It’s been more than a century since the Scout Movement of both Boy Scouts and Girl Scouts was established here in the UK. Back in 1907, the movement adopted the motto that still exists today: “be prepared”.
From a scouting perspective, being prepared means always being in a state of readiness in mind and body to do your duty. When it comes to financial planning, it means something different – although no less important.
No one wants to think about ill health. However, a recent report from The Health Foundation revealed that, while we are generally living longer, 9.1 million people in England are projected to be living with a major illness by 2040, an increase of 2.5 million people compared to 2019.
Recently, we were talking to a business associate of ours whose 47-year-old wife had been admitted to hospital with a rare and serious neurological condition. Now, 10 weeks later, she is still an inpatient with recovery likely to take months rather than weeks.
All this happened completely out of the blue and, of course, it has turned their life and their plans upside down.
It goes to prove that unexpected events like this can happen at any time, irrespective of your age, health, or wealth.
While the health aspects might be out of your control, there are steps you can take to ensure you can cope financially with this sort of scenario. Here are three practical (and straightforward) steps you can take.
1. Make sure you have an emergency fund
If you, your partner, or a family member suddenly can’t work unexpectedly, you still need to find a way of paying your rent/mortgage and other regular commitments.
You may also find that your outgoings increase, whether that’s out-of-pocket expenses for travelling to and from a hospital regularly, or perhaps because you need to pay for additional childcare.
Resorting to credit to get through a tough time can end up being expensive, so one of the cornerstones of a solid financial plan is an emergency fund.
We’d usually suggest holding between three and six months of regular expenses in an easy access savings account. Doing this means you always have funds to fall back on that you can use to replace income, pay bills, or meet unexpected expenses.
A topped-up emergency fund means you don’t need to worry about meeting your commitments at what is likely to be a stressful and emotional time.
2. Put the right protection in place
Making sure you have the right protection in place is another key part of your financial plan. Think of it as the scaffolding that holds the rest of your plan together!
If you or a loved one is unable to work due to illness or injury – especially for a long period – health and illness protection can help you to remain on a financially even keel during treatment, recovery or recuperation.
The payout from a protection contract can help you to:
- Keep paying your regular commitments, giving you one less thing to worry about at a difficult time
- Pay for adaptations to your home
- Pay for additional expenses you might incur, such as commuting, childcare, or private healthcare.
It can also support the rest of your financial plan. For example, if you lost one income stream and did not have protection, you may have to pause your savings or pension contributions to meet other expenses. This can have a negative long-term effect on your financial position as it may mean you may have to retire later or accept a lower standard of living in retirement.
Protection can ensure you can maintain your regular savings, ensuring an unexpected bump in the road doesn’t have an adverse effect in the future.
3. Prepare the appropriate paperwork
If you’ve ever had to deal with the financial affairs of someone who has passed away, or is incapacitated, you’ll know that it can be a minefield to deal with banks and insurance companies.
Putting the right paperwork in place can help you and your loved ones practically manage issues such as paying bills and claiming on insurance.
A Lasting Power of Attorney (LPA) is a simple way to nominate people you trust to look to make decisions on your behalf if you’re not able. For example, if you or a loved one finds themselves in hospital for an extended period, a financial LPA would allow nominated attorneys to manage their financial affairs on their behalf.
And, a will lets you clearly identify how you’d like your assets to be distributed when you pass away and the arrangements for any minor children.
Taking the simple steps of organising your paperwork can make it significantly easier for you and your family to manage your finances – whatever unexpected event happens.
Get in touch
Preparing for an unexpected event won’t stop it from happening, but it can ensure your finances are one less thing to worry about.
To find out how we can help you, email email@example.com or call us on 01189 876655.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.