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 us here at WMM (financial planning in Oxford).
Life is unpredictable. You cannot fully anticipate what will happen in the next hour, let alone tomorrow or in the coming years. This can make life exciting and interesting; an unknown adventure to experience. Yet it also brings dangers such as crippling injury, personal loss or early death. Whilst you cannot shield yourself from tragedy, there is much you can do to lower the financial impact. In this article, our financial planning team at WMM lists some common tragedies that can afflict people and what you can do to preserve financial stability.
Sudden loss of work
From March 2020, many people found themselves out of work due to the onset of COVID-19 and nationwide restrictions. Others were furloughed. No one could have predicted this, yet many households could have lessened the financial impact by taking wise steps ahead of time. For instance, having 3-6 months’ worth of living costs in an easy-access savings account can help see you through a spell of unemployment.
It also helps to have a clear budget delineating your essential and discretionary monthly costs, allowing you to significantly reduce the latter and live well within your means should you ever lose work. You might even be able to lower the cost of the former, for instance, by remortgaging to get a better interest rate – possibly saving £100s each month.
Unexpected severe illness or injury
What would happen to your finances if you find yourself left in a prolonged coma, perhaps due to a car crash? What if, one day, you fell badly and could no longer go into work? For many, their employer would provide Statutory Sick Pay (SSP) for a period. Yet this will soon expire, and it will likely fall far short of covering your expenses in the meantime.
Here, it can help to put financial protection policies in place to cover such an eventuality. For instance, critical illness cover can provide a much-needed lump sum if you are ever diagnosed with a condition defined in your policy (e.g. a heart attack). Income protection can also provide a replacement income if you find yourself unable to work due to serious illness or injury.
You may also wish to consider setting up Power of Attorney so that you can delegate important financial decisions to someone you trust (e.g. your spouse) if you find yourself unable to make those decisions – perhaps due to a coma. This can help your loved ones access much-needed funds, such as bank accounts and insurance policies, during your incapacitation. The case of Kate Garraway is still fresh in many people’s minds, where her husband fell into a year-long medically-induced coma after contracting COVID-19 in March 2020. The lack of Power of Attorney placed the family under considerable financial strain.
This isn’t a pleasant scenario to imagine, but the sad reality is that some people die before old age – often leaving dependents behind (e.g. children). Here, one of the best things you can do for your surviving loved ones is have a life insurance policy ready. This provides an essential lump sum should you – and/or your partner/spouse – die suddenly, helping your family navigate the difficulties of reorganising their life (such as moving house). It could help to pay off the rest of the mortgage, and supply an important financial buffer in the short term.
You should also consider taking time to make sure your will is up-to-date. This can make things much easier for your family when administering your estate, should the worst ever happen.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469