Most people can tell you that they feel they’re either ‘on top’ of their finances or they’re not. This usually suggests that they’re either able to pay their bills and have a few bob left over each month or they’re living from pay day to pay day.
Now, we’ve all been the latter. I’ve been the hero who has given the excuse that I can’t attend this and that because I’m flat broke at the end of the month. Luckily the older and wiser you get, the less frequent these days become. There is more to being on top of your finances than making your pay cheque stretch out, you need to know what financial products to use and when in life to use them…
This is called Life Stage Financial Planning. Professional advisors like myself are the ones who assist consumers in making sure that they have the right products at the right stages.
Everyone’s introduction to financial products will be their first bank account. We rarely think of bank accounts as financial products, but that’s just exactly what they are. It’s a product or service provided by a financial institution to assist you with you finances.
Your first bank account could happen when you’re in your early teens or even before that. But what comes after the bank account? Where you are in your life can generally dictate what other financial products you need at that moment in time.
Now let’s fast forward, you’ve left college and you’re out in the big bad world. You get your first proper job and you start earning a little more than you’ve had before.
One of the most practical and smartest thing you could and should do at this stage is to start a savings plan. These plans are an alternative to low yielding bank accounts. If you’re going to be disciplined enough to stick away €100 each month, wouldn’t you rather that €100 yield 4-5% as opposed to 0.1-0.5% on deposit? You also need to be disciplined enough to consider this money the start of your savings journey. Trust me, I don’t know a 30-year-old out there that wouldn’t be delighted to have started their savings in their early 20’s as opposed 28 when the concept of mortgage deposit pop’s up on their radar.
Financial advisors will research the market to make sure you’re getting the best savings plan available.
Then when mortgage day comes along, and you’re in the space where you and/or your partner can get on the property ladder, you’ll come across Mortgage Life Insurance. Your lender is going to insist on you taking out life cover to protect the bank against the borrower not being able to pay the mortgage back due to sudden death. But, you don’t have to do this through the bank. 9 times out of 10, the bank wont set you up with a cost effective or comprehensive mortgage cover plan but A financial advisor will.
Then after (or even before) the mortgage, comes the pitter patter of tiny feet. Now you’re into looking at personal protection to protect you, and/or your family. Again, some people seem to think that with mortgage life insurance they’re sorted for life insurance. They’re not, but the bank is! A professional advisor can help you arrange the type of cover, whether it be illness, income or life, that is most appropriate to your situation, and help determine how much you need. They will scan the entire market to get you the best cover for the best price.
In and around the same time (or again before) the word pension starts to rear its head. The bulk of people will kick this can down the road, but much like our frugal saver, the wise owl will start tipping away at a pension as early as they can.
Pension make sense. But not enough people know it. With the different reliefs available and the fact that the state pension is only hovering around €12,000 a year, you need to start a pension as soon as you can. If you compare €100 a month going into a pension account, versus €100 going into a bank account, over 30 years, taxing the tax relief into account, the pension will grow to €93,000 whereas your bank account will only make it to €45,000.
Pensions saving is a journey however, and initially setting one up with an advisor, and regularly checking it in terms of performance and target with your advisor, will shed light on how painless the pension journey can be. With the right advice.
Once you get to retirement the journey still continues. Ongoing management and structuring of the pension with your advisor will help make the money last you well into your golden years.
No matter where you are in life, and whether you considered any or all of the life stages that I’ve outlined above, there is always a need to sit down and engage with an advisor to help guide you through each step.
Now… anyone coming to the Pub?