To include the State Pension or to ignore the State Pension, that is the question…when you’re retirement planning.
 
If you’re a millennial (born between 1981 and 1996) or later, I’ve come to a bold conclusion: it’s best to assume you won’t receive a State Pension, when you’re planning how much to save for retirement.  Let me explain why…
 
While it's likely that some form of State Pension will persist, I believe there’s a good chance that it will become much less generous or that the state retirement age will increase even further. It is also possible that it will become means-tested so only the least well-off will receive it. Because the UK population is ageing and, as a result, the cost of the State Pension is increasing, one or all of these possibilities is almost inevitable.
 
With an ageing population, a conundrum arises: an increasing number of people require care in their later years, while the workforce available to support them through tax contributions continues to dwindle. And, as State Pensions rely on current tax collections – that is, taxes collected from today’s workers are used to pay today’s pensioners, fewer workers will shoulder the burden of supporting a larger and growing retired population. So pensions will be less generous unless something changes.
  
How has retirement and the State Pension evolved over time?
 
Retirement is still a rather new concept. In the past the average person worked until they physically couldn't anymore; if they were lucky, their family looked after them in old age otherwise they faced serious financial struggles (this is how it still works for many in developing economies).
 
In the UK, the introduction of the means-tested 'Old Age Pension' in 1909 marked a big turning point, providing a modest income to people aged 70+ with an income below £21 a year. The pension payable to a single person of 25p a month is roughly equivalent to about £157/month today (if we account for inflation and the increase in average earnings over time) – very much in line with the current Basic State Pension of £156.20.
 
But...average life expectancy in the UK was about 50 in 1909 so, most people did not reach the state retirement age.

This initial State Pension didn’t require any contributions to be made in order to be entitled to it; a contributory State Pension scheme only came about in 1925 for manual workers and others earning £250 a year or less (equivalent to £12,500 in 2023 prices).
 
It wasn’t until after the Second World War, in 1946, when the ‘Welfare State’ was created, that a contributory State Pension applied for all people.
 
From 1946 until 1980 people with higher average earnings enjoyed a higher State Pension, however, linking State Pensions to earnings was abolished in 1980. Personally, I think the new flat rate for all is much fairer.
 
The State Pension has become less generous over time and may need to become less generous still
 
In terms of what the money you receive can purchase, the State Pension seems to have not changed too much since 1909  - it’s just as generous or not so generous, depending on your view, as it ever was. What has changed since the introduction of the Welfare State is the bar you need to meet in order to get a State Pension.

Whereas women used to start receiving their State Pension at 60 and men at 65, now, both men and women get it at 65 for the older generation and that’s rising to 68 for my generation.
 
In addition, while someone used to need just 30 qualifying years of National Insurance contributions or credits to get the full basic State Pension, a total of 35 years is now needed and, to get anything at all, at least 10 years of National Insurance contributions or credits is required. These changes reflect the challenges governments face in balancing the needs of retirees with the available resources.
 
To maintain the purchasing power of pensioners, the Government has maintained a 'triple lock' since 2010; under this mechanism the basic State Pension is increased each year by either average wage increases, average price increases (i.e. inflation) or 2.5%, whichever is higher.
 
Despite all this, to continue to be able to take care of those that need it most, more may need to be done. There is only so much that can be done to raise the qualifying age or the number of years of contributions; at some point, it may become necessary to start cutting out those that don’t really need the State Pension given their other sources of income. And if I’m honest, I wouldn’t be upset if this is where we end up because if the government can balance its books it can stop progressively increasing taxes (including through fiscal drag).
 
What does the State Pension currently cost?
 
Consider this: in the 2023-24 fiscal year, an estimated £124.3 billion (10.5% of public spending) is projected to be spent on State Pensions. This figure, equivalent to approximately £4,400 per household, highlights the scale of financial commitment required, particularly when you realise that UK median household disposable income (that’s income after tax) is only about £32,300.

Just to give you an idea of how mind-blowing this statistic is, in my native Malawi, the government's budget for the whole year for absolutely everything is £450 per household (UK: £42,000). And, the average Malawian household is 4.3 people compared to just 2.4 people in the UK.
 
And what’s going on with population projections?
 
Without an increase in immigration, the UK’s natural population is projected to start declining by 2025 … that’s in two years; a lot sooner than was expected based on estimates made in 2018; at that point we didn’t expect the natural population to start declining until 2043.
 
So, what’s the long and short of it?
 
