good.

Now I work for myself, I do what I believe is meaningful work. My job is not particularly grueling, but as in any job, you know, there are things that I don’t like. I hate emails. Emails stress me out. I’m not good at them. And it’s something that I procrastinate. If I never had to send another email again, that would be amazing. Ultimately, getting Crohn’s has simply cemented my belief that we are not put on this earth to work and that our value as individuals is not derived from how much we work.

Life is so much more than our careers

Life is so much more than our careers and I want to be able to experience and enjoy all of the things that I’m interested in. Having Crohn’s does mean that there are some things that I love that are harder to do. And I anticipate those things getting harder and harder as I age, but that just makes me want to reach financial independence ASAP, so that I do truly own my own time.

All right, that is my plan for financial independence as a chronically ill person. Let me know in the comments if you have any questions if you have a chronic illness, what you’re considering for your financial independence or just for your regular retirement. I don’t think there’s enough content out there around having a chronic illness and around planning for things financially. So if you have specific questions and you want to see more videos, definitely drop them in the comments.

And if you’re more of a visual learner, check out our YouTube channel.

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