This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.
Nobody is quite certain what 2021 will hold. Yet it seems likely that many of the government’s COVID-19 financial support measures will come to an end. The spotlight, in particular, hovers over the furlough scheme (which some argue is just delaying a rise in unemployment) and the stamp duty holiday – which is currently set to expire in March. Regardless of what happens in 2021, the question is: is your financial protection plan ready?
Here at Cedar House, we offer this summary of some key protection planning areas to consider over the months ahead – for your own case. We hope you find this content helpful, and invite you to contact our team here at Cedar House for more information or to access personalised financial advice:
020 8366 4400 or enquiries@cedarhfs.co.uk
Review your budget
Our financial advisers at Cedar House have lifestyles and families of our own. We’re not asking you to cut all discretionary spending. Yet most people fail to review their budget regularly – also separating their essential expenditure from luxury spending. The former are costs that cannot be avoided, whilst the latter represent the “nice things” which, if required, could be cut back on.
Consider whether your luxury spending is leading to a situation where you are struggling to save, invest or pay off debt each month. If so, then some refinements may be due. Also, it could be that some essential expenditure costs could be optimised. If you are a mortgage holder, for instance, have you thought about whether you could remortgage to a cheaper rate?
Check the “fallback fund”
When COVID-19 led to national lockdown in March 2020, few anticipated that the UK would be in a state of near-perpetual shutdown for the next ten months. For some workers, their situation has been more bearable as they have the ability to work from home. Others such as taxi drivers, waiters and construction workers, however, have not been so lucky – since their job requires being on-site.
As a result, COVID-19 has led to a widening inequality in Britain where some have been able to save more during lockdown, whilst others are struggling to get by. Regardless of your situation, it is prudent to check your emergency fund. Do you have enough in easy-access savings to cover 3-6 months of essential spending – if you lose your job, for instance?
Consider lining up some extra work
Most financial planners will talk about the importance of having a diversified portfolio – which “spreads your investment risk” across multiple investments. However, have you thought about how diversified your income streams are?
Most people rely on one to survive each month (i.e. their salary). Yet if your job security is under question, this could put your financial stability at significant risk. One way to address this in early 2021 is to consider whether you might be able to pick up some extra work – perhaps on the evenings, or weekends. If you enjoy graphic design or content writing, for instance, then maybe you could start some freelance work. This opens up some extra cash which could be put into your emergency fund or paying off debts. It might also help provide some much-needed income if 2021 turns into a worse year for the British economy.
Address your debts
Some debts are “good” in that they are attached to an asset which, you hope, will rise in value – e.g. a mortgage and a house, respectively. However, other debts are simply liabilities. They are not fixed to something which appreciates and come with terrible interest rates, such as personal loans and credit card debt.
These kinds of debts can be a millstone around your neck, dragging down your ability to save and invest each month. Take a careful look at these in 2021 and think about whether any can be paid off (without risking your emergency fund). If not, then it may help to research any 0% credit cards which you could move the debt to – giving you more “breathing space” to pay it off. Be very careful, however. If you do not settle the debt within the 0% period, then the penalties can be very financially painful.
Check your insurance
It is not pleasant to say, but for many people COVID-19 has been a reminder of their mortality. Have you put appropriate financial measures in place for your family, should the worst happen to you? If your surviving spouse/partner and dependent children would be hard-hit without your income, then consider speaking to a financial adviser about your options. In particular, a life insurance policy could be immensely helpful to them in the event of premature death – allowing the mortgage to be paid off, for example. In certain cases it may also be wise to consider critical illness cover (CIC) and/or income protection – which can provide a replacement income or lump sum in the event of serious injury or illness, leading to your inability to work.
Conclusion
Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:
020 8366 4400 or enquiries@cedarhfs.co.uk.