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10 ways we can help improve your lifestyle

We thought it might be useful to step back a little bit and review the value that we bring to our clients, in order to make sure we’re meeting your needs as much as we possibly can. We identified ways in which we enrich the lives of our clients and ended up with quite a long list! We then came up with the brainwave of narrowing down this list and sharing with you 10 ways in which we can help you to improve your lifestyle.

 

1. We help you develop a financial plan to achieve your desired lifestyle

When you set out on a journey, you need a map to get to your destination. The same applies to your desired lifestyle and the finances to achieve it. Think of your desired lifestyle as the destination. The map you need is a financial plan. This will show you what is needed to live the life that you want to live.

 

2. We help you sleep at night

We’re firm believers in the principle of risk based investing. Your portfolio needs to clearly reflect your own appetite for risk in order to ensure that your money is working as hard as possible for you, while not increasing the risk in your portfolio beyond your comfort levels. We don’t want you lying awake at night worrying about your portfolio.

 

3. We make sure an unexpected event doesn’t dash every hope and dream

Life is full of uncertainties that impact all of us every single day. Sometimes significant events change the course of your life and the lives of your loved ones. A serious illness or the death of a parent has an enormous emotional impact on a family. It can also be catastrophic financially and dash a lot of dreams. It’s our job to help you protect yourself financially against such events.

 

4. We help you reduce your tax bill

We’re very aware of how taxation can take large chunks out of your financial assets. We stay on top of changes to the taxation regime and this knowledge helps us to ensure you are reducing your tax bill as much as possible. This applies of course to retirement planning, but we also look to find tax saving opportunities in your investments, life assurance and income protection planning. We want the money in your pocket rather than the taxman’s!

 

5. We help you to keep your discipline and focus on long terms goals

Our goal is to help you live the life you want to live, both today and tomorrow. We’re not killjoys, only trying to get you to save as much as possible for the future! Instead we help you strike a balance between spending today and saving for the future. We want you to achieve your long-term financial objectives while living your life to the full.

 

6. We make sure your plan remains relevant

People get married, babies come along, people change jobs or even careers, future aspirations change. All of these types of events fundamentally change your financial plan. It’s our job to make sure that all of these changes are fully reflected in your plan and that you have the optimal set of financial solutions in line with your changing circumstances.

 

7. We help you to understand the swings and roundabouts of investment markets

Investment markets are moving up and down all of the time. Some people don’t notice, others sweat over every (downwards) movement. Often this is down to a lack of understanding of markets, volatility and how it works, and the impacts on your own portfolio. While ensuring you have the optimal risk based portfolio in place is an important job for us, it’s equally important that we help you understand how markets work.

 

8. We help you to make your debt v investment decisions

When incomes increase and there’s some extra cash left over each month, or indeed you get a windfall as a result of a bonus, a gift or maybe an inheritance, you’ve got decisions to make. Do you pay down debt or invest? We can help you make those decisions, taking account of interest rates, projected risk-based investment returns and tax considerations. We want your money working as hard as possible for you.

 

9. We help you to prepare for a long and happy retirement

Retirement is a significant event in all our lives. It’s also an increasingly lengthy stage in our lives, which means it takes even greater financial planning than before. This planning begins when you’re young and start building up your retirement fund. It continues through to retirement, at which stage important decisions need to be made when your income from work stops, and you need your fund  to sustain you into the future. And the planning doesn’t stop there, it continues onwards through retirement as you want to make sure you never run out of money. We’re here for you every step of the way, at every stage of this long journey.

 

10. We help you to plan for later in life and to pass your assets on to loved ones

And finally as you age and the end draws near… We help you plan for the transfer of your financial assets to your loved ones in the smoothest and most tax efficient way possible. We want you to live out your final years without the worry of causing any financial difficulties for your family as a result of poor financial planning.

Are deposits the answer to market fluctuations?

We understand that building an investment portfolio that meets your specific needs is no easy task. There are a few fundamental principles that we consider when advising you in this regard.

