As Benjamin Franklin once said, “in this world nothing can be said to be certain, except death and taxes.” However the good news is that both of these don’t necessarily have to occur together.
In our last newsletter, we wrote about what's important financially for people in their 30s. We got quite a few comments about this piece and some requests to set out the financial priorities for people in their 40s. So here goes...
Keep control of your lifestyle
For a lot of people as they enter their forties, the financial pressure starts to ease a bit. As a result of career progression and increased earnings, the bills (in particular the mortgage repayments) don’t look quite so daunting any more. And this is when people’s lifestyles can run out of control. Rather than putting their increased wealth to good use, they simply grow their lifestyle until this becomes the new “norm”. And as a result, that hard earned extra income ends up delivering zero impact to your long-term financial health. Put that extra wealth to good use.
Stay vigilant with debt
Debt costs have been very low in recent years, with base interest rates around the 0% mark. However this situation is changing - we saw last week the first rate increase by the ECB in more than a decade. One of the challenges caused by low interest rates is that people can become a little complacent about debt, thinking it will always be cheap. Be very prudent about taking on new debt, and stress-test your finances carefully against the impact of rising interest rates. Do you really need to take on debt for home improvements, or for a fancy new car? Does it make more sense to save first and spend later?
Think carefully about home improvements
We’ve seen a number of examples of people with the back broken on their mortgage, and then deciding that it’s time to almost re-build the house. The rationale is usually around higher income levels making this possible, and also because the kids need more space – don’t they? This may well make sense, just be clear that the it’s hard to recoup money spent on your house as it usually isn’t fully reflected in future valuations. Also think past the next 5-10 years – will you want a bigger house when the kids decide it’s time to move on? Yes, make your house more comfortable and enjoyable to live in, but don't spend money unnecessarily on it. Oh, and best of luck trying to get a builder at the moment!
How's your emergency fund?
Maybe you were very forward-thinking years ago, listened to the advice and built a nice “rainy day” fund. Now’s the time to take a good, hard look at it. A fund built up a few years ago may be quite inadequate today. Do you need to add to this to cover your current level of expenses?
These are the golden years for building a nice lifestyle in retirement
These are often the critical years for retirement savings. You now have the financial firepower to really accelerate your retirement funding, and you also still have the time on your side to benefit from the magic of future compound interest. So make these years the high impact years in your retirement savings. Look to avail as much as possible of the generous tax reliefs on offer for pension contributions.
How are your parents' finances?
One big challenge facing families today is the multi-generational impact on financial plans, it’s not enough to plan solely for your own future. Quite often, we see parents playing an important role in helping their children with significant deposits to enable them to get on the home ownership ladder or to remain in full-time education for longer than might have been expected. And as we see older people living longer and having more complex and expensive care needs later in life, the burden of financing this support can sometimes fall on the family. Does your financial plan take account of these costs?
It might be time to consider starting to transfer your wealth
Depending on your specific financial situation, now might well be the time to really start looking at the future transfer of your wealth. If you have significant assets to pass on eventually and as we've outlined in our other article this month, these can be seriously eroded by our penal inheritance tax environment. Planning for this a long time in advance will allow us to develop financial strategies that will enable you to significantly reduce this tax burden, ensuring your assets go mainly to your loved ones and not to the taxman.
Your 40s are hopefully great years... Manage them wisely and you can establish a really strong financial foundation for the rest of your life.
This is the first in a series of articles that will be aimed at people at different stages of life. Today we're starting with those in their younger more carefree years, but probably with an eye on financial planning - the 30 somethings! For this group there are lots of competing priorities – a house to be bought, maybe a wedding to be celebrated or a family to be started. And these also don’t take into account the holidays, cars and social life that are there to be enjoyed too... So here are our thoughts on some of the important financial challenges facing this group.
We await with interest each year the claims statistics from the leading protection providers in the Irish market. Irish Life annually issue very insightful and detailed information about their claims (as do other providers), and we’ve taken the opportunity to dig a little into the claims data from their Retail division for 2021.
There’s been a lot of media talk over the last few weeks following the recent release of The Tinder Swindler on Netflix. How did these educated, smart women fall for the charms of Simon Leviev and end up giving him hundreds of thousands of euros? Unfortunately, it happens. Attempted scams are happening in different ways every day of the week now, and the key is to have your radar up and be naturally suspicious of any interaction with your money and a third party.
We wrote in January about “Staying out of your own way”, a piece that resonated with a lot of people in these volatile investment markets. In this article, we spoke about how managing our own behaviours is the single factor that will probably have the greatest impact on our investment success.
We’ve seen quite a lot of volatility in investment markets in recent months and while many analysts are forecasting single digit growth in 2022, there is also a sense that markets will continue to be volatile. Covid is still lingering, the US & China are having their differences over trade and Brexit issues remain unresolved.
Let’s make it a real resolution in 2022 to focus together on the big picture when it comes to your finances. All too often, it can be very easy to be dragged down into weeds – in our world that’s the (very important too) world of products, funds and fund managers. Don’t get us wrong, these really matter and need to be discussed, but never at the expense of discussing the bigger picture.
