Health issues can create immediate and ongoing financial pressures, often requiring changes to both budgeting and investment strategies. Medical expenses, loss of income and increased living costs can affect your ability to maintain long-term financial plans. Adjusting your approach can help ensure funds are available when needed, while still protecting future goals. This article explores how to manage investments and overall finances when health concerns arise.
ASSESS THE IMPACT ON YOUR FINANCIAL POSITION
A health issue may affect income, increase outgoings or both. Start by reviewing your current financial position, including savings, investments and ongoing expenses. Understanding the scale and duration of the potential impact helps in deciding how much liquidity you need and whether adjustments to your portfolio are necessary.
PRIORITISE LIQUIDITY
Accessibility to funds becomes critical during health challenges. Consider holding a greater proportion of your assets in highly liquid forms such as cash savings, money market funds or short-term bonds. This ensures you can cover medical costs, home adjustments or other urgent expenses without selling longer-term investments at an unfavourable time.
REVIEW RISK EXPOSURE
Health issues can increase the need for financial security, prompting a reassessment of investment risk. Shifting part of your portfolio into lower-volatility assets can help preserve capital and reduce the chance of short-term losses. While it may be necessary to reduce exposure to higher-risk investments, aim to retain some growth potential to support long-term financial goals.
MAINTAIN AN EMERGENCY FUND
An emergency fund is essential when facing health-related uncertainty. Ideally, hold three to six months of living expenses in easily accessible accounts, factoring in potential new costs such as care or additional medical needs. This provides a buffer against unexpected events and reduces reliance on borrowing.
CONSIDER INSURANCE COVERAGE
Review any existing health, life or income protection insurance policies. Adequate cover can help mitigate the financial impact of illness or disability, providing income replacement or covering medical expenses. If cover is insufficient, explore whether supplementary policies are viable, but weigh costs carefully against your budget.
EVALUATE IMPACT ON RETIREMENT PLANS
Health issues can affect contributions to pensions or other long-term savings. Monitor how reduced contributions or early withdrawals might affect future retirement income. Where possible, maintain minimum contributions to retain employer matches or tax benefits, and adjust the plan as circumstances stabilise.
PLAN FOR LONG-TERM CARE NEEDS
Chronic or long-term health conditions may require ongoing care. Explore potential costs and funding options, including NHS support, local authority assistance and private care planning. Factoring these into your financial strategy early can help prevent strain on investments intended for other goals.
SEEK PROFESSIONAL GUIDANCE
Complex decisions around liquidity, insurance and long-term care often benefit from professional advice. A financial adviser can help tailor strategies to maintain security while aligning with long-term objectives, particularly when circumstances change rapidly.
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This Trustnet Learn article was written with assistance from artificial intelligence (AI). For more information, please visit our AI Statement.