Have you future-proofed your finances?

29 June 2021

7 min read

Melanie Wright
Melanie Wright

Personal Finance Journalist

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Taking steps to future-proof your finances could reap rewards in years to come. Here, we look at five ways to protect your financial future.

Planning ahead is something that often falls down the priority list, especially when most of us are busy dealing with the here and now.

It’s vital to keep some savings readily available in case something unexpected happens. For example, losing your job, being unable to work due to ill health, or having to replace an essential expensive item, like your boiler or your car.

 

Financial planning - have you got an emergency cash buffer?

It’s often recommended that you should try to keep the equivalent of three to six months in an easy access savings accounts that you can dip into when you need to.

Having this buffer available can give you some financial breathing space if your circumstances do suddenly change.

 

Are you in control of your debts?

If you’re juggling lots of credit card debts, personal loans, and your mortgage, try making more than just the minimum repayments each month, if you can afford to. It’s a good idea to start with the most expensive debts first – these are the ones you’re paying the highest rates of interest on.

The fewer debts you have, the more manageable your outgoings will be, which can really help if your financial circumstances change in future.

 

Do you have financial protection in place?

Having financial protection in place, such as life insurance, income protection and/ or critical illness cover can provide peace of mind that any dependents you have don’t have to worry about money if you’re no longer able to provide an income.

Read: The difference between life insurance and critical illness cover

The amount of cover you’ll need will depend on what your financial commitments are and whether your employer provides you with any cover.

Once you reach the age of 50, you’ll qualify for over-50s insurance, which allows you to leave your loved ones money when you pass away, either to go towards your funeral costs, or for them to spend as they wish. You can typically get cover of up to £15,000 from this type of policy. 

 

Have you reviewed your retirement savings?

You should regularly review any pensions you have to make sure you’re on track for retirement.

Your annual pension statement or statements should give you an idea of how much you can expect to receive when you stop work.

Check where your retirement savings are invested, as the funds your money goes into should tally with your approach to risk and your investment timeframe.

For example, if you’ve got several years to go before retirement, you might be more comfortable putting your money into riskier investments such as stocks and shares. Whereas if you’re closer to stopping work, you may prefer to move your cash into less risky assets such as bonds and cash.

You should also find out how much you’re paying in charges, as these can eat significantly into your investment returns.

Seek professional financial advice if you’re not sure whether your retirement savings are working as hard as they possibly can for you – it could mean the difference between a comfortable retirement and just scraping by.

 

Is your will up to date?

None of us likes to think about dying but making sure you’ve got an up-to-date will in place means your estate will go to exactly who you want it to when you die.

If you haven’t got a will, then intestacy laws will apply and anything you own might not be distributed to the people you want it to go to.

It’s also worth thinking about funeral costs as planning ahead for these could save your loved ones a serious financial headache at a time when they’ll be grieving for your loss.

There are lots of different ways you can do this. For example, you might decide to build up a savings pot that is specifically ear-marked for your funeral expenses. Or, you might choose to take out an over 50 insurance policy that will provide a guaranteed pay-out when you die.

Whichever course of action you choose, make sure you let your family know that you have got these costs covered, so it’ll be one less thing for them to worry about when the time comes.

Biography

Melanie Wright is an award-winning freelance financial journalist, who has written about personal finance and consumer issues for the past 22 years. She is a former Deputy Editor of The Daily Telegraph's Your Money section, and wrote the Sunday Mirror’s Money section for more than a decade. She contributes to a wide range of publications and websites, including The Sunday Times, The Daily Telegraph, The Observer and the Radio Times.