There’s no two ways about it, to sustain the current generosity of State Pension in the context of an ageing population, some difficult decisions will have to be made. Sustaining the system will require adjustments such as raising the retirement age further (it’s difficult to imagine, I know) or reassessing eligibility criteria. In the short-term increased immigration may help to boost tax receipts but it’s unlikely to be a long-term solution.
 
Some thorny questions will need to be addressed on how to balance fairness and affordability when it comes to State Pensions.

Having enjoyed a sneak peak into the state of our public finances, it seems sensible that if you’re planning how much to save for retirement, as we did last week, especially if you’d like to retire early, then the best approach is to view the State Pension as a bonus. It will be awesome to get it but if you find that you’re not entitled to it, then by saving as though it won’t be there, the retirement you would like to have won’t be scuppered.
 
References
 
How much would the original old age pension be worth today?
Basic state pension rates, Royal London
Why should I pay national insurance once I've paid enough for a state pension? Steve Webb (former pensions minister)
A brief guide to the public finances, OBR
Average household income, UK: financial year ending 2022, ONS
UK natural population set to start to decline by 2025, FT
Government expenditure on state pension in the United Kingdom from 1948/49+, Statista

You can listen to this episode on YouTube.

Retirement is a dream shared by many of us, but achieving it requires careful planning and early action. In this article, we’ll delve into the world of retirement savings and reveal exactly how much you need to save each month to retire comfortably. So, if you're aiming for financial independence but are possibly thinking it’s a pipe dream, buckle up and discover the key to retiring early!
 
Understanding the two pension types – DC and DB pensions
 
Before we jump into the numbers, let's familiarize ourselves with the two primary types of pensions: Nowadays, most people have "defined contribution" (or DC) pensions, where the amount you and your employer contribute determines your retirement income. The risk lies with you, because your return, i.e. the pot of cash you’ll have at retirement, depends on the performance of the stock market.
 
Previously, "defined benefit" (or DB) pensions were more common, guaranteeing a pension until death based on your final or average salary and the years of service. However, DB schemes have mostly been phased out and won’t be covered in this article.
 
If you have a DC pension, if the stock market performs poorly you’ll either have to work longer or plan for a leaner retirement. Defined contribution schemes are sometimes called ‘money purchase’ schemes or self-invested personal pensions (SIPPs). They are similar to what Americans call 401K plans.
 
How do you calculate your retirement "pot"?
 
To estimate the size of the retirement fund you'll need, we can employ a simple rule of thumb. Multiply your desired annual retirement income by 25, and voila! You have worked out roughly how much you should aim to accumulate. But why 25?
 
This is based on the ‘4% rule’ – a widely accepted guideline that suggests that withdrawing 4% of your invested pot annually, ensures your money lasts. Research has shown that even after three decades, your investments tend to grow due to average growth rates of a diversified investment fund surpassing the 4% withdrawal rate.
 
{If the nerd in you wants to get into the maths: 4% = 4/100 and 100/4 = 25; … you don’t need to understand the maths, though, just use the rule}
 
Estimating your retirement expenses – how much will you need to spend in retirement?
 
Now, let's discuss the various lifestyle options and corresponding expenses you might encounter during retirement: according to research conducted by Loughborough University and the Pensions and Lifetime Savings Association, we can categorise retirement lifestyles into three levels: minimum living standard, moderate lifestyle, and comfortable lifestyle. To account for inflation experienced since these studies were done, I’ve increased the figures by 20%.
 
To maintain a minimum living standard, a single retiree requires an annual income of £12,240, while a couple would need £18,840. For a moderate lifestyle, the figures rise to £24,240 for a single person and £34,920 for a couple. Lastly, to enjoy a comfortable retirement, aim for an income of £39,600 if you're single or £57,000 for a couple.

(source: moneyfacts.co.uk; and increased by 20%)
 
What are these different lifestyles assuming?

​A minimum living standard assumes a single retiree spends £46 per week on a food shop, has a one-week holiday and a long weekend in the UK each year, does not own a car and spends £555 a year on clothing and footwear.
With a moderate lifestyle, our single retiree spends £55 on food each week, enjoys two weeks in Europe and a long weekend in the UK each year, and spends £900 on clothing and footwear each year.
With a comfortable lifestyle, the single retiree spends £67 per week on their food shop, enjoys three weeks in Europe every year and spends £1,200-£1,800 on clothing and footwear each year.
 
