What if tomorrow is that rainy day? Tips to future-proof your financial plan

Saving for a rainy day is an oft-used colloquialism, but there’s a lot of truth behind it. We don’t know when that rain will come, so it’s essential to be ready. Here, we discuss some key components to future-proof your financial plan.

Save easily accessible emergency funds

Access to at least six months’ income is a must because it gives you some clarity to make decisions when an unexpected event occurs.

You can use facilities such as offset accounts or higher-interest savings accounts to put this money to work; however, it must be liquid and accessible, not tied up in investments. 

This is because you may not have time to release funds from investment or be in the best headspace to decide which investments to sell. Six months’ income may not cover all your expenses for the period you are affected, but it will allow you to take your time, get advice and make bigger decisions with a clear head.

Protect your assets and your loved ones

According to the Financial Services Council Australia’s Life Underinsurance Gap: Research Report, a startling 3.4 million Australians are underinsured when it comes to income protection. But it can be a high-stakes game with life-changing consequences. 

Whether it is financial assistance for a period where you can’t work or being able to access medications that aren’t subsidised, the right insurance is a must.  

While no one likes to think about it, illness, accident or death can have a long-term impact on us and our loved ones. When you’re correctly insured with the right policy, you’ll have peace of mind, and that’s invaluable. 

In recent months alone, we’ve seen life insurance keep a family in their home amongst their support network following the death of one parent, and income protection has enabled a cancer patient to access non-PBS treatment that would have otherwise cost in excess of $80,000 per cycle. 

It’s also crucial to understand any coverage within superannuation. 

Superannuation coverage may not be appropriate for your age and stage. In many cases, the right cover is the same price and, in some cases, even less than what you’re paying through super. So, the key here is not just having cover but having the right policy for your specific circumstances.

Structure your super

We often call events that drastically impact investment markets ‘once-in-a-lifetime’, but it’s a misleading term. Anyone aged over 15 has been alive through the global financial crisis (GFC) and COVID-19, two events that severely impacted markets. For many of us, they happened at peak times in our financial lives.

There are several steps you can take to structure your super, such as keeping a portion of your super in cash and injecting it into growth investments when the market drops, and understanding your asset mix. However, it is important not to make panicked moves when the market has already dropped. 

Additionally, the steps are different for every career stage and personal circumstance, so it’s important to talk to your adviser about the right set-up for you. 

Future-proof your home loan

While we can’t plan for every eventuality, it’s important to ensure you think ahead when you take out or refinance your home loan, and interest rates shouldn’t be the only consideration. 

For example, if you know time out of work to care for a loved one is on the cards, looking for a loan option that allows for a pause might be important to you. It’s also important to consider the redraw facilities you might need to support changing financial goals.  

It’s good practice to get a mortgage health check every few years or any time there is a significant life change to ensure you have the right product for your circumstances.  

Get your estate in order 

According to Finder, some 12 million adult Australians don’t hold a current will, and it’s a frightening statistic. 

Many people assume that their finances will go directly to their loved ones if they die without a will, but it can be far more complex. There are different laws in different states, and protecting your loved ones from unnecessary additional stress is crucial. 

A will should be part of your broader financial plan to protect your loved ones and ensure you leave the legacy you want. So if you don’t have one, make it a priority.

Plan for aged care

Aged care is something we often don’t like to think about until it is on our doorsteps, but last-minute planning can be ineffective. 

We all want our loved ones to have the best possible care, and unfortunately, in Australia today, that can come with a significant price tag. So, for retirees or those with ageing parents, it’s important to include it in any financial planning.  

Family succession planning

It’s crucial for families with a business, revenue-generating property, such as a family farm, or significant assets to have a succession plan. It can save significant heartache and stress on loved ones if something unexpected happens. 

Ensuring everyone is on the same page as early as possible will mean that if something happens to a family member, everyone knows what will happen next. And there’s no ambiguity at a time when a family needs it the least.

It is a process, and it can take time to get all family members on the same page, so the earlier you start, the better.

Preparing for your rainy day

We don’t always know what is around the corner, so it’s important to be prepared financially. While a financial plan can’t take all the pain out of an unexpected situation, it can ease some of the stress at a time when you need it most. 

Need to get your ‘rainy day’ finances in order? Speak to the Apt Wealth team. 

Rainy day finances checklist

• Six months’ income as accessible, emergency funds 
• Adequate life and income protection 
• An appropriate structure for your superannuation
• The right home loan for your circumstances 
• A current will and estate plan 
• Aged care finance plan 
• Family succession plan 

General Advice warning

The information provided in this blog does not constitute financial product advice or a recommendation to purchase a particular product. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners Pty Ltd is not a registered Tax Agent. You should consider your individual situation and seek tax advice from a registered tax agent before making any decision based on the content of this document. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.