Craig Turton, Head of the Wealth Creation team at Chartered Wealth Solutions, explains that each new life stage comes with its own risks, and a comprehensive Financial Plan takes all of these into account. Check your own list as you read through the article.
When you were a fresh graduate in a new job, you possibly shared a small dwelling with two roommates, had a second-hand car and three neat work outfits that you laundered carefully. With no dependents, your financial priority in terms of cover was short-term insurance for your car and some personal possessions.
Now you are a parent, with significantly more expensive assets, and have many more financial responsibilities. Not having enough cover can jeopardise you, your lifestyle and your dependents’ wellbeing.
Risks associated with each life stage
Within our Wealth Creation team, we see clients of different ages and in different stages of their lives and careers.
A complete Financial Plan should include the risks associated with being at these different stages. Risks include such unexpected life events as:
- loss of income
- severe illness
In this article, we touch on potential risks in the different stages of our lives and career. It’s important to note that medical aid is excluded from the risks below, so we must ensure that, at all life stages, our medical aid covers what we need it to cover.
If you have student debt and you pass away, your family will inherit your debt. The solution would be to have some life cover in place to protect against this debt.
Young, single work-starter
Be aware of debt, such as study loans, as indicated. Your biggest asset at this time is your ability to earn an income. Consider the implications of not being able to work. Protect this ability through an income disability protection policy – your Financial Planner will be able to advise you.
In a committed relationship or marriage
If you buy a home together, ensure the bond is protected through a life policy. While it’s not romantic, it is caring to have a formal contract in place between the two of you, to make provision for the possible dissolution of your relationship. Ensure your Will stipulates what should happen to your share of the house in the event of one of you passing. Growing up is not easy and the conversations just get harder, but it is essential that you have them.
Married and considering having children
If you are both are income earners, will the survivor suffer financially without that income? If yes, you need to make sufficient provision to allow the survivor to maintain their standard of living. Education is a huge cost for one parent, so include this cost in the calculation.
Peak of your career
You may suffer a health risk; a severe illness benefit will assist with the financial demands of such an illness. An estate plan should address the costs in your estate when you die. Ensure your beneficiary nominations are correct and updated on your policies and retirement funds. Make sure your children will have sufficient capital to see them through varsity when you are no longer there.
A goal here may be to be relatively or completely debt-free by this stage; if not, ensure you have covered the remaining debt. Your Will should be up to date. A severe illness benefit is likely to be very relevant. In your Financial Plan, consider the costs of long-term care for when you are less independent, such as assisted living, frail care or in-house caregivers.
If we live, we have risk. These risks need to be planned for and managed. Most importantly, having planned, live in the moment and enjoy each day you have with your families and loved ones.