Calculating your investment targets
 
Using the 4% rule and these lifestyle figures, we can estimate the amount you need to save for retirement. Here's a breakdown based on your desired lifestyle and whether you're single or part of a couple:

I know that these numbers look huge. But keep listening, I’ll show you that you can achieve them much more easily than you think.
 
Getting started: how much to save each month
 
Now, let's explore the exciting part—how much you need to save each month to reach your retirement goals.
 
Assuming you're a basic rate taxpayer, investing in a global passive fund with an average annual growth rate of 7% (we’ll discuss whether this is a reasonable assumption in a future post), aiming for the ‘comfortable’ lifestyle (i.e. £990k if single; £1.425m for couples) and ignoring the state pension (I’ll explain why in the next article) and employer contributions these are the monthly amounts you need to put into a pension account based on your starting age (rounded to the nearest 5):

Each month until you’re 68 you need to save:

What the table shows is that the younger you start saving and the longer you save for, the less you need to set aside each month.
 
Factors that can offset the numbers
 
Don't worry if these saving targets seem daunting because there are several factors that can actually work in your favour, offsetting even the larger amounts you need to save if you start late. Let's take a look at these positive factors:

• If you're employed (i.e. rather than self-employed), chances are your employer will also contribute to your pension fund, on top of your own contributions. Many employers even offer a ‘matching’ programme, where they match a percentage of your contributions. For example, if you contribute 3%, your employer will also contribute 3%. Contact your HR department to learn how your company’s policy works.
• The state pension can also help offset the amount you need to save. However, whether or not you should include the state pension in your basic calculation for your target pension pot is open to debate.
• Any gifts or inheritances super charge your journey to retirement. However, research suggests that the average Briton doesn’t get an inheritance until about the age of 61. If you’re very fortunate, you may receive a gift or inheritance from your grandparents – although at that stage you will more than likely need to invest it in a home, putting a portion into a pension would supercharge its growth. Here’s how the magic of compounding works:
  • Imagine receiving a £10,000 gift at the age of 28 and investing it in a diversified global passive equity fund. By the time you turn 68, without any additional contributions, that initial amount would grow to an impressive £163,000, assuming a 7% return. Similarly, if you had £50,000 at age 22 and let it grow with the same assumptions, it would multiply to an astonishing £1.2 million by the time you're 68.
• Lastly, if you're a 40% taxpayer, the tax savings on your pension contributions are even greater. Contributions to your pension are made before taxes are calculated, so saving becomes more efficient. This means you need to save even less to achieve the same effect as someone in the 20% tax bracket.

 
In conclusion, securing a comfortable retirement requires forward thinking. If you didn't have this information when you started working, don't worry—now you do! There's no time like the present to start saving for your future. And here's a bonus: you can share this valuable knowledge with your children, ensuring they don't make the same mistake that many others do—starting too late. With the right strategies and a proactive approach, you can pave the way for a financially secure and fulfilling retirement. Your future is in your hands.
 
References
What Is the 4% Rule for Withdrawals in Retirement and How Much Can You Spend?
Q&A: How much do I need to save for a comfortable retirement?
Pensioners need a £33,000 a year income to enjoy a comfortable retirement
Fidelity Retirement calculator
How to get the £260,000 pension pot needed for a comfortable retirement - and why it might not be as hard as it sounds
Dave Ramsey investment calculator (ignore the $sign)
Fidelity.co.uk retirement calculator
​

Fifi asks about how best to manage her money when her income from month to month fluctuates a lot with some months bringing in just enough for her to get by. She also wonders how best to manage her credit score and to boost her monthly income. 

I give a broad answer covering:

• cutting back on expenses;
• increasing revenue;
• thinking about the legacy you want to leave; and 
• creating an exit strategy

Heather 
p.s. subscribe to my podcast and ask me any money question, HERE - do it now!

​Hi Heather,
 
My name’s Nicola. I’m fortunate enough to still have a job right now, most of my friends have lost their jobs and it’s made me realise that if I had lost my job I wouldn’t be able to survive at all. I have no savings, a few debts and spend all my earnings every month. What do I need to start doing, right now, to ensure that by the time the next crisis hits the economy, I would be able to survive regardless of my employment situation?
 
Thanks for all the financial knowledge you share.

Dave Ramsey is having a field day with this COVID-19 pandemic and associated financial crisis! His very conservative school of advice is exactly the type of financial planning that you need to survive an economic crisis and it works especially well if you are in the type of job that is insecure and disappears in a market downturn. Go to his channel and he is all about the, “I told you so.”
 
