Wednesday, 4 April 2018

Financial Planning Tips for Dependent Spouses to Build a Secure Future

There are many people who are totally dependent on their spouse. Disability, health conditions or simply needing someone to manage the kids – a full-time job in itself! - can be one of many reasons why some people are totally dependent on their spouses.

However, they could be CEOs of their house and therefore one of their duties involves managing the household budget.

Over the last few years, rise in inflation rates has not coincided with a rise in average wage. Also, emergency scenarios may arise, for e.g. your spouse might lose his or her job or suffer from health issues, which will affect the family income, whereas the expenditures remain the same.

In such a scenario, you might have to step up to the plate and help manage the finances of your family. Wandering how to go about that? Read on to find out more.

How Can You Identify Financial Risks?

It can become easy to fall under the misconception that nothing wrong will ever happen to your family.

Risks are omnipresent and may strike any moment. Financial setbacks can be crippling, as the process is time-consuming and involves rebuilding your portfolio. Financial problems can loom unnoticed and if one is unprepared, it could leave you in danger.

The main aim of financial planning is to create financial assets through instruments such as mutual funds, shares, and bank deposits to help you realise your future goals.
However, any unwanted event can lead to a loss of such assets or a depletion of a sizeable chunk from your savings. That is why it is necessary to be aware of the risks that could hinder your saving exercise.

Risks Involved

The first step in looking to secure funds involves identifying the events, which may trigger financial risk. The most common risks a family faces includes property, personal and liability risks. Let’s get a brief run-down of what these three risks are and their causes:
  • Personal Risk: It is a loss of income that is directly proportional to an increase in expenses. Loss of income may be attributed to loss of job or a physical disability.
  • Property Risk: Any damage or loss to one’s living house or invested real estate property due to fire or theft.
  • Liability: This involves negligence resulting in damage to someone else’s property, belongings, physical injury etc.

What to Do After Identifying Potential Financial Risks?

You should look to prioritising their significance on the basis of financial severity and the probability of the risk happening.

When you plan your financial future to meet your goals, risk identification becomes necessary.

The motive of identifying financial risks and having a financial plan in place is to compensate the dependants or insured people monetarily in an unexpected event such as illness or damage to a property.

One of the best ways to protect against complete loss of income is having secured funds in place, because this way your family will be in a better financial position and well-prepared for a potential loss of income.

Tips to Manage Finances

  • Money Flow Management: Learn how to manage finances, if you didn't know how to before. Analyse household earning and expenditure. This will help you to understand where you are spending more and how it can be controlled.
  • Control Your Expenditure: If you have analysed the cash flow then it’s time to control each of those wherever possible. For example, if your monthly electricity bill is high then you need to check why, and how it can be controlled. Similarly, a check should be done on monthly expenses incurred in restaurants, malls, etc. If you are a shopaholic, look out for discounts and deals. If you are a movie goer, then try watching it on weekdays as tickets will cost you less as compared to weekends.
  • Save, Save and Save: Always look to save money wherever possible. For instance, if you don’t have a bank account, look to open a normal savings account. Opening a savings account in a bank will allow you to enjoy many benefits and provide you with some financial security as well.
  • Awareness about Financial Products: 10 years down the line things will change and expenses will increase. For e.g. expenses for education, daily necessities etc. will rise with time and inflation. So think of long term ways to create funds to adjust to these rising expenditures. For this, you will need to get knowledge of the best available financial products in the market that will help you meet your financial objectives. Before investing you should consult a finance expert if possible.
  • Investing: If you’re saving every month, then think of how you can grow your money in order to beat the growing inflation. Never let your money remain idle in your bank account or anywhere else. Invest in fixed or recurring deposits. Even if your investments grow slow, it’s good. Something is always better than nothing.
  • Reclaim For Mis-Sold PPI: It is very probable that you or a family member might have been mis-sold a PPI policy along with a loan/mortgage or credit card. Why? Because millions of customers were knowingly mis-sold PPI policies in the UK without their knowledge or consent. Reclaiming for a mis-sold PPI can be a good opportunity to get a good boost of money. The amount of compensation that you can receive for a mis-sold PPI can be around £1000 if your claim is successful. If you are not able to figure out whether or not you have been mis-sold PPI, you can do a free PPI check and verify this.

Following the above-mentioned tips will help you protect your wealth and secure your family’s financial health in the long run!

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