Idly thumbing through some old magazines recently, I came across an article about the effects of redundancy. It was written by a journalist who had found himself jobless in his early fifties.
He still had a big mortgage to pay and his children’s education to complete, so he couldn’t simply retire. The insecurity of the self-employment that he was forced into was not something that he enjoyed. He had thought that his old job really was a “job-for-life.”
Yet in the article the journalist also described the debates that he had with colleagues about what they would do if redundancy happened to them. The prospect of a large cheque, earned for many years loyal service, can seem attractive on those grey days when work seems such a trial. Taking early retirement has its attractions.
The writer soon found out that the reality is very different from the fantasy. The large cheque soon disappeared to pay off loans, credit cards and his son’s university fees, and to meet living expenses for the first few months whilst he sorted himself out.
He acknowledged that, financially, he hadn’t been sorted out at all. Various shocks were in store. He found that, despite years paying in, the unemployment insurance covering his mortgage wasn’t worth the paper it was written on, because of restrictive clauses that meant that the insurers would not pay out. He found that the company pension scheme, on which all of his retirement hopes had been pinned, was not going to be anything like enough to pay the bills when it was drawn several years early. And he found that his mortgage didn’t offer much flexibility because of the way it had been set up, and now that he had no income other lenders would not consider him as a customer.
It is easy for me to sit here and tell you that, with some thought and preparation, it doesn’t have to be like this, but it is true. Neglecting your finances is easy to do when you have a busy life and career, jobs to do, children to organise, and money to spend. But one day it is all going to come to an end, either because of redundancy, retirement or ill-health. What will you do then?
The first step in financial planning is to understand what you already have. What will your policies pay out? What will you get from your employer? How much is your pension plan worth? How much money will you need?
These are questions that a competent financial planner will work through with you, helping to make your choices clear and building a strategy to create a firm financial foundation for you.
Most people are too busy enjoying life to worry about what will happen when their income stops. Perhaps they deserve the shocks yet in store for them.
If it's time that you got your paperwork together and started work on your retirement plan, you can visit our Education section for more advice or Contact Us to discuss your situation with one of our Financial Planners. There's no time like the present!