At the start of a new year it is always tempting to write the ‘financial resolutions article’. They start by saying that after the Christmas break, having eaten and drunk to excess, it’s now time to get fit, join a gym and eat healthy food. It then goes on to suggest that if you are making fitness resolutions you should make financial ones as well, suggesting you cut out unnecessary expenses and luxuries, and ensure that you get your finances in order.
This year however, things are different. Many people are strapped for cash and are already scrutinising their incoming and outgoing money. In fact they started their financial detox so long ago, they can’t even remember when. So with difficult economic conditions ahead, what’s the best solution?
Instant financial safety nets
On TV I see adverts for ‘pay day’ loans, or for companies offering unsecured loans that must be repaid within 12 months. The popularity of these services is madness as many simply take on these loans to take advantage of the January sales rather than for a genuine emergency. It is clear that for many people it is too late to consider changes to spending patterns.
Instead of being worried however, there seems to be a ‘live for the moment’ attitude taking a grip. I heard one of my friends moaning the other day about having a credit card debt of over £6000. And yet I saw him return from town several days later with another arm full of consumer goods. I joked about the debt and he shrugged it off. “I’m just going to enjoy myself and worry about it later,” was his response.
But let’s be realistic. Whether you are living for the moment and racking up more debt, or if you are worried about making ends meet, it is still relatively easy to free up £10 over the course of the month. In fact I’d go as far as to say it should be essential. Ten pounds is all it takes to put in place some financial protection.
Peace of mind strategy
If the monthly credit card bill is making a louder noise when it hits the door mat then ‘live for today and put in place as much of a financial safety net as you can for the future’ has to make sense.
For those for whom the usual annual ‘financial resolutions article’ is still relevant, maybe there is not as much to cut back on, but again it only needs a small monthly investment to put in place a financial safety net for the future.
1. Look at your situation
As you reach different life stages, like becoming a home-owner, having children or changing your job, your emergency plan needs to change too. Look at your current lifestyle and what you think it’ll look like in the near future and make sure you have plans in place to protect everything that’s important to you.
2. Speak to an independent financial adviser to weigh up your insurance options
Knowing which insurance products are best for you and your family can be confusing. Why not speak to an independent financial adviser who can talk to you about life cover, critical illness cover and income protection and see which options are best for you?
3. Pay off large credit card debts
Credit cards might seem like an instant safety net to fall back on, but they’ll probably only add to your worries in an emergency situation. Credit card debt will continue to grow if you’re unable to pay the monthly bills.
4. Start saving
Put as much money as you can afford to save into a separate account that you can fall back on if you need to. Make sure you use an easy access account, so you can dip into it quickly in an emergency.
5. Tell someone you trust your emergency plan of action
Tell someone close to you about your emergency savings and how to access them, as well as details about any insurance plans you have. This’ll make things a lot easier for them to put your emergency plan in place if you can’t do it yourself.