Episode 3 - Catastrophe Planning

In Episode 3 of The Azalea Wealth Podcast, the directors of Azalea Wealth Management discuss the importance of having financial plans in place for life’s unexpected events. From emergency funds to protecting your family’s future, we explore how planning ahead can provide stability and peace of mind when it matters most.

Transcript

SPEAKER_00 0:15

Right, episode three, um Azalea Wealth podcast. Um done the introductions before, but um we'll do them again. So I'm Andrew Bowden, Operations Director, um and this is Harrison Smith. Hello. Um we've uh sort of touched on a couple of subjects more broadly, haven't we, in the past? Probably wanted to start touching on things a little bit more specifically, didn't meet the more specific people. Um something we discussed a few ideas and something that sort of kept coming up was I wanted to call it catastrophe planning. Harrison thought that was a bit too uh, but we'll go with it. Yeah, we'll go with it. We're going with it anyway. Um yeah, so we decided that we'd go with it. Um but no, I think it's probably becoming more apparent to people that you need uh you need to start planning for things happening, things happen in life where that aren't expected, but there is plenty in place just to make those things a little bit easier when they do happen. Um so we just wanted to sort of start discussing what there is out there and how there's it doesn't matter your age, etc. Um there is plenty of products out there for people um to start planning for them sort of things.

SPEAKER_01 1:30

Yeah, I think I suppose as a starting point, I think just kind of to highlight the importance. That's probably where we would start with pretty much every client to be fair. Um, you know, I've I uh clients will have heard me say this before, but really there's no point in us you know building the best investment portfolio of all time or the best, you know, pension solution or whatever else from an investment perspective, there's no point in doing any of that if you know something goes wrong. Um because then it's all pointless anywhere. So, you know, for me when it comes to financial planning, this kind of topic that we're going to talk about is is by far and away the most important one. Um, you know, as well without getting too deep into it, but you know, straight away, I think for me, you know, when I describe financial planning to to to to someone who I've never met before or to to new clients or whoever it might be, you know, I kind of and it's you know it's quite a you know commonly used analogy, but I I think of kind of building a financial plan a little bit like building a pyramid. Yeah. Um you know, there's obviously tiers to a pyramid that work from largest to smallest. Um, you know, and and for me, this is this is what we're talking about, is is the base of that pyramid. You know, it's the it's the bedrock, it's the it's the it's the the cornerstone that sits underneath everything. If you get this bit right, the bit above just becomes easier and more attainable.

SPEAKER_00 2:46

Yeah, 100%. And I suppose it even starts with I mean, what's one of the first things you would ask people when you um when they come and say it's it's a it's an emergency fund, isn't it?

SPEAKER_01 2:55

Yeah, absolutely. You you're right. I think that's that's that's the starting point of any good financial plan. Um, you know, before I've had many, many people come and say, you know, I'd like to invest X, I'd like to do this with Y, I'd like to do Z, but um, you know, uh they've got nothing in the bank.

SPEAKER_00 3:11

Yeah, because I mean we we're calling it catastrophes, but it can be anything from your boiler breaking, yeah, car breaking down, and needing to have the funds to fix that.

SPEAKER_01 3:20

I'm gonna quickly have a look while you're s while we're on about that. But um there's a there's a there's a very um there's a very striking stat about about literally about the boiler breaking or something similar to that where I think it's a it's a scary percentage of the population wouldn't even be able to call. I I have I have heard that yeah, yeah, and I won't quote numbers without knowing them exactly, but it's a scary percentage of the population wouldn't be able to account for even something uh like that happening.

SPEAKER_00 3:47

And that's it. I mean when you first speak to somebody that that's you need to get to the you need to get deep into that and say, right, if something like this did happen, um you need to be able to have direct access to to cash straight away because these things do happen, you you can't just presume, and that's why I mean I suppose you touch on minor insurances. I mean that's why people do ensure things like that. Um and I suppose it's it's there's different there's different range to it. And I suppose that's probably something I wanted to touch on. Yeah. Um it's getting the right balance, isn't it?

