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It's time to review your spending after Lockdown

A huge amount of the time we spend with our clients is spent building an understanding of your goals in life and developing a financial plan to help you achieve your objectives. A lot of attention goes into your retirement strategy, your investment approach and other such important areas.

 

One area we never forget about though is the other side of your financial picture – your expenditure. After all, this impacts your level of saving and investment in your future. This has come into sharp focus in 2020, particularly as we emerge from lockdown due to Covid-19. For some people, reviewing this makes sense as they have simply gone through a period of much lower spending than normal. For others who are facing a loss of job or a reduction in income, it is out of necessity. For everyone, there’s an opportunity to save more into the future.

 

Here are 10 areas which we believe are worth investigating to see if there are opportunities to reduce your monthly outgoings, whether out of necessity or to be able to spend more on the things you like…

 

1. Mortgage

An obvious place to start if your current mortgage rate is uncompetitive. There are a number of “switcher” deals out there that are attractive and worth investigating. While it is a bit of hassle to switch your mortgage, it can yield significant savings that will justify the effort. Of course switching your mortgage is likely only available if your income has continued at the required level.

 

2. Credit cards

A really important one… If you have a balance outstanding on your credit card, you are probably paying anywhere from 13% p.a. to in excess of 20% p.a. on this balance, which makes it very challenging to reduce the balance. Look at options to switch to an alternative provider, some of who will offer you a period where no interest will be charged. This will hopefully buy you time to get rid of the outstanding balance. Credit cards are great… but only when they are paid off in full every month.

 

3. Energy bills

This one drives us mad! Energy companies have great deals for new customers, that are not automatically passed on to existing, loyal customers. They rely on us not bothering to shop around. Check out the deals available and be willing to switch. Comparison sites such as www.switcher.ie may help you to find a better deal. 

 

4. Phone & broadband

Similar to energy companies, telephone and broadband providers rely on the inertia of subscribers who don’t keep an eye out for better deals. Know when your phone and broadband contract periods have expired. And then start negotiating, either with your current provider or a new one. These services are very easy to switch. 

 

5. TV subscriptions

As the Coronavirus took hold around the world and countries went into lockdown, people turned to home entertainment in numbers. In the first quarter of 2020 alone, Netflix added 16 million subscribers and this growth probably continued in Quarter 2. Some of us also subscribe to Sky, Amazon Prime and other services. The question to keep asking yourself, particularly as restrictions ease is – are you still using the services? If not, ditch them.

 

6. Takeaways

Are you a (too) regular purchaser of takeaway food? If you are, I suggest you record over the space of one or two months every single Euro you spend on takeaways. You might be shocked… and this may be an area where significant savings can be made in the household budget. Apply this to both takeaway food and coffees that you buy.

 

7. Grocery shopping

This is one where savings can be made through a few simple actions. Don’t start planning meals by thinking, “what do we want for dinner?”, instead use what you have at home and eat the food you’ve already purchased. Before shopping, plan your meals and create a shopping list of what you need. Without a list, you are prey to every promotion on display in the supermarket. Then make sure to avail of special offers, loyalty programmes and vouchers that each can further reduce your bill. Finally close your eyes as you get to the tills, that’s where they target you to throw a few more items into your basket!

 

8. Memberships

Club memberships are great, when they are used. However if you’re not using them, how can you justify the continued spend? Are you using the gym enough or playing enough rounds of golf to justify the ongoing expense?

 

9. Subscriptions

Check through your bank and credit statements for all of those seemingly insignificant subscriptions that you pay for. Music streaming services, news media, other publications, in-app ongoing purchases – they all add up. If you’re using them regularly, great. If not, get rid of them.

 

10. Online shopping

Amazon was another big winner of the lockdowns across the globe. So too were the parcel return services. Lots of people bought lots of items that they subsequently returned or kept them and never used them. Online shopping is far too easy, and we all need to be really careful. Buy what you really need and avoid mindless surfing for impulse purchases.

