15th June 2016
3 Things You Should Protect In Your Financial Plan
Life can throw any number of unexpected events at you, and the value of financial security in the event that a “what if” actually happens cannot be overstated.
In this article we outline 3 fundamental pillars of financial security we encourage everyone to protect in case something unexpected should happen. We often find that many people neglect this vital part of any sound financial strategy and fail to take the necessary steps to ensure their financial wellbeing is adequetely protected.
1. Protect your income
What happens if I’m hurt or ill and cannot work? With the best will in the world, without an income, all the plans you have made for your life and your retirement will come to a halt.
There is no use in financial planning without the finances to back it up. Income protection will provide an income for you and your family if you are off work due to accident, sickness or unemployment.
2. Protect your mortgage
If you’ve got a mortgage, you know the warning: your home is at risk of repossession if you are unable to make your mortgage payments (or those on any loan secured against your home).
The best way to protect your home and mortgage is with Mortgage Payment Protection Insurance (MPPI).
3. Protect your family
Your ability to earn money is your most valuable possession. If there are people in your life who depend on you financially, you cannot afford not to have some form of life insurance.
You pay your life insurance each month, and if you die during the life of your policy, your life insurance provider gives your dependents an agreed sum of money.
Did you know that if you put your life insurance policy into trust for your children, and it is set up correctly, it will not form part of your estate and therefore be free from inheritance tax? It will also come to them a lot faster than if it was part of your estate.
An alternative to life insurance is Family Income Benefit (FIB).
If you want to provide your partner or dependents with an income if you die before collecting your pension, FIB is a far cheaper alternative to life insurance. Whereas life insurance gives your family a lump sum, FIB pays them a tax-free income for a defined period. Buying FIB instead of a lump sum policy could halve your monthly premiums.
An independent advisor can look at all the options for you.
Even the best insurance policies won’t protect your family from all kinds of hardship if you haven’t left your affairs in order.
If you have possessions, family & insurance, you should absolutely write a Will and keep it current. It’s usually worth employing a solicitor to make sure your Will is drawn up properly, as a badly worded Will can often cause more problems than having no Will at all.
Once you have established your budget and you have protection for your wealth in place, then you can look at any surplus funds to begin to grow your wealth.