Planning ideas for the pandemic: some new, some not so new!
When many of the marketing gurus made great play of this year being the year of “20 20 vision”, they somewhat overestimated the optimism that would be associated with the 20 20 idea. With the benefit of hindsight, in years to come, we will forever conjure images of 2020 as being one of chaos, death and despair, rather than associating it with clarity of vision. The Brexit debacle has even lost its place centre stage in our thoughts. It’s best not forgotten, however, that unless a deal happens in short order, we can look forward to additional dollops of misery come the new year. Even then a late deal is unlikely to enable a smooth transition out of the EU. Realistically, the festive season is likely to be far from, with family gatherings and the enjoyment of good cheer being logistically challenging via zoom!
For me the challenge remains to make financial planning relevant amid the competing claims for your attention. It is however important to keep your eye on the ball as the pandemic is going to be having a large impact on your personal finances for some time to come. There are in fact things you should be doing whatever the circumstances.
The obvious one, and I know I have already mentioned it this year, is to make sure that your will arrangements are reviewed or indeed put in place. This can help maximise the potential for estate planning and it is also a simple way of making sure that your wealth finds its way to where you want it to go, once you have no further use for it. Drafting a will can be a complex undertaking and it is usually one that involves one or two meetings with a suitably qualified willwriter, or a solicitor. Lockdown or not, in person meetings should be avoided for the time being. Our own company stopped doing them in March and all communications since then have been via phone or internet. Using skype, zoom or similar can be demanding for you if you aren’t computer literate but having said that it should be perfectly possible to find a practitioner who can talk you through the technical steps involved.
Equally important is to ensure you have a lasting power of attorney. There are two types: medical, and also property and finance. Your attorney can then act on your behalf in the event of your being unable to do so yourself due to illness or lack of mental capacity. Wills and lasting power of attorney deeds can in fact be written via online services but given that this area can be a minefield you would be advised to avoid the penny wise pound foolish approach. In a similar vein it may be worth appointing a younger additional trustee if you are yourself a trustee and are starting to get getting advanced in years. This is a means of maintaining the trust’s smooth operation if you die sooner than expected.
Now also might be a good tie to beef up your contingency fund. In normal times our advice is that you should have a contingency fund of 3 to 6 months’ expenditure needs. Now it would seem a fund covering 12 months expenditure needs would be more prudent. Under lockdown it’s harder to go out and spend, so why not put the money aside and ensure your lifeboat fund is as watertight as it can be? You could also go through your regular outgoings and check whether all of them are essential. If you are unable to make use of memberships or subscriptions, you might as well cancel them.
If you have a mortgage or other debt, now would be a good time to refinance it. Interest rates are going to be lower now than when you took out your loan, so look around and see what’s on offer. With the internet it is easy to review this yourself. You could consider shortening the term of your loan also as a way of saving money.
If funds are available why not add to your investments? The market is unusually volatile but if you’re investing for the longer term this should not be a concern. You can in any case choose investments with varying amounts of risk and then allocate them to staggered objectives; eg moderate risk investments for a 5 to 10 year timescale, then more equity-based ones for 10 years and beyond. By the same token if your investment portfolio is showing losses, it is not a good idea to panic sell, particularly if you are holding collective investments. It’s different of course if you have individual stocks, where it may be better to cut your losses, if a company or sector is going to be badly and will be permanently hit by the pandemic.
The last thing I’d say in this unusually unfestive festive season is that if you are fortunate enough to be financially secure notwithstanding the general uncertainty, do spare a thought for those worse off and who are suffering exceptional hardship due to the pandemic. I know personally many of you are already giving a lot but food banks and homeless charities will be under desperate and increasing pressure this winter and would very much appreciate your further generosity.
If you have any queries about this article or if there are any topics you’d like to discuss, please feel free to contact us. We won’t make a charge for any time we spend with you on your preliminary enquiry.
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In the meantime please do all you can to stay safe.
Joe Coten is a member of the Personal Finance Society.
