5 top tips for taking care of your finances today.
The UK is in recession for the first time in 11 years. A recession is declared when economic growth slows down for at least six months.
It means there are fewer jobs, people are making less money and spending less, and businesses stop growing and start to close.
Usually all of us feel the impact in some way, but it can be a worrying time for many.
Here are our 5 top tips for taking care of your finances today.
Sort your savings: in these days of very low interest rates (the Bank of England base rate is just 0.1% at present), it can be difficult to find a way to grow or even protect the buying power of your savings. However, you can shelter them from tax by opening an Individual Savings Account – an Isa. There are various types, the main ones being the Cash Isa, which keeps your money as cash, or a Stocks and Shares Isa, which can be slightly more risky, but with the potential for better returns. Also, if you’re prepared to lock your cash into a Fixed Rate Isa for up to 5 years, you can get an even better savings rate.
Be ‘pension savvy’: even in bleak financial times, it’s crucial to keep up our retirement savings. Remember, a pension gives you tax relief: if you’re paying basic rate tax at 20%, then for every £80 you save into your pension, HMRC tops it up by £20, making it a great option for long-term saving for retirement. The sooner you start pension saving, the longer your money has to grow. The motto is: the earlier, the better - you could reap the benefits of 40 years of growth!
Review fund investments: your financial plan is flexible, which means you can always review the funds you’re invested in. This is especially important if you’ve invested your money yourself, ie, without financial advice. That’s because, in any given year, many funds, including some of the largest, fall short of their investment targets. Your advisor can take a look inside your fund investments, and if necessary, switch you into better performing funds, ‘tweaking’ your finances to restore your money to top performance and ensuring it’s reaching its maximum potential.
Protect your family: how would your loved ones fare if they were to lose your income through serious illness or even worse? Life insurance is something many of us think of when we start a family, with good reason: it can provide our dependants with financial security, or even pay off the mortgage, if the worse were to happen. Then there’s critical illness insurance, the insurance you take in case you don’t die. It can pay a once-off, tax-free lump sum if you are struck down by a serious illness such as cancer, heart attack, MS or a stroke. This would provide a financial safety net for you and your family and give you peace of mind to help you recover.
Take good advice: In their report ‘What it’s Worth – Revisiting the Value of Financial Advice’, pensions company Royal London found that those who took advice were, on average, £47,706 better off when they retire. This included pensions, savings accounts and Isas, insurance products and shares investments. The rules around financial products, and pensions in particular, have never been more complex. If you want to avoid unexpected tax bills and unsuitable investments, advice has never been more necessary!
This article does not constitute financial advice, and should not form the basis for financial decisions, which should be taken only in consultation with a qualified financial adviser.
The value of investments can fall as well as rise, and you may end up with less than you invested.
Ancojada Limited trading as Prosperitas Consult is not authorised or regulated to provide financial advice.
All financial advice is provided by other regulated businesses.