First of all, the aim in building a portfolio is not about “picking winners”, as this is a sure-fire recipe for disaster! Instead a portfolio needs to be constructed with an asset allocation that fully reflects your appetite for risk. This is why we spend time at the outset clearly establishing your own appetite for risk and then help you to build your portfolio from there.

Secondly we are firm believers in the importance of diversification in a portfolio, the concept of not having all of your eggs in one basket. The merits and de-merits of all asset classes need to be considered when building the portfolio. This brings us to the subject of deposits and their place in a portfolio today.

 

Deposit accounts have their (limited) place

There’s no doubt that deposits always merit some consideration when building a portfolio. They used to be considered risk free, however this notion was tested somewhat during the financial crisis as some banks teetered on the brink! However they are generally recognised as a very low risk investment vehicle, which is attractive to some investors. They also are extremely liquid. You can walk into a bank, and if your money is in a demand account you can withdraw it all on the spot. Deposits also make a lot of sense if your investment horizon is very short.

 

Never forget about diversification

However there are also issues with deposits that cannot be ignored. Some savers simply put all of their money in the bank and leave it there. This may be a mistake for a number of reasons. First of all, this approach may not suit your appetite for risk and it completely undermines the merits of diversification. Depending on your investment timeframe and risk appetite, you may be better served by also considering other asset classes in order to achieve your investment objectives. Yes, there is very often merit in having some of your money on deposit, however it often makes more sense when your money is split between deposits and other asset classes.

 

Timing markets is folly

Of course some people like to keep their money on deposit while they wait for the markets to fall, with a view to jumping in when investment assets are cheaper. From our experience this is folly, as trying to time the markets is not much different to trying to pick winners. Typically when investors try to time markets, they miss the peaks (to sell out of markets) and the troughs (to buy into markets) to the detriment of their investment portfolio. And they end up constantly questioning themselves, “Is now the time to buy / sell”?  Statistics have shown time and time again that successful investors stay invested through good times and bad. They make sure that their portfolio reflects their risk appetite and as a result, they can live with the swings and roundabouts of the markets as they take a longer-term view of their investments.

Coming back to the title of this article, seasoned investors recognise that market volatility is simply a feature of investment markets. They learn to accept it, once they have a risk-based portfolio in place that reflects their own appetite for risk. If deposits have a place in that risk-based portfolio, then they should be included. Removing volatility altogether is not the answer.

 

Negative interest rates?

And then of course, you just can’t ignore the really poor interest rates that are being offered on deposits. We’ve recently seen one of Ireland’s main banks starting to charge corporate customers for the pleasure of holding their money, rather than paying interest! And while this trend hasn’t carried through to consumer deposits as yet, already a number of the banks are paying 0% or very close to it to consumers on demand deposit accounts, meaning your hard earned savings are simply treading water. And then to cap it all off, DIRT (deposit interest retention tax) has been increasing over recent years and now stands at 41%. It’s hard to win with deposits!

 

 

In summary, deposits always warrant consideration and often make sense as part of an overall investment portfolio. However tying all of your money up in deposit accounts may not be the wisest strategy.

How much control do you have of your retirement plan?

The government, pension providers and financial advisers such as us expend quite a bit of time and energy encouraging individuals to take control of their retirement planning. After all, we’re all becoming more aware of the folly of relying on the state if we want to maintain even a half decent lifestyle in retirement.

But how much control can you actually take of your own retirement planning? We recently came across a really interesting piece of research from JP Morgan (Guide to Retirement – 2016 Edition) in USA that explored this topic, and we are now adding our own thoughts to this.

There are some factors over which you have full control, some for which you can influence but don’t have full control and finally there are some factors over which you have no control at all. We’ll examine these in turn and how we can help you with each of the factors.

You’ve full control

While your earnings potential may limit your financial resources available for retirement purposes, you retain control over how your money is allocated. Do you live for today and worry about tomorrow when it comes around? Or do you live frugally today with the view to being able to kick back early and in style in later years? Of course most of us are somewhere in the middle, but the balance of how much to spend and how must to save is our own to decide.

