Two Simple Good Financial Planning
Sometimes there are certain situations in life where all you need is some money to sail you through. While you are employed you can combat the situation by opting for debts as then you would be able to repay it with your monthly salary. But after retirement if your pension amount is meager or if you do not get pension at all, facing a financial crisis becomes a huge problem. Taking a debt is not an option since you would not be able to repay it and if you give up all your savings you would not be left with anything to sustain your life on the other side of the crisis. The only option you have left is borrowing or selling or mortgaging your property which again could have adverse effects on your life later on. But if you just plan your personal finances well, you can avoid all the above mentioned options in case of a financial crunch and face it head on instead.
- Opt for an annuity policy to avoid falling in to the ‘no pension’ trap – this can be called a preventive measure. Plan for your own pension if your company does not provide the option after retirement and by doing so you would have the security of the monthly income even after retirement. Annuity is a fairly simple policy where you pay money to the company offering the policy for a certain amount of time, say till your retirement. After that stipulated time period is over, the company pays back your amount along with the interest accumulated as monthly installments or as a lump sum amount depending on your initial contract. By having the backing of the annuity policy you can at least opt for a loan if your situation ever demands so.
- Equity release is the best option if you have not got an annuity done – this is the option that would help you get out of a crisis after retirement without having to take a loan or sell or mortgage your property, if you do not have an annuity policy to your name. Equity release is much like mortgaging in the sense that you get money against your property. But unlike mortgage, you do not have to forfeit your property if you are unable to repay the money ever and the amount of money you receive does not depend on your need, but on the valuation of your property. You can choose to receive the money as a lump sum amount or as monthly installments, as per your requirements.
Hence with good planning of personal finances you can overcome any financial crisis after retirement without having to lose your property or without falling into the debt trap too.