Planning your finances for 2009

Recession aside, there is no reason why 2009 should not be more prosperous and there are a few simple things we can all do to reduce our outgoings and secure our futures.

It makes sense to review your financial affairs on an annual basis and I encourage you to contact an independent adviser in 2009 for a financial 'health-check'.

There are many new financial products and incentives launched every month, along with changes in interest rates (and tax law for many expatriates) that could directly affect your finances.

Over the next few weeks, we will put forward five simple resolutions that most of us could benefit from adhering to:

Part 1: Structure your bank savings

For many, it is the simplest things that are overlooked. Many people have a huge proportion of their savings sitting in a current account despite them having no need to do so.

This potentially has several consequences:

Firstly, and most obviously, is that the saver is missing out on the best interest rates. If three months' salary is left in a current account as an 'emergency fund', the remainder can be split between seven-day, 30-day and 90-day notice accounts, which offer higher interest rates - or possibly even longer-term fixed interest accounts if the terms are attractive.

Across their savings, this will result in an increase in the interest being earned, without significantly reducing their liquidity - as the seven-day account can quickly top up the emergency fund, the 30-day account can top up the seven-day account and so forth.

Secondly, placing savings in an offshore account is vital for expatriates as this avoids their money being frozen should they die unexpectedly - giving surviving family money to live on until their estate is distributed.

Many expatriates in the Middle East do not realise that their bank accounts (even joint name accounts) will be frozen if they die, and it can take over 18 months to get access to this money, especially if they do not have a valid Will in place. Whilst it is not something we wish to think about, holding money offshore is the easiest and most effective way of keeping money liquid should the worst happen.

Lastly, by choosing a bank in a jurisdiction that has Government protection, it is possible to protect the money from the current credit crisis should the individuals' bank collapse. Whilst most offshore jurisdictions do not have 100% themselves, some are subsidiaries of Irish or UK banks which are covered by these governments' guarantee on savings.

A good, independent financial advisor will be able to advise on suitable bank accounts to structure your savings efficiently and effectively.

See also:
Planning your finances for 2009: Retirement plans
/182495.html">Planning your finances for 2009: School fees