With austerity measures already starting to take their toll, many of us are feeling the pinch. In testing times like these, getting the right advice from a qualified professional can pay dividends. Whilst everyone’s needs and objectives are different and it is important to get personalised advice based on your own specific needs and circumstances, we’ve asked Steve to put together his top five tips on surviving in this current economic climate.
Pay yourself first. Don’t live from one payday to the next, aim to make your first monthly commitment a contribution to a savings plan or separate deposit account. Work out your regular monthly expenses, then set up a standing order for a portion of your surplus. This will avoid the common pitfall of living to your means and will encourage you to save on a regular basis. Having a rainy day fund will help in the future, especially if you become incapacitated and unable to work or if you are made redundant, or it could go to towards a large unforeseen expense, or a child’s education or wedding, or your own retirement nest egg.
Don’t live on credit, its easy to get into and a lot harder to get out. Too many people rely on overdrafts, credit cards and loans to cover every day expenses. The interest rate on these can be 10% to 29% per year, or even more in some cases, the cost of a purchase is immediately made more expensive by the cost of borrowing and interest will continue to accrue until the balance is repaid. Don’t confuse being able to afford a monthly payment with being able to afford the item itself.
Avoid buying a brand new car, especially on finance. We all know that a brand new car is a luxury, we also know that the price of a car will depreciate vastly immediately after you drive it off the forecourt. Furthermore, if you buy the car on finance, it will depreciate over time, whilst interest will be added to the amount that you borrow to buy the car. When you come to sell the car, there will be little equity left in the vehicle after the loan has been paid. Whilst there are advantages to buying a new car, such as warranties and better fuel efficiency, the long term cost and depreciation can easily outweigh these.
Avoid excessive spending. It’s often said that great fortunes are lost or created a pound at a time. It may not sound like a great extravagance, but that latte in the coffee shop during the day, dinner out once a week, the odd take away here and there, going to the movies once a week, and this can add up to over £1200 per year, which could be an extra monthly mortgage payment, or a few payments on a personal loan, or even £100 per month towards a pension. Having this surplus cash will help in times of financial hardship. I am not saying cut out all of life’s little treats completely, but to keep an eye on the expenses that can be avoided.
Ensure you are adequately protected. Often overlooked, we take ourselves for granted, and presume that nothing will ever happen to us. Making sure we have sufficient financial protection in the event of being unable to work due to an accident or long term illness, or worse, if we suffer from a serious illness such as a heart attack, cancer, tumour or stroke, will help with our financial commitments and ensure that we don’t suffer financial hardship, or worse, lose our family home due to falling behind on mortgage payments. Often the value of protection is confused with the cost of the cover, after all, cost is what you pay, but value is what you get and what price can we put on peace of mind?