SPEAKER_01 4:15

Because yeah, yeah, and I think you know almost be too prepared, can you, in a way. Well, that's that's absolutely it, you know. That's that's a it's a very important conversation that you know we don't just have once with with a client, we have it year on year, you know, because it it's it's a really important part. It's about setting an emergency budget. Um, but setting an emergency budget that's appropriate to you. You know, for example, you know, if you're in your 70s and your only income source is is a guaranteed pension income from a final salary pension and your state pension, you know, and you're and you live well within your means, then you're probably not gonna need that big of an emergency budget because you can you can maintain your cost of living quite easily yourself. You know, you will need a little bit for for any kind of capital expenses that may come up, but you know, that's going to be very different to, for argument's sake, someone who's a similar age to us who's got a young family, you know, uh relies solely on their income and their job.

SPEAKER_00 5:08

Of course it is. So like with everything in this space, yeah. Um and I suppose it then then it's about it's about gauging where you're at, what what you need specifically. We're not gonna sit here and say that everybody needs income protection, everybody needs uh three months of their salary um emergency fund. It's it's like you say, with everything it's tailored to the individual. Yeah, of course it is, it's circumstantial. Um but I suppose we just wanted it we we wanted to touch on what products are out there and what people can do to plan for things like this, because some people might not know these things exist. I mean one thing I've always sort of pushed um in my previous job with people because we only um got statutory sick pit was um income protection because people are always very concerned if I go out and break my leg and I can't because I worked in a manual labour job. Um if I go out and break my leg, I can't work for two months. I I can't live on the statutory sick pit, what's what's out there. Um so I suppose that's something we can talk about.

SPEAKER_01 6:12

Yeah, yeah, absolutely. I mean, like I know we've just mentioned about it being very individual and very different, but there is some common themes that kind of run through through it all, you know. I think regardless of your position or age or whatever else it might be, you know, everyone needs an emergency budget of some way, shape, or form. Um, because well, for good and bad reasons, life's not a straight line, you know. Um things can be thrown up, and I think it's very difficult to account for those without that emergency budget in place. You know, we've seen it seen it time and time again, not just person professionally but personally, where you know people get themselves in that situation and the answers to go down the credit route and yeah and the debt route, and all of a sudden that becomes their their main line of supply.

SPEAKER_00 6:50

When something bad happens, you don't want that to then affect you financially. Well, exactly. And then it just is bad enough, you know what I mean? But like you say, yeah, it can be anything from a from a death of a close relative to if you need to have a couple of months off to sort things out, you don't want the added stress of then having uh struggle financially.

SPEAKER_01 7:06

Yeah. No, absolutely, and I think yeah, it's it's about first of all, what can you do to self-sustain, you know, well selfies you know, be self-sustainable, you know, before we even start talking about different products and and all that side of things, how much can you first of all be responsible and look after yourself? Yeah. You know, you're in control of your own destiny to an extent. You know, there's nothing um you know, there's really there's nothing to say you shouldn't be really trying to help yourself first before you start looking at anything else.

SPEAKER_00 7:30

And if you do have dependencies, when that even that adds to it even further.

SPEAKER_01 7:33

Well of course it doesn't. I think that's when that's when the insurance side of things and other bits and pieces start to become more prevalent. I mean, a big thing you touched upon there was was about sick pay. Um, you know, I think sick pay now is £123.25 a week um payable for £28 weeks, and since I think the legislation has just changed actually, um it's now payable from day one. Um so you know, but it's still not going to touch on the £500 a month. I mean it's good that there's a government initiative in place, but £500 a month.

SPEAKER_00 8:03

It'll fade you order. It's not gonna get a roof over your head. So that's where people start thinking, right, but you c you also can't just have ten grand sat in the bank in case you need six months off.

