The mantra of ‘live everyday as if it were your last’ is, sadly, not something that can be applied to many people’s finances. If you are not one of the world’s elite, there is a chance you could be overlooking some financial areas that could become a knife in your side in the future.
We all understand the social norm of planning ahead to fund homes and retirement, but there are some expenses that could be considered now to save a future headache and, potentially, a snowball of debt.
Research by NS&I (National Savings and Investments) brought to light that those who spend time worrying about their finances save an average of £53.47 per month, whereas people who budget and plan save more, with an average of £104.39.
25% of British people admit that they do not budget or plan ahead financially, with 10% of these individuals worrying about money once a day but, interestingly, only keeping tabs on their accounts and debts once a month.
NS&I Savings Spokesperson, John Prout, comments: “Britons seem to be getting into a cycle of financial fret. Time is spent worrying instead of focusing on money management and finances suffer as a result, causing more stress. By planning ahead and taking active steps, we can take more control of our money and work towards saving. So if you’re getting money worries, take some time out to review the situation and take action.”
Planning ahead to pay for care
The Live-in Homecare Information Hub released its No Place Like Home report in 2015. Results revealed that many people are not aware of the costs involved in later-life care and are leaving financial planning to the last minute, with just 1.9% of those asked having discussed the potentially long-term financial commitment with an independent financial advisor.
With families leaving care planning later and later, due to lack of awareness or sudden ill-health with an elderly family member or relative, situations are often at crisis point. At this point, little to no research can be done into the financial options available and a decision is made based on necessity and convenience.
A specialist later-life planning advisor could be an ideal point of contact for those considering options for later-life care. The specialist advisor would hold a face-to-face meeting to assess the individual’s situation from both a care and financial stance to prepare a comprehensive report detailing each and every available option appropriate to the individual. This would allow the client, legal representative or family member to weigh up all the facts and make an informed decision. The use of an expert care planner can also help to ease the burden of worrying about essential monetary matters during a time that is often emotionally exhausting.
However, some people are paying care fees that could be footed by the NHS and this would be indicated by a later-life financial advisor. If the individual requires care solely for health reasons, all their fees could be paid by the NHS through a little-known funding stream called NHS Continuing Health Care.
Whether considering home-care or residential care, it could be suggested that planning ahead to pay for later life care is vital in reducing stress, both psychological and financial, in the future.
Planning ahead to pay off all debt
Debt not only affects an individual’s credit score, but also their psyche. Whether for financial or emotional benefit, the notion of seeking a debt-free existence could be an option to consider in the future.
It is understandable that big ticket items such as property and cars will set most people back financially and these will inevitably take longer to reduce. However, minimising debt to regain financial security could be beneficial in making the most of your money. What is spent on debt repayments could be syphoned off into rainy day or retirement funds and allow people to become much more financially secure.
Essentially, until you become debt-free, you have less money to spend on things you want to buy. With interest rates sucking money into a black hole of nothing, the chances of slipping deeper and deeper into debt are a reality for some. This vicious cycle of debts to pay for debts unavoidably ends when the borrowing chain snaps and a crisis point has been reached. Therefore, paying off debts could allow people to spend more of their hard-earned cash on what they enjoy – guilt-free.
Research, based on a YouGov survey of over 4,000 British adults, suggests an increasing number of people worry that they cannot pay their mortgage. Families are the worst affected, with 70% currently struggling or falling behind with payments. This overwhelming situation can often cause an ‘ostrich effect’ and people’s homes could be at risk. Talking to a mortgage advisor could help set individuals on the right path and essentially help people pay off their mortgages as efficiently as possible.
When you have a mortgage, you don’t own your home, the bank does. Taking steps to become debt-free could allow people, in the future, to own all their assets and be free from fear of bounced payments and bailiffs.
Planning ahead to pay for university
However, financial planning isn’t something for only the older generations to consider. With average student debt having risen from an already eye-watering £20,000 to £45,000 (under the new system), it could be time for some younger people and their parents to consider making plans to make monetary issues as painless as possible.
Although the pull of a gap year is almost a rite of passage for those fresh out of college, choosing to work through this period could relieve stress when the time comes to fly the nest. It is widely argued that the student loan barely covers fees for halls of residence or rented accommodation, particularly in London, therefore it could be desirable to ditch the dream of Thailand for the time being and work towards a monetary buffer for the start of the academic year.
Parents could also help with setting their children up with a strong financial foundation during their degree. In the US, many parents filter money into college funds for their children and this is something that is slowly becoming a trend in the UK, alongside parents’ affluent enough to support their children financially through their course with no help from student finance.
It could also be worth double-checking what funding you are entitled to. Many students rely on their student loan, when there are a variety of bursaries and grants that could come to your aid if you meet certain criteria.
Without the bank of mum and dad, or saving up over a gap year, university can be a real strain for some as they get to grips with having to handle significant sums of money and budget to pay for living costs. Taking some time out now to mull over options could prevent crisis and lessen the vast amount of debt students can end up in after university has finished. This allows for less worry and financial anguish, and a clearer mind to focus upon the feared graduate job hunt.