9:30 AM, 20th September 2012, About 12 years ago
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Howard Reuban
Priorities. Everyone has them, and as a Financial Adviser I work with my Clients to ensure that their own personal financial planning priorities are properly structured, reviewed and achieved.
Over the years, my Clients have asked many times for me to assist with their medium and long term financial planning and of course these aspects are considered as part of the whole.
But what many people overlook is the short term priorities. For most people looking at today and the ‘what if’ situations that may occur (eg the effect on their finances and estates today in the event of unforeseen illness, disability, sickness or even premature death) should be the starting point, long before they plan the medium and long term futures..
Some hard questions to face would include, for example, why put all efforts into planning a retirement income, if you don’t live that long? Why look at investment returns for 5-10 years time first, without ensuring the family is financially secure right now if you lost the ability to earn an income through illness, accident or disability?
I illustrate the need to assess financial priorities using the analogy of building a house, together with three little letters … S, M and L.
No, not small, medium and large, but short term, medium term and long term planning.
Does a builder put the roof on (long term planning) before laying the foundations (short term)? Would you build your walls and create your rooms, if your ‘roof’ was never going to be achieved anyway?
In the same way a solid structure is built to ‘live in’ so financial planning has to also have a solid structure to be able to provide that security too.
Income, debt, commitments … are of course all regularly paid for whilst we are fit, healthy and have the ability to earn an income, but what if? What if a serious illness was suffered? What if an ‘unforeseen’ event happened and you couldn’t work and continue to earn your vital income? Would you still want to have the worry of a massive debt (mortgage) hanging over you whilst you are focusing on getting better? Probably not. What if a borrower prematurely dies? Will the lender just sit back ad infinitum and wait for repayment whenever the family has finally sorted out the affairs? Definitely not. Can you fully cash in a pension plan to release money to provide for the family in the event that income has stopped due to long term illness? Of course not.
Whereas the medium and long term financial plans are essential to secure the future finances, and should be planned for accordingly, today is where the planning should start to at least cover the short term requirements.
Take a snapshot of today and ask, “if I had suffered an illness yesterday, or if I had died yesterday, what would the financial implications be for my family right now?” Be honest, do you have sufficient ‘replacement income’ covered, or lump sums available or your Will and Trusts updated (or even written!)?
This is a question which I have asked to many of my Clients over the past 20 years, and with hundreds of Wills written and over £200million of life cover advised on so far, our Clients can confidently plan for the medium and long term future knowing that their own ‘snapshot of today’ is a picture of financial security.
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