Similarly we each have control of how our money is invested. Do we lock it down in a savings mechanism that is 100% guaranteed but that will not achieve any meaningful growth, or are we willing to take some risk with the aim of greater reward over the long-term? The decision is yours.

Of course we will help you in both of these areas. We’ll guide you towards getting the balance right between living today while planning for tomorrow, and also getting the right risk adjusted portfolio in place to enable you to achieve your goals.

You have partial control

Then there are factors that you can influence, but where you don’t have full control. The first is in relation to your earnings power. Yes you can work longer hours and harder, increase your qualifications and work until later in life. All of these are likely to increase your lifetime earnings and capacity to save. But you don’t have full control over these. Some companies unfortunately close down, many have standard retirement ages and sometimes the value of qualifications is not fully rewarded. Some will assist you in your retirement planning, some won’t. So you can influence the level and duration of your retirement savings, but without full control.

Likewise you can influence how long you will spend in retirement. Live life as a hell raiser today and the chances are you won’t last very long! But if you eat well and look after yourself, you are increasing your chances of a long retirement. But of course none of us have full control over our health. The increasing longevity that we are seeing is a huge challenge for retirement planning. It is accepted wisdom that the first person to live to be 150 years old has been born – that person will need some retirement fund to see them through retirement!

We can help you clarify your own situation with regards to these factors. We’ll help you to look at your employee benefits and make the best financial decisions around these. We’ll also help you to understand the impact your potential longevity will have on your retirement plan.

You’ve no control

And then there are factors over which you have no control. Governments set policy; they decide the levels of tax relief available for retirement planning, the size of funds allowed and other important factors. You’ve no control over these (outside of your vote!) and must just plan within these constraints.

And then there are investment markets. Sometimes these change with alarming speed and with no warning – just look at the short-term turmoil that Brext caused! Again you have no control over these macro factors.

But on the other hand we can help a lot here. We can make sure you are maximising the opportunities available in our pensions system today and also as policy changes, that your approach to retirement planning remains the best way. We also don’t have any control over markets. But what we can do is make sure that you have a risk appropriate, diversified retirement portfolio in place.

 

At the end of the day, you have some control over your future. With our help you can give yourself the very best chance of dealing with all of these factors, whether you have control or not.

What Income Protection is and what it is not

As financial advisers helping our clients to build a better financial future for themselves, we are talking to clients every day about a whole range of issues in relation to their personal finances. With some clients, we are helping them with their retirement planning and to build diversified and risk adjusted investment portfolios. We also help our clients to protect themselves against a range of possible catastrophic events, from ill-health to death.

However we are sometimes concerned when we hear people talking about income protection, as they often don’t do it justice or sometimes don’t appear to fully understand it. Some think that they have income protection in place, while in fact having some other form of lower value cover. In these situations, we always sit them down and give them the A to Z on income protection, ensuring a full understanding of this really important protection product.

But to help you in the meantime, here goes on a whistle-stop description of what income protection is and what it isn’t.

Income protection is…

  • It is protection against being unable to work due to illness or accident. So it relates to your physical capacity to carry out your work. When taking out an income protection policy, you choose a deferred period. This is effectively a waiting period of anywhere from 4 to 52 weeks before your claim becomes payable. The longer the deferred period, the cheaper the premium.
  • Income protection is a replacement income. The insurance company effectively steps into the shoes of your employer / self employment and pays you your regular income instead, at your income protection benefit level. You will submit your tax credit certificate to the insurance company and they will pay you as a PAYE worker.
  • Income protection is a benefit that continues to be paid until your retirement date. So it ensures that your income is maintained right up until the end of your working life. Of course if you recover in the meantime and return to work, the benefit ceases, as your employer / self employment then replaces the insurance company again as the payer of your regular income.
  • Income protection is a fully tax relievable expense, so you can reduce your tax bill at your marginal rate by paying for income protection.


