For the IDEAL financial planning from home.
Will things ever be the same again? Only a month or two ago, this felt like an unnecessarily dramatic question. Now, it’s pretty clear that we may never return to life as it we knew it before the coronavirus pandemic. While the extension of the Government’s furlough scheme to October is welcome news in providing continued support to businesses and employees, it is also an acknowledgement that many people will be kept in financial limbo for a long-time yet.
But as much of the nation remains confined to their homes, many may find they have extra time on their hands, thanks to their daily commute being from the bedroom to the living room, study or kitchen rather than a marathon slog on the tube, and certain demands of the day, such as getting dressed and meeting social obligations, suddenly redundant.
This extra time means you can crack on through the list of life admin you’ve been meaning to do for months. Amongst that, a little time spent reviewing your financial affairs can help you identify ways to save money and cut costs. So, with the help of Zoe Bailey, Director of Financial Planning at Tilney, here’s how to future proof your post-COVID finances, for some IDEAL financial planning from home.
GET A TRUE PICTURE OF YOUR OUTGOINGS
The first thing to do here is to work out what your current financial situation really is, and whether it the COVID crisis has impacted it significantly.
It’s not all bad news; right now, some will be making substantial savings on costs like daily travel, restaurant bills and trips out with friends and family. Others, however, will be feeling the pinch, with uncertainty over future employment and current enforced inactivity affecting millions.
By understanding the impact of the pandemic on both your income and your outgoings, you will be in a much better position to draw up a household budget to get through the current period and beyond.
SCRAP UNUSED SUBSCRIPTIONS, STANDING ORDERS & DIRECT DEBITS
You’d be surprised at just how many people continue to pay subscriptions, standing orders and direct debits without even realising. Thoroughly reviewing your actual outgoings, with a fine comb or better yet, your eyes, is an opportunity to identify any further savings.
For example, if you weren’t making use of your gym membership before the lockdown (and certainly, right now with all leisure centres closed!) then cancel it. Should you be paying members of Netflix, Amazon Prime, Sky Go and Disney Plus, well, ask yourself; do you really need all of them to flick mindlessly and never actually settle on a show to watch?
Consider where you can make cutbacks to regular costs; so, scrapping any unused subscriptions, finding a cheaper deal on recurring costs like your mobile phone, energy bills or car insurance. All of this will accumulate extra money at the end of the month which can go into savings, or be invested, in order to give you greater financial stability during these uncertain times and beyond. If there is a beyond, that is.
CHECK YOUR BANK BALANCES
Everyone should endeavour to have some ‘rainy day’ cash savings squirrelled away, to provide a financial buffer for emergencies and unusual times, such as, well, right now. While a large savings account can seemingly provide a sense of security, over time the future spending power of that cash will be slowly eroded by inflation.
As a first step, pay off any loans or credit card debts if you are able to do so without incurring any prohibitive early repayment penalties. Take a long, hard look at how much cash you need to keep readily available. Consider feeding any excess cash that you can identify as unlikely to be needed in a hurry into investments for the longer-term.
REVIEW EXISTING INVESTMENTS AND THINK ABOUT OTHERS
Anyone with existing investments should take stock of what they already own and not leave this until the end of the tax year like so many typically do. The past is behind us but what matters from here on in is being positioned as well as can be for the future.
And while many of us will naturally shy away from the idea of investing when markets have experienced a period of turmoil, investing capital during periods when share prices have weakened can present really strong opportunities for long-term investors.
If you are looking to get started, then feeding cash into investments in stages over the coming weeks and months can help smooth out the daily ups and downs. Consider traditionally ‘safe’ investments such as gold, too.
PLAN FOR SUPPORTING YOUR FAMILY
If you’re married or living with your partner, have children or older parents, then it’s likely that you’ll be giving extra thought to your family’s future and what your financial situation currently is in terms of long-term support for them.
Now might be a time to consider providing them with a financial helping hand. Indeed, all taxpayers can make financial gifts of up to £3,000 per annum without adverse tax implications. Financial gifting in your lifetime means that you can help family members when they are younger and perhaps in greater need – for example, to clear debts, buy their first home, raise a family or start a fledgling business – as well as reducing potential liability to Inheritance Tax on your assets when you die.
HAVE A RETIREMENT CHECK-UP
If you’ve been planning for retirement, whether it be in a year, or 5 or 10, or even longer, the value of your pensions might have dropped as a result of falling investments or reduced monthly contributions.
Now is a good time to undertake a pensions check-up as well as considering other retirement planning measures, be it delaying your proposed retirement date or if you’re about to withdraw, consider taking money from a different pot rather than a pension which comes with greater risks.
PROTECT YOURSELF FOR THE FUTURE
While we all hope we are over the worst of the crisis, there is no telling what the future will hold. The economy will eventually bounce back but managing our money effectively will remain a challenge, so it’s important to think about how we can protect ourselves and our loved ones from future economic uncertainty.
Think carefully about insurance arrangements, like life cover, critical illness cover or income protection, which will protect your finances should anything unexpected happen, and perhaps even more importantly, give you greater peace of mind in tackling this troubling, topsy turvy time.
*Anything written by IDEAL Magazine is not intended to constitute financial advice. Always consult with an independent financial advisor or expert before making an investment or personal finance decisions.*