- January 20, 2018
- Bob Quinn
- Financial Planning
Last week’s newsletter sparked quite a reaction.
It pushed a few buttons and got many people talking.
I hope it got you asking questions of your investment product providers.
Now that you’re on a roll and you’ve experienced how great it feels to take action on your finances, here’s a little challenge.
By the end of this month, you will have
- Cancelled all unnecessary insurance policies
- Started to overpay your mortgage by €200 per month
On the first one, many of us are over-insured. This is a function of the financial services industry’s obsession with selling policies – in fact it’s not just financial services; you can hardly buy a hairdryer now without the retailer trying to sell you gadget insurance or some kind of extended warranty.
What do I mean by unnecessary? Well, you should only insure yourself against things that can financially ruin you. Cracking the screen of your iPhone doesn’t fall into that category.
All you really need is enough life assurance to cover household expenses after you (or your spouse/partner) dies. As your children become independent and your mortgage debt decreases (see point 2 below), you’ll need less. It’s pretty simply. Ignore the noise.
I explained in a piece in the Sunday Independent a couple of years ago how to work out how much life assurance is enough. It still stands, so have a look, work it out and start cancelling policies or reducing the amount you are insured for.
You should also consider increasing your excess to reduce your premium. The chances of these things happening are so rare that the higher excess you might have to pay if they do happen is still lower than the premia you’ll pay over the years.
Search and destroy. You’ll save money and simplify your affairs in one go.
On over-paying your mortgage, €200 per month extra will make a significant impact on your term and therefore the amount of interest you will pay.
Don’t believe me? Let’s say you have €250k left to pay on your mortgage and are currently paying €1251 per month. Add €200 per month to that and you’ll reduce your term by five years and save €27k in interest.
Build momentum. Sort out the simple things first.
How do you eat an elephant?
Bit by bit.