 

There’s no silver bullet to making savings. However, by looking across a range of areas such as these, small savings when put together can really add up.

 

 

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The purpose of insurance is to pay claims when needed

As we emerge from lockdown and the world is getting back to some sort of normality, unfortunately for some people the pandemic has had quite a significant impact on their income. We’ve had a small number of queries from clients in this situation who are looking to reduce their expenditure. Some are pausing savings plans and other regular investment products. One or two people have queried whether they should cut back on their levels of life assurance and specified illness cover. 

While we look at each individual case on its specific circumstances, generally we try to guide clients towards making savings elsewhere. We hope they will read our other article this month on that very topic! We remind these clients that these insurances are in place for when that enormous life changing event happens to them and their families. The purpose of these products is to pay claims when needed, so it’s important to have confidence in the claim paying end of the transaction.

To help build this confidence, we’ve taken a look at claims statistics, specifically those of Irish Life as the largest insurer in the Irish market, recognising that these statistic will be similarly reflected by the other providers too.  Irish Life recently announced their claims payment statistics for 2019 and as before, the sums are quite mind-boggling.

 

Irish Life pay out over €100,000…. every hour

No, that is not a typo, they paid out €104,563 every working hour in 2019, which adds up to €212 million over the full year. This amount was paid to 4,175 claimants, with the average life assurance claim being €73,688 and the average specified illness claim being €62,202. Just over half the claims were paid for living benefits (illness & accident), with the balance being death claims. 

 

Cancer is still the No.1 cause of death claims

Deaths due to malignant cancer accounted for 44% of all death claims, with heart related reasons being the second most common cause of death. Proving that life assurance is not only for older people, 30% of death claims were paid to people between the ages of 41 & 60. Over 60% of claims were for males and 23 death claims were paid to people outside of Ireland. One claimant had taken out the policy in 1962 – 57 years ago!

With the high cost of living in Ireland, people who are on average incomes need cover in excess of €250,000 to replace lost income as a result of a sudden death. However only 5% of claims were for more than this amount. It is very important to have life insurance in place, but it is equally important to review it regularly and ensure you have enough cover. Seven of these claims were for in excess of €1 million each.

Another very sobering set of numbers were the claims paid as a result of accidents. 4% of all death claims were as a result of an accident, however this jumps to 31% of all claims paid on the death of under 40’s. Accidents happen in greater numbers to younger people. It was also very sad to see that 9 of Irish Life’s death claims were as a result of road accidents and 1 from a workplace accident.

 

Specified Illness Cover (SIC) claims were significant too

Cancer accounted for 62% of SIC claims in 2019. What might surprise many people is that 60% of paid SIC claimants were aged between 41 and 60. How long people had their policies before claiming varied hugely – one claim was paid on a policy in force less than 6 months, another was paid on a policy taken out in 1989.

The Irish Cancer Society research The Real Cost of Cancer*, states that the average loss of income for a cancer sufferer is €1,527 per month plus hundreds of euros in additional monthly expenses. An average benefit of over €62,000 has made life a lot easier for Irish Life’s SIC policyholders…

We always remember though when looking at these statistics that there are real people behind all of these numbers. People and families who often have gone through incredibly difficult times. We are happy if we can ease the burden at all, by helping people reduce or remove any financial burden heaped on top of grief at these difficult times. It is for this reason that we try and encourage our clients to make savings elsewhere when needed.

 

Sources: Irish Life Assurance plc 2020. *Irish Cancer Society ‘The Real Cost of Cancer’ research conducted by Kantar 2019.

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Is it time to rethink the importance of money?

As economies around the world start to cautiously emerge from their various states of lockdown, people are also stepping back into the light albeit gingerly and carefully. Some shops and services are open for business again, others have a while to wait still. Some activities that involve mass gatherings such as sports events and concerts face a quite uncertain future for some time to come. 

