Financial Resilience – How You Can Protect Yourself from Financial Disaster

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The online community talks a lot about financial independence. The goal – one of mine too – is being so financially secure through assets like stocks and shares or property, that you’re in a position where you no longer have to work. But what I don’t see covered very often is the journey, how things can go wrong, and what measurements to put in place to protect yourself when things don’t go to plan. 

Finding Money Freedom

Having money freedom involves getting to a stage where you can handle most situations that require money without having to stress. It’s not a state of financial independence where you can give up work, but rather a case of money no longer stressing you out because you know you are covered. It’s taken me 5 years to get to this point, and it’s a great place to be, and I’m sure you could do it quicker if you put your mind to it. 

The Scenario is All Too Common

As a doctor I’ve seen lots of circumstances where patients are being caught out through illness, then struggling to cope with daily life. For example, old and young people alike getting cancer — and children too, where their parents have to take time off work to care for them. And in an already difficult time, they face a situation where they’ve got no appropriate insurance or cover in place to help them financially. 

With one partner out of work, this can put pressure on the other partner to make sure everything is financially stable. Equally, I’ve seen self-employed patients who have broken their leg and can’t take time off as they don’t have insurance. Without work, they have no income. So, they have to keep going while they’re ill, when they should be resting. 

A Real Life Story

I recently read about a story via Emma Astley from Cover My Bubble. 31-year-old Neil Grimes, married with a 4-year-old son and a mortgage, has recently been diagnosed with stage 4 terminal cancer. He has no life cover, critical illness cover, or income protection insurance. Neil’s illness means he’s unable to work, nor earn any money.

Emma, founder of the family insurance broker, is promoting Neil’s story because not only are the family facing a financial crisis, but he’s also having to cope with his illness. His wife is having to cover the mortgage alone, and when Neil is no longer with them, she’ll also be raising their son on her own. 

The mortgage, bills and childcare costs etc will still be there, because despite the incredible sadness of their story, life doesn’t stop. You want it to, but it doesn’t, and it’s just horrible. It’s such a heart-wrenching story – who expects to get cancer at 31? He didn’t expect he’d ever get ill. No one expects it to happen to them. 

What really inspired me is that he’s spreading the word about what’s happened to him so that others don’t find themselves in the same situation. A fundraising appeal has been set up via Go Fund Me, so if you’re inspired by Neil’s story please do make a donation to help his wife and son in the future. Give whatever you feel is necessary. 

With Neil’s story being so significant, here are some things I think you should have in place to help you ensure your own financial resilience. You can’t remove the emotional pain of such a terrible situation but having money there to support you will help reduce the stress of having to worry about finances at such a difficult time. 

Get Appropriate Insurances in Place

Building a safety net can really take the weight off your mind, which is why I like to promote the importance of renting wealth before you have wealth. So, first things first, take a look at what you already have in place. For example, your workplace may already have provisions such as paying you when you’re off sick. Check your workplace benefits to confirm what cover you might already have. 

Income Protection Insurance

Next, choosing income protection insurance is a really important insurance to have, as it can kick in when the income from the workplace reduces, or stops altogether. If your illness continues for a year or more and you can’t go back to work, income protection insurance is there to safeguard you financially. 

Critical Illness Cover 

If you are affected with a critical illness such as a stroke or cancer, this kind of insurance pays out a lump sum to cover your expenses for a period of time, until you’re hopefully well enough to go back to work again. It can be really reassuring and a weight off your mind so you can concentrate on getting well again. 

Life Cover 

Life cover pays out after you’ve died, so it’s not for you, but for your family. Even if you don’t have a mortgage or any dependants, you might want to consider life cover to pay off any debts you owe and to cover funeral costs. It means you’ve covered all angles, and it’s peace of mind for your family. 

An inheritance can really help to change people’s lives; I was able to bring my debt-free goal forward by 18 months thanks to the inheritance I got from my dad when he passed away. 

Emergency Fund

It’s a really good idea to have some money set aside in an account you don’t touch, to help you in an emergency. Think burst car tyres, washing machine breakdown. Perhaps you’re desperate to leave your job because you hate it. Or it can be a safety net if you get made redundant, or a get-out fund for if you want to leave a relationship. 

Health Fund

Having a health fund in place can be really useful to help you get back to wellness. You could cover counselling fees to help your mental health, pay a chiropractor for issues with back pain, or pay for physiotherapy. You could even consider paying for some private health insurance, which would mean being able to see a GP more quickly, access physiotherapy, or get a routine operation so much sooner. 

Wills and Lasting Power of Attorney 

By having a will in place, you’re thinking about your family and ensuring your money is directed where you want it to go, thereby reducing any potential arguments about your estate when you’re gone.

A Lasting Power of Attorney is worth putting in place to help you in the event of a stroke, or something which renders you unable to make decisions for yourself. It means having someone who can look after things for you. It’s important to review it regularly, especially if the person you’ve appointed isn’t a family member. You could have someone acting as Lasting Power of Attorney sooner; it doesn’t need to wait until you’re incapacitated. 

For example, when my dad lost the capacity to make decisions, my mum had fortunately had the foresight to close his accounts beforehand. If she hadn’t, she wouldn’t have been able to make these changes. It would have cost a lot of money, going through the courts to get permission to do anything to do with his affairs. 

NB: It’s much cheaper to have Lasting Power of Attorney set up at the same time as having your will written. 

Final Thoughts

So those are my four recommendations to be financially resilient: insurances, emergency fund, health fund and will/lasting power of attorney.

These aspects are there to help you in pretty much any situation, though I hope you never have to use them. But, as Neil’s story highlights, you never know what may happen. 

If you want help with your finances, I offer free 15 minute strategy sessions to help you plan your next steps. Click here to fill out the application form to start exploring how you can transform your finances.

Until next time,

 

 

 

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