Income protection is not

  • It is not a lump sum payment if you fall ill. There is no once-off windfall payment, instead it is a regular (and often far more valuable) monthly payment until you retire. If it’s the protection of a lump sum you want in the event of illness, talk to us about Specified Illness Cover.
  • Income protection is not restricted to a list of specific illnesses. Claims are paid on your inability to work due to illness or accident, whatever the cause might be.
  • Income protection is not protection against redundancy. Claims are only payable when you are unable to work due to illness or accident.
  • Income protection is not an income for life, it is payable until you get better or until your retirement age.  However with most income protection policies, you can also choose to protect your pension contributions as well, thereby ensuring that your post-retirement planning and income stays on track.

Income protection is often known as the glue within a financial portfolio. Without income, everything is at risk – your mortgage, your pension, your other financial commitments. Now might just be the time to talk to us about securing your future income, and your peace of mind.

Do Irish Pensioners Get a Raw Deal?

We received quite a number of comments after the article in our last newsletter about Ireland’s future €440bn state pension issue. A number of our readers were shocked about the size of the problem facing the country.

They were also shocked that this problem is not being faced up to at all by politicians of any hue; it really is an enormous can being kicked down the road to be dealt with by future generations. And this begs one big question – are our expectations of what the state provides (or should provide) too high in comparison to other countries?

So we’ve examined this issue from two different perspectives before drawing some conclusions. First of all we look at some figures that were released at the end of 2015 by McKinsey that compared “pensioner poverty” levels in different countries. The second perspective is how much we have to pay while we’re working, to actually qualify for a state pension.

Poor pensioners or golden oldies?

How do the over 65’s in Ireland compare to other countries? A measure that is used to compare the wealth of pensioners in different countries is to look at the percentage of over 65’s who have an income that is below half of the national median household income. These people are considered to be living in pensioner poverty.

This research found that on average 12.6% of pensioners in OECD countries are living in income poverty. The graph below shows that the Netherlands is the best place to be a pensioner – only 2% of their pensioners live in income poverty. At the other end of the scale, you don’t want to be retired in South Korea, where half of all pensioners live in poverty.

Ireland fares pretty well on this measure, with less that 7% of pensioners living in income poverty, placing us as a strong performer. This is far better than the UK at over 13%, and a good number of our European partners.

But of course this begs the question; with a €440bn future liability, how can we afford to be performing so well here?

pensioner poverty (1)

But what’s the cost?

This is maybe where reality bites a little… We also looked at OECD figures that show how many years you have to contribute towards your state pension (through PRSI in Ireland) in order to qualify for the maximum available state pension. And guess what? Ireland is top of the charts here – with workers having to contribute an average of 48 contributions per year for 43 years to qualify for the maximum state entitlement! In the UK, you have to contribute for 35 years, in Australia for 10 years only.

Now it has to be said that the pension amounts in Ireland are actually quite generous. Currently the state pension is €233.30 per week in Ireland as compared to the equivalent of €197 in the UK.

The question of course again is – can we afford these levels of old age pensions? The answer unfortunately is no.

In Ireland you also need a minimum of 10 year’s contributions to qualify for any contributory state pension at all. Of course if you don’t have this, you might qualify for a means tested old age pension.

So where does this leave us now?

Well with the huge future liability being faced by the state, we’re certainly not going to see any reduction in the number of years you need to contribute to PRSI, in order to get a full state pension. We can (or should?) also expect to see a reduction in the amount of state pension payable – Ireland just can’t afford to be near the top of the class here! But this will take lots of political courage…

What we are more likely to see is gradual, further increases in the qualifying age for the state pension and greater incentives to help people financially plan for their retirement themselves. This is likely to include an element of mandatory private pensions in the future.

We’re constantly tuned into this changing landscape on your behalf. We’ll monitor the impacts that any changes in state pensions will have on your own retirement plan, and will help you alter your plan accordingly. At the end of the day, our goal is the same as yours – to help you live the life you want to live when you retire.

5 Principles of Sound Investing

Investing today can be a bit of a minefield. You could end up paralysed by fear, worrying about the possible impact of the likes of Brexit, market fluctuations, elections here and abroad and terrorism threats! However as your financial adviser, we remain focused on your long-term investment and pension objectives, and always do our best to keep you on track to achieve them.