The last few months have been a time of great uncertainty for all of us. Apart from the threat to our health, most people’s work lives have undergone significant changes. For some, this has been a very difficult period with businesses closed and jobs gone for a while, or in some cases for good. Others have experienced reduced income as a result of the Covid-19 restrictions. Some lucky people have not really been hit in the pocket; they have just had to adjust to a different way of working.

We’ve all had quite a bit of time to think, both about the present and also what the future might hold as the pandemic runs its course.

Our own world of work has changed hugely in these times. Apart from getting used to working remotely, our core role of meeting the needs of our clients has changed a lot too. We’ve been unable to carry out our usual face-to-face meetings and have adapted as quickly as we could to using the full range of other means of communicating with you, our clients – by telephone, email, online meetings, messages etc.  The silver lining on this cloud has been our ability to have some really insightful conversations with many of you.

A theme has emerged from these conversations – a re-evaluation of the importance of money in the big scheme of things today.

Now we are not for one moment suggesting that money is unimportant or that your personal finances don’t need to be carefully planned.  Money is always important, it’s just not the “be all and end all”. What the lockdown has taught us is the importance of everything else. When it comes to your money, you need to have a plan and then let it go and do its work, refining it as your circumstances and goals change.

However what we’ve observed in these different times is that many of our clients are no longer sweating the small stuff. We’ve really seen this in the different conversations we’ve had with you in recent weeks. Previously, short-term volatility in investment markets might have resulted in lots of worried conversations, sometimes panicked decisions that more often than not damage your long-term wealth. We have seen so little of this lately, even though markets have been volatile. Most of our clients have rightly viewed the recent market turbulence as a temporary blip in a long-term plan.

Instead the conversations have been about the more important challenges in life today, with these then naturally veering towards the financial impacts caused by these changes.

In every single conversation with you, the starting point has always been an enquiry about our health and that of our families. This has been so heartening and has shown us the importance of trusted relationships and community spirit. Conversations have typically then moved quite seamlessly on to how we’re all dealing with the restrictions, and the impact they are having on family lives.

Yes, Covid-19 has caused challenges. Health concerns, work, childcare, schooling and social restrictions appear to be topping the list. But we’ve seen people wherever possible viewing recent times with a “glass half full” attitude. Many clients have spoken about the importance of health and how thankful they are that their families have stayed well. You have spoken about the challenge, but also the benefits of working at home - no-one has mentioned that they miss commuting and working long hours away from your families. Many of us have rediscovered the benefits of a bit more time on our hands and the flexibility gained from working at home. The importance of getting out for a regular walk with the kids has featured in many conversations, also having a laugh and finding new ways to socialise as a family. Simple pleasures that cost very little.

There has been a sense that we’ve all simply been more present with our families.  This is what will live long in the memory as the situation eventually fades. Money can never replace this.

Not having enough money certainly causes worry. However for many of you, your mindset has changed significantly, your view of how much is enough is now different. That shiny new car or expensive holiday is a bit less important to many, instead “enough” is now more focused on experiences, health and togetherness. We’ve seen a greater focus on planning for the long-term, ensuring you’ve enough to really support your families and live your life, as opposed to material possessions.

If you have been impacted financially by the restrictions, structured financial planning will help you deal with the situation, as you can consider different potential scenarios in the future. Having a robust roadmap will give you increased confidence that you will emerge from your short-term challenges.

Have a financial plan and manage your money wisely. The money is not important in itself, instead view it as a means to free your mind and to let you enjoy the things you love doing.

 

 

 

 

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Covid and your money have a lot in common

A recent phone conversation with a client triggered this article, as we were discussing the volatility in markets over the last few months. This was a relatively easy conversation, as this particular client has a very measured view to managing her pension fund and her investments. She doesn’t make rash decisions, she maintains a long-term perspective and doesn’t fret over every movement in the markets.

