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Take control of your future
Ivan Ahern shares the first steps in creating a financial plan and when you should ask for help
you can do without. This is the important step in becoming financially fit for life as it identifies the money you need to financially survive if something unexpected happens. Being unable to cover these costs is often one of our biggest financial stresses. Evaluate the cover you need to protect your family including income protection, health insurance and life insurance to cover Your goals are unique to you and your family. Break them into short-, medium- and long-term goals (see Table 1). At this point, evaluate what money you currently have to fulfil your goals so you will know what amount to put aside. Example of retiring early and travel goals Catherine and Sarah are both nurses who want to retire at 60 years. Their situations are similar; they have the same years of service and salary at retirement. The difference is they started in the public sector at different times. Table 2 outlines their annual incomes at retirement. Sarah’s income is significantly less and therefore she can’t afford to retire early as planned. By identifying this early, Sarah can create a plan that will not only allow her to finish working earlier, but allow her to fulfil her retirement travel goals. Step 4: Plan The final step in creating your plan is identifying what to do with your money to make your goals happen. Keeping your money in deposit accounts like savings and current accounts might not deliver the returns that you need for your long-term goals. Your money could also lose its value due to inflation. This is because deposit account interest is at an all-time low of 0%, unlike in the 1970s when it was as high as 15%. This is the perfect time to seek advice from a financial expert, who will help you analyse your long-term options, for rainy all of life’s events. Step 3: Your goals
It’s true – money makes the world go round. It’s integral to your overall wellbeing and happiness. It fuels your future but can also cause significant levels of stress when things get difficult. We often assume earning more money will help us escape our financial challenges, but for many of us being prepared and making better decisions with the money we have is the solution we really need. Here are four key steps to help you create Take an honest look at your money and your budget – what is your monthly/ weekly expenditure versus your income? Incomings Identify all of your sources of income, allowances and any extra earnings you receive. Review your payslip to ensure you are on the correct point of the scale and receiving any income tax relief and allowances available to you. Expenditure Make a list of your monthly/weekly spending. A good rule of thumb to categorise your spending is the 50/30/20 budgeting ratio: • 50% needs – mortgage or rent payments, loans, insurance and utilities • 30% wants – your livelihood, home improvements, cars and hobbies • 20% savings – an additional voluntary contribution (AVC), emergency fund, holiday fund. This ratio is a guideline only and is dependent on your situation. However it should give an indication if you are overspending. If your spending is more than your income, you will need to revise your budget. Step 2: Your needs Before you decide your needs, ensure you don’t confuse them with your wants. Needs are essentials such as your home, utilities, food, insurance and so on. The wants are often things you think you need but when money pressure is on, your financial plan. Step 1: Your money
Table 1: Your goals
Goals
Time
Examples
Short-term Up to
Holiday, emergency fund New car, house renovations Early retirement, travel, children’s education
one year
Medium- term
One to five years
Long-term Five years or more
Table 2: Sarah and Catherine’s annual income at retirement Catherine Sarah
Planned early retirement age
60
60
day funds, education funds, retirement savings or other investments that could prove beneficial for you. It’s important to know all of your options so you make the best choice for your future. While others might charge for a similar service, Cornmarket offers complimentary financial planning services to INMO mem- bers. You can book a free appointment at Tel: 01 4086277. Ivan Ahern is a director at Cornmarket Group Financial Services Ltd Cornmarket Group Financial Services Ltd is regulated by the Central Bank of Ireland.A member of the Irish Life Group Ltd which is part of the Great-West Lifeco Group of companies.Telephone calls maybe recorded for quality control purposes. Retirement salary €60,000 €60,000 PRSI Class A Class A Years of service 27 27 Joined the public sector Before April 2004 After April 2004 Supplementary pension Yes (where eligible) No Annual income €20,000 €10,000
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