Quick tips for a financial health check

If the last few years have taught us anything, it’s that nothing stays the same for long. From lockdowns and furloughs to the cost-of-living crisis and the highest inflation rate seen for 40 years, each of us each will have been affected differently. Right now, with so much uncertainty about the future, our financial health is more important than ever. Here we set out our top-tips on how best to get a grip on your finances:  

 Get to grips with your income and outgoings

Whatever your position, it’s important to know how much of your hard-earned money is going where. We have developed a Budget Planner which is available on our website, www.broadwayfp.co.uk/resources, which will help you get started on assessing your current income and expenses, perhaps in more detail than you’ve done before. This can help in identifying any areas that need addressing. Alternatively, there are many apps available that can link to your bank and do all the hard work for you by categorising your spending as it happens.

Manage your debt before it manages you

Whilst rising interest rates are great news for savers, they can cause huge misery for those managing debt. For any debt you can’t pay off with savings, where possible move it to a 0% deal such as a balance transfer card. If you can’t meet the minimum payments on your debt, explain your difficulties to your creditors. Most corporations have dedicated support in place for those that need extra help, so don’t be ashamed to avail of it.  

If you have savings as well as debt that you’re paying interest on (separate to your emergency fund), you may want to review this. Getting rid of the interest from a credit card for example ( now typically charging over 25%) will far outweigh the interest earned on the same money in a savings account (typically around 4%). List all your debts and prioritise using any savings or spare cash to reduce the most expensive debt each month.

Emergency Fund

As we now well know, unexpected events and expenses can happen to anyone, at any time. As a general rule of thumb, you should try to keep approximately three to six months’ worth of expenses in an easy access account. This has the purpose of supporting you if things go wrong whilst allowing you to avoid accumulating more debt. For our most recent recommendations on the easy access accounts with the top interest rates, visit our website www.broadwayfp.co.uk/news-and-views

Don’t neglect your pension

When times get tough it may be tempting to try and save money by reducing or pausing pension contributions. You should think carefully before doing this because opting out of your pension could have a huge impact on the amount you live on when you retire, and really must be an absolute last resort. Not only would you be missing out on the government 25% top on each contribution, but many employers now offer to match your level of contributions, which is essentially free money towards your retirement.

 What would happen if you weren’t here tomorrow?

If you weren’t here tomorrow, is everything in place for your affairs and estate to be handled according to your wishes? It’s estimated that up to 60% of people do not have a Will in place. If you die without one, your estate will be distributed according to the strict laws of intestate, meaning the people you care about may lose out and your beneficiaries may end up paying more tax than necessary! Being disorganised can also cause family members added and unnecessary stress at an already difficult time.

 In addition, you don’t have to actually pass away for things to become complicated. In the event that you become ill, lose mental capacity, or feel like you’re just not up to managing some things anymore, without a Lasting Power of Attorney (LPA) in place for both financial and health and welfare decisions, those that you trust the most (even your spouse) won’t be in a position to help you. LPAs can only be put in place by you when you have mental capacity and can be a lengthy and costly process to put in place once needed. You can do this online without the need for a solicitor at https://www. gov.uk/power-of-attorney

 At BFP, we are passionate about bringing clients the peace of mind that comes with having your financial affairs in order. While it’s important to accept that you cannot control everything, having the above covered can make you feel more prepared for whatever may be around the corner.