Financial Planning Journey

Life is a journey. You may already have a clear vision of where you want it to take you. You realise that money is an important aspect of that journey. As you grow older, your life and financial circumstances change, and you make important decisions that can shape the rest of your life.

Sometimes you encounter unexpected situations that life throws at you. Having a robust financial plan in place can shield you and guide you towards your life and financial goals,  no matter what stage of life you are at.

The foundation of any financial plan starts with personal & asset protection.

You have already been in the workforce for some time, you have some savings, and even perhaps a family. Think of what would happen to you if you suddenly fell ill? Do you have medical insurance to cover the cost of the treatment?

Even worse, what would happen if you were unable to work because of an accident or a critical illness? Who would be able to provide for your family? What would happen to your house if you stop paying the mortgage?

If you are unable to work you can’t continue to accumulate wealth, and if you have children or debts, you need even more protection, as there are both family and assets you need to protect now.

Insurance products, such as medical insurance, critical illness insurance, income protection, home insurance and other types of general insurance are recommended at this stage of life. Their purpose is to protect you, your life and accumulated wealth. Any financial plan without strong foundations can fall apart like a house of cards very quickly.

Medical Insurance
Income Protection Insurance

Imagine the same scenario, but this time you have medical insurance in place and disability/critical illness coverage. Your medical insurance would cover the costs of immediate medical treatment. A stroke is one of the top covered illnesses in critical illness policies, therefore your income level would be intact as the insurance would pay you a lump sum to cover the costs of recovery and your lost income.

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During your highest-earning phase, you should be saving and investing.

For most people, their prime working years are between 30 to 55. This is the time where you can expect the highest earnings, promotions and bonuses. It is also the stage when you focus on two main things: your retirement savings and your children’s future. By setting specific goals you can then focus on achieving them in a systematic way. When it comes to finances, long-term planning can offer the biggest rewards.

Conventional savings plans rarely offer substantial capital growth. They are a tool for you to save enough, so you can create a substantial Lump Sum (capital) and turn it into property investment or other sophisticated investment products. That includes various investments and Discretionary Managed Services, which are investment funds managed for you by a team of highly experienced portfolio managers for a fee.

Property Investment

You have been saving money over time so you can buy an investment property with a goal to have an additional revenue stream from the rental income. After putting money in a dedicated savings account for 5 years, you have saved enough to make a down payment for an apartment in the United Kingdom for £300,000. With the right mortgage advice, you can pay off your debt, while still having some rental income at your disposal. With the current prediction of UK property prices appreciating by 3% a year,  and set to continue, you can expect the property value to rise to £541,833 after 20 years.

A story of Mr. Frivolous

“If you don’t know where you’re going, any road will get you there.” Lewis Carroll

Andrew has been successful in his career, and in his best years, he made a substantial amount of money. Andrew had health insurance through his company, and he also believed that his state pension would be sufficient to provide for his retirement. As he was travelling so much for work, he never decided to buy a property. Instead, he would rent beautiful apartments, and spend his money on novelty and pleasures, rather than savings. Most importantly, he didn’t have any financial plan and would spend his wealth instead of securing even part of it for a rainy day or his retirement.

As such, when he was reaching retirement, he realised that his monthly retirement income would not be enough to sustain his standard of living, even if he would move to a country with a relatively low cost of living. Not being able to get personal private health insurance due to accumulated pre-existing conditions, he must struggle with a local healthcare system, which often leaves him frustrated and in pain whilst waiting for his turn to have his condition treated.

Since he has to rent his home in his retirement, he is now worried about what would happen to him if something unexpected happened to him. Andrew led a life full of experiences and pleasures but did not plan accordingly for his years as a senior.

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As you are nearing retirement, your goals shift from building wealth to enjoying it and passing it on.

You are now accessing your career  savings and enjoying your retirement income, while still being exposed to unexpected events, such as sudden illness or death. When you are in retirement, your need for some insurance products reduces, but costs related to medical or elderly care can increase. Your focus is shifting from generating to protecting your accumulated wealth and ensuring it is passed to your family in the most efficient way possible.

You may want to shield some of your wealth from your children and grandchildren. Do you really want them to access it too early in life or allow their spouses dispose of it? Certain trusts can help you make provisions in terms of who and when can access your estate, and efficient tax planning can mitigate taxes such as inheritance tax. Having all these in place results in a peaceful and joyful retirement. You know you have done everything in your power to provide for yourself in retirement, so your children don’t have to, and you ensure your loved ones also have the financial security they deserve.

Inheritance Tax Planning

If you own any assets in the UK or are a UK national with worldwide assets, then you probably know that your loved ones will have to pay 40% Inheritance Tax on the total net value of assets over £325,000, or £650,000, depending on your marital status when you die. Assets subject to IHT include property, businesses, cash and investments, and life insurance policies.

If no IHT mitigation will be put in place for a couple’s assets value of £2,200,000, then a total of £620,000 in taxes would have to be paid by your children, or other beneficiaries, before being granted access to the rest of your estate.

Thankfully, there are ways to mitigate or drastically reduce UK Inheritance Tax. Soteria Trusts is a brand dedicated to this one single purpose: tax-efficient estate planning.

Guardianship and lasting powers of attorney 

However, your estate planning is not just about your physical assets. What about you, your children or other causes you care about? Estate planning, therefore, is a wider exercise that can be life-saving in cases, such as:

In the event you become incapacitated, you should have a specific document, called Lasting Power of Attorney in which you appoint a trusted person to make decisions for you in areas of your health, finances and business. If you don’t have one, your life decisions might be taken on by a stranger, your bank account frozen and your future jeopardised.

You leave small children behind so you can plan ahead who should look after/become a guardian for your children in case you are no longer capable, or you pass away. If you don’t do it, your children may end up in foster care.

You marry or divorce and need to update your Will. Imagine you divorce and sadly pass away prior to updating your Will. Your ex-spouse, who is named in your Will, inherits everything, instead of your new life partner, who wasn’t named in the Will.

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Don’t leave your financial future to chance.

Contact Platinum Financial Services to help you through your financial journey.