By Dave Kavanagh

Most aspects of your life are connected to your finances, yet most people don’t take the time to plan them effectively. A couple of reasons for this: If you have a problem that needs a plumber, an electrician or a roofer, you will know about it. If you haven’t reviewed your finances for a while, you may not even be aware that you have a problem. The other reason is that some of the main aspects of financial planning are viewed as “negative”. I mean who wants to spend time considering potential occurrences like the impact of a fatality, or give thought to having sufficient income in your retirement when you haven’t reached 30 yet? This perception of “negative” is often why people subconsciously avoid the topic, often citing “not having enough time” as a reason. The same reason explains why people spend regularly on things like the lotto, believing they can win the jackpot, at odds of 10.7million to 1. The same people’s odds of being diagnosed with one of the specified illnesses covered, is 1 in 4 (before age 65!) yet they say “that’ll never happen to me”. This is a natural desire for something very positive to happen and for something negative not to happen. However, these everyday occurrences will happen whether or not someone has the right planning in place. One hour is 4% of your day. Spending that much time even once per year can be hugely beneficial. You get the peace of mind that you are up to date with your planning. You get the reassurance that anything you have in place is the most appropriate for your current circumstances. You also get the satisfaction that you are not overpaying for something and are getting the best value. Suddenly, the mystery and uncertainty are removed, along with the stress and anxiety often associated with them. In all my years of doing reviews, I’ve never heard anyone regret taking time to go through their finances, but I’ve heard plenty regret not going through them when something unexpected crops up. Remove “money worries”. Make the time.

Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can of course also be contacted by you by emailing info@financialcompanion.ie or you can also use the contact form on www.financialcompanion.ie or @Davekav_advice on Twitter and Instagram.

Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation. As heard on RTE 2FM, LMFM and TV3.

By Dave Kavanagh

A question I usually include when helping clients with their finances, is, how long (if at all) their employer will pay them if they are out of work long term due to illness or injury. In some cases, it is standard and can be something like 3 months at full pay, then 3 months at half pay and then a pensionable rate of pay. For many, they are not sure and when they look through their employment contract, it states “at employer’s discretion”. Many people realised how vulnerable they were when the pandemic arrived, dropping some incomes from €600 or €800 per week down to €350 of PUP. Many don’t give much consideration to how they would cope if they suffered a loss of income for an extended period because they think “it’ll never happen to me”. Sadly, many find out the hard way following an injury or illness that keeps them out of work for months or even years. This is where having Income Protection in place, can be the difference between maintaining a level of income that keeps your lifestyle virtually unchanged, or dropping to a level that could force you to use up any savings and also get into financial difficulty.
So how does it work? Depending on your circumstances, you choose an appropriate level of cover. This is based on not exceeding 75% of your salary, less any state income entitlement. You also choose a “deferred period” which refers to how long you are off work before payments commence. The premiums are based on factors like your age and occupation, as some occupations would leave you more at risk of not being able to work. There is also tax relief on premiums paid for income protection, which could mean up to 40% of your premium is refunded by way of adjusting your tax credits. If dropping from your current income to the current state benefit is something that would impact badly on you, perhaps it is time to consider.

Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation. As heard on RTE 2FM, LMFM and TV3.

By Dave Kavanagh

In the last few claims, I have processed (death claims, serious illness claims and income protection claims) there was something that they all had in common. None of them knew what cover they actually had in place. Some were unsure whether there was sufficient cover in place to clear their mortgage (which is often the case. Consider all of the people that took 6 months’ payment breaks during Covid. Their mortgage protection cover continued to reduce while their mortgage balances slightly increased.) Some thought they had serious illness cover because we had discussed it a couple of years back, but they never actually got around to commencing it. It was yet another reminder that most people do not know the important details of plans that they pay regularly for. As people’s circumstances change, it’s important to be up to date with knowing what you are actually paying for. Here is the very least that you should know about any protection plans that you have in place:

Life Cover: How much cover is there? When does it expire? Is it dual or joint? Does it have a conversion option? Is it level, increasing or decreasing? How much does it cost?

Income Protection: What is the deferred period? (The length of time you have to be off work due to illness or injury before payments commence). What level of cover do I have? Up to what age will payments continue if I could never return to work again? How much does it cost? Have I claimed my tax relief? (I.P. premiums are tax deductible).

Serious Illness Cover: A.K.A. Critical Illness Cover or Specified Illness Cover. What level of cover do I have? Is it stand alone or accelerated cover? Is it dual or joint? When does it expire? Do I have the option to extend cover without further medical evidence? If you don’t know those details, it’s time to get out the paperwork and find out. You’ll be glad you did.

