Personal finance: Minding her business

Financial Makeover: NAME Sue Grossman AGE 34 OCCUPATION Runs Blue Ribbon Events, a Corporate And Hospitality Agency

Like many women who decide to go it alone Sue Grossman has kept her feet firmly on the ground. Since she set up her business, Blue Ribbon Events, almost a year ago it has achieved a turnover of almost pounds 300,000 and she is preparing to recruit her first member of staff. However, for now she does not intend to relocate the business out of her London flat, where it is based.

Over the past few years, Sue has built up a small portfolio of individual company shares, including BT, Abbey National, Lloyds TSB, Railtrack, Rolls Royce and Thomson Holidays. The shares are now worth about pounds 25,000. She also holds about pounds 30,000 in an instant access account with Direct Line, paying 7.05 per cent gross, and has a separate account with Standard Life Bank, out of which she conducts her business finances.

So far, Sue has ploughed almost all her earnings back into the business and intends to sort out her pension planning and other financial areas on its first anniversary next month.

The adviser: Roddy Kohn, independent financial adviser at Kohn Cougar, Wellington House, Wellington Park, Clifton, Bristol, BS8 2UR (0117-946 6384).

The advice: For the past year, many of Sue's personal finances have had to take a back seat,allowing her to concentrate on setting up and establishing her business. There are now areas where planning would come in useful.

Sue already has a term assurance policy with Norwich Union for pounds 20,000, so in the event of her death all her debts will be wiped out. This is tax effective because it is linked to a personal pension, thereby enjoying the same tax benefits from the Inland Revenue as with a personal pension. Out of every pounds 10 paid into a policy in this way, the Revenue chips in pounds 2.30 for standard rate taxpayers and pounds 4 for those on the higher rate.

Perhaps one of the most important issues is whether any debts could be covered in the event of long-term illness. Sue has some capital set aside from Blue Ribbon Event's earnings. But long-term illness would eat into this.

It is clear, however, that additional critical illness cover of pounds 150,000 will be needed. Critical illness cover, which pays out a lump sum in the event of diagnosis of major diseases, including heart attacks or cancer, would go some way towards resolving this issue.

Should anything happen, she could simply choose to use the capital to repay her mortgage or any other liabilities. That's the attraction with critical illness cover; it can be used in any way Sue sees fit. This will cost in the region of pounds 25 per month through Scottish Provident.

I also have recommended that Sue take out permanent health insurance. This pays a regular income in the event of a person being off work for a long-term period for any reason. I suggest Friends Provident because this will provide an income equal to approximately half her current salary at a cost of pounds 28.71 per month.

Premiums and benefits are fixed at the outset which means Sue need not worry about rising costs in the early years. She will need to review the contract at least every three years to inflation-proof her benefits.

As far as pension planning is concerned, I originally advised Sue to sit tight for at least nine to 12 months before making a pension contribution. This is simply because we need to be sure that the profits from Blue Ribbon Events are sufficient to justify making the contribution.

Bearing in mind that the Inland Revenue allow the self-employed up to seven years to catch up with pension contributions, Sue need not be concerned about a short-term deferment of her plans. In any event when Sue's personal pension does begin, she will need to include waiver of premium cover, which continues to pay contributions into the scheme in the event of illness.

She also will need to look for the most flexible pension possible, one that allows for large lump sums to be paid in as well as regular contributions, but does not penalise savers for altering the payment level from time to time, as their earnings fluctuate. There are several companies on the market offering such products and we can discuss the benefits of each when Sue is ready to plan her contributions.

The existing pension-term-assurance contribution is sufficiently small so as not to cause concern.

When Sue starts a personal pension is it unlikely she will be in danger of paying in too much, and thereby forfeiting any tax breaks, as her current maximum contribution limit is 17.5 per cent.

Sue's cash deposits are earning reasonable rates of interest, be they with Standard Life Bank or Direct Line. If she wanted to rationalise the accounts and earn a marginally higher rate of gross interest, it would make sense to switch all the money to Standard Life Bank, which currently pays 7.35 per cent a year on deposits of more than pounds 1. Sue knows this. The key question is will Sue decide to move the money?

As for her investments, there is no doubt that Sue has done well with her share portfolio over the past two to three years.

It is sometimes difficult to re-examine things when they have proved to be such a success. Again, however, there is an underlying problem, as with most portfolios of this size, that the number of shares she owns exposes her to greater than normal risks in the event of market downturns.

As we have seen in the past week or so, this is not an idle risk: the truism about the value of shares is that they can go down and up. In such cases, I believe investors should take shelter by maximising the spread of their holdings as much as possible.

Doing so by simply dividing the portfolio into smaller units would not be economically sensible. That is why it often makes sense to look at "packaged" investments, such as unit and investment trusts, which by holding shares in a greater number of companies, helps reduce risks. Again, I have indicated this to Sue. Should she feel that she is ready, I would be happy to look at a suitable portfolio to match her needs.

Whilst these are not all the issues Sue will need in addressing the financial makeover of her business they certainly represent the most pressing ones. She has done exceptionally well in the past year. It is now up to her to take the next financial steps to help secure her future.

Blue Ribbon Events: 0171-609 7400

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
News
i100
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Maths Teacher

    £110 - £200 per day: Randstad Education Leeds: Secondary Maths Teacher for spe...

    Business Analyst - Surrey - Permanent - Up to £50k DOE

    £40000 - £50000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    ***ASP.NET Developer - Cheshire - £35k - Permanent***

    £30000 - £35000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    ***Solutions Architect*** - Brighton - £40k - Permanent

    £35000 - £40000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker