According to the old proverb, "Early to bed and early to rise, makes a man healthy, wealthy, and wise." Turns out that the combination is more apt than you might realize. As Motley Fool Answers podcast hosts Alison Southwick and Robert Brokamp explain in this episode, a "negative wealth shock" -- defined as the loss of 75% or more of your net worth -- is likely to have a significant impact on your health, and can markedly reduce your lifespan. 

You read that right: Getting poor can kill you.

Since our goal at The Fool is to "make the world smarter, happier, and richer" (why, yes, we did just change our motto!), helping you avoid such unpleasant outcomes is a natural fit for our agenda. So, Southwick and Brokamp are dedicating this episode to discussing the most common causes of financial disasters, and laying out some moves you can make pre-emtively to keep them from striking you, or mitigating the effects if they do. 

But first (speaking of disasters), the pair has a bit of good news about a common one. In this week's "What's Up, Allison?" segment, we learn that divorce rates are falling significantly, and much of the credit goes to millennials, who are doing better than their elders at staying married. Of course, when they dig into the data a bit further, they find all is not as upbeat as it seems...

A full transcript follows the video.

This video was recorded on Oct. 2, 2018.

Alison Southwick: This is Motley Fool Answers! I'm Alison Southwick and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool.

Robert Brokamp: Hi, Alison!

Southwick: Bro, I have big news!

Brokamp: What's that? I'm excited now!

Southwick: This is our 201st episode of Motley Fool Answers. Can you believe it?

Brokamp: It feels just like 159 or so.

Southwick: Well, in this very special 201st episode of Motley Fool Answers...

Brokamp: What is the typical gift you give on a 201st anniversary?

Southwick: Well, I totally missed it because Chris was like, "Did you realize that your next episode is your 200th episode?" Which was last week.

Brokamp: The last episode.

Southwick: And I was like, "Nope." And so that's why we're acknowledging our 201st.

Brokamp: And thanks, Chris, for paying attention!

Rick Engdahl: I think it's the postcard anniversary.

Southwick: Send them in, folks! So anyway, hurray! It's been a fun journey. Thanks for going on it with me, both of you guys.

Brokamp: It has been fun! Highlight of my job, as I always say.

Southwick: In this week's episode I'm going to once again come to the defense of millennials while Brokamp offers advice on how to disaster-proof your finances.

Brokamp: The awfulizer strikes again.

Southwick: All that and more on this week's episode of Motley Fool Answers.

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Brokamp: So, Alison, what's up?

Southwick: Well, Bro, as you may know, I'm on a little bit of a mission to get people to stop bad-mouthing millennials.

Brokamp: It's a noble mission.

Southwick: Well, today we're going to look at a few studies that show millennials are actually pretty OK at something, and that something is staying married!

Brokamp: Really!

Southwick: Yeah! Did you not know this?

Brokamp: No!

Southwick: OK. Well, according to recent analysis of U.S. Census data by Dr. Philip Cohen at the University of Maryland, the divorce rate in the U.S. dropped 18% from 2008 to 2016 and it's going to continue to drop all thanks to millennials.

Brokamp: Good for you guys!

Southwick: So, why is divorce on the decline? Well, for starters, millennials are doing a lot of things differently than baby boomers, who are actually really good at getting divorced. We'll have more on that later.

What are millennials doing differently? Well, No. 1, they are waiting longer to get married. Let's talk about the median age for first marriages for men in 2016 was 29 and a half years old. Now that is compared to 26.1 years old in 1990. For women in 2016, the median age for your first marriage was 27.4, which is actually up four years than it was in 1990.

Brokamp: In a previous episode, I think I went through some stats that showed the age at which you got married was a big predictor of whether you got divorced. The younger you are, the more likely you are to get divorced.

Southwick: And why is that? Well, the word on the street is because you're going to have better finances. You're going to be more established in your career. You're probably going to have a better sense of who you are.

I remember my husband's aunt was reminiscing about how when she first got married they had one car, they were living in a one-bedroom apartment with a baby and her husband, Uncle Bill, was still finishing college. So every night she would have to pack that baby into a car to go pick him up from night school. And I remember being so stunned. Why did you make it so hard on yourself? You were going through all of this with a baby on top of it.

