Margaret George MBA DipPFS Independent Financial Adviser

LIFE STAGES

No matter what stage you have reached in life, sound financial planning is very important. Financial planning is all about lifestyle. It's about protecting the lifestyle your currently enjoy, for yourself and your loved ones; and it's also about planning for the lifestyle you want to enjoy in the future. However, as you progress in life, the focus of your financial planning changes as your circumstances change. That's why you need to review your financial plan regularly to ensure that it still suits your needs.

YOUNG, FREE AND SINGLE

This is a very exciting time in your life. The future holds such promise for you and who knows what is going to happen? You may have just started in your very first full time job and perhaps you have bought your first car, or even your first home. You are probably more interested in having fun and enjoying life than you are in financial planning. I totally agree that it's very important to enjoy life and have fun with your friends. However, small financial planning steps taken at this time will make a huge difference to you in the future.

So what steps should you be taking?

Saving: Firstly, and most importantly, get into the habit of saving regularly. You should be saving for the short term - for your next holiday, for example; for the medium term - for the deposit for a home; and for the long term - starting a pension. Also think about saving some "rainy day" money so that you have something put aside to meet your bills for a few months if things go pear-shaped at work.

Starting a pension: Retirement must seem a very far in the distant future. However, the sooner you start saving for it, the easier it is and the less you have to save towards it. If you get the chance to join a pension scheme at work, especially if your employer is prepared to contribute, then do it!

Insure your income: You insure your car and your personal belongings. Did you know that you can also insure your income for the rest of your working life? How much more important is your income than your mobile, or your laptop, or even your car? It is best to start this whilst you are young and healthy, because the cover is much more affordable and, if you have guaranteed premiums, these will not increase as you get older.

Critical illness cover: You should consider having at least sufficient cover to pay off all your debts - student loan, credit cards, mortgage - if you were to be diagnosed with a serious illness or became permanently disabled.

FAMILY WITH CHILDREN

This is when you need to get really serious about your financial planning. You have a responsibility to protect, not only your own lifestyle, but that of your loved ones.

Key financial planning areas:

Life insurance: Make sure that you have sufficient life cover so that your family's standard of living will not be affected if you, or your partner, were to die prematurely. I can advise you on the most affordable cover for you and the right amount you need.

Critical illness cover: There should be at least sufficient cover to ensure that all your liabilities, such as your mortgage, loans and credit cards can be paid off if you are diagnosed with a serious illness, or become permanently disabled.

Education fees planning: If you want to be able to help your children with the cost of university, you need to start planning for this early, especially if you also want to plan for private education. I can help you on the best ways to plan this.

Income Protection: If you haven't already insured your income, do it now! Make sure that all your bills can be paid even if illness or disability prevent you from working.

Retirement planning: It is important to keep up your pension contributions throughout your working life and have your pension performance reviewed on a regular basis.

EMPTY NESTERS

So your children are all grown up and fled the nest? Now is the time to really concentrate on your own financial planning - especially on your retirement planning, making up any shortfalls in your pension provision.

Now is the time to address the BIG questions which really need answering.

Questions like:

• When, precisely, can you afford to stop working and start doing the things you really enjoy?
• What do you have to do to ensure you NEVER run out of money?
• How much do you need to earn, save or sell your business for to give you what you want out of life?
• Exactly what level of investment return do you need to achieve your objectives?

And possibly the biggest question of all...

• How much money is enough?

These are questions that need answering, and answering fast. Life is not a rehearsal.

Telling you the Truth about Money

The good news is that I can help you answer these crucially important questions. Through a process called Lifeplanning™ I will help you identify what's important to you and the things that you want to achieve in your lifetime. Then I will carry out a financial planning analysis. Not only are the details of your income, outgoings, assets and liabilities considered, but resources that may become available to you in your lifetime. This gives an accurate measure of your net worth and current and future financial situation. I will help you estimate the cost of the life you want to enjoy in years to come. I use truth™ software to put the two together. It produces a dramatic picture, which spells out the reality of your financial future - telling you the truth about money. Suddenly you see it, understand it, and believe it. Together we can then model realistic 'what if' scenarios that will demonstrate the different outcomes you can create. Many clients have found they can retire years earlier when they are armed with this truth about money. Business owners identify how much they need to sell their business for in order to be financially independent. Other clients learn how they can spend more now and still be financially secure for the rest of their lives.

RETIREMENT

When you reach retirement you have some very important decisions to make. If you have private pension provision, you will have various options regarding your pension fund. You can take up to 25 per cent of your fund as tax-free cash. You can then either use the remainder of your fund to purchase an annuity, which is an income for life. This is known as a secured pension. Alternatively you can leave your fund invested and draw down an income from it. This type of arrangement is called an unsecured pension and is commonly known as pension fund withdrawal, or income drawdown.
Secured Pension

If you decide to purchase an annuity you have the choice between:

• Annuity provider: you don't have to take your annuity from the company who provided your pension plan because you have an open market option.
• Joint life or single life annuity: you can choose an annuity which will stop if you die, or which will continue to be paid to your partner or spouse (usually a reduced amount) after your death.
• Guaranteed annuity: an annuity which is guaranteed to be paid out for a specified number of years, even if you were to die shortly after the annuity started.
• Level or escalating annuity: you have the choice of whether your annuity stays level throughout payment or whether it increases each year.
• Impaired life annuity: if you have a health problem, such as diabetes, or if you are a smoker, you may be able to have an impaired life annuity, which will pay a higher level of income.

Unsecured Pension

If you have a substantial pension fund - usually in excess of £100,000 - you do not have to use your pension fund to purchase an annuity. Instead, you can leave it as an unsecured pension and draw down an income from it until you reach the age of 75 when you must either purchase an annuity or transfer into an alternatively secured pension. There are obvious advantages to opting for income drawdown. However, there are also disadvantages. This is a very important decision which must be taken after financial advice and careful consideration.

Other Important Areas of Financial Planning

• Investment
• Inheritance tax planning
• Long term care planning