A combination of dismal savings and annuity rates, as well as the potential for falling house prices may prove worrying. But there are steps you can take to safeguard your finances from any further knocks.
Deal with debt
If you’ve got debt, make it a priority to use any savings or spare cash to clear it.
Tackle the debt at the highest rate first, but don’t forget your mortgage.
You can typically overpay by up to 10% a year on a standard mortgage without facing penalties. While savings rates are poor, it’s worth piling cash into reducing this liability.
How to clear your debts
Build a cash emergency fund
If you’re debt-free, try to squirrel away enough cash to cover six months’ worth of bills. Hopefully you’ll never need to dive into this fund, but it’s a good habit to get into anyway.
Take out insurance
Income protection policies will meet your outgoings if you suffer an illness, accident or disability that leaves you unable to work.
They pay a regular income to cover your loan, credit card or mortgage payments.
These policies have a good reputation of paying out for the majority of claims. They are different to payment protection insurance, which rarely paid out and is surrounded in controversy.
Spread your search for income
You don’t have to stick to standard savings account as a home for spare cash. While plunging into the stock market could be nerve-wracking, there are ways to reduce the risk.
You could opt for equity income funds, spreading the risk among a large pool of companies. These pay a dividend, or a slice of their profits, in return – often amounting to payouts of 4% or more.
This is far higher than the top paying savings accounts on the market at present.
Don’t put all your eggs in one basket
Savers with substantial deposits should spread their money among banks and building societies.
The government guarantees £75,000 per person, per UK-regulated bank or building society – meaning that if you have money in one of those two places and they become insolvent, you’ll be compensated the amount you lost, but only up to £75,000.
If you’ve more than this set aside, spread it among accounts with different institutions.
Check for any benefits
Benefits aren’t just for the unemployed. You may qualify for financial help you are unaware of, particularly in retirement. So ensure you aren’t missing out by going to entitledto.co.uk and filling in your information.
What benefits am I entitled to when I retire?
Draw up a budget
Use one of the online budget planners to work out how you’re spending your cash. It may be simple to reduce your outgoings, if you’re feeling the pinch.
While this is a wise step at any time, it’s particularly helpful if you are worried that times could get tough.
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