Quite soon after the global COVID-19 pandemic hit in 2020, stock markets plunged to 2017 levels. Lots of investors got scared and decided to hold their money as cash, however, those of us that follow the Warren Buffet school of investing were not selling our shares, we continued buying as usual but at the now lower prices to reduce the average price at which we bought our shares. It turns out to have been a good idea because portfolios have bounced back very rapidly BUT it wouldn't have mattered either way, those of us with 15 plus horizon have plenty of time to recover and make fresh gains.
 
Investing consistently over time and especially when stock prices are falling helps to reduce the average price at which you buy your shares, this is called “Dollar Cost Averaging”.
 
Getting your financial house in order takes time; it is not an overnight thing. If you have a low income or significant debts it can take very many years indeed but these are the fundamentals you will not have regretted following in a world where the next crisis is always just around the corner.
 
I don’t claim to have created a new financial world order; the principles I like and follow have been collected from many financial authors over the last fifteen years:
 
1. CREATE AN EMERGENCY FUND (and AD HOC FUND)
 
Have an emergency fund of £1,000. This will cover most emergencies. If you’re a student, a £500 emergency fund should be sufficient.
 
I used 60% of our £1,000 emergency fund to buy a freezer just before the UK went into COVID-19 lockdown. We only had a 70/30 fridge/freezer which means the freezer portion is tiny.
 
I’ve personally always preferred fresh fruit, veg and milk to frozen or canned stuff so it was never a problem before but having such a low stock of food made me properly anxious and I am not even the anxious type. I won’t tell you the drama I went through to get what was probably Britain’s last freezer from a back alley warehouse shop but I do know I am not the only one that had some kind of emergency when COVID-19 hit.
 
If you did use your emergency fund then please share how you used yours in the comments.
 
If you didn’t have to use your emergency fund, that is awesome but I know you will have had a certain level of peace of mind by having had the £1,000 emergency fund set aside. An emergency fund is there to be used for any expenditure that you feel has to be made but had not been budgeted for: a car breakdown, an unexpected medical expense etc.
 
How should you set up your emergency fund?
 
Many UK savings accounts and current accounts are completely free so I would just add a savings account at your existing bank and build your emergency fund there.
 
We also use the emergency fund for ‘ad hoc’ expenses so it gets topped up monthly to accommodate what we call ad hoc expenses. These are expected annual expenses that we prefer to pay for annually rather than by monthly direct debit. Ad hoc expenses include:

• Car insurances;
• MOT and car service costs;
• Car tax;
• Buildings and content insurances;

 
For example, if you figure out that these will total £1,800 per year, then you need to add an extra £150 every month to your Emergency Fund. Sometimes it will dip below £1,000 but because it’s topped up religiously every month it will get topped up again and if these annual expenses are bunched up around the same time of the year sometimes your emergency fund will be well above £1,000 but that is okay because you know that the money is there for a specific purpose.
 
Paying for lumpy expenses annually rather than monthly gives you the same peace of mind as buying things for cash. You’ve paid for it, it’s done and frequently paying for it once a year is cheaper than setting up payments. Of course, if it costs exactly the same to pay monthly then that might be the better option to even out your cash flow.
 
Alternative option: You could split bank accounts up further by having a separate "Emergency Fund" bank account and Ad Hoc Fund or Annual Expenses account; that way, the Emergency Fund remains sacred for a true emergency.
 
2. GET TO DEBT FREEDOM
 
You will not ever regret having paid your debts off completely. Those that had zero debt when COVID-19 hit will have been best placed to weather the storm because they have no debt payments to be making in addition to their costs of living.
 
If you want to tackle your debts systematically, get my “notes to debt freedom”.
 
If you do have outstanding debt then create a plan such that in under 3 years, and ideally within 12 to 18 months you will be completely debt free. My notes to debt freedom will guide you through that process.
 
3. SET UP A CRISIS FUND
 
The crisis fund is completely different to the emergency fund. A crisis fund is there to protect you against times of unemployment.
 
The usual advice is to maintain 3 to 6 months of expenses to protect yourself against periods of unemployment. If you have a budget then you can easily calculate which expenses would continue whether you were unemployed or not. For guidance on creating your budget plus a downloadable spreadsheet to create a budget see my article, “Q&A: I hate budgeting – am I doomed to be broke?”
 
