13 January, 2020 17:00
Financial Resolutions for peace of mind
In the first two columns of the year I covered New Year’s resolutions on debt, and the psychology of that debt.
In the final of the trio, I’ll cover the broader areas of financial advice, keeping your money safe and serving you.
Avoid procrastination. There is a great book called the best time to eat a toad. Have a read.
Simply put, if you knew you had to eat a toad during the day and it was sat in front of you, when is the right time to eat it?
It becomes an uglier, smellier meal as the day goes on. All day you have had to look at it, and at the end, you still need to eat it. So, do it straight away.
If you have been procrastinating on your will, go do it. The legal cost of administering an estate that has no will is a multiple of one with a will.
There are difficult decisions in a will, but they are toads – eat them, they will make you feel better. A will isn’t just about transferring capital to beneficiaries, it’s also about explaining what debts need paying off, making provisions for ongoing care of others should something happen to you, and also giving guidelines for taxes and care cost mitigation.
Google ‘the problems of dying intestate’ to give you motivation to munch that toad.
Whilst making the will, be sure to appoint a Power of Attorney. This trusted individual would then be able to speak to your banks, debtors, utility companies and act on your behalf to ensure your finances do not collapse. A head injury, sickness, stroke, or heart attack can leave you temporarily unable to make these decisions, but the Power of Attorney will allow the trusted individual to action in your best interests.
It is commonly believed the Power of Attorney can act now, but this is not the case. They can only do so if you were deemed unable to act on your own behalf.
Let your children/beneficiaries know the name of your Independent Financial Adviser, solicitor and accountant, and introduce them for their own affairs, so your wishes are understood and the team are together on the task.
If you have life insurance, be sure it’s written into trust so it bypasses your estate for Inheritance tax and also with speed, direct to your children. Probate can be lengthy, but a trust document ensures rapid payment in the proportion you need to each beneficiary. This is a relatively simple document an Independent Financial Adviser can set up for you.
Review the costs of your life insurance. Each year, some companies become more competitive so you could either reduce your premiums, or have more cover for the same premium paid. The benefits are better providing security to your family than in an insurance company’s profits.
Consider your mortgage in light of Brexit. A hard Brexit will force up inflation as the UK is a net importer. The Bank of England typically uses interest rate increases to lower inflation, so calculate your monthly costs if rates rose by 1-3%.
Similarly, a fair Brexit would support Sterling and lower inflation, at least until the euphoria made its way through to spending, which in turn will drive up inflation.
Chat that through with your Mortgage Broker and they can give you the best rates available today.
Take photos of your key important documents and store on Google Drive or Dropbox, and then share that folder with your trusted family or executor. Consider also having a fire-resistant box which is easily accessible in the house to grab should there be an emergency.
List your spending each month to create an awareness of where it flutters away to. You will be stunned where the money actually goes, but this will trigger you to make the changes.
It’s better to be in control rather than reactionary, and simple steps like eating out less, cooking double meals and taking to work, buying what you need at supermarkets, as well as reducing utility costs, can all buffer up your end of year balance.
Peter McGahan is Chief Executive of Independent Financial Adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority.
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Worldwide Financial Planning Ltd are authorised and regulated by the Financial Conduct Authority.
'The FCA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'
Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.
All information is based on our understanding of current tax practices, which are subject to change.
The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage.
For the purposes of mortgage Worldwide Financial Planning is a credit broker and not a lender.