Of course we remain vigilant about all of these potentially damaging events, but all of the time we stick to some important principles that have stood the test of time for investors for many years now.

Learn the Market Cycle                  

The investment market usually (but not always) follows a typical cycle as shown below. While you obviously cannot rely on all of the different factors coming together as illustrated, this is a useful picture to bear in mind.

There are always anomalies, such as the unprecedented low interest rates that we’ve seen in the last few years, but remaining aware of the market cycle can help you to avoid letting greed or excessive caution cloud your judgement.

Marketycle

Diversification is key

There is always the temptation for investors to follow the latest and supposedly greatest hyped-up investment. This might be investing only in property (remember what happened in Ireland 10 years ago…) or indeed acting on a great share “tip” that you got. Putting all of your money into one area is an extremely risky strategy; if it goes wrong, you could lose the lot.

Always spread your risk and build your wealth through funds or pools of assets. This diversification will give you some protection against one of the companies you’re invested in, or even one of the asset classes going south.

Volatility is okay!

When people get fixated on short-term changes in their investment and pension assets, volatility can cause a lot of concern. The focus turns to those short-term dips in returns and investors get anxious.

However volatility is simply a feature of long-term investing. Markets will go up and down, the critical tactic is to stay invested and not react to short-term factors.

Trying to time markets is folly…time and again it has been proven that you are better off riding out the peaks and troughs, rather than trying to call them yourself. However if you really struggle with the volatility of your portfolio, it’s possible that you don’t have the right risk-adjusted portfolio for you in place. Give us a shout, as we’ll help you to identify your appetite for risk and will design a portfolio that will allow you to sleep at night!

Know the magic of compound interest                                                                

Compound interest has a huge impact on investment and pension portfolios. For this reason, it is really important to start investing early, and to keep investing. The more time each tranche of your investment has to grow allows the magic of compound interest to really deliver!

To help see the effect of compound interest, it’s worth remembering the ” Rule of 72″. This is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. For example, the rule of 72 states that €100 invested at a 10%p.a. return would take 7.2 years ((72/10) = 7.2) to turn into €200.

Knowing this rule will help manage your expectations in relation to the performance of your portfolio or will help you identify the return needed to double your money in a specific timeframe.

Time and compound interest are great friends of investors!

Cash costs you money

Cash in the bank today is simply a missed opportunity. Yes it is a safe haven and staying true to the diversified portfolio principle, it makes sense to have an allocation of your portfolio in cash. But many investors today have too much of their money sitting in the bank, being eroded by inflation and very low interest rates.

You have long-term financial goals and probably need a level of investment growth to achieve them. Leaving your money sitting in cash is likely to undermine your chances of achieving your goals.
At the end of the day, investing is not always straightforward. Your emotions, doubts and behaviours can get in the way and undermine your likelihood of success. But that’s where we come in. As your independent financial adviser, we can be completely objective and can help you plot your course to help you ultimately achieve your investment goals. These are a few tips to help you along the way – we of course would be delighted to discuss any of these or indeed any aspect in relation to your investments.

Warning: If you invest in these funds you may lose some or all of the money you invest.

Warning: The value of your investment may go down as well as up.

 

Help your Kids to be Wealthier than You!

We all want the best for our children, as we help them every day to build up their social skills, develop relationships, maximise their education opportunities and most of all be happy children! We can also help them in a financial sense too. Below first of all are a few valuable lessons you can teach them about managing money, followed by two ways you can ensure they receive money from you more tax efficiently. Hopefully these will all help them have a healthy relationship with money into the future!
Teach your children about saving

Show your children the benefit of saving small amounts of money each week out of their pocket money. The old adage of “Look after the pennies and the pounds will look after themselves” stood us all in good stead over the years.

This teaches children that they cannot have everything they want on demand, and that by being patient and saving a few bob, they then get to enjoy more expensive toys / games / clothes than they could otherwise buy. They also tend to become more tuned in to making sure they aren’t just frittering their money away.
Teach them to be wary of borrowing

Borrowing money is a part of life and often makes good financial sense. Getting a mortgage to buy a home or even a loan for a car are often necessary. However borrowing money simply to support a lifestyle you cannot afford is a recipe for disaster.