Three months of living expenses is considered enough if you have a safe recession-proof job that’s likely to be easy to find again should you be unemployed for a period, think nurse, doctor, accountant, delivery person, bin man etc. If there is one thing that is being amply revealed by COVID-19, it’s the types of jobs that are safe and essential to our day-to-day life. A recession is not the only reason you might need to take time off work so that's why you need a crisis fund even if your job is recession proof. If you disliked your work environment because it was toxic, for instance, you might prefer to leave even if you haven't secured another job to move on to.
 
If you send your children to private school, add at least a term of school fees to the crisis fund.
 
If you have a property portfolio then add another three months of related expenses. You can make a reasonable judgment on this. If you have a large portfolio then this may not be necessary as you can make the judgment that some properties will always be occupied to support those properties that are not occupied. If you have lots of buy-to-let mortgages then do make a reasonable provision to accommodate continued payment of mortgages even if you lost a significant portion of rental income.
 
If, when the COVID-19 pandemic hit you had:

• A fully funded emergency fund;
• A fully funded annual expenses (or ad hoc) account;
• No consumer debt, (only your mortgage and perhaps some student debt – and by the way any borrowed money other than a mortgage or a student loan is consumer debt); AND finally,
• A fully funded crisis fund then you are feeling pretty secure about your finances.

 
If you have a mortgage-free portfolio of buy-to-let properties then you are feeling even more secure. With the stock market crash, it’s best to ride it out and not sell any of your shares. Selling would just convert paper losses to real losses. With a fully-outright-owned property portfolio you can enjoy some income stability in addition to having a healthy balance sheet as outlined above.
 
To clarify, my household is not in the perfect situation either but we have been working towards it and will continue to do so. Our plan to get to the above situation is a 10-year plan and we are only at about year 2 right now. Thankfully we both still have our jobs so we can continue focusing on that plan.

4. GET/HAVE AN AFFORDABLE MORTGAGE

The more affordable your mortgage is, the less financial pressure it adds to your life. 

If you are in a relationship, an ideal goal would be to have a life that is affordable on the lowest of your two salaries. So, whatever your mortgage is, that mortgage and all your other costs of living would be affordable on the lowest of your two salaries.

Not entirely possible for all people. However, one way to work this is to have a very long-dated mortgage, e.g. a 30-year mortgage instead of a 15-year one, and in good times, make overpayments as though it were a shorter mortgage. However, in a crisis you would reduce payments on the mortgage to conserve cash.

I reduced payments on one of my buy-to-let mortgages as soon as the covid-19 lockdown was put in place in the UK. The monthly re-payments for the last year were £2,500/month, which was £900 above the mortgage deal and in fact less than £500 of each payment was interest. This week I called the bank and reduced mortgage payments by £900 to conserve cash in case I lose a tenant, etc. This can work in exactly the same way for your personal mortgage.

If I lose the tenant, I will call the bank and ask to pay interest only until the lockdown is over. My bank would probably be completely fine with that given my level of over-payments far exceed what they expected on the mortgage deal.

In the past I have used this same type of cash flow management by getting an interest-only mortgage deal on our home and making excess payments with the intention of cutting back to interest only should times get tough such that we need to live on one salary. However, interest-only deals with a good interest rate are much harder to secure nowadays than they were in 2010 when I last got a residential interest-only mortgage.

If your mortgage becomes unaffordable for any reason, call your bank and get a mortgage holiday. The media has made it sound as though mortgage holidays are something banks are doing as a one-off exceptional thing for COVID-19 but the truth is banks are always willing to give people payment holidays if they can prove that they are needed. Your bank would prefer not to have the hassle of repossessing a home.

That wraps up the key 'big picture' things you can do to crisis proof your finances.
 
>>>HABITS OF A LIFETIME THAT WILL HELP YOU SURVIVE THE CRISIS

No matter what your personal finances look like, the one thing you can do right now is look at your monthly and annual budget with a fine tooth comb and figure out how to cut your cost of living – if you have a very expensive lifestyle, this is the time to think through your habits. If you want me to help you rework your finances, schedule a call using the “request a call button” on my coach page. Sometimes you just need an independent party to point out where you could possibly cut back, you know, the non-essentials you’ve began to see as essentials.
 