Because that's what you did. You got married and you started a family, whether you were financially ready or not, and millennials, these days, are just like, nah, that's it. Nah, I'll wait!

The No. 2 reason why millennials are more likely to stay married is women are more educated and career-focused. So looking at some additional research from the University of Maryland [this time from Dr. Steven Martin -- not the Steven Martin you're hoping for]...

Brokamp: Oh, that wild and crazy guy.

Southwick: When the wife is more educated, the chances of the marriage lasting increase. How much? Well, from the 1970s to the 1990s, rates of divorce fell by almost half among four-year college graduates, but it remained relatively high for women with less than a four-year college degree. The divorce rate for women without undergraduate degrees has remained around 35% since 1980, but for women with college degrees, the divorce rate has shrunk from 27% to 16% since the 1980s.

The No. 3 reason. I don't have hard numbers, here, but I think it's still a valid point. We are all more accepting that we don't have to follow the same path. So marriage between a man and a woman is no longer the only path that we must morally feel obligated to take. Growing LGBTQ acceptance is changing the norms around marriage and it's increasingly acceptable to just not get married.

So here's a funny story. You probably played this game as a kid, too. I remember as a little girl playing Old Maid. The card game. I remember playing it with my grandma a lot. This was in the '80s. Basically if you're not familiar with the game, the cards were all somewhat insensitive depictions of jobs. For example, Moonshot Martha is a female astronaut. Oh, that's good!

Brokamp: That is good!

Southwick: But she's in space doing her makeup. And don't get me started on the Native American depiction. It's not great. Anyway, in this game you trade cards trying to make matches, and then whoever ends up with the single Old Maid card, a card of an older woman who never got married, you're the big, old loser.

In the '80s, sitting on your grandmother's shag carpet, you didn't think about how incredibly offensive this game is on so many levels. So fast forward 30 years and there I am, a mom, playing this game with my daughter Hanna for the first time before I realized just how horrible it was.

Brokamp: Where did you get the game?

Southwick: Someone sent it to us. They sent us a package of Go Fish and...

Brokamp: Old Maid.

Southwick: ... Old Maid. So I'm like, "Oh yeah, I remember playing this. Let's play it." And we're playing it, and I'm increasingly horrified. So now what we do is we play a game that we call Independent Career-minded Woman and if you end up with the Old Maid card, you win! And Hanna prefers to play Go Fish anyway. But the point is just that game, as an example, [shows how] much more acceptable [it is] to not be married, or to marry the person that you want to marry regardless of their color, sexual orientation, etc.

Not only has the divorce rate declined for the reasons we talked about, it is expected to continue to decline. Why? Baby boomers. Yes, we already talked about how getting married younger and not having an education or financial stability can contribute to divorce, but there's also this vicious [cycle].

Even when they were young, baby boomers had unprecedented levels of divorce and because remarriages tend to be less stable than first marriages, those that remarried are now, once again, contributing to growing levels of divorce for those over 50. It's called "gray divorce"... You're going to talk about this on the show, as well.

Pew Research found that among those age 65 and older, the divorce rate has roughly tripled since 1990. So yes, the divorce rate is expected to continue to decline because, again, baby boomers are the most likely to get divorced and baby boomers [how do I put it nicely] are aging out of existence, so they will stop...

Brokamp: Moving out of the sample size.

Southwick: The averages. So here's actually a more interesting deeper dive. The gentleman who wrote the first study I mentioned that came out this week, Dr. Philip Cohen, told Bloomberg that he believes marriage is now becoming an achievement of status rather than something people do regardless of how they are doing. So marriage is increasingly becoming something that well-educated, financially stable people do.

Meanwhile, cohabitation is up, particularly among those who are poorer and less educated, and these relationships [cohabitation] are less stable than marriage and are not being taken into account when you look at divorce rates because they never got married to begin with.

So the demographics [show that people who are] older, wealthier, and educated are increasingly more likely to get married in the first place, while those who are likely to get divorced aren't getting married to begin with. It's fascinating to me that the idea that marriage itself -- something that everyone was just supposed to do -- is now becoming almost a status symbol.

