Are Your Finances Ready for Fun?

While the best things in life are free, as the saying goes, some of life’s great experiences do have a price tag. If you’re considering fulfilling your childhood dream of hiking the Appalachian Trail or you’re offered tickets to see your favorite team play in the championship game, you know these experiences can be costly. Yet these opportunities can be within financial reach if you have a plan and sufficient funds set aside. The following do’s and don’ts can help you take the right steps to make these dreams a reality.

Do calculate the total cost of the experience. Many opportunities have upgrades or additional options that can make the experience memorable. Think about what the ideal experience looks like for you, and factor those extra costs into your budget. Be sure to include the cost of accommodations and airfare if participating requires you to travel.

If you’re traveling with family or friends, discuss your expectations before you go. That way, if your friend wants backstage passes or a seat upgrade, you can prepare your budget accordingly. You’ll also avoid an emotional decision in the moment that could derail your finances.

Do make saving a priority. Start by looking at your recent spending and identify ways to allocate money to fund your dream. If you have a recurring subscription or a cable package you don’t use, consider eliminating the expense and funding your dream instead. Next, create a savings goal, or the amount you’d like to earmark for those VIP tickets each month. Having a goal may help you reign in impulse purchases, because your financial priorities will be top-of-mind.

If you’re still tempted to spend the money elsewhere, consider establishing a separate savings account. Many accounts allow you to set up an automatic transfer into the dedicated account each month. If you have the option, automatic transfers could help make the process of saving easier.

Don’t spend your emergency savings. While you may be tempted, avoid tapping into your emergency fund. This money should be used to meet a sudden unexpected expense or to fill the gap in case of a job layoff. If you fund your scuba vacation instead, you do so at a possible risk to your long-term financial security. Unforeseen expenses can occur at any time, so you want to have sufficient money in place.

Don’t forget to keep funding other financial priorities. As you save toward your dream, make sure you continue to fund other long-term financial goals, such as your retirement or your child’s college tuition. If you want help balancing your priorities, consider meeting with a financial professional who can work with you to develop a strategy that addresses your unique situation.

Do enjoy the experience without the financial guilt. If you take the time to create a plan and be diligent about saving, chances are that you’ll be able to enjoy the experience without thinking about its impact to your budget. Your dream will feel even more fulfilling if you feel good about the financial decisions you made to get there.

Later Life Mortgages

Equity Release – ER: (Later Life Lending) and the interest-only mortgage timebomb.

It is estimated that around 3m people in the UK have interest-only mortgages and a great many of these people either have a shortfall on their mortgage repayment vehicles (mainly endowments not performing) or have no repayment vehicle in place – with an ever-faster approaching mortgage repayment date.

For those with a shortfall, if over a certain age, they’ll have to either find the money to repay the lender or downsize – the chances for many over 55s getting an affordable remortgage are slim, if in fact they can get a mortgage at all. An answer could be Equity Release.

Most people have built up equity in their properties over the years and, for those with a mortgage to repay but who want to stay in their home, releasing some of the cash tied up in their property could be the perfect answer.

Other uses for ER

Of course using ER to repay a mortgage is just one of the uses it can be put to. Some other uses are:

A tax-free lump sum for private medical care, to avoid a lengthy waiting list.
Help a family member to buy their first home.
Help finance a move to a new property.
Replacement of family car/home improvements/similar uses.
Supplement retirement income.
Reduce the value of your estate and save on Inheritance Tax.
Enjoy your money while you’re alive.
Actually go on that adventure that you’ve always dreamed of.
Purely to have the money to spend as you want, when you want.

Modern Equity Release plans are very flexible and, because ER advisers are now regulated by the Financial Conduct Authority (FCA), very transparent.

Before settling on the services of an ER adviser you should ensure that the firm you are considering offer the following:
*An initial meeting/discussion either by telephone or face to face without obligation and without charge.
*Ensure that equity release is a suitable route for you now or possibly later.
*They’ll explain in full how equity release works and its impact on you & others.
*They’ll discuss all alternatives and provide access to these options if needed.
*Their recommendation will be based solely on your needs.
*If the recommended route is to proceed with an arrangement, then they will provide you with a Key Facts Illustration (a client specific illustration).
*If you are fully happy to proceed, they will help you with the application process.

When an application is completed, you will receive a suitability letter from them, that will fully explain why the Equity Release product has been chosen.

Equity release: types of scheme

There are two main types of equity release: lifetime mortgages, which allow you to borrow money against your house; and home reversion, whereby you sell a share in your property.

Lifetime mortgages (can be taken out from the age of 55) – repaid when you die or go into long-term care.
With a lifetime mortgage, you borrow a proportion of your home’s value. Interest is charged on the amount borrowed, but nothing usually has to be paid back until you die or sell your home. The interest is compounded or ‘rolled up’ over the period of the loan, meaning your debt could double in 11 years at current rates.

Home reversion schemes (only available to people 65 or older) – you effectively sell a portion of your property to the lender but can remain in the property until you die.

With a home reversion scheme, you usually sell a share of your property to the loan provider for less than the market value. You have the right to stay in your home for the rest of your life if you wish. When you die or move into long-term care and the property is sold, the provider gets the same share of whatever your home sells for as repayment. For example, if you sold 50% of your property to the provider, it would get 50% of the sale price.