Let’s face it, Financial Planning doesn’t make us jump out of bed in the morning 🙂 Typically, it’s something we know we should do but we tend to kick it further down our “to do” list to next week, after the summer holidays, in the New Year, next pay raise ….. but what’s the cost of not doing anything now? Let’s take a look.
What enables us to live our lives as we do? Money, right? Our income keeps a roof over our heads, puts food on our table, clothes on our back. It lets us enjoy all the fun things, going to nice restaurants, amazing holidays, nights out with friends. It helps us through the tough times, if we get sick or have a family emergency, it pays for medical help or flights back home. So, if our income does all this and more, why don’t we look after it? Â
We tend to take our regular, reliable income for granted and don’t think about the consequences of no longer having this, but like everything in life, all good things must come to an end, so what’s the cost of NOT protecting our income and planning for our future?
1/ Our retirement:
Close your eyes for a second. Imagine you wake up tomorrow and you are retired (I can see you all smiling now at the thought :-)) Where will you be? What does your day look like? Travelling? Lazy breakfasts overlooking the sea? Spending time with the family? Spending time on a new project or a hobby you’ve always wanted to do but never had the time for? Sounds great? So, what will you live off?Â
Imagine now, that throughout your working life you’ve not planned for this day because the state will give you a pension. In reality, the state may provide a pension, however, this realistically will be peanuts! In Czech Republic, the monthly state pension paid out today is around CZK 12,000, however, with current demographics, people are living longer and there is less of a working population, so fast forward another 30 years and this same state pension will be lucky to be around CZK 3,000 per month in today’s money (see pension article for more details). So back to the question, what will you live on? Â
Does this mean you have to keep working for another 5 or 10 years? Or does it mean you have to struggle and count every penny spent, every day of your retirement? It doesn’t paint a pretty picture, but unfortunately, it’s reality for many people who didn’t plan ahead in time. The good news, however, is that you CAN make the choice to plan for your retirement now, plus the longer you have to save for this, the easier it is on your pocket 🙂 Â
New pensions survey: Nearly half of Europeans not saving for retirement
“43% of European citizens are not saving anything privately for their retirements… “
(Source:Â https://www.insuranceeurope.eu/new-pensions-survey-nearly-half-europeans-not-saving-retirement)
2/ Our health:
If you are an employee working here in the Czech Republic and you suffer long term illness, injury, or incapacity, you will receive approx. 50% of your salary from the state, until you are either declared invalid or heal from it, whichever comes first. Now, 50% of your monthly pay doesn’t sound too bad, or does it? Is this enough to cover all your fixed expenses or would you have to think about moving to cheaper accommodation, cutting back on essentials such as food, utilities, clothing etc? What if you needed additional medical equipment, specialists, or care, over and above the basic state healthcare, to support you during this time, how would you pay for this? Would 50% of your income still be enough? And when the 50% stops, what happens then?  Do you “borrow” money from your savings account or your investment plan (earmarked for your retirement), telling yourself that you’ll make it back up? What if you can’t make it back up? What if your savings account runs out?
To make matters worse, if you’re working as a freelancer/self employed here in the Czech Republic and you suffer long term illness, injury or incapacity, you receive nothing from the state in terms of percentage of your income, you’re on your own! Â
So, if we rely on our income for everything we do today, tomorrow and for our future plans, why on earth would we not protect this? Why take the risk? So many of us think “it’ll never happen to me” or “I’m too young and healthy to worry about that”, sound familiar?
The reality is the time to take action and protect your income IS when you are young and healthy. The reasons are simple, it’s much cheaper the younger and healthier you are, plus there are less likely to be any pre-existing medical exclusions. Typically, as we get older, we have more health issues which mean these may not be covered if we wait until then to apply for income protection cover, plus it’s more expensive!
Lastly, if you’re a normal person, you will have the logic of only purchasing things that you need. You want to go running? Buy new shoes. It’s simple. Income protection is the ONLY thing in the world that you can’t get when you need it. You can only get it when you really don’t need it! Which is counter-intuitive. Nevertheless, whenever you get a flat tire in the middle of nowhere, you thank your lucky stars that you have that spare tire in your trunkÂ
 3/ Our goals and dreams:
We work because we want to earn money:-)  So we work for most of our adult life, making plans for the future as we go, our next holiday, maybe buy a house, start a new business, get married, have a family, move to another country, change career etc. We work hard but we are typically lazy when it comes to making our hard-earned money work hard for us.
It’s easy to log on to our bank account and stick some spare cash into our savings account each month. It feels good! We’re saving some money, tick in the box! Or is it?
Unfortunately, interest rates today are terrible, and interest paid out on savings accounts doesn’t come anywhere close to the current rate of inflation. So back to our financial goals and dreams, how can we make our hard-earned cash work better for us? How can we reach our goals and dreams quicker? What’s the cost of not doing this?
In the example below, saving only 1000 CZK per month for 15 years, the value is almost doubled! The cost of not doing this is 123,751 CZK.
As the saying goes “Prevention is easier than cure”! Â
Reach out for friendly, professional, FREE, English speaking advice today. Go on – be proactive!