Credit cards can feel cool to children! That is until they get their bill and suddenly realise the rates of interest being charged… Children should be taught about the dangers of credit cards in particular and loans in general, and that they are only suitable as part of a structured financial plan.
Educate them in your own financial errors.

Unfortunately we’ve all made financial mistakes over the years. Maybe too much property in the boom, maybe we didn’t get proper independent financial advice early enough in our lives.  Tell your children about lessons you’ve learned and how they can avoid making these same ones themselves.

Give money to them in a tax efficient way

One of the impacts of the economic crisis was a slashing of the amount of money that could pass tax free from a parent to a child either as a gift or as an inheritance on death. In the good old days, a parent could gift more than €500,000 to a child before any tax applied. However this lifetime tax-free threshold now stands at only €280,000.

Should you be in the fortunate position to help your child buy a house for example by gifting them money, the amount you give them will be set against the threshold. This will mean that at a late stage, such as when they inherit from you on your death, their tax bill will be bigger as they will have used up much of their threshold.

The answer may lie in how you gift the money to a child. Rather than giving your child a large sum of money in any one year that is offset against their lifetime threshold, it is more efficient to gift them a smaller amount of money each year. There is a “small gift exemption” that allows any individual to gift up to €3,000 to any other individual each year without impacting the lifetime threshold at all.

So two parents can gift €6,000 to each of their children each year tax free, and without impacting the lifetime threshold. So if you started this at birth, your child could enjoy the fruits of your savings of €120,000 (plus all growth on this) at age 20 without any tax implications. Now there’s a nice start to their adult lives!

Life assurance can help too

Even without gifts prior to death, these lower thresholds are causing problems for many families that are inheriting money from parents. Many families are facing sizeable inheritance tax bills, as a tax rate of 33% is applied to the inheritances received by individuals above the threshold. This has resulted in many family homes having to be sold by beneficiaries when they would have preferred to keep it, just in order to generate cash to pay the tax bill.

Life assurance is one of the best solutions to deal with this issue. In fact there is a specific type of policy (a section 72 life assurance policy) for this purpose. A section 72 policy does not form part of the estate, instead its purpose is solely to pay the inheritance tax liability. The premiums can be paid either by the parents or by the future beneficiaries. Having this cover in place should ensure that a tax bill won’t decide whether inherited assets can be retained or not.
If you can teach your kids a few valuable lessons about money and maximise the amount of money they will receive from you during your life and on death, there’s every chance they will end up wealthier than you one day!

What’s the Problem with Ireland’s State Pension System?

Ireland needs €440bn to address its pensions problem. Now has that got your attention? Particularly when you compare this to our National Debt figure, a (not so) meagre figure of €208bn that gets so much attention, and was such an important input into the policies of all of the parties in in the recent election.

The reason the pensions figure gets so little attention is because it is tomorrow’s problem, not today’s. But we can’t escape the fact that €440bn is the “hidden” state liability for public servant pensions and the shortfall in the Social Insurance Fund, which is used to pay old age pensions. If nothing changes, this money will have to be found in the future to pay all of our old state pensions and the pensions of all our public servants.

So how have we got here?

Changing demographics is a significant cause

There are a number of demographic factors that are exacerbating the problem in Ireland. Today we have 5 workers for every pensioner. These workers pay PRSI, which goes towards the payment of the pensions mentioned above, and even at this, the full cost of those pensions is not covered. However Ireland is ageing and by 2050, there will only be 2 workers for every pensioner. Which means much less PRSI going in, and much more pensions coming out. It just doesn’t add up.

And apart from this, we’re all living longer. In fact it is anticipated that 20% of people in their 30’s today will live to see 100 years of age! So pensions will need to be paid for longer.

So what’s being done about it?

