Protecting your income for a better outcome

A few short decades ago, we lived in a world that seemed to have far more security and certainty. The rate of change was slower, and many assumed that if you stuck to the system, the system would look after you.

Social security, income security and good health were taken for granted in developed countries. The chance of losing one or all the above did not feature too highly in financial plans. As you are reading this, you are likely already acutely aware that this is no longer the world in which we live.

From attacks on political structures that we assumed were unassailable to economic systems bending to the will and manipulation of the mega-wealthy or well-organised-online-communities - it is harder to protect our financial and life plans. Planning for protection if you lose your income has simply become imperative. There are financial products and financial planning strategies that can help with this.  

When it comes to products, income protection is a popular option. These financial products are primarily designed to pay you a benefit if you cannot work for a while because of illness or injury. As needs evolve, the products evolve too, and some can be set up to provide an income due to retrenchment (not voluntary resignation).

When it comes to financial planning strategies, one can leverage or sell assets to cover a period of non-income or set up emergency funds that give you access to up to six months of income should you need it.

Unfortunately, many people take a head-in-sand approach when it comes to income protection, believing that they will never be inflicted with a disability, or assuming they can find a quick resolution if they are.

However, this does not necessarily equate to positive thinking but rather naiveté. A more responsible approach would be to hope that disaster won’t strike while still having a back-up plan for when life has other ideas, because life will have other ideas.

If you are going through an income crisis presently, then it’s hard to plan for the eventuality of another. You will now need professional financial advice more than ever to swim through the rough waters to solid ground. Only once you have regained an income, and are in an income-secure space, can you begin to protect your income for a better outcome.

If you are currently income-secure, make sure you have a strategy in place to build up resilience and protection for one of your greatest assets.

The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken based on information in this article. Always remember the prudent way is to consult your portfolio manager before investing. PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728