Back in January 2019, Andrew Hannay, director of RobMac outlined some top tips for a healthier financial position for that year.
He thought it would be interesting to re-visit those tips today given the current pressures on the standard of living, the backlog from COVID, the war in Ukraine and the general state of the world.
So he’s added his comments to the original list
1. Health Check – go for a medical. This will help set your expectations.
This is still good advice, the only caveat being that you need to book it well in advance given the current pressures on the NHS who are still recovering from the ravages of COVID.
2. Budget. Calculate your income against your outgoings and plan.
This has become even more important as the cost of living has risen significantly. By way of example, the average household energy cost in 2019 was £1300 and is currently predicted to be £3250 by the end of the year. Given the other increase in the cost of fuel, food and high inflation, then calculating your outgoings against your earnings is going to become even more important in 2022.
3. Rebroke your all your insurances. There’s lots of savings to be made by switching providers whether its medical, personal, house, car etc.
You should still shop around but in fact the cost of insurance has remained remarkably stable. For example In the 12 months to January 2022, the average premium for home insurance rose 2.9% and the average premium for motor insurance decreased by 2.8%.
4. Get your children/grandchildren into the savings habit.
This is probably even more important than before given current volatility – just don’t suggest cryptocurrencies!
5. Settle your credit cards on time.
Again really important as interest rates are continuing to rise and so the cost of debt will increase. In January 2019 the average APR of credit cards in the UK was 18.67% and in January 2022 it is 21.9%. So, in July 2019 if you had debts of £2500 on your card and were paying back £100 per month, you would clear the debt by March 2022 at a cost of £621 interest. In July 2022, the same calculation the interest rate cost would be £759.
6. Plan for the longer term. What will you need to live on after you retire?
Without getting into the politics associated with the State Pension, it is currently rising in 2022 by 3% however inflation is currently running at 9% meaning that you will be able to buy less. When you add the cost of energy onto that, surviving on a state pension looks difficult meaning that those with savings will have to draw on them. As Martin Lewis commented, “You know the money that you put away for a rainy day? Well, it’s pouring outside!”
7. Review your mortgage. There’s a lot more choices available today.
While it is still true that there is wider range of mortgage products, the rise in interest rates has meant that the cost of borrowing has increased. In 2019, the average mortgage interest rate was 3.94% compared to 4.38% as of July 2022.
8. Use all your tax allowances.
With all the increases everywhere else, you need to make sure that you are being as tax efficient as possible.
9. Keep up with your education, whether that’s professional qualifications or just learning something new.
We think that a lot of people did do this during lockdown. In some cases they also evaluated their jobs and decided to pursue other careers. This has resulted in a shake up in certain sectors such as the hospitality business.
10. Arrange a review with your financial advisor.
You’d expect us to say this, but as the landscape has become more challenging, we honestly believe that talking with a professional adviser about your financial position has never been more relevant.