Well, not enough really… There were some attempts made; the National Pensions Reserve Fund was set up to address this issue and had built up to a healthy €22bn. But this was then emptied to help address the economic collapse.

The qualifying age for the state pension has also been pushed out to 67 from 2021 and 68 from 2028. This is definitely a step in the right direction but not enough on its own.

Unfortunately it is estimated that the state pension needs to be reduced by 35% to become sustainable. Now what about all those election promises to raise the old age pension….


So what needs to be done?

Well if you found the above depressing, I’m afraid it gets no cheerier! But if we want a sustainable economy into the future, solutions such as the following will need to be implemented.

  1. State benefits will need to reduce. Both for state old age pensions and for public servants. They are simply unsustainable. Rather than cut benefits, could we instead increase PRSI? Well we could, but it would take a brave politician to do so! And any increase in PRSI contributions would impact the economy and would limit the ability to introduce other measures to boost savings. There are simply no easy choices here.
  2. We will all need to save more for retirement. As old age pensions decrease, we will need to personally make up the shortfall if we want to avoid poverty in retirement. At the moment in Ireland, it is estimated that 29% of working households are on track to retire without a significant adjustment in their lifestyles. Should old age pensions fall by 35%, this figure will increase to 52% of households. To avoid this negative adjustment in our lifestyles, we simply need to save more.
  3. Employers will need to play their part in helping to address the problem. Some form of auto-enrolment in a pension scheme, where both the employer and the employee pays is probably inevitable too. Yes people will always be able to opt out. However the default position should be that every worker is automatically included in a pension scheme.
  4. The progression from work to retirement will change. The days of the gold watch on your 65th birthday are gone. Instead we will see people easing into retirement over a period of time. People in their 60’s and their 70’s will continue to work, albeit working reduced hours. So careers will change as people work for longer and also work differently into the future.

And the biggest issue is that the longer we take in making these hard choices, the worse the problem gets. We simply can’t afford this €440bn problem.

5 Great Habits to Transform your Finances

There is a lot that you can do yourself to help build a stronger financial future! Here are a few ideas that if you can turn them into habits, will transform your every day relationship with money for the better.

Don’t be a financial drifter

Don’t just drift along spending money in an ad-hoc fashion as the need or desire arises. Instead set yourself some financial goals. Yes some might be big important goals such as retiring early or buying a second property. But they don’t all have to be long-term, big financial goals. Some might be around simply living within your means or building a small nest egg. And then, give yourself rewards along the way, if your goals result in better financial practices. If you achieve your objective of saving an additional amount ever month, treat yourself to a night out or a weekend away. Maybe better financial habits can pay for a winter holiday later in the year? Have a goal, track your progress and work towards it throughout the year. This will help to keep you motivated to continue the new better practices!

Understand your spending

This one probably sounds the easiest but actually is one of the most difficult to implement. If you want to gain a clear picture of your spending habits, you need to record your spending for a month or two. However the key to success here is to record every euro, not just approximate amounts. If you keep just a rough record, you’ll inevitably leave out some items or giving yourself the benefit of some big “rounding differences”! Instead if you diligently record every amount you spend, you’ll soon get a clear picture of where you’re possibly wasting money, and will quickly identify where easy savings can be made. Maybe it will show you how those two coffees a day during work (€7) are costing you €35 per week or approx. €1500 per year. You’ve got to earn €3,000 p.a. just for these?

Spend less than you earn

Sounds obvious but how many of us are living from month to month, dipping into the credit card to get us to payday? While it’s often not easy, we’ve all got to live within our means, keeping our expenses below the level of our income. While this mightn’t result in the luxurious lifestyle we all yearn, living beyond our means is only going to store up a whole host of trouble for the future.

Pay yourself first

With the economy back on track and the recent giveaway budget, hopefully everyone is starting to see an increase in his or her income again. This just might be the opportunity to start saving for the future by saving your increase in take-home pay. To make this happen though, you need to set up a direct debit / standing order for this money to leave your current account immediately after payday, effectively paying yourself first. Otherwise, the increased amount will just disappear, as you loosen your purse strings a bit…

Use your credit card… but pay it off every month.