SPEAKER_01 8:13

Well, I think there's a balance to be struck, and again, that that comes down to the individual. You know, for example, if if my I don't know, let's use uh uh Mr. Bloggs as an example, if his if his outgoings are five grand a month, you know, ten grand a month for him's probably not appropriate because it's not enough. Yeah, yeah, exactly. On the flip side, if you've got someone who, you know, again at the opposite end of the spectrum is retired who lives within their means and all the rest of it, they only they might only need two or three grand, you know, just if the odd if the odd mad capital expenditure happens. So, you know, that side of things is very difficult to put a number on, and that's just a case of you know, in our position, what we do is have a conversation with with said client to say what's appropriate, you know, what do you spend, what do you know, what do you need, you know, what's the what's the outgoings, what's the incomings, and that's how we can kind of establish that number. Um, and that's really the that's the base of everything, you know. Get that bit right first, then we can start looking at everything else. Yeah, um but just coming back to the to the income protection and sick pay, you know, conversation that you mentioned, you're absolutely right. You know, 500 quid for the vast majority of us is just sadly not gonna cut it. It's it's not gonna meet what you need it to. Um now employers don't have to offer a sick pay scheme. Um a lot of a lot of employers do, to be fair, but a lot of them don't as well. Yeah, yeah. Um you know, put yourself in that scenario, if you don't if you need to be off work and and and you're relying on 500 quid, very, very quickly things are gonna be you know, are gonna start to become troublesome.

SPEAKER_00 9:35

So even if you do, even if you have been sensible and you've got an appropriate um emergency fund, that's if you need to have an extended period of time off, that's going to eat itself away.

SPEAKER_01 9:44

And then remember, you need to then build up that that fund back up when you get back on your feet and it's not might not be Well and and you know, sadly, you know, another title of this you know podcast is Catastrophe Plan, and there might be a situation where you never get back off your feet. 100%, yeah. You know, so what in that situation what do you do? Yeah, you know, then the reliance comes heavily, you know. Well it doesn't heavily, it becomes all on the state, basically. Yeah, um so there are you know, in that's in that circumstance, there is absolutely things you can do. Um, emergency budget is one, as we've touched upon quite a lot here, income protection is another one. Um, you know, it's a great great addition to a lot of people's catastrophe planning. Um, you know, you can effectively, through some of these policies, secure yourself an income for the rest of your working life, yeah. Um if needs be. But again, it's it's about sitting down and making sure that's appropriate to the individual. Um and from an income perspective, that's the you know, if it's if if it's an illness or an injury or something like that, you know, where you're still here, that's that's the big things that you need to focus on. Um, you know, again, titles catastrophe plan, and I think the the other side of that is that we're not just talking about illnesses and injuries here where you break your leg or um you know other let's call them minor things, the way you're gonna be off work. You know, now we're we're more talking about the more serious events, you know. Sadly, it's it's you know, it's a fact that all of us are as are sadly gonna die at some point in time. 100%. Um ideally, we don't want anyone doing that anytime soon.

SPEAKER_00 11:02

You will you will also be amazed just sort of keep I feel like we're sort of sort of sticking with this a little bit too long, but I think it's relevant. Um sticking with the sick pay and things like that, you'll be amazed that when full sick pay isn't offered, in what states people will drag themselves to work. Yeah. You don't want to be in that situation. I mean you don't want to put yourself in a situation where you have to go to work. Yeah. Um if you've let's say if you even if it's if you've got dependencies at home and or if you're really, really struggling with something. I just you know, my you don't want to be in that situation, but it does happen.

SPEAKER_01 11:31

Obviously, I'm I'm gonna have a biased view on the importance of insurance, of course I am, because you know uh why wouldn't I? It's it's my job really, but you know, I just th sometimes I just look and just think, you know, for the for the cost of two pints a week, that's it, isn't it? Potentially.

SPEAKER_00 11:45

And I suppose that's what I mean, unfortunately for some people it isn't as affordable as that, um depending on what sort of um situation you're in personally, but for for the vast majority of people, it is very, very affordable, isn't it? And it is just that safety net, and we talk about getting the balance right, but for me, if you're talking about literally less than a percent of your income a month, just to ensure that you won't have them stresses, um, if something does go wrong, it's just an absolute knob.

