Weekly Thoughts 10 January 2022

Yes, it’s Monday. But there was nothing in my head on Friday. The inspiration came over the weekend, so I thought to write today.

I wasn’t going to write about this matter until Covid was completely done and out of the way – because there are people still battling – but that might actually still take a long, long time. Possibly years, not months.

I have over the years while doing basic financial planning with clients, often looked to see if someone could manage to survive without a job, or survive if their business started to struggle, for three months. Meaning, do you have enough savings somewhere, to cover living expenses for three months.

I knew a while ago, after watching so many folk battle with job and business income, both clients and just looking around the world, that after Covid, I would change this advice, this opinion, and would begin to help clients look to build the ability to survive for double this time, to have the ability to cover living expenses for six months. I think there have been sufficient reasons and lessons for us to look at this as a better plan in the future.

The spaces and mechanisms to create and store this liquidity can be different. A very good place, and what I have done over the years, is to pay extra funds into property debt until one has the capacity to withdraw from your access bond sufficient funds for the above reasons. Straight forward money market accounts can work and discretionary unit trust funds can also work. But regardless of where the ‘emergency’ funds sit for you, it requires a timeline of being able to spend less than we earn, so that we can build up the cash, while we pay for the regular expenses that we have.

So I will begin to look, advise, and ask over time if you can cope for six months with no income. This will become my financial planning approach.