Brokamp: Right. You build up enough money to buy a car, buy a house, and get married. It's like one of those things. And if you haven't gotten all those other things taken care of, you don't get married.

Southwick: Yeah, as where before you're going to get married and then your baby's going to sleep in a dresser drawer and that's fine because...

Brokamp: That's what you do. Somebody told me that recently. They went to a wedding in a part of the country where people got married a lot younger. And she was shocked by how many people said, "You just get married and have kids, and then you don't worry about how to pay for it. It will just somehow take care of itself." Me, as a planner, I was looking at it like that's not the way you do that.

Southwick: Not now, anyway.

Brokamp: Right.

Southwick: Increasingly less common.

Brokamp: So to bring it around to finance is something we talked about before. Divorce can be one of the most financially devastating things that can happen to you.

Southwick: Oh, wow! This is a great segue, isn't it?

Brokamp: It is a great segue, right. We know that people often get divorced because of money, so it makes sense that people, like women, do have a four-year degree and they do earn higher income. It also introduces a certain level of stability and it probably reduces one of the factors that can lead to divorce, as well.

Southwick: Which is funny, because in the study he mentions how it's even more remarkable that divorce rates are declining, because conventional thought used to be if that's an educated woman, then she's going to get divorced and [leave]. But actually you're going to lead to all these factors of more stability in the marriage, as opposed to her being a more independent-minded woman who's going to go off on her own and divorce her man. So Bro, that's what's up.

[...]

Brokamp: Alison, a few episodes back we discussed this study which found that from 2013 to 2016 there was a twofold increase in the rate at which older Americans [age 65 and older] filed for bankruptcy.

Well, thanks to an article sent to me by my favorite podcast co-host...

Southwick: That was me, and I sent it over Slack.

Brokamp: Yes, you did. That is true. I learned about another study that investigated the fallout from financial calamities. It was discussed in a really good article on Quartz by Corinne Purtill and the study is entitled [ready for this?], Association of a Negative Wealth Shock With All-cause Mortality in Middle-aged and Older Adults in the United States. That's pretty long. It was written by several authors, but the lead author was Dr. Lindsay Pool, an assistant professor of preventive medicine at Northwestern. This is what they did.

The study looked at almost 9,000 middle-aged Americans. They really looked at two things; No. 1, whether they experienced a negative wealth shock of 75% or more over any two-year period from 1994 to 2014. In other words, did their net worth drop 75% or more? And two, their mortality over this period. In other words, were they still alive?

And here are the findings. Of these 9,000 people, 9% had a negative net worth. They just didn't have any money or they were so in debt they had a negative net worth. 28% experienced a negative wealth shock.

Southwick: Of losing 75% of their wealth?

Brokamp: Over any two-year period. 28%. But then -- and here was the real shocker -- those who experienced a negative wealth shock were 50% or more likely to die in the following 20 years. In other words, they didn't just lose their wealth. They lost their health. The stress [part of the reason] that comes from experiencing such a financially traumatic event increased the chances that they would die.

Southwick: Or did they lose 75% of their wealth because they were unhealthy to begin with?

Brokamp: So they controlled for all kinds of factors, like pre-existing health conditions, divorce [at least being divorced beforehand], and all kinds of things so that most of it was just what the effects were of the drop in their net worth.

Southwick: Was there a common thread to why people lost 75% of their wealth?

Brokamp: They didn't look at that. They just measured how much they had in things, like whether they lost a business, or whether they had a drop in home equity, or whether they had a drop in investments. And definitely one of the events that was most correlated with dying sooner was a foreclosure on your house. And this period, 1994 to 2014, includes the Great Recession, so a lot of people did have that experience in that period. It didn't get into the causes, though, of exactly why their wealth dropped.

The bottom line is, dear listeners, that we would like you to avoid a negative wealth shock and we definitely want you to live a long and happy life. So today what we're going to talk about is how to disaster-proof your finances.

When you look at what causes a financial disaster, it basically comes down to three categories. No. 1 is a loss of income. It could be a job loss. Layoffs in your industry. I remember back in the day when there were video stores. We would go to a local video store and there was this one woman who worked there. That video store went out of business. We all went to a different video store and she ended up getting a job there. That went out of business. Then she went to work at the local Radio Shack. Radio Shack went out of business. So I think of her a lot when somebody is trying to work hard but just had a series of bad luck.

