Financial MOT, would you pass?
It’s the dawn of a new year, now is the time to review all your financial matters. Here are 5 disturbing questions you should be asking yourself.
1. Are you living within your means? If your outgoings exceed your income, it’s time to take a deep breath and get your house in order. The consequences of debt are dire! Take a close look at your outgoings and compare them to what comes in. Write a list of everything that goes out of your bank account and credit card account. Add it up. If the total is over or too close to your net income for comfort, grab a red pen and ruthlessly cross out those things on the list that you can do without.
2. Is your money working for you or against you? Think about this: when you borrow money from your bank, they charge you a sometimes whopping rate of interest. They pass on some of this interest gained to their savers. However some banks are more generous than others. It’s easier than ever to switch accounts – your new bank will transfer direct debits and standing orders for you.
3. Are you putting any money aside for a rainy day? Putting aside a modest amount of money every month can mount up significantly. A modest £250 put aside every month for the last 10 years would amount to a substantial £30,000 today. If you haven’t been saving like this, project this image into the future and start today.
4. Do you have all the must–haves for your age group?
• 20+: Pension. It may seem ridiculous to be thinking about retirement at this early stage of your life but this is the right time to set up a pension plan.
• 30+: Your own home. It’s becoming easier and easier to get a mortgage, with schemes like Help to Buy available. 30+ is the right time to start planning.
• 35+: Financial protection. Your finances should now be more flexible. With marriage and children comes responsibility and the need for financial protection. It is essential that you speak with your financial adviser to ensure that you have the right plan for your circumstances.
• 40+: An investment portfolio. At this stage of your life, you should be thinking about an investment portfolio of some sort to build your liquid reserves. Seek advice.
5. What would the financial consequences be if…You lost your job or got made redundant? You became seriously ill for a long period of time? You contracted a critical illness such as cancer, stroke or a heart attack? You died leaving a dependant spouse and children behind? You found yourself at retirement age? You needed specialist medical care and found yourself on a long NHS waiting list? It’s always a good idea to plan for the unexpected. If any of the above questions are disturbing to you because you are ill prepared, speak to your financial adviser. One thing is for certain. No one plans to fall ill or die. But failing to plan for the unexpected could ruin a lifetime of hard work.
Akwasi Duodu is a fully qualified IFA and senior partner of Sterling & Law Ltd at 1 Harley Street, London. Akwasi should be able to help you with any financial matters you may have. Email him on email@example.com