Financial security is something we all aspire to in life, and with a reliable stream of money pouring into your bank account every month and plenty put away in savings, it can be easy to assume you’re all set. But circumstances can change quickly, and it’s important to make sure you have a well-thought-out plan in place should things ever go awry – as well as taking steps to prepare for your future, including retirement.
Whilst there are many options when it comes to keeping your fortune safe, ‘safe’ isn’t always the word to live by if you’re looking to grow your money, and taking out some savvy investments can go a long way towards boosting your bank balance long term. On the other hand, there are a few sensible things everyone should be doing with their money to protect themselves should the unexpected occur, too – and each plays a small part in the bigger picture and ultimately, your future.
If you’re unsure where to start when it comes to achieving financial security in 2022, then here are three simple steps to take that will set you off on the path to success.
Take out an investment ISA
These days, standard savings accounts just don’t cut it when it comes to the most effective ways of growing your money – but stashing your cash in an investment ISA is a great alternative. A stocks and shares ISA allows you to invest in a wide range of shares, funds, investment trusts and bonds, which can rise or fall in value over time. You determine the level of risk you are prepared to take, so if you’d rather play it safe than you can – but there are more substantial returns potentially on the cards for those who are willing to opt for more volatile choices.
Allowing you to put away your money without paying income tax on the amount gained, those prepared to opt for higher-risk stocks and shares investment ISAs can also essentially mitigate inflation to maximise their gains. Even a 2 out of 10 risk would have given you around 10 per cent in returns over the past five years, which compares favourably to the 2.7 per cent annual rise in inflation we’ve seen over the same period.
Consider equity release
Many property owners opt to take advantage of equity release later on in life, once their mortgage has been paid off in full – but given there are some associated pitfalls, is equity release a good thing?
For many, it can be a great way to improve liquidity and allows you to have more to spend on making the most of your retirement. These ‘later life’ mortgages allow you to unlock the money tied up in your property whilst still being able to continue living in it – you can unlock it as a lump sum, a draw-down, or a combination of both, and you also have the option to receive the money as a monthly salary, which can be a great way to maintain your current standard of living once you enter retirement.
The loan you take out will eventually be repaid, along with compound interest, through the sale of your property – so do bear in mind that should you pass, this will affect the value of the estate you are able to leave to any beneficiaries in your will, as well as what they can do with it.
Take out critical illness insurance
One of the most important things to do when it comes to ensuring you remain financially secure for life is to assess your current range of insurance policies and make sure they are still fit for purpose. Individual circumstances can change over time, rendering what was previously sufficient useless, so it’s important to take stock again every few years or so to make sure you have everything in check.
While a robust life insurance policy will take care of your family’s financial security should the worst occur, critical illness cover is essential to ensure that, should you be rendered unable to work prior to retirement, your most important expenses will be covered. When you have a sizeable bank account, it’s easy to assume the funds will last forever – but a good policy will mean you don’t have to eat into your balance in order to keep things ticking over should you fall ill.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.