Friday, March 16, 2018

10 Money Tips That Could Save You From Financial Ruin

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

A few days ago, I said that becoming financially aware and astute is not just about making money, it is also about watching your back for potential threats to your bank balance and financial well being.

Tony Robbins used to run a ‘wealth protection’ service for people with large sums of money, and Jim Rohn advised us to build a financial wall around our family so strong that nobody could knock it down.

The wealthy don’t only concentrate on making money, they also focus on keeping it (probably the two most important basic components of being wealthy) and protecting themselves against liabilities and threats, but you don’t have to be rich to protect yourself too. After all, the less money you have, the more a loss will hurt you.

Businesses do regular S.W. O.T. (Strengths, Weaknesses, Opportunities and Threats) analysis exercises and risk assessments as a matter of policy, and so should you.

You are your greatest asset, so look after you! Act as if you are the CEO of your own corporation and start thinking of yourself as if you are a business.
More than at any time in history, we are surrounded by potential threats to our wealth and liabilities which could bankrupt us or worse still, send us to prison.

I’m not scaremongering or exaggerating the threats to your wealth so do not ignore this message – ignorance of the rules of the game will not offer you any defence.

Some threats are relatively small, like the increased likelihood of receiving a fine for speeding, parking or unwittingly drifting into a bus lane whenever you drive into a major city.

Others are far more serious, for instance:

  • keeping all your money in one bank (this would particularly apply to those holding more than £85,000/£170,000 for joint accounts amount protected by the government Deposit Guarantee Scheme) 
  • having your money devalued by a government (Greece, Cyprus, Latin America) 
  • currency swings or economic downturns
  • changes in legislation, which could hit your business or that of your employer
  • changes in the business environment or technology 
  • changes to your agreements by financial or utility providers
  • an unscrupulous freeholder landlord gaining control of the freehold and management of your leasehold property
  • For some, Brexit is a threat, although for others it may be an opportunity.

If you have assets and investments you should carry out regular reviews with an independent financial adviser who is not dependent on the commission from selling you insurance-linked products.

Forgetting to pay any small bill these days can quickly lead to a CCJ (County Court Judgement), bailiffs banging on your door at enormous cost or a default, which will completely ruin your credit history for up to six years.

I have discussed this earlier in relation to credit cards, as people often pay their bills a few days later than the due date (which is not the date you think) and find that the trigger happy banks have been reporting you as a late payer or in arrears.

This equally applies to utility bills, mortgage payments and especially parking fines, which can quickly escalate into thousands of pounds once courts and bailiffs can their sticky hands on you.

Liabilities include being sued by an increasingly litigious society and ‘no win no fee’ ambulance chasing lawyers. In a recent case, a mother is being sued by the mother of a boy who was accidentally hit in the eye when standing behind another child swinging golf club at a mini-golf kids party.

10 Tips that could save you from financial ruin

1. Pay recurring bills by Direct Debit, or standing order, so you do not overlook the due date.

2. Pay bills on time, especially tax, or inform your creditors that you need more time. 

3. Never ignore a legal letter, especially one concerning a debt or tax liability, and don’t bury your head in the sand hoping it will all go away like a bad dream.

4. Pay and keep your taxes up-to-date and fully compliant! In my book, Yes, Money Can Buy You Happiness, I have written about “The Stars Who Lost It All”, and one of the biggest reasons big stars who have earned millions went bankrupt was their failure to pay their taxes.

5. Check your credit rating and file at least once a year for errors registered against you. This is really easy to do online and I have written about tips to improve your credit rating in an earlier episode.

6. Never sign Personal Guarantees or be a guarantor for a friend or relative without taking legal advice, and never sign anything you have not read and understood – even those boring terms we all agree to online.

7. Avoid litigation and suing people, which are still the preserve of the rich and famous. Wherever possible, try to mediate and sort things out without going to court and use legal action as a last resort. Be a mediator, not a litigator!

8. Insure yourself against liabilities, for instance by adding public liability to your home insurance. You can also take out very inexpensive liability insurance to cover yourself when you run an event or children’s party. In my experience as a financial adviser, smart people insure themselves, their property and cover themselves against potential public or employer liability claims.

9. Take legal advice and be very wary of leasehold properties and signing any leases for business premises or shops. Leasehold properties are a legal minefield and are covered in more detail in an earlier episode. In business, I use a limited liability company, rather than acting as a 'sole trader'.

10. Review your financial circumstances regularly with an adviser or with your family, partner or spouse. The importance of this tip cannot be overstated. You must review at least once a year.  

Finally, watch your back! Keep your eyes and ears open and be alert to any potential threats. Carry out a regular S.W.O.T. and annual risk assessment as part of your financial review - this risk isn't always external, it could come from something you are doing.

Check out my Podcast, Money Tips Daily by Charles Kelly, former IFA and author of Yes, Money Can Buy You Happiness., on Anchor!

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