Savings and Investments - Magazine

06Are you ready to invest?Be preparedBefore deciding where to invest, take stock and ensureyou have a sound financial base to start fromSorting out the basicsAny savings and investments should be madewithin the context of your overall financial health.What if you have debts?If you have any debts that are growinguncontrollably or whose repayments are solarge they stop you achieving other goals,paying these off should be your top priority.What about emergencies?Next, your first savings goal should be to buildup a fund for emergencies. Experts suggest afund equal to three months’ take-home pay, butsmaller sums will still help with unexpected bills.Don’t take risks with this money.What if you’re ill?Make sure your finances are protected in caseyou are off work sick for a long period. Check thesick-pay scheme at work and consider incomeprotection insurance if it’s low or if you’reself-employed.Is your family protected?Life insurance is a must to protect anyonefinancially dependent on you if you were to die.Check what’s available through work, or takeout your own policy to top it up.Are you hoping to buy a home?Building up savings to cover a deposit andbuying costs may be a top priority. Usually thisis a short-term savings goal.Do you have cash to save or invest?You may be looking to rearrange your existinginvestments and savings. Perhaps you havecome into a lump sum, for example, throughinheritance, retirement or redundancy. Butfor many people saving means simply findingsurplus cash each month.Do you know what you want and whereto get it?If, at any of the steps in the financial planningprocess, you don’t feel confident doing theresearch or making decisions, consider gettingfinancial advice. See p21 for more about how tochoose an adviser.Are you on track for retirement?The earlier you start saving, the more manageablethe cost. Because of favourable tax treatment,pension schemes are usually the best option.Understanding riskAn important part of taking stock of yourcircumstances is being aware of your attitudetowards risk and how this may affect your“Be aware of your attitudetowards risk and how thisaffects your decisions”decisions. There are three main risk profiles andyou need to work out which is closest to you.Low-risk investorYou don’t like taking risks with money. That’s finefor short-term goals, like an emergency fund, butwhen it comes to longer-term goals, like investingto pay off a mortgage, building up a nest egg forwww.which.co.uk