By Dave Kavanagh

Capital Acquisition Tax includes Inheritance Tax and Gift Tax. In 2022 in Ireland, there was over €600 million collected in Capital Acquisition Tax. It also includes estates that may have been taxed in previous generations. For example, if someone left an estate worth €1,000,000 to an only daughter, she would (in the current tax year) have a tax bill of almost €220,000. After she pays the bill and puts what’s left in the bank, any interest is taxed (DIRT). Guess what happens when she passes and leaves her estate behind? It’s taxed again! Spouses can leave any amount to each other tax free. After that, the three thresholds are, a) Children - €335,000, b) Other close relatives - €32,500 and c) All others (including cohabiting partners) - €16,250. Everything received above these is taxed at 33%.

So, is there any way to prevent it? There are two main actions that can either reduce or eradicate such a tax bill. The first is to take the time to plan when making a will. Let’s say a value of €750,000 was being left to 2 adult children. (Not a big estate if you combine a house, savings and a life policy). This would create a tax bill of over €25,000. Instead, if €670,000 of it was left to the 2 children and the balance between a few grandchildren, there is no tax bill. The second thing that can be done is for the person leaving the estate to take out a Section 72 plan. This is a type of life policy that is allowed to pay any tax liability without adding to the value of the estate. It becomes particularly important for anybody that does not have children to plan things out, as even other relatives can only receive €32,500 before any balance is taxed. These thresholds are particularly important for anybody in the process of planning or making their will.

By Dave Kavanagh

This time of year, is traditionally when people set out to make some positive changes or improvements in their lives. The most recognisable of these is the ‘losing weight/getting healthier” one. To give people more of an incentive to maintain what they start, it’s worth noting that if done properly, losing weight can have the added bonus of leaving you with more money at the end of each month. So how does that work?? Well, by “doing it properly” I refer to NOT going on a diet, or buying products with magic properties that will make the weight just fall off. Instead, making small, sustainable lifestyle changes. It can be adding some exercise in week 1, drinking more water (and less alcohol/sugar laden drinks) in week 2, reducing portion sizes in week 3, substituting things like chips for wholegrain rice or pasta in week 4, breaking the association of biscuits/cakes whenever you have a coffee or tea in week 5, etc., etc. Doing it this way, makes it sustainable and when weight is dropped slower over a longer period of time, it is far more likely to be kept off. So how does that help my finances?

When I analyse people’s spending budgets, it’s clear that takeaways, alcohol, sweets, cakes biscuits etc. pop up quite frequently. If you keep track of the savings when you cut down on many of these things, it’s easy to see how much you can save. One person I was helping used to enjoy her “treat” of a chocolate eclair most days. When she accepted that she felt bad after eating it and conceded that it was not helping her goal to lose weight, I suggested it was more of a punishment than a treat. I proposed that she put the money into a jar each day and when there was enough, to treat herself to a back massage, which can positively reinforce the good changes someone has made. Make the right choices, one day at a time.

Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing Dave at info@financialcompanion.ie or use the contact form on financialcompanion.ie or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial well being, positivity and motivation. As heard on RTE 2FM , LMFM and TV3.

By Dave Kavanagh

Those that rent their accommodation privately, compared to home owners, can be a lot more vulnerable. Apart from the obvious points, like rents being increased or having to move out if a property is being sold, there are other potential events that could prove problematic for renters.

As we saw in the early part of the pandemic, where many people’s incomes were drastically reduced, those with mortgages were permitted to avail of “payment breaks” with minimal effort. Unfortunately, those renting do not usually have the flexibility of this option. When someone cannot work due to illness or injury, they may suffer a loss of income, either immediately or after a short period, resulting in the inability to pay rent. This could lead to eviction and all of the problems associated with it. While those renting may not have been exposed to the kind of financial advice as someone going through the mortgage process, there are still safeguards that can be put in place. One option is Income Protection, paying them a portion of their income if they were unable to work due to illness or injury. This could be the difference between affording rent or being evicted. Something not often considered by renters is Life Cover. If one of a couple renting passed away, this could allow the surviving partner (or family) to purchase their own home immediately without the need for a mortgage. Similarly, Serious Illness Cover could pay out a tax-free lump sum on diagnosis of one of the illnesses covered, giving another layer of financial security. Better to consider these options earlier rather than later.