Being confined to your home is not easy especially if you enjoy being out and about. The plethora of memes that have hit our whatsapp screens show just how much people are struggling to keep themselves entertained during the period of lockdown and social isolation. If your job, like mine, can continue as normal even from home then you have less time to get bored, however, this is the time when you can work on things that you wanted to do before because you don’t have a commute:

• Indoor exercise – yoga, pilates, strength training: sit-ups, push-ups, I am very envious of all those that are using this time to get their ab game in tip top shape;
• Blogging – if you love to write, this is the time to start working on your writing skills;
• Cookery and crafts – try out all those recipes that you've been meaning to try;
• Spending quality time with the children, like actually engaging and listening and getting to know your children’s personalities really well.

 
These are just a few ideas and I am sure you have more. Once the initial overwhelm and disruption to normal life created by COVID-19 subsides you will have the mental bandwidth to figure out how you can make the best use of this time.
 
Oh and by the way, watching endless YouTube videos of all the skills you would love to develop, doesn’t count. Start working on something that you would never have otherwise had the opportunity to explore.

In summary, to get your financial house in order:

1. Build a £1,000 emergency fund; £500 if you are a student.
2. Build an adhoc fund for annual bills and add an amount to it every month equivalent to total annual bills divided by 12.
3. Build a crisis or unemployment fund with 3 to 6 months of expenses including a term of school fees and enough liquidity to support a rental portfolio.
4. Have an affordable mortgage;
5. Assess your expenses today to see where you can cut back.
6. If you don’t have life insurance or a will, this is a good time to get that in place.
7. Engage in positive hobbies to distract you from focusing too much on COVID-19.

​Hope this helped. My prayers are with those that have lost a loved one or suffered a job loss at this already difficult time.

Lots of love and adoration, 
Heather

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If your partner died today would you struggle financially? Would you be able to make mortgage payments, pay the bills and school fees easily? I would and it’s not because I’ve got a huge stash of cash in the bank.
 
If you are a parent and you haven’t done this, I suggest you stop doing whatever you’re doing right now and sort it out!
 
I come from a country where most people don’t plan for their death at all. When a Malawian dies their family often expects everyone to pitch in for the funeral. There is often no financial plan for the children left behind and some well-wishing relative will normally take the children in.
 
The death rate of young, working people in Malawi is high so this is a frequent occurrence.
 
Now, because the cost of insurance is high and unaffordable for most, this is acceptable. I love coming from a society that supports its own.
 
If you live in a developed country, however, I think it’s completely unacceptable. Whether you own something or nothing, are an immigrant or a native you should get life insurance especially if you have kids.
 
WHAT IS LIFE INSURANCE?
 
In exchange for monthly payments called insurance premiums a life insurance contract pays out a lump sum if the holder of the insurance dies. This is called pure life insurance.
 
If you want to be covered if you get critically ill as well, you can get life insurance with critical illness cover. The specific illnesses that are covered are listed in the insurance contract.
 
Paying premiums can feel like a waste of money but if you think about it as a payment for peace of mind, it makes paying feel like less of a burden.
 
The insurance can be under a single name or joint names. If it is in joint names the cover pays out when either one of the named parties dies or falls critically ill (if critical illness is included).
 
WHAT IS MORTGAGE INSURANCE?
 
In exchange for monthly payments (mortgage insurance premiums) a mortgage insurance contract pays out a lump sum if the holder of the insurance dies.
 
The sum paid out is designed to track the amount outstanding on your mortgage. This means the amount you would get on a payout falls from month to month as the mortgage outstanding falls.
 
You can also add critical illness cover to a mortgage insurance contract.
 
WHY WOULD YOU GET INSURANCE? WHY DOES IT MATTER?
 
You buy insurance to make sure your loved ones don’t struggle financially if the worst should happen – that is, if you died. It’s a back up plan. Plan B.
 
So, if for example your partner dies, you would contact the insurance company, present the death certificate and they would pay you whatever the insurance contracts states they should pay.
 
Although a mortgage insurance contract is designed to track your mortgage, when the money is paid out you are free to use it for whatever you want. You don’t have to pay off the mortgage.
 
If you made overpayments on your mortgage or if the interest rate on the mortgage insurance contract is higher than the interest rate you were actually paying (this is usually the case) you will have some money left over after paying off the mortgage.
 
Claiming for a death can be easier than claiming for an illness because it’s simpler to prove.
 
Sometimes when a claim is put in for a critical illness insurance companies go all out trying to prove you hid something when you signed the contract.
 