This one requires financial discipline, so proceed with caution! This idea will only work if you diligently pay off your credit card in full every single month. Did you realise that your credit card can actually help you save money in this new era where free banking is harder to find? Because every time you go to the ATM, use your debit card or write a cheque, you may be racking up bank fees. Instead if you use your credit card for purchases and pay off your bill in full and on time each month, you avoid bank fees. However, this one is only for very disciplined people, as any slippage will result in extremely high interest charges that will quickly dwarf any savings you might have made.

Minimise your tax bill

Of course the biggest bill that we all have every month is a tax bill. If you are a PAYE worker, you don’t actually see it, but trust us, you are getting one every month that your employer is paying on your behalf! So make sure you take every opportunity to reduce your tax bill. Claim all of your medical expenses, understand the tax relief that you get on your pension contributions. Talk to us about the potential for tax effective income protection and life assurance planning. Look for every legitimate way to reduce your tax bill.

Of course there are many other steps that you can take to improve your finances. However we think that these 5 will help you see a real difference in your financial health. Can you afford to ignore them?

We’ll Get You on the Right Financial Track in 2016!

A New Year means New Year Resolutions. Getting back to the gym, maybe pounding the pavements, trying to improve your diet. Well if your financial health is not where you want it to be, a resolution that should be top of the list is to come and talk to us. And we suggest that you do this sooner rather than later if you want to see your financial health improving quickly.

 We start by listening
How can we help you? Well first of all, we’ll spend a lot of time listening to you. We will want to understand exactly what it is that you want to achieve with your money – are you looking to get back on an even keel, possibly squirrel away some money for your children’s education in the future or build up a nest egg for your retirement? Maybe you simply want to make sure all will be okay financially if you are unable to work or indeed if you get sick or die prematurely. Indeed you might simply want to gain more clarity and confidence about your financial future.

We help you to understand risk
We then place a significant focus on risk. We will help you to determine your own appetite for risk (how much you are happy to take) and your capacity for risk (how much you can afford to take). This is a key part of building your financial picture. We want you to achieve your potential outcomes, while at the same time ensure that you understand the relationship between risk and reward. We also want to make sure that you continue to get a good night’s sleep, and that events such as the current turmoil in the Chinese stock market don’t keep you awake at night!

Once we understand your financial goals and your risk profile, we’ll then want to determine where you are today in terms of your financial resources. We will want to clarify your earnings, what you spend every month, what financial assets you have and also get a picture of your debts.

It’s all about a plan…
At this stage we start earning our corn! Knowing where you are trying to get to financially and understanding where you are today, we will then develop a financial plan for you. This will set out a roadmap for you to achieve your financial goals.

Yes, this might result in some tough decisions for you, as we might recommend that you need to cut right back on what you are spending on holidays and other luxury purchases. We might demonstrate that you need to be saving more for the future, that your current level of saving is simply not enough to achieve your future goals. We’ll work through all the different challenges in your own financial roadmap with you, help you to prioritise your next steps and determine how best to move forwards.

And then we will put in place any financial products that might be needed to help you achieve your goals. These could be protection policies in case any unforeseen events occur, or a pension plan to save for your retirement. Maybe you don’t need new products at all. Often we find that existing products are absolutely suited to your needs, but maybe the fund strategy needs to be tweaked. Sometimes again, the solution lies completely away from products. We’ll point out if the solutions lie in your day to day management of your finances.

We’re now at the start line, not at the end!
Now you know your destination (your financial goals), your starting point (your financial situation today), you have your roadmap (your financial plan) and the vehicles to make it all happen (your financial solutions and products). So let your financial journey begin!

And that’s a key point; the journey has only just begun. We won’t just send you on your way alone. We will want to meet you year after year to review your progress towards your financial goals. We will adjust your plan as needed, and tweak some of the solutions as needed. And finally when you reach your financial objectives, and only then, our job is done!

So give us a call. Turn those good intentions into action and aim to leave 2016 more confident about your financial future and on the road to achieving your financial objectives.