June 29, 2023
When we talk to our clients, we’re increasingly hearing similar stories from a ‘sandwich’ generation balancing the need to ensure that ageing parents are cared for and supported with the needs of their children. With a generation of adults leaning heavily on the ‘bank of Mum and Dad’ to help them get on the property market, the current economic situation has left many, even in quite high-income brackets, feeling overstretched.
Whilst they tend to be happy to help out, many of our clients are concerned that the younger generation in their family aren’t able to save enough to ensure their own financial futures, and they worry about how to help them in the long-term.
It’s an understandable concern. UK inflation rose to 10.4% in March 2023, pushed up by an increase in food prices. Predictions are that it will fall again by the end of the year, but this is just another example of how rising prices are squeezing household incomes and making it more expensive to maintain the sort of lifestyle we’ve been used to.
With life generally continuing to be more expensive, you might feel that now isn’t the time to be talking to the younger generation about saving or investing more.
But we often find that when we encourage our clients to review their finances and plan a budget, they find that they can not only make ends meet, but also keep their longer-term financial goals on track.
Here are our tips to help you plan your budget and build healthier financial habits.
For a month, keep a log of all your financial transactions, however small. At the end of the month compare with the previous month’s spending and see whether you notice a difference. Writing down all your financial incomings/outgoings will keep you more accountable and should help pull you up on those impulse buys.
Many banking apps also have a tool that analyses your spending, so you can see clearly where the money is going, too.
Typical advice is that you should have three month’s salary put away in case of emergency. But the reality is that many people had to dip into their savings during the pandemic, and you might, like many, not have been able to save as much again.
However, do make an effort to prioritise your savings, even if it’s only a small amount each month.
There are several apps that allow you to round up to the nearest pound each time you make a transaction, and transfer the extra into a savings or investment account – so once you’ve set it up, you don’t even have to think about it.
When it comes to your monthly outgoings, it’s all too easy to treat savings as a low priority – the last thing you do, and then only if you happen to have something left over.
But, having finances in place to support those long-term goals, and for an emergency fund, will ultimately give your future-self more freedom. Decide on a manageable amount to put away each pay day, and prioritise it in the same way that you would with paying your bills. Setting up a direct debit into an ISA may take away the temptation to skip the saving.
Paying off your debts should be another of the things you treat as high priority each pay day. If you do already have savings in place, consider using them to start paying credit card debts or loans. More than likely, you’ll be paying a much higher rate of interest on those debts than you can earn in a savings account. In most cases you’re better off using your savings to reduce your debts to as close to zero as possible and then start saving again.
Establishing a realistic budget which includes all your regular outgoings (including your savings and any debt repayments) will, in the long term, take the stress out of managing your finances and give you more confidence about what ‘wriggle room’ you may have financially. Being in control helps you to a more comfortable life from pay-day to pay-day, as opposed to just hoping for the best.
Ultimately, managing your budget and saving for the future will depend on your personal financial circumstances – and we know that, for many people, balancing the monthly household finances is particularly tough right now.
You probably won’t be able to make a big change to your finances overnight. We take a long-term view, and strongly believe in making small changes for long-term gain. Just saving a little each month now, could make a big difference to your financial future in 10, 20 or even 30 years’ time. It’s never too early to start developing healthier financial habits!
If you’d like to talk about the best ways to save for you, click here to find a Talis IFA.
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