Dealing with uncertainty
As we emerge out of a lockdown period longer than most of us envisaged, many people are still facing a degree of uncertainty in their financial life which can have a big impact on their overall wellbeing. Here are some tips to help people look at their finances and make plans at this uncertain time.
1. Work out your budget (see my blog at grovelyfinancial.co.uk for a template) to set a realistic expectation of what you can save each month.
2. Determine when you might need to access your savings - is it short term (for Christmas/emergency fund), medium term (needed in the next five years) or is it long term (for retirement, for a rainy day, for the children or grandchildren)?
If you need short term access, you should consider keeping it as cash. Although the value will not grow, neither will it fall so your planned expense can be met.
If the time horizon is longer, you may want to consider potential investments for the funds. Over longer time frames, the spending power of cash will be eroded by inflation, even in the current low interest rate world. I can work with you to assess your willingness and ability to take investment risks as well as your ability to bear any potential losses, and this allows us to find the right investments for you. The future value of investments can fall as well as rise and future growth is not guaranteed. If you cannot afford for your investment to lose any value, the stock market may not be the place for you.
3. You should consider the tax wrapper (pension, ISA, investment bond etc) into which you place your funds. There is no point putting all your savings into your pension if you need access to some of them before the age of 55, as your pension will not allow withdrawals any earlier. Tax efficiency is important, but you need to pick the right wrapper for you. The benefits regarding the treatment of tax will depend on your individual circumstances and may be subject to change in the future.
4. Don’t think of financial planning as a ‘done and dusted’ exercise. Your needs change, the products available to you change, legislation changes and (as we know only too well currently) stock market values change. Any of these may happen quickly, so having an ongoing review of your finances keeps you in control and up to date - on track to meet your goals, whether that be a house purchase, a comfortable retirement or a legacy for the children.
If you have any questions finance related, give me a call on 01722 632456 to set up a free initial discussion where I can help you make the most of your money.
Ellie Price
ellie@grovelyfinancial.co.uk