The terrifying cost of living crisis affecting much of the world right now has brought into focus just how many households are living frighteningly close to the edge when it comes to managing finances. How can you turn your financial situation from spooky to sorted?
The gruesome truth about financial planning
This Halloween, the financial situation of millions of people around the world is definitely erring towards trick, rather than treat.
Figures from Fincap paint a gruesome picture of the UK:
- nearly nine million Brits are in serious debt
- 11.5 million have less than £100 in savings
- 39% of adults (20.3 million) don’t feel confident managing their money
The hallmarks of spooky finances
These figures reveal some of the hallmarks of spooky finances: excessive unsecured debts, no savings and a lack of confidence when it comes to managing money.
Perhaps those are characteristics of your own financial situation? In which case, you need an action plan to get yourself into a less scary financial position. Let’s look at each of those main issues in turn:
How to deal with debt
Our consultants have always highlighted paying off debts as a financial planning priority but rising interest rates make this even more urgent. We are talking here about unsecured debts like credit and store cards that have very high rates of interest. Managed debt in the form of mortgages and other secured loans which are tailored to your financial situation are ok if they are correctly managed to help you build wealth over the long term.
While some people simply don’t have any disposable income to spare, many of us can spend more mindfully to free up money each month to pay off debt. The key is prioritising debt repayment over other non-essentials. You’ll find a list of 35 ways to cut your expenditure here.
How to start saving
Financial planning is all about building wealth. There’s no hocus pocus to it, you simply need to make saving a priority. Start budgeting to ensure that income exceeds expenditure. Allocate income first towards essentials such as accommodation costs, bills etc. but also designate a specific amount each month to save. You may have to start small but anything you can afford to save is better than nothing.
The key, to borrow a quote from Warren Buffet, is to not save what is left after spending but spend what is left after saving. To avoid the temptation of instant gratification, squirrel your monthly savings away into a dedicated account as soon as you get paid.
This can be a life-changing shift that sets you on the path to achieving your long-term financial goals. Writing down exactly what these are will keep you motivated and enable you to track your progress.
We offer an interesting perspective here on striking the balance between living for today and saving for tomorrow.
How to gain confidence managing money
There is a lot you can do to educate yourself about the basic concepts of money management, which sadly are often neglected in formal education. There are a ton of resources available online, including on the Infinity website. Start by ensuring you understand compound interest and how this relates to both debt and savings. It may well spur you into action!
In even better news: you don’t have to go it alone with financial planning. A financial adviser can give you the support and guidance that you need to become confident in building wealth.
Whatever your income level, a financial adviser can help you to save and invest for a great, not gruesome, future ahead of you through your career and beyond, into retirement.
The hallmarks of sorted finances
‘Sorted’ financially generally means you will have:
- An emergency fund of six months’ worth of expenditure
- A retirement plan tailored to your requirements
- Comprehensive life insurance to protect your family
- Health insurance to protect your savings in the case of illness or injury
- An education fee plan (if you have children)
- Savings for any other specific long-term goals you have
- Critical illness cover to guarantee income if you fall ill for a lengthy period
From spooky to sorted: an Infinity financial adviser can help
You may have all of these bases covered. You may have some, or none. Whatever your situation, if you’d like some help to turn your finances from spooky to sorted, get in touch for an appointment with one of your highly experienced financial consultants.
A leading provider of expat financial services and wealth management services across Asia.