The other reason you'd have a loss of income is disability. Something happens to you medically which means you can't do your job and, of course, for a household in general it could be death. One of the breadwinners in the household passes away. So No. 1 is a loss of income.

No. 2 could be an unexpected and unmanageable expense. In most situations that is medical. Some sort of thing that happens that costs you thousands and thousands of dollars. I just had knee surgery and the total cost [not to me, thank goodness, because we have good insurance] was $5,000. And I look at that and I'm like, "What would I have done if I didn't have insurance, or if I didn't have particularly good insurance?" So thank you Motley Fool, by the way, for taking care of my knee. It might not be medical. It could also be car repairs. Home repairs. Having to bail out other relatives. There are lots of reasons why you could have a big-ticket, unexpected expense.

And then No. 3 is a significant loss of assets in property. It could be your portfolio takes a significant dive. Now if it's a well-diversified portfolio over this time period, it has recovered, but that is not the case for everyone. They might have had too much of their money in company stock. They might have had a business that went under. It could be, like we mentioned, the home foreclosure.

Or for some people it's actually as simple as a loss of transportation. For probably the average people listening to this podcast, if something happened to your car you probably have insurance, or you'd be able to pay. But a lot of people, especially if you're working an hourly job, if you lose your transportation, you've lost a lot of your income, especially if you then have to rely on something like Uber until you can save enough to get another car.

Those are the three main reasons why someone had some sort of financial calamity. What can you do about that to either prevent it from happening or when it does happen, mitigate the fallout from it? Here we go.

No. 1 is to share the risk with someone else, and by that what I mean is insurance. Health insurance is crucial. Absolutely crucial. When you look at bankruptcies, the No. 1 reason people go bankrupt is because of healthcare expenses. So having good health insurance.

Southwick: Easier said than done.

Brokamp: Easier said than done.

Southwick: In many cases.

Brokamp: Yes. Life insurance is the other one. As far as I'm concerned, if someone in your family is relying on your income, you need life insurance. There's really no question about it. If no one relies on your income, you probably don't need it. But if you're a parent, or you're taking care of relatives, or you're a married couple and only one person is earning money, that person needs life insurance, and the person who's not earning money [if you're a stay-at-home parent], that person might need life insurance, too, so that there's enough money to replace and pay for the services that they're providing.

Of course, property insurance. If anything happens to your house or your car. I'm a big fan of high-deductible insurance, because it will save you a lot of money. That does mean you have to have some cash on the side, but that's what's that made for, is to take care of these big-ticket expenses that you didn't expect, but to make sure that you're adequately insured for those types of things. I'm sure maybe people right now in the Carolinas are going through this situation with all the flooding hoping that they have enough insurance to cover all that.

And the final one is disability, and I said this is the one that's always been more challenging for me. Statistically what many financial planners will point out is that you are more likely to become disabled than to die. You're more likely to become disabled before your normal retirement age than to die before your normal retirement age, and a lot of these stats come from the Social Security Administration. Basically you're three to four times more likely to become disabled before age 65 than to die. Those are the stats.

My anecdotal experience is it doesn't happen that often. I even checked this with our head of HR here at The Motley Fool, because we do provide disability insurance as a benefit. How many Fools have ever become disabled? It is pretty rare. This is one of those types of insurance where I don't say you definitely need it.

It partially depends on your job. If you're like me, as a writer, I could be pretty physically disabled and still do my job. If you are a surgeon, or if you have a job that requires a lot of physical effort, that to me argues more for disability insurance. I don't have a definite opinion about it. It's definitely something to consider.

No. 2 in how to disaster-proof your finances [it's the most boring advice in the world] is have adequate resources to replace your income or to pay for any expense. What that means, of course, is...

Southwick: Emergency funds.

Brokamp: Emergency funds! Three to six months of must-pay expenses somewhere safe in cash. It's a simple warning, but it's so important.

Southwick: Well, it's not boring. You probably think it's boring because it's advice you give to everyone.