Our conversation then moved to on to the impact on all our lives of the Covid-19 restrictions – this is a topic coming up in every single conversation we’re having these days! As we chatted through the impact of the Covid-19 pandemic, we came to the conclusion that there are a lot of similarities between the worries caused by money and those caused by the pandemic. Let me explain…

 

It’s very easy to lose perspective

When the markets take a big hit as they did from the middle of February to mid-March, it’s very easy to lose perspective. After all, the S&P500 fell by over 30% in just over a month up to 23rd March. It was very easy to think then that your long-term financial plans were blown to bits. Of course, at that point you didn’t know that there was going to be an immediate and rapid recovery of much of those losses. Your plan is decided by your long-term strategy, not what happens over a period of 4 or 5 weeks.

Similarly, when Covid-19 cases started to spread around the world and found their way to Ireland, it was easy to think the end was nigh. While this virus probably still has a long way to run, it’s important to remember that approximately half of one percent of the population of Ireland have been diagnosed with Covid-19 up to mid-May, and that the mortality rate is a fraction again of that number. Every death is a tragedy for the families involved, but the overall impact has still been relatively small. Now just like the markets, we’re not predicting the future based on past performance, we’ll leave that to our medical experts.

 

Good behaviours will win the day

We’re always at pains to point this one out in relation to your money. Short-term tactical decisions such as trying to time the markets rarely pay off. You might get lucky from time to time, but more often than not market timing decisions turn into expensive mistakes. Other good behaviour such as having a plan, maintaining a budget and continued saving will help you towards long-term success.

The same applies to the virus. It’s been drilled into us all at this stage about the importance of washing our hands, good cough etiquette and not touching our faces, as well as the importance of social distancing. We’ll beat this virus through everyone playing their part and adopting these good behaviours.

 

Be careful who you listen to

This one is so important! If you only went to Twitter for your news, you risk being turned inside out every day, not knowing what to believe. The virus is the end of the world, or nothing to worry about. Everyone should be allowed back to work now, or the lockdown is being lifted too quickly. Who do you believe?

This is a regular bugbear of ours. The weekend papers and online media can be an enormous and unnecessary source of angst for investors. We always caution our clients against making investment decisions based on what you read. We think it is really important that over a period of time, you identify a small cohort of rational opinions that you really trust for their balanced and non-emotional views. Listen to them and shut out the sensationalist, headline grabbing noise in the background.

By the way, we hope we’re one of your trusted voices…

 

Stick to the plan

We always seem to end up here! That’s because this is so important in relation to your money. Have a long-term plan that will guide you towards your lifestyle objectives, and then stick to the plan.

The same applies to you and your family’s approach to staying healthy. Agreeing as a unit to stick together, maintain your good health habits and minimise your risks will help every one of you stay healthy. And then maybe you can start planning how you’re going to celebrate success when you come out of this crisis together, all fit and well. Because that’s the goal.

Stay healthy.

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Get your life cover in place when you don't need it

Experience in the life assurance industry shows that most life assurance policies are taken out by people in their 30’s, 40’s and to a lesser extent in their 50’s. There is a very low uptake of life assurance by people in their 20’s who simply think they don't need it.

We believe that it’s time to look again at this line of logic, and we ask you to consider why we believe it makes sense to get cover in place sooner rather than later. 

 

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Keep your head when all around you are losing theirs

Lots of factors are currently creating a great deal of uncertainty for investors; markets have been a bit jittery after such a strong performance in 2019, USA and Iran are causing a lot of tension in the Middle East and Brexit is finally happening. The picture is quite daunting for investors today.

So what do you do?

Well the answer is probably, not very much! Let us explain…

  

Stick to the plan

Your financial plan was developed to guide you to achieving your goals. Your plan is there to guide you, both when markets are racing ahead and also when they are more volatile. Now is not the time to start second guessing yourself and trying to predict where markets are going. Because you can't predict where they are going, and nor can we. Tune out the noise, stick to the plan and don't let emotions such as greed or fear cloud your decision-making.

 

Volatility is a feature of efficient markets

Investing doesn't happen in a straight line, you have to expect bumps along the road. Volatility is simply a feature of investment markets which go through periods of both calm and volatility, sometimes in line with the market cycle, at other times reacting to once-off events. Historically, times when markets are volatile have proven to be bad times to make significant investment decisions, as strategies tend to be coloured by short-term factors.