By Dave Kavanagh

When it comes to the important task of making sure that you have the most appropriate life and serious illness cover in place, many people often keep putting off making time to arrange it, (it’s not the most fun exercise!) despite the fact it can give them peace of mind, knowing that in the event of a fatality or a serious illness, their family do not suffer substantial financial loss. But what are they really saying? “I’ll have a look at that after Christmas”. Often replaced with “after Easter”, “after the holidays”, “after the kids go back to school” and a few others. What is actually being said is “I’ll name sometime in the future so that I don’t have to deal with it now” (a bit like “I’ll start the diet on Monday/in January”). Let’s face it, you can easily find 30-60 minutes once a year to deal with something this important. You’ll be glad you took the time. “We have cover in place already”. Great. That is if it’s been reviewed in the last few months, but on closer examination, it often hasn’t been looked at in years and circumstances have changed, it may no longer be suitable. It’s important to keep things relevant to your current personal circumstances. “Our bank sorted everything for us”. Your bank may have sorted a few things, but in most cases, banks are tied to one life company, so a fair comparison cannot be made, meaning you could be paying way over the odds for whatever the bank has put in place for you. Dealing with an advisor who is not tied to one company and can compare other options is the only way to make sure you get the best value. “I’m busy at present, I’ll give you a shout in a few months”. But the fact remains, if there is an activity that you like you will make time for it. Burying your head in the sand is rarely a successful solution to most problems. Someone once told me that they had no time and in the same conversation told me they had queued for over an hour in a drive-through for doughnuts. (They were also up to date on all the soap storylines!) If it’s important, make the time.

By Dave Kavanagh

There are many situations where homeowners have limited or no savings but may have requirements that need funding, even though their income does not permit them to commit to unaffordable, regular repayments. Imagine you’ve worked diligently to pay off a substantial portion or all of your mortgage, and you find yourself in need of additional funds due to unforeseen circumstances. A lifetime mortgage allows you to tap into this equity without selling your home. The borrowed amount, along with accrued interest, is typically repaid when the property is sold or when the last borrower passes away or moves into long-term care, so there are no regular repayments to make. There are, of course, reasons why they may not be appropriate for everyone’s circumstances. Some of the benefits include access to funds, whether it is to cover medical expenses, modifications to your home, to assist children in purchasing their own home, or any other urgent needs, no monthly repayments and ownership of your property is retained. Some of the factors to consider, include interest accrual, as interest is added to the borrowed amount over time, this may reduce the equity remaining in your property. It can reduce the value of your estate, potentially affecting any inheritance you leave behind. Financial implications: it’s crucial to understand the impact of a lifetime mortgage on your overall financial situation, including potential entitlements to state benefits. The amount that can be advanced will depend on the ages of the homeowners and the value of the property (minimum age is 60). Choosing a lifetime mortgage is a decision that should be made carefully, taking into account your unique circumstances, goals, and needs, including situations where there may be still some of your children living at home and you may have planned to leave them the home to live in after your passing. For further information on lifetime mortgages, you can email info@financialcompanion.ie and put “lifetime mortgages” in the subject line.

By Dave Kavanagh

One of the issues with planning ahead to protect you and your family’s financial future, is the fact that we don’t know exactly what the future holds. Will jobs and income change? How long will I maintain good health? Will I win the lottery jackpot in the next 3 years? The uncertainty of the future means that we often plan for a variety of occurrences. One important aspect of this planning is deciding on a term for things like Life Cover. A life cover plan can either be done for a specific term or it can be done as a “whole of life” plan. One of the problems with the old way of doing these was that the premiums were reviewed after a few years and could result in constant, substantial increases, often forcing people to either cancel them or accept a much lower level of cover. With “guaranteed whole of life” plans, you at least know exactly what the premium will always be and the level of cover but planning that far ahead can be costly. A relatively new method of dealing with this issue was introduced from one of the life companies, and it is an addition called “Life Changes Option”. This option gives the policy owners a number of choices once they have paid premiums for at least 15 years. They can then choose to either; a) Stop paying premiums and reduce the level of cover which stays in place until the cover is paid out, or b) Cancel the cover (if it is no longer required) and take a refund of up to 70% of all premiums previously paid, or c) Continue the plan as it is with the same level of cover and premiums. This option has become quite popular when people are looking to future-proof cover as it offers choices that can suit people’s changing circumstances. If they have cleared loans and have sufficient savings, a reduced level of cover might be ideal. If they have strong pensions and savings, they may no longer have a need for cover and can take back a lump sum. For more information on how this type of cover may suit you, ask your advisor or contact me for a free quotation.