The past year has shown us all the unpredictability of life.
No-one could have foreseen the ongoing impact of Covid-19 on people’s health, employment, and the wider economic landscape.
Of course, nobody wants to go through another period like this – but we, of course, may.
Here, we look at how you can plan ahead to manage future financial pitfalls, whatever your personal circumstances.
Set a household budget
Take stock of your everyday finances. Draw up a list of your regular and essential bills by scanning your bank statements and use this as a basis to set a household budget.
You could consider creating a simple spreadsheet, splitting your outgoings into ‘essential’, such as your mortgage and utilities, and ‘non-essential’, including entertainment and holidays, while giving yourself monthly spend and save targets.
Don’t forget to factor in some money for emergency spending, alongside major costs such as family trips and festivities.
Deal with any debts
You’re likely to be paying far more in interest on your debts than you could be earning on your savings, particularly with interest rates at record lows.
Tackle any debts with the highest interest rate first, such as credit card and store card debts. You could move the debt onto a card with a 0 per cent rate for balance transfers, although it’s important to check whether there any fees for doing so, and whether it’s worth the cost.
Build on your savings habit
Consider what you can truly afford to save each month and stick to this by setting up a direct debit into a savings account. The inability to spend on some things during lockdown could have highlighted where you can make the necessary cutbacks to start a savings habit.
You might want to try some tactics to avoid unnecessary spending. For example, give yourself 24 hours before buying a new item to avoid impulse buys. You could also spend some time removing any credit card details saved online and unsubscribe from store emails to avoid temptation.
Boost your safety net
It’s generally considered wise to have enough cash set aside in an easy access savings account to meet at least six months’ worth of expenditure. However, you might feel that given the current economic uncertainty, this isn’t a sufficient sum.
This money could provide peace of mind if you suffer a salary cut or a drop in dividend income, and need to meet your essential outgoings.
Check your protection
Protecting your family from financial difficulties isn’t just about having savings and investments to provide for the long term. It’s also about ensuring your loved ones are provided for should you suffer a long-term illness or die.
There are various types of financial protection, including income protection, life cover and critical illness cover, but it’s important to seek advice from a financial adviser because your options are unlikely to be clear cut. An adviser can help you work out the right level of cover and benefits for your personal circumstances.
Start – or continue – investing
Ongoing periods of economic uncertainty are undoubtedly unsettling. Yet if you’ve no immediate need for your spare cash, and enough set aside for emergencies, investing for the long-term could be wise.
Stock markets go down as well as up, but history shows that, over the long term, shares tend to perform more strongly than cash. It doesn’t typically pay to hold off on an investment decision if you’ve got spare money and time on your side, whatever the wider economic circumstances.
If you are unsure about your next steps and would like some expert help, an adviser can help you plan effectively to financially safeguard against whatever lies ahead.
A good financial plan helps you manage your financial risks, while helping you make the most of any opportunities to increase your wealth over time.
The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd.