Better Financial And Healthcare Planning As We Age
As much as we like to deny it, we’re all getting older.
And with age come certain responsibilities that we can no longer afford to ignore.
We all need to ensure our finances are in order and that provisions are in place if we ever fall seriously ill.
Unfortunately, most of us live like we’re invincible until it’s too late, and we are left with no backup plan to bail us out.
Fortunately, it’s very easy to change this outlook and make better financial and healthcare decisions today that’ll ensure we’re comfortable tomorrow.
Unsure about where to begin?
In this article, we’ll outline some crucial steps you can take to protect your future interests.
Along the way, we’ll look into the role of budgeting, setting SMART goals, and the benefits of a Power of Attorney.
What is a Power of Attorney?
This powerful and legally binding document essentially lets you (as the principal) appoint someone (the agent) to manage your affairs in the unfortunate event that your health dips or you are unable to make decisions on your own.
Power of Attorney documents can be durable. Durable Power of Attorney means they come into effect from the date they’re signed, remain valid if the principal becomes incapacitated, and retain their authority until they’re officially revoked or until the principal’s death.
This document, as you’d imagine, is crucial when it comes to securing your long-term interests. Consider the two major types of power of attorney:
* Financial Power of Attorney: This lets you appoint an agent to be in charge of crucial financial decisions, including paying bills or managing retirement benefits in the case that you’re unable to manage them on your own.
* Medical Power of Attorney: Puts an agent in charge of making crucial healthcare decisions on your behalf, such as deciding which medical treatments are necessary and which hospitals and doctors are best suited for the purpose.
Crafting these two documents is one of the best decisions you can make — as it ensures that everything you’ve worked for will be used to serve your interests in the unfortunate situation that you can no longer speak for yourself.
Assess your current financial situation
To secure your long-term interests, it’s critical to begin by analysing your current financial status.
Net worth
You will need to calculate your net worth (the difference between your assets and liabilities):
* Assets: Include savings, investments, property, and other valuables.
* Liabilities: Include debts like loans, mortgages, and credit card balances.
Your net worth is the value of all of your assets, minus the total of all of your liabilities. If you owe more than you own, you have a negative net worth.
Income
Determine all sources of income, including:
* Salary
* Bonuses
* Investment income
* Rental income
* Side hustles
Expenses
Record your monthly expenses, categorizing them into:
* Fixed expenses (e.g., rent, mortgage, insurance)
* Variable expenses (e.g., groceries, entertainment, utilities)
Review your debt
List all your debts, including:
* Amount owed
* Interest rates
* Monthly payments
* Remaining term
Evaluate your savings and investments
Assess your savings accounts and investments:
* Emergency fund balance
* Retirement accounts
* Other investments (e.g., stocks, bonds, real estate)
Set SMART financial goals
All financial goals should be SMART (specific, measurable, attainable, relevant, and time-bound).
Making financial and healthcare decisions based on these metrics helps you avoid setting vague targets that you’re never going to meet. Instead, it enables you to develop more realistic and accurate budgets that are easier to adhere to.
These goals can be split into:
Short-term goals
For example, how much money do you need for a holiday or to buy an expensive home appliance?
Medium-term goals
For example, how much money do you need for an emergency medical fund? (This should ideally be 3-6 times your monthly income).
Long-term goals
For example, how much will you need to save to retire comfortably to buy a home in the foreseeable future?
Evaluate financial and medical risks
Evaluating financial and medical risks as you age involves a proactive approach to understanding potential future scenarios and planning to mitigate those risks.
Assess current health status
This includes regular medical check-ups to identify any pre-existing conditions or risk factors.
Consider your family medical history to understand potential hereditary risks.
Understand general medical risks related to age
Research common health issues related to aging (e.g., cardiovascular diseases, diabetes, arthritis, cognitive decline).
Review your health insurance to ensure it covers potential age-related conditions.
Evaluate the potential need for long-term care services, including home care, assisted living, or nursing home care.
Assess the stability and longevity of your income sources (e.g., pensions, social security, investments).
If you think that the biggest risk is that your investments don’t mature as intended, you can look into diversifying your profile or hedging your investments.
Legal and estate planning
Ensure you have a legally binding will that outlines your wishes.
Or, what if you were to suddenly fall ill and become incapable of making any decisions? Who will be in charge of your accounts? Who’ll pay your bills?
Assign a trusted person to make financial and medical decisions on your behalf if you become incapacitated. This trusted person is known as the Power of Attorney (we talked about it earlier).
Conclusion
These personal finance solutions are easier to outline than they are to implement. But as long as you take a step-by-step approach and remember to assess your current finances, set SMART goals, and maintain all the right paperwork, you’re going a long way in positioning yourself for a better future.