  

Stay diversified

One well tested principle of investing is to stick to the diversified asset allocation approach that was used in constructing your portfolio, as this is more likely to deliver long-term success. There are endless examples of investors chasing that one sure bet – technology companies in the late 1990’s, bank stocks in Ireland and foreign property investments in the 2000’s.  And we all know where these ended up. A key principle of successful investing is to stay diversified across asset classes, geographical regions and sectors. This will protect you against unforeseen negative developments in a single area. 

 

Keep on saving

When short-term volatility happens, some investors are slow to commit more money to their investment strategies. It’s important that you keep the faith and keep saving, as otherwise you are effectively trying to time the market. Keep investing, although talk to us about the best way to do this. It may make sense for you to employ a strategy such as “euro cost averaging”. This is where you invest a fixed amount at regular intervals and as a result if markets are moving around, you are buying in to the market at various price points.This softens the impact of significant market fluctuations.

 

Remember past successes

While of course we are always at pains to point out that past performance is not a guide to future performance, at the same time it’s sometimes worth looking back and seeing where you came from. This hopefully will give you confidence in the future! Look at an investment that you've had for a long time – this could be an old pension fund, a children’s education fund or even your family home. Or for example, just look at stock market returns over any 10year+ time frame. With very few exceptions, the results are extremely heartening. This will give you a sense of how time is your friend and will bolster your confidence to stick with a consistent investment approach throughout good and bad times. We're not talking about where once-off bets fell in your favour (that one time), instead where you stuck to a long-term strategy and have seen the rewards. 


Often it simply makes sense to sit down with an expert who will look dispassionately at your situation, and will reassure you to stick with your plan. We would be delighted to help you.

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What does ageing in Ireland look like today?

We’ve written before about the importance of a very planned approach to retirement. Having a healthy pension fund is what springs to mind for all of us in this regard – of course this is very important, as having access to financial resources will help you to ensure that you can enjoy your retirement and live it on your own terms.

But it’s not only about money. Money may be an enabler of the lifestyle that you choose. But you have to first of all do some thinking about what that lifestyle actually looks like! Who are the people that will be around you, where will you live, how will you fill your days, will you continue to work etc.? All of these are important questions that require careful consideration.

We recently came across The Irish Longitudinal Study on Ageing (TILDA), which is a large scale, nationally representative, long-term study on ageing in Ireland. It collects information from adults aged 50 years and over resident in Ireland and is one of the most comprehensive research studies of its kind both in Europe and internationally. TILDA’s Vision is to make Ireland ‘the best place in the world to grow old’ by studying the health, wealth and quality of life aspects of ageing. We thought this research was definitely worth sharing with you.

Four waves of research with over 8,000 people have been completed since the launch of the study in 2006. So what can we learn from TILDA to help us live a more fulfilled life in retirement?

 

Retirement is not the end

Quality of life peaks at age 68 – this is when life is at its best! TILDA found that people aged 80 enjoy a similar quality of life as people aged 50. It’s only from age 80 onwards that quality of life starts to decrease. So if you’re 60 today and retirement is on your horizon, you haven’t even reached your peak! The next 20 years should be great ones, so start thinking about how you can make that quality of life a reality.

 

Social participation is really important

Increased social integration, through maintaining a larger social network and positive supportive relationships with friends, is associated with higher quality of life. Similarly volunteering and participating in both active and social leisure activities lead to happier lives as you get older. So keep participating in your golf, bridge or amateur dramatics. Even if you are physically less able to participate fully in sports, keep up your club memberships where you can for the social interactions that you’ve enjoyed for many years.

