Lessons Learned from the ongoing Pandemic
We are currently in the midst of an ongoing Global Pandemic, but I’m sure that everybody is already aware of this, as this blog is coming ‘Live from Lockdown’ and I know the majority of you will be reading this in ‘Lockdown’ at home and are probably fed up with hearing about it by this point, from one news bulletin to the next.
We are posting regular blog updates to keep you informed on the developments within the markets as they change with the Pandemic response, so I won’t go into this here, however what I will talk about and what I want you take away from reading this, is what lessons can we learn from this situation?
Other than the obvious lessons we have learned, such as to wash our hands more and never take a trip to the pub for granted! What can we take away from this with regards to financial planning?
Ask yourself the following question,
‘If a situation like this ever arises again, what position financially would I like to be in?’
Whilst this might vary from person to person, I’m sure the answer would generally have the same theme, to have the necessary financial resources to ensure that you wouldn’t be affected by market drops or being unable to earn for a short period of time.
Now you should have an answer to the first question in your mind, ask yourself the next question,
‘What steps can I take to help move towards being in this position?’
Again, this will vary but should follow the same themes.
Do you have an adequate emergency cash fund? The guidance is generally to have around 3 to 6 months emergency fund in an easily accessible cash account for unforeseen circumstances. This would be particularly useful, if not necessary, during a time like this. This was certainly an unforeseen circumstance.
Do you have any expensive debts/ liabilities such as credit cards and loans? What can you do to reduce these? (We should all be spending less now without the freedom to go the pub, go out for a meal and casually stroll around the shops spending too much!). Reducing expensive debts and liabilities will free up more cash for you to build up your emergency funds, Pensions/Investments etc.
Do you have other assets to fall back on? We advise our clients to have a ‘3 pot approach’ which is having a range of different assets such as Pensions, Cash and Stocks & Shares or Investment ISAs to help manage risks in and in the run up to retirement. For example, switching to cash assets from drawing on Pensions/Investments during a market crash (like now!) to allow the funds to have time to recover.
Protection
We have now all seen how fragile life really is. At times like this we think about what life cover, Income Protection and Critical Illness cover we have in place. Do you have enough cover in place to protect your family?
At People and Business IFA we are happy to audit your protection for you and take a holistic view that takes account of your assets, liabilities and employee benefits.
Summary
The aim of this post is to give you some ‘food for thought’ and to get you thinking about how you can improve your financial position to help you generally, not just in times like these.
I will also take this opportunity to once again to remind you to please remain calm and stay invested. Keep funding your pensions/investments if you can (the market downturns give great opportunity for investing and buying assets at low prices!).
Keep calm, stay safe and we will hopefully all get through this together.
Andrew Lloyd
24/04/2020