9 ways to protect your finances

PUBLISHED: 14:10 02 October 2020 | UPDATED: 14:10 02 October 2020

Photo: AndreyPopov/Getty/iStockphoto

Photo: AndreyPopov/Getty/iStockphoto

Copyright (C) Andrey Popov

Ian Howe of Druthers Financial Planning, Windsor, ecourages you to wear financial sunscreen

Every financial plan is as unique as the individual nature of our lives, but there are a few fundamental actions that we each should take and truths to accept when structuring our finances. Inspired by Baz Luhrmann’s Sunscreen song (search for it on YouTube; it’s great), here are the most vital nine...

1. Protect against the very worst case – we insure our cars because we must by law, but not enough of us adequately insure our lives. What would be the financial impact on your loved ones if you pass away prematurely? Without the right provision it would be catastrophic. Also, what would happen to your earnings should you suffer long-term illness? What about the impact of a diagnosis of a horrible medical condition that doesn’t quite kill you off? It’s morbid and sobering stuff to think about and confront, but ignore the conversation at your financial peril.

2. Maintain an emergency cash fund – have between three and six months of your regular expenditure sitting in an instant access deposit account. If you need fast access to money, forced encashment of long-term investments is unlikely to work in your favour.

3. Live within your means – it’s surprising how many people use unfettered, super expensive, unsecured, long-term debt to create cashflow. Avoid credit cards and overdrafts at all cost and don’t be your bank’s best customer. Understand the ebb and flow of your income and expenditure and work to a budget.

4. Be honest – the number of times we see financial duplicity destroying relationships, families and futures is alarming.

5. Use your tax allowances – the starting point for any long-term savings strategy is to max out your family’s ISA and Pension allowances. They’re effectively state sponsored tax avoidance schemes that you should use every tax year; they may not be around for much longer. If you have substantial income and capital gains tax to endure, look at getting advice on other, Treasury approved ways of legitimately reducing your liability.

6. Save early – the earlier in life you get into the habit of regular savings, the wealthier your future self will be. It’s always worrying when someone comes to us in their 50s wanting to start saving for their retirement. Also, the compounding effect of growth on investments is compelling; annual growth of five per cent will double the size of an investment in 14 years.

7. Embrace the correct investor behaviours – never panic sell or panic buy when investing. Following the investment herd generally means that we cash in once they have fallen and then buy back in when they have reached their peak. Your plan is likely to need you to be a long-term investor, so accept that you are invested for the long-term, not to make a quick buck.

8. Make sure you have an up to date and valid Will and Lasting Power of Attorney – dying intestate means that you don’t have any say on where your wealth passes to and if you become incapacitated you really do need to know that your most trusted have the say over your financial affairs and health. Use a solicitor - don’t try to do this yourself, it’s too important to get wrong.

9. Take professional advice – I would say this wouldn’t I? But please find a financial planner to guide you, mapping out and implementing your financial future. The annual costs of doing so are broadly the same if not less than doing it yourself and you are more likely to adhere to a disciplined yet adaptable financial plan if you’ve got one! Creating investment portfolios by following fads and themes is simply gambling, whereas a structured, disciplined and unemotional approach to creating investment returns is intrinsic when entering a long-term relationship with a professional planner.

How many can you tick off? Regardless, do please remember that money exists to facilitate your happiness and is not an end in itself. Once you know you are never going to run out of money and your future is secure, focus your time, energy and love on those you hold dear.

Please take care out there and, remember, use financial sunscreen.

Email ian.howe@druthers.co.uk for more information

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