Brokamp: And everyone gives to everyone.

Southwick: But it's still good advice!

Brokamp: It's still good advice. But it's not just that. You have other resources if your emergency fund isn't enough or you don't have it. You could rely on home equity. You could rely on your retirement accounts. But before you can even rely on those, you have to build them up. A key component of disaster-proofing your financial plan is start building up assets in any way you can do it but having something you can rely on. Even some forms of life insurance, as well. The key is just to start building that up.

Southwick: Say it again. What do you need in your emergency fund?

Brokamp: I say three to six months of must-pay expenses and the more you have kids in your house, and the more if you have a mortgage and car payments, you need a bigger emergency fund. If you're single and you rent, you usually take the subway or the metro, you're probably going to be OK if something happens to your job. You have more flexibility. That's the way I think about it.

No. 3 is keep your must-pay expenses manageable. What causes a lot of people to get in trouble is they lose their job or they have this big expense and they have no room in their budget. That usually comes down to three related things: one, a big mortgage; two, a big car payment; or three, any other kind of debt. And, of course, mortgages and car loans are just another form of debt, but basically these are things you can't get out of unless you sell those assets. So the more you can keep those manageable, the more you're going to be able to handle any other unexpected event to your financial plan.

No. 4 is get your legal documents in order. Again, this is also pretty standard advice. You need the will, you need a living will, and you need to designate your Durable Power of Attorney. And when it comes to disaster-proofing your finances, that one is key and probably underappreciated. If something happens to you and you are in no position to handle your financial affairs, someone has to be able to do that. To pay your bills. File your taxes. Make medical decisions and financial decisions for you.

That's pretty important to have in place. You don't want to have a situation where, let's say, someone's in a car accident. They're in a coma and then nobody knows anything about their finances. Nobody is legally able to make any decisions about their finances or their healthcare. You want that in place beforehand.

Southwick: If you don't have a Durable Power of Attorney, is there a hierarchy? Like your spouse automatically has [power of attorney], and if you're not married, then your mom? I don't know.

Brokamp: It depends on the state. The medical stuff -- doctors will make decisions if it's medically necessary and if your life depends on it. Finances are different. If no one can access your bank account and your mortgage has to get paid, it has to get paid somehow, and you have to go through legal rigmarole to be able to access someone else's checking account and to take over their bills.

Southwick: But that's not just Durable Power of Attorney. That's also making sure people have a password to your accounts.

Brokamp: And that's the final point. Thank you for leading into that. Basically tell people where to find it all and how to access it all. You make that document. You share it with people who are going to take over if necessary and they know where to find all of this stuff. They don't have to go routing through your files. In fact, that's difficult, because they can't even get into your house legally. It should really all be set up beforehand.

Southwick: It's so funny how it starts getting into the nitty-gritty where it's like, "Yeah, make sure they have the Durable Power of Attorney and also a key to your house." I didn't even think about that.

Brokamp: And even if it's your brother, you're not allowed to break a window to break into their house to get their legal documents. So yes, you have to take care of all of that ahead of time.

Southwick: It's almost like you need to do a fire drill where it's like, "OK, I'm dead. Go!" And then see where the process falls down. "Well, I literally couldn't get into your house to log on to your computer to pay your power bill."

Brokamp: Right. Exactly. And then of course, it's not just you, but if something happens to one of your relatives, you're going to have to be the person who's picking up the pieces so you've got to encourage them to do as well. Your siblings. Your parents. Anyone else for whom you might have to step in and take care of something for them.

The last two things. One is just work on your relationships and take corrective action if you sense any disaster ahead. We've already talked about divorce. Divorce is financially devastating. That doesn't mean you should stay married to the person, but you definitely want to try to work on that. And if you sense that is happening -- that there's a divorce on the horizon -- you have to take corrective action for yourself. You have to build up your own credit score. You have to build up your own retirement savings. You have to start thinking about your career on your own, and things like that.

But also, in any situation where someone needs help, who steps in? It's either friends or family. So to the extent that you can build a good network to be there for other people and for the people to be there for you, that will help you.

Southwick: Bro's advice. Just go make more friends!

Brokamp: Exactly.