We spend our days helping clients to plan their financial futures. What we see is that people face similar challenges depending on their stage of life. At the same time of course, each and every one of us has a unique set of circumstances, has our own specific financial objectives and needs bespoke advice to help us reach our goals.
No, no, no – really how’s life? We’re not saying this just as a polite greeting, but instead are asking this as many people have become a bit more reflective after the pandemic, as we’ve all seen how our lives can be totally upended by something completely from left field. Unfortunately, a small number of our clients were (and one or two continue to be) quite sick from covid and we know people who also suffered bereavement because of the wretched virus. These people have unsurprisingly been reflecting on their new circumstances.
Tax is a necessary evil. If we want to live in a country with access to public services, taxation is the system used to pay for these services. We can (and do!) argue and moan about the different levels of tax payable and whether they are levied fairly. But at the end of the day, the money to be used for public services has to be collected somewhere.
Are we finally getting back to normal? It’s great to see people out and about again as the country eases itself out of lockdown. And for all of those retail businesses that were forced to close their doors, the early signs are good with the example of footfall on Grafton Street back to approx. 90% of the pre-pandemic levels.
We’re currently doing a lot of planning work with clients whose financial situations have changed greatly in the last 18 months. As part of this process, we’ve taken a little bit of time to stop and reflect on some of the changes to their lives in general, how these might impact their future and how these changes feed through into their financial plans. We’ve noticed a number of themes emerging.
We decided to write about this topic after listening to a very sad radio interview recently. It was with a father of three children, who had recently been bereaved after the death of his life partner of 20 years, the mother of his children. She passed away as the result of a medical condition, that was further complicated when she contracted Covid-19.
We were wondering recently about the impact that COVID has had on claims within the life assurance sector, and so we decided to do a bit of investigation by examining Irish Life’s (the leading provider of protection products in Ireland) claims data for 2020.
OK we admit – this may not sound like the most exciting topic in the world, but it just might make a significant difference to your financial future…
Evidence Based Investing (EBI) is gathering more and more supporters and advocates around the world, and as a result is starting to appear quite frequently in investment commentary and indeed the mainstream media. It is a term that you may or may not be familiar with, so we’re taking the opportunity to inform you of what you need to know about it.
Where do you start with Warren Buffett? Widely recognised as the world’s shrewdest investor, the “Sage of Omaha” is now 90 years young and still doling out nuggets of advice to investors across the globe. Using his investment expertise, he had amassed a fortune of some $79 billion as of August 2020, making him the 4th wealthiest individual in the world.
Pretty much all of our conversations these days open with a quick chat about the current situation with Covid. While it’s all a bit bleak at the moment with the latest surge in cases, hospital admissions and most unfortunately deaths, there is light at the end of the tunnel in the shape of the rollout of the vaccine starting to gather pace. This of course is the gamechanger for 2021.
We are fortunate to work with quite a number of clients who have reached or are well on the road to financial independence. This is a great place to be, where any money worries fade into the background and your desired future lifestyle is achievable, except of course where the assumptions underpinning the plan are ignored.
Ethical investing refers to the practice of using one's ethical principles as the primary filter for the selection of investment assets. Today it is seen as one element of the broader investing approach of Socially Responsible Investing (SRI). With the increased attention given to climate change, achieving a just society and the desire for good health, particularly in the current Covid era, there has been a surge in interest in SRI. Investors want to understand the impact of their money, and they want it to enhance the world we live in as opposed to simply achieving monetary growth at any cost.
2020 has been a year of great uncertainty. Of course Covid-19 has dominated the landscape, bringing with it insecurity for some people around both their health and also their economic circumstances. As countries are moving in and out of various states of lockdown, for many people this is creating a lot of worry about their jobs. For some this is temporary and they can see a relatively swift return to normality. For others their prospects are more bleak, as they are forced to close their business or they see their employers reducing headcount or shutting down altogether.
It’s not an easy ride for investors today, when you consider some of the actual and potential headwinds facing you,
Look, it happens regularly… people realise that with their current retirement planning approach, they are going to fall short of achieving the lifestyle they want in retirement. This happens for a whole lot of reasons – not having a plan, starting to save too late, not saving enough or the wrong investment strategy.
A huge amount of the time we spend with our clients is spent building an understanding of your goals in life and developing a financial plan to help you achieve your objectives. A lot of attention goes into your retirement strategy, your investment approach and other such important areas.
As we emerge from lockdown and the world is getting back to some sort of normality, unfortunately for some people the pandemic has had quite a significant impact on their income. We’ve had a small number of queries from clients in this situation who are looking to reduce their expenditure. Some are pausing savings plans and other regular investment products. One or two people have queried whether they should cut back on their levels of life assurance and specified illness cover.
As economies around the world start to cautiously emerge from their various states of lockdown, people are also stepping back into the light albeit gingerly and carefully. Some shops and services are open for business again, others have a while to wait still. Some activities that involve mass gatherings such as sports events and concerts face a quite uncertain future for some time to come.
A recent phone conversation with a client triggered this article, as we were discussing the volatility in markets over the last few months. This was a relatively easy conversation, as this particular client has a very measured view to managing her pension fund and her investments. She doesn’t make rash decisions, she maintains a long-term perspective and doesn’t fret over every movement in the markets.
Find out how well your finances match your lifestyle needs