 

Your living conditions are important

Independent living is an important goal for many people as they age, you want to stay at home. The condition of your home plays an important role in this. As your finances allow, make your home as easy and comfortable as possible to live in. For example, keeping your house warm has a big impact on your quality of life. It can be too easy to “let the house go” a bit. If your adult children suggest that it needs a lick or paint or carpets need to be replaced, listen to them. Where you can afford it, be willing to spend your hard-earned money to make your life more comfortable.

 

Stay strong and fit

Give yourself every chance for a long and happy life. Start or continue exercising today, and then keep it up! It will pay off in the long run. Frailty is a common condition in Ireland but is not inevitable and can be avoided, delayed and even reversed. The keys to this are staying active, avoiding falls, staying socially engaged and good nutrition.

 

There’s loads more brilliant content that is relevant to life over age 50 at TILDA. Simple changes in both your actions and outlook can go a long way. When you add to this our advice to help you with your financial outlook in retirement, you stand every chance of your later years indeed being your golden years.

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What's your financial plan for the next decade?

How has this happened? Surely we can’t already be facing into a new decade! Many of us remember fondly the big party we were at on New Year’s Eve as we entered the new century – and all the worries about the Y2K bug that was going to bring the end to many IT systems across the globe. We’re coming up to the 20th anniversary of that now…

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8 important principles to teach your kids about money

In today’s era of consumerism on a grand scale, it can be hard to maintain a clear and constant perspective about the value of money. Many of us muddle along, surviving, making mistakes and getting by. However this is no example to give to the next generation who are likely to pick up on our behaviours and habits. Instead we need to carefully teach our children about how to act responsibly with money and to give them the best chance of building positive financial habits for life.

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How tidy are your retirement affairs?

As part of our work with clients, one really important element of an overall financial plan is retirement planning. Of course, it happens quite often that clients are some way along this journey before we come into contact with them.

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What our investment research is telling us

We carry out a lot of research throughout the year, whether it’s attending conferences and seminars, meeting investment managers and product providers and also carrying out desk-based research. Inevitably from time to time, our reading pile gets a little higher! However this is now a great time of year to make real inroads into that reading.

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Investing is about more than money

Traditionally the role of a financial adviser has been to help you grow your financial resources. This has evolved significantly in more recent times into a much broader role, as financial planners have developed the skills and the tools to provide a lot more value than this. Sitting at the heart of what we do now is helping you to identify the life that you want to live, and then through careful financial planning, guiding you on your financial journey to ensure you achieve your goals and dreams.

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Claims are what count

As part of our financial planning conversations with you, we always bring the attention around to subjects that are not easy to think about – a serious illness or death visiting a family member or indeed yourself. We all naturally don’t want to spend too long thinking about this, but unfortunately for us to do our job properly it’s a subject that we simply must contemplate.

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Lessons from a Mexican Fisherman

We’d like to share a story with you that originated back in 1963 when published by the German writer, Heinrich Böll. It’s a very short story, but perfectly captures one of the key messages that we stress with our clients.

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What factors impact your investment returns?

Well there is no exhaustive list for this one – there really are so many potential factors that can influence your investment returns. When you ask a professional investor, they will often jump to factors such as the economy, sentiment and interest rates. All very relevant factors.

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Be on your best (financial) behaviour in 2019

2018 ended with a bit of a sting in the tail for investors, where we saw a lot of volatility in markets and a modest correction. While many analysts are forecasting single digit growth in 2019, they are also suggesting that 2019 may be another bumpy ride for investors with more volatility in markets. We fully recognise that volatility can cause uncertainty and lack of confidence for investors, but it's our job to help you to avoid making mistakes now that will hurt your long term financial future. 

Here are a few habits and behaviours that we believe will stand you in good stead throughout 2019, and will prevent you from making short term mistakes that will negatively impact you in the future.  

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5 reasons it's time to review your pension

At the start of a new year and as outlined in our other article this month, we all tend to take stock of how we manage our finances. We look at our financial habits, ways of saving money and managing our spending better. This is also a great time of year to take a hard look at our retirement planning, to ensure it is in the best shape possible.

Here goes on five reasons why we think it’s a good time now to do so.

 

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