SPEAKER_01 12:11

And again, I think like the funny thing that I always again it's not funny really, but the thing that I always find startling, really, more than anything else, is that everyone's so quick to insure their dog. They could go insured with a mobile phone. Yeah, yeah. The car obviously has to be insured, you know, they're quick Yeah, it's things that you think about every day, isn't it?

SPEAKER_00 12:28

Honestly, all these things that obviously the car legally has to be, but yeah, even contents insurance for houses. If you if you go if you go and buy houses, most people would 99% of people would straight away, oh yeah, we need that, we need that, but they're not actually insuring themselves.

SPEAKER_01 12:41

The the amount of time, you know, the biggest asset you you're ever gonna have is you, your ability to make money. Whether you know the amount of times I've sat in in in you know in in meetings and and and the person in front of me said, My business is my pension, you know, my house is my pension, and I'll go, right, okay, so your house is worth I don't know, 300 grand for argument's sake. So that's your pension. Yeah. So you're 40-year-old and you're earning 50 grand and you wanted to retire at 60. So your biggest asset's your house at 300 grand, but you're gonna be working for the next 20 years at 50,000 pounds a year. Doesn't take a genius to do the maths and figure out that's a million quid. Yeah. That's probably a bigger asset to you and your family than that house is ever going to be.

SPEAKER_00 13:19

You need you need your health, don't you? And I suppose that touches on um other things like um from like a private medical perspective. Um, because as much as the NHS um can be a brilliant service in this country, and we're lucky that we have it, um it's not always the most efficient.

SPEAKER_01 13:38

No, it's it's becoming it's becoming more popular, I think, you know, and it's a it's a standard in other nations, isn't it? You know, I love the NHS, as you well know. My you know, my other half, my fiance works with the NHS, and I've got nothing but you know admiration and and you know time for the NHS, but uh it's also a system that's very, very heavily under pressure at this point in time, and I think people are taking advantage of things such as private medical insurance.

SPEAKER_00 14:01

I mean um yeah, for example, if you if you do have a manual job, or even not even a manual job, I mean school teachers and people like that, and nurses do a lot of walking. Um if you needed an e-replacement, for example, there might be an 18-month waiting list at the end. I think that's it, and again, I don't even think it's necessarily about you know that's about that's sort of because you if you can't work without getting that done. Well, this is it, it's it's hard to be relying on that kind of thing.

SPEAKER_01 14:24

But you say it's not even about industry per se, it's just it's just about having that ability to to be flexible and quick, you know, it's just about efficiency. Quality of life as well as it's not. Of course it is, of course it is, and like I say, they are becoming more popular, and I and I can you know I can understand why.

SPEAKER_00 14:37

I think and I suppose that they are they are also affordable to a certain degree, Arna, for some people.

SPEAKER_01 14:42

But it's like all things, it's just it's about prioritising, isn't it? And you know, the amount of times again to use a silly analogy, you know, I'll have people who'd rather cancel their up their life insurance than they would cancel this guy TV. Yeah, you know, 100%.

SPEAKER_00 14:54

And i i it it is it's about it's about direct priorities because that's not affecting you in the in the hundred percent. And I think insurance is that I'm gonna do it. It is, isn't it of course? I mean you watch the telly every day, so you think, well, I need that. Yeah. You use your phone every day, like you say. You mentioned the phones earlier, that is that why people insure their phone and not themselves, because they're not thinking about it. That's it. Unfortunately, it is until it does go wrong, that's when people start thinking about it. Yeah, and and and and as you know well no, unfortunately that's far too late, isn't it? Of course it is. And I suppose that touches on things like wills and power of attorneys, because that's exactly the same. Yeah. Um until unfortunately somebody does die a little bit. The thing I say to start thinking about it.

