None of us are born immune to worrying about finances. True, you can take steps to improve your financial health, ensure a strong foundation for the future, and alleviate any worries that used to keep you up at night but, until that time, the tendency for money worries to creep in is high.

Unfortunately, this past year has made those worries all the more acute. Many are looking ahead to the winter with trepidation, while the new year represents a big question mark in so many ways. Ensuring your finances are protected is vital, but knowing where to start – particularly during rocky times – can be a sticking point.

After all, financial protection is a broad subject. There are plenty of factors that can – and do – pose a risk to financial stability, and only by addressing each concern with a financial advisor can you start to diminish those worries.

What is Financial Protection?

Anything that is designed to add a stronger sense of security to your financial future falls under the remit of ‘financial protection’. Your income, your ability to work, and your business’s health (if applicable) all represent the focus of any discussion about protecting your finances, and will determine what types of protection you need in order to feel confident about the future.

For those who are just now starting to think about boosting their financial health, the focus often falls first on the outgoings: limiting unnecessary spending, for instance, or tracking down old direct debits that are no longer needed. These are the (relatively) quick and easy fixes to a head plagued by financial concerns, but a more comprehensive, long-term move toward financial stability will be one that addresses things from the source.

Providing financial planning advice tailored to our clients’ unique situations is what we do, so here are a few things to consider if you’ve made the decision to protect your finances better.

It Means Addressing the Risks to Your Income, However Remote or Unlikely They Seem

Your income is essential to meeting those monthly or yearly financial goals, but we all need a back-up plan. No line of income is bulletproof, after all, and while many of us work on shoring up our savings accounts for that exact reason, feeling forced to dip into that pot is far from ideal.

One of the biggest risks to income is illness. We cannot ever guarantee that our lives – and, by extension, our jobs – won’t be impacted by poor health. Consider the fact that, between June and August this year alone, the number of people considered economically inactive rose by 0.6% – and the Office of National Statistics found the biggest driver to be long-term sickness. In fact, they found that the total number of people unable to work due to illness reached a record high.*

There are ways to protect your income against illness, but the type of product you stand to benefit from most will depend on a range of factors, such as your employment status (whether you’re self-employed, in permanent employment, or a company director, for instance), as well as your company’s policy concerning sick pay.

Depending on those factors, you could consider:

  • Income Insurance

Income insurance protects you against loss of income due to illness or injury. It is important to keep in mind that it does not cover loss of employment due to redundancy.
If you’re looking at income insurance, then it’s worth knowing that there are many, many different products out there. It’s not just an option for those who are full-time employees, and some income insurance policies are specifically designed for those who are self-employed.
Income insurance will not pay your full salary, but it will reimburse you a percentage of your salary – and continue to do so until you are back in employment.

  • Critical Illness Cover

While it sounds similar, critical illness cover is quite different. Yes, it is a policy taken out to ensure financial reimbursement if you become seriously ill, but rather than replacing your salary until you are back at work, it will pay out a single lump sum.
This lump sum can be a lifeline if you are unable to continue working during your illness.
The current rate for statutory sick pay is £99.35 per week for up to 28 weeks. This is significantly less than the average worker is taking home – which, in August of this year, was just over £600 (total pay) – which is why cover for the worst-case scenario can prove so vital.
Critical Illness Cover and Income Insurance both offer very different benefits, and you can’t decide what’s best for you on a whim. A detailed conversation with your advisor will shed more light on the policy that will offer the most support to you.

It Also Means Considering Your Family’s Future – One Without You In It

Planning ahead inevitably means planning for the very worst-case scenarios, no matter how much we’d like to put them to the backs of our minds. As you start to create your own family, protecting your finances turns into protecting the household finances and, for that, you need to consider what plans are in place if you die unexpectedly.

For this, one of the clearest options is life insurance.

As with any insurance policy, life insurance does not cover every potential scenario, and different policies will offer different pay-outs depending on what you’re able to pay into them – and your state of health at the time the policy is taken out.

Life insurance really can take a considerable weight off the policy holder’s shoulders, particularly if they are the main or sole provider for their household, but these policies can be expensive. There are, however, many, many different products out there. As independent chartered financial advisors, we can walk you through the process of obtaining a life insurance policy that really works for you – rather than a limited selection of products.

Ensure You’re Getting the Right Help to Make Sound Investments

The benefits to building a strong investment portfolio don’t disappear during times of economic uncertainty, but the importance of taking a measured approach using expert financial advice and guidance becomes all the more acute.

The right investment portfolio will match your willingness (and ability) to take risks, and offer an additional line of income that could help to bolster your finances now, or offer an invaluable support way off in the future.

Our advisors can help you to create a long-term plan that truly underpins your plans. Making investments isn’t tricky, but understanding which investments are worth making (and which aren’t) is much, much harder. This is why we would never recommend anyone tackle the job of building a sturdy investment portfolio alone, despite the fact that the ability to do so is (literally) at our fingertips these days.

Ultimately, the very best thing you can do for your finances is take charge, and get the advice you need in order to making the most of your investments and savings, and ensure you have a solid, weatherproof plan in place for the future. Click here to get in touch with us to find out more about how we can work with you.