Southwick: You need more friends!

Brokamp: Yes. And then I've got a bonus one. One more is to factor in employee benefits when choosing an employer or just knowing what's offered. A lot of the stuff we have talked about here, already, is offered by many employers. Health insurance. Life insurance. Disability insurance. Accidental death and dismemberment insurance. Here at The Motley Fool if you lose an arm, you get paid a certain amount of money. If you lose two arms, you get a different amount of money. We have that policy here.

Is there a family leave policy where you are if you have to go and take care of somebody? The ability to build and access retirement funds. Not only do I have a good match that I can retire when I want, but the more and faster you can build up your 401(k), the more you can access it in an emergency if your employer allows it. Of course, we don't recommend that, but it's good to have there if you absolutely need it.

More and more employers now have what's called an employee assistance program [EAP].

Southwick: We have that, too.

Brokamp: Yes. It's basically an outside company and they offer all kinds of services from counseling to stress leave. Some do financial planning. Some do help with debt consolidation and things like that.

Southwick: They helped us to find Hanna's day care. Which is a very competitive thing in Northern Virginia.

Brokamp: Yes, so definitely be aware of that. Some employers offer Prepaid Legal. There are all kinds of ways. Travel assistance. I just recently went through all the stuff The Fool offers, and they offer travel assistance. If you're traveling and something happens to you, we have travel assistance that can help you take care of it. Many of the problems that happen while you're away.

So No. 1, if you're out looking for a new job, factor that in. And, as we mentioned earlier, the health insurance is probably key among all of those in where you decide to work. Don't just base it on the salary. But also review the stuff that is offered by your [current] employer, because you might be offered something, already, that you just had forgotten about.

And then finally, getting back, again, to the whole mortality thing. There's just no question that there's a connection between health and wealth. The better in shape you are, the less likely you are to need any healthcare. The quicker you'll be able to rebound from any sort of health issues that you have.

There have been surveys of people in retirement and they ask them what the No. 1 determinant of their happiness is, and by far it is health, not wealth; so make sure you take care of your health, because that will have a big impact on whether you'll be in any sort of disaster, but also your ability to cope with any disaster.

The bottom line is you can't prevent the unexpected. Just by definition it's going to happen. But you can mitigate the fallout by taking steps, now, to reduce the chances that a surprise doesn't turn into a disaster and increase the chances that you'll live a long, healthy, and happy life.

Southwick: Which is what we want for all of our listeners.

Brokamp: Which is what we want for all of you.

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Southwick: So Bro, I learned something really neat this week.

Brokamp: And what was that?

Southwick: And that is I was talking to Annie, who heads up our recruiting team, and she said that it's not uncommon for people to mention in job interviews here at The Fool that they found out about The Motley Fool because of the podcast. That's us! And, of course, a team of like a dozen other people here at The Fool.

So, in the spirit of getting even more listeners to apply for jobs, I just wanted to give a quick shout-out to talk about how we are really ramping up hiring here at The Motley Fool. Now, a lot of the jobs are here at HQ in Washington, D.C. but there are also jobs in Australia, Colorado, Singapore. Jobs like data analyst, back-end developer, full stack PHP developer, customer service, research analyst, legal and paralegal, lots of content marketing positions, editor/ analyst, and also writer positions for Fool.com and oh, so much more. There are like almost 50 open positions.

Brokamp: Really?

Southwick: Yes, that's crazy! So, listeners, head on over to careers.fool.com and take a look. And also tell your friends. We're an amazing place to work. But don't tell your flaky friends. I don't want to work with your flaky friends. Definitely go to careers.fool.com. Take a look. See the jobs that are there and apply. And then tell Annie that we sent you.

Brokamp: Do we get a bonus?

Southwick: No! Oh, I know. But still it's cool, right?

Brokamp: That is very cool!

Southwick: All right. The show is edited disastrously by Rick Engdahl. Our email is Answers@Fool.com if you want to say hi or send us a question. You can also send us a postcard. We're still accepting them. We will always accept them. We are at 2000 Duke St., Alexandria, VA 22314. For Robert Brokamp, I'm Alison Southwick. Stay Foolish, everybody!

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