SPEAKER_01 15:31

Exactly. And the thing I always say to to to all of our clients when it comes to this area is I don't like talking about it, you don't like talking about it, nobody likes talking about it. But it's a it's an important conversation to go and have. Yeah, you can't bury your head in the sand, can you? Get it done, make sure you're happy with it, put it in an envelope, put it in the bottom drawer, tell who needs to know where it is, where it is, and leave it.

SPEAKER_00 15:52

And you sorted then and and it's you might not think that it's going to be a way off because you're not thinking about it, but it is and it will be.

SPEAKER_01 15:57

Yeah, and every couple of every couple of years, go back in, make sure you're still happy with it. If you're out, put it back in the drawer. If you think things have changed, you're not happy with it again, get it sorted out. And it's just a very, very important way of making sure that you protect your legacy.

SPEAKER_00 16:11

You know, especially that especially in the modern world, because a lot of a lot of people are unmarried with kids and things like that, and it's a lot more complicated when it comes to wills and um and mortgages and things like that. Um if the unfortunate thing does happen, um that's when you really need to start thinking about it. Um I say we've touched on the main talking points that we wanted to touch on. Was there anything else from you that you would think um that would affect them?

SPEAKER_01 16:43

Yeah, I think probably nothing more than we've kind of already touched upon. I think the big thing for me is just understanding the importance of these things. They're not they're not just another bill, they're not something to you know impact your quality of life, they're not something that's going to take away from you going to the pub. These are real, real measurable, yeah, you know, useful tools that you can have. And if I was to stress anything, absolutely, you know, just get some savings in place, even if it's a little bit, you know, ten pounds a week to start with, if that's all you can afford. But that's the key thing about it.

SPEAKER_00 17:10

Sort of like I say, it's quite a depressing thing to be talking about, but it is something that I feel we do need to talk about. But let's sort of let's try and sort of end this on a on a happier note. Yeah, I think the Well what to be fair, in terms of a happy note, what better thing could you do for your family? Exactly. Exactly. That's what they it's not it's not about being morbid and oh, well, I don't really want to think about that, but it's sort of like, well, no, you just what better thing could you do?

SPEAKER_01 17:30

You know, I sleep very well at night knowing if anything happens to me, you know, my other half is is well and truly taken care of. Yeah, exactly.

SPEAKER_00 17:36

I know you sort of you do need to look on the bright side, although it is unfortunate. Oh well yeah, but the the mortgage will get paid off.

SPEAKER_01 17:43

I know I know she's gonna be well taken care of. And for me, that's that's that's an unbelievable person.

SPEAKER_00 17:47

It really is, you know. Um because like you say, you've I've seen so many people just be left in in a lot in a bit of a mess. And it makes an already difficult situation become an even more even more of a one. So I think the more the more people think about this and even know about this, I say a lot of people don't realise that these products are out there and that these products are affordable.

SPEAKER_01 18:05

Yeah. Yeah. I would agree. No, that's that that's the big thing to take away from it. Just don't shy away from it. Not nice conversations, we don't like having them, you don't like having them, but you need to have them. Yeah. Because the biggest asset you're ever, ever gonna have is yourself and your family, and being able to protect that. God, can you put anything more in more above that?

SPEAKER_00 18:23

Well, that's it, exactly. And like I say, I think a little bit of a shorter one, but I think a lot of important information in there, and like hopefully that sort of helps people out and they can sort of start researching that. Because it's not very time consuming either. It's one of those things that you can you can get sorted in a day, you can get all of this sorted in a day if you speak to the right people. Yeah. No, absolutely. No, very good. Yeah, happy. Right, we'll try and make the next one a little bit more upbeat, but uh no, I think there is some stuff in there. Thank you.

SPEAKER_01 18:48

Thanks. Will writing and powers of attorney involve the referral to a service that is separate and distinct to those offered by St. James's Place and are not regulated by the Financial Conduct Authority. Azurly Wealth Management Limited is an appointed representative and represents only St. James's Place Wealth Management PLC, which is authorised and regulated by the Financial Conduct Authority for the purpose of advising solely on the group's wealth management products and services, more details of which are set out on the group's website at www.sjp.co.uk forward slash products.