The good news is that it’s a lot harder for companies in Europe to do that nowadays. The courts look more favourably upon the contract holder especially if any omission the insurance company claims was made is completely unrelated to the illness at hand.
 
WHAT IF YOU DON’T OWN PROPERTY OR ANYTHING ELSE?
 
Get life insurance anyway to cover funeral expenses and to give the surviving partner time to grieve without worrying about money.
 
MY LOVER IS GOING TO KILL ME TO GET THE INSURANCE PAYOUT!
 
I’ve heard some people argue that getting life insurance isn’t a good decision because it would incentivise their partner to kill them. Firstly, if you think this, get a new partner.
 
That said, to avoid any sort of incentive get a level of cover that’s worth less than your partner’s lifetime earnings. If your partner’s earnings over the life you’ll have together will exceed the insurance contract’s payout then this won’t be a risk.
 
Don’t forget that there’s a financial burden when a death occurs even if the partner that dies wasn’t earning money but worked in the home. In the case where the homemaker dies the earner has to now invest in costly childcare and home cleaning services.
 
WHAT DOES INSURANCE COST AND WHERE CAN YOU GET IT?
 
I don’t recommend getting life insurance through price comparison websites. Ideally, get the advice of an independent financial adviser so that they can guide you towards a provider that will suit your needs best.
 
Try to get life insurance from a well-known company or bank. If you have never heard of the company check that they are regulated by the Financial Conduct Authority in the UK or whoever your local regulator is you are else where.
 
If you’re 20 years old, £200,000 of pure life cover for 25 years costs as little as £8/month. This increases to about £10 per month if you’re 30.
 
Our key interest was covering our children’s private education. The expected cost is £24,000 a year and we estimated to have such costs for the next 21 years so we got a level £504,000 of insurance cover for 21 years with critical illness included for about £87.10/month. This sounds like a lot but without the critical illness cover it was under £40/month.
 
Mortgage insurance cover costs us £37.10/month. It doesn’t include critical illness.
 
Oh, yeah, and while you’re at it please get a will in place too.
 
What are your thoughts on life insurance? A great way to get peace of mind or a waste of good earned cash?

​Have a business or life question you want me to answer? Please email it to me with the subject “Question”. Note that all such questions will be answered as a blog post and will be sent to my full email list. 

Want to start a business? Check out The Money Spot Program.

Last Sunday as I wrote my plans for the week ahead I wondered how many people do this.
 
I don’t do it every Sunday and when I don’t, my week is not productive at all, I feel as though I am wondering about aimlessly productivity-wise.
 
Conversely, when I plan I’m so much more focused that I can just let emails pile up as I try to meet personal deadlines before close of business on Friday. I used to plan work during the weekend but I don’t tend to anymore.
 
So, I sat down and thought about why I like planning on Sundays.
 
Mental Preparation
 
As with most people, my productive/working week starts on Monday. If I make plans on Sunday it means that I am ready to go by the time Monday starts.
 
For me, it doesn’t work to do this planning on any other day because it makes Mondays feel like they’ve started on the wrong path.
 
Reviewing The Week
 
The planning process doesn’t take much time, perhaps 20 minutes, but it also allows me to review what didn’t work or happen the week before.
 
Most people don’t finish everything they tasked themselves to do because, by nature, we all think things take less time than they actually do.
 
It’s Saturday morning as I write this and when I woke up at 4 a.m. I planned to write, post and schedule emails for three blogs. I’m only on my second blog and the third will not happen. This is what happens, it’s life.
 
It’s okay though, because it’s Saturday, and I don’t work on Saturdays but my body clock forgot that so here we are, essentially in “bonus time”, doing some extra work.
 
Creating Focus & Clarity
 
Unlike New Years’ Resolutions weekly reviews tend to be more specific and generally much more achievable.
 
Having a focus for the week gives each day a sense of direction it doesn’t have when you just wake up and start making things up as you go along.
 
Taking Time To Think
 
Normally, when the week starts we go into autopilot and don’t pause to think even when we know we need to. Sundays are a good time to have this very necessary pause so that we don’t go into overdrive doing things week-in week-out that are not working.
 
Sundays are an opportunity to change tack, to refocus, to energize.
 
My big question to you is: do you sit down and plan your week? How do you plan? How could you plan better?

Have a business or life question you want me to answer? Please email it to me with the subject “Question”. Note that all such questions will be answered as a blog post and will be sent to my full email list. 

Want to start a business? Check out The Money Spot Program.