5 ways to protect your financial wellbeing in tricky economic times

The price of food, energy, fuel, and other necessities has increased significantly in recent months. So it’s little wonder that the rising cost of living is one of the biggest issues affecting families today.

Increasing costs have made it difficult for many families to make ends meet and has put a strain on many household budgets. When more people have money troubles, mental health issues also rise.

And while money can’t make you happy, an absence of, or lack of enough, money can cause stress and anxiety.

Money worries are far from unusual

Research has revealed that the cost of living crisis is causing financial wellbeing concerns for three in four adults.

In fact, data published by the Office of National Statistics (ONS) in June, suggested that 77% of UK adults over the age of 16 reported feeling “very or somewhat worried” about the rising cost of living, with 50% of those admitting to worrying on a daily basis.

Some are feeling financially confident

On the flip side, as a significant number of people are struggling financially, an even greater number are not. In recent months, we have seen a surge in holiday bookings, as well as a strong demand for property and second-hand cars, indicating that many are feeling financially confident.

However, having a high income doesn’t mean money worries don’t exist.

Research by small loans provider, Salary Finance, found those earning £90,000 or more a year had almost the same level of financial worries as those earning between £10,000 and £30,000. The same study revealed that 33% of C-suite executives and 30% of managers run out of money before payday at least once a year.

Money is still a taboo topic

Since there still seems to be a stigma attached to talking about money, many suffer in silence. This means that those in a position to help don’t.

There is no shame in having money worries. And, in many ways, the cost of living squeeze, which is affecting so many, makes talking about money troubles a little easier.

If your income isn't keeping up with inflation, planning for increased costs can be a challenge. As the cost of living continues to increase, there are a few important things to consider to maintain your financial wellbeing.

5 proactive ways to protect your financial wellbeing

1. Review your spending

Review your budget and get a clear idea of your outgoing costs. Seeing where your money is going can help you find areas where it may be possible to cut costs and make savings.

2. Maintain your rainy day fund

When it comes to financial security, having some money set aside for emergency spending is one of the most important things you can do. Ideally, you should hold the equivalent of around three to six months’ income in an easy access account.

Should you need to draw on it, top it back up as soon as you can to ensure you maintain the appropriate level.

3. Keep debts at a manageable level

Setting out a plan to reduce any form of debt, such as credit cards or a mortgage, could save you money.

Managing high-interest debt first will likely have the best outcome. So, focus on repaying any credit card debt you may have.

You may find you can pay off debt quicker by switching providers or making overpayments. Doing this will also reduce the cost of borrowing over the long term. Watch out for early payment charges and be sure that your new deal is better than your old one.

4. Resist temptations to dip into your pension or investments

If you are feeling the squeeze, you may be tempted to use your pension or investments to help tide you over. While doing this may help you make ends meet in the short term, it’s important to think about the long-term effect this could have on your retirement plans.

Drawing down on your pension or selling investments could leave you worse off in the long run, so it’s important to consider all of your options before making any decisions.

Consolidating your old pensions into one could help you cut down on management fees and give you a better picture of how your finances are looking.

Talk to us before you commit to transferring your pensions. We will help you understand the benefits and drawbacks of combining your pension savings.

As well as assessing your retirement funds and performance, your adviser will also discuss your current financial circumstances, your long-term plans and objectives, and your attitude to investment risk.

5. Take a long-term view

It’s important to think about the long term when it comes to your finances. Making short-term decisions could jeopardise your long-term financial security.

Think about what you want your life to look like in 10 years and then consider putting a plan in place to get you there.

If you’re ready to review your finances and improve your financial wellbeing this year, get in touch. We put your long-term goals at the centre of the financial plan we put in place for you, helping you to make your dreams a reality.

Get in touch

If you would like to discuss your financial situation and find out how we may be able to help you improve your wellbeing, please email enquiries@alexanderpeter.com or call us on +44 1689 493455.

Please note: The content of this newsletter is offered only for general informational and educational purposes. It is not offered as and does not constitute financial advice.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

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