The bricks that build prosperity

These three essentials will protect you in a storm

Your house of wealth needs strong foundations

If you’ve followed my column over the past couple of weeks, you should have a pretty good idea of what you want from life and have set some clear goals to work towards.

You may even have automated much of your finances by setting up the bank account system to take your organisation to the next level – if you have, congratulations, that’s great progress in two weeks!

The next step is to put in place the foundations upon which you can secure your financial future.

I use the analogy of a building because I call this your “house of wealth” – and a good house is only as strong as its foundations.

Financial foundations are often ignored because they aren’t exciting.

But they’re so important – just like in your real home, if you start building your house of wealth without a solid base and something goes wrong, it can all come crashing down.

As we saw in 2020, things happen in life. In the house analogy, if a hurricane strikes, solid foundations can keep things standing. In money terms, if you’re ill and unable to work, with a solid base in place you’re not going to be destroyed because you have reserves and insurance set up to handle that situation.

There are eight foundations to consider; three that I feel are essential for everyone, detailed below, and five that are optional, which I’ll cover in a future column.

Anyone at any age could slip and bang their head, and then need long-term care

Emergency cash reserve

This is a cash buffer of between three and six months of your expenditure. This money needs to be held securely, but be easily accessible and without risk, so I suggest NS&I Premium Bonds. It’s not an investment, it’s an insurance that if you lost your job, your boiler burst or some other financial emergency occurred, you’re not going to lose much sleep.

Will

If you don’t organise your estate now, you leave the problem to others to sort in the event of your death.

It’s even more important if you have dependent children to ensure they are cared for by someone familiar and who loves them, not by social services, if something happens to you.

Finally, a will can ensure that specific assets are protected and pass to the people you intend, such as your home passing to your children rather than your partner.

Lasting Power of Attorney

These are not just for the elderly: anyone at any age could slip and bang their head and need long-term care.

An LPA is a document for when you’re unable to make decisions yourself. There are two types:

Health and welfare, which covers your medical decisions

Property and affairs, so someone can make financial decisions for you.

Once you’ve completed your LPA, which you can do online, register it with the Office of the Public Guardian.

To hear more about the financial foundations, search for The Money Planner podcast.