Preparing for a Financial "Spring Clean"

I was told recently that our lives have three very defined areas, business, personal and money. It is at New Year that we focus on these areas and what we can do to improve them. While I cannot claim to be able to help you with the first two, I hope to be able to assist you with the latter.

This article will try to give you some areas that you need to address to ensure that there is a continued cohesive strategy in your Investment and Financial Planning for 2002 and beyond.

• Credit Cards
  Have you built up a sizeable balance following the holiday period? If so, shop around, is your credit card company charging over the odds for your credit balance?

• Currency Movements
  As some you may have seen on the run-up to the holiday period, the Bank of Japan is now taking active steps to decrease the value of the Yen. The reason for this is to try and revive an economy that is experiencing it's third recession in a decade. As interest rates in Japan are effectively at zero, the BOJ cannot use this mechanism to assist the economy, so one of the few options left is by making Japanese products cheaper for foreign buyers by weakening the Yen.

  At the time of writing the Yen is 131.82 to the US Dollar and 190.5 to GB Sterling. This does not help an investor who has money sat in their Yen Bank accounts as it is reducing in value all the time against your 'own' base currency. This, on top of zero interest, and a very shaky Japanese banking sector does not make it a sensible place to hold your money at the moment. Obviously, it is important to have a balance here for emergency cash, but I advise that all excess deposit money needs to find a more suitable home.

• Portfolio Planning
  Following last year's turbulent stockmarket activity, most of us have now taken a closer interest in our portfolios than ever before. Is your portfolio balanced so that it is spread across the main asset classes to ensure that there are opportunities for long-term growth, but also protection against sudden market corrections, as we have seen? Assess your own attitude to investment risk, as this changes over time. The once aggressive 'high risk' investor may be seeking solace this year in more 'balanced' funds that offer some protection for his or her portfolio. Is the fund manager that you have been investing in still providing the returns that you were hoping for, if not, speak to your adviser to look at more suitable options going forward.

• Interest Rates
  We are going through a period of very low interest rates, indeed it over 35 years since the world has experienced such low levels. It may be time to see if your bank is giving you the best deal possible for your cash savings. Again, shop around, there are always banks looking to attract your business by offering better rates of interest.

• Mortgages
  If you own a property in your 'home' country, are you getting the best rates on your mortgage? There are some excellent new deals being offered by all lenders at the moment. If you can save, say US$ 100 (or equivalent) on your loan costs per month, you can use this to top-up your pension, and it has cost you nothing to do this. Many investors do not know that by simply asking their current lender to give them a lower rate on their loan, that lenders are not averse to doing this for fear of losing your custom. Remember that it is only the cost of a phone call. If this does not work, then there are many Financial Institutions who are ready to offer you a good package.

• Retirement Planning
  Most people have something in place to provide them with a pension in retirement, but when did you last take a close look at what it may pay out when you retire? You may have started this a few years ago with all good intentions, but perhaps the premium levels do not now reflect the salary that you are earning or indeed the pension that you wish to receive. Take a close look at the projected maturity value and see if this is going to provide you with the pension that you need in retirement. My advice here is that simply taking out a retirement savings plan is not enough, you need to constantly re-assess it to ensure that it is on target.

• Family Protection
  What level of life assurance cover do you have in place to protect your dependants, is it enough? Indeed, do you know what level of cover should be sufficient to take care of your family in the event of early death?

  What would happen if you were to suffer from a serious illness such as Cancer, Heart attack or stroke? Do you have any cover in place to protect your lifestyle should this happen? For a modest cost, you can bring some peace of mind that you will not be left financially helpless in a time of crisis.

May I wish you all a very happy new year.

Ivan Doherty
ipd@ifg-asia.com

Ivan Dohety MLIA (dip) is Chief Operating Officer of IFG Asia. Part of The IFG Group PLC and registered with the Ministry of Finance in Japan to give investment advice.