Reviewing Your Financial Plan to Tackle the Cost-ofLiving Crisis

Reviewing Your Financial Plan To Tackle The Cost-OfLiving Crises

A lot of your cash flow this year could be consumed by increased prices, not just for food or goods, but also for living expenses.

AUTHOR: Jean-Pierre Stone Financial Planner at FLM Wealth Management While inflation is likely affecting your bottom line in some shape or form, it could be worth making some simple changes to your budget and spending habits. Some planning and self-awareness around your spending could help you scope out opportunities to save. If you don't have a budget, now is a good time to start one.

Reviewing your finances has therefore become increasingly important to understand the effect inflation has had on your lifestyle. High inflation means an increase in the cost of living. You will essentially be able to buy less with the same amount of money as you did before. There are many factors that contribute to rising inflation, including the war between Russia and Ukraine, which has disrupted energy and food supplies.

Ofgem released data stating that the average home's energy bill in the UK will increase to £3,549 a year, with this set to increase in 2023. This represents an 80% increase in the average energy bill - UK Prime Minister Liz Truss has, however, announced that she intends on capping this at £2,500.

This increase in the cost of living is not matched by an increase in wages and as a result, many are turning to using credit cards to sustain or improve their current situation. Whilst this method can be useful for unexpected emergencies, this is very unlikely to exacerbate the problem over the long-term.

Costs are clearly sky high, interest rates are rising, and experts seem to think that we're headed for an economic crash. Although there might not be one specifc solution to each individual's situation, here are a few steps that I'm doing to prepare during such uncertain times.

Reviewing my finances

• How much money do you make and how much do you spend? When I subtract the two, that number tells me how I'm doing. If it's positive, I'm good. If it's negative, then I'm overspending. • Doing a deep dive into what spending is essential and discretionary will help you manage your cost better but also give you clarity on how you might be able to reduce your expenditure. Many are switching supermarkets and especially switching to own-brand product rather than big brands. Although this may not seem like much, doing a plethora of small changes like this will all contribute to easing the increase in the cost of living.

“If you've been investing for your future, don't stop. History shows that despite short-term volatility, the market tends to rebound and reach new all-time highs over the long-term.

Adding to my emergency fund

• According to research by Hargreaves Landsdown, 51% of UK adults do not have enough emergency savings. This should ideally be 3-6 months' worth of essential expenditure in an easyaccess account. If this seems unattainable, start by aiming for £1,000 and then build from there.

Rethinking Risk

• What percentage of your money is in high-risk investments (crypto, NFTs, options) versus traditional investments? Risk is inherent to investing but if your life savings is in a bet on the market's movements, ask yourself whether you're okay losing 100% of your money.

Sticking to my plan

• If you've been investing for your future, don't stop. History shows that despite short-term volatility, the market tends to rebound and reach new all-time highs over the long-term. If you're going to ride out periods of negative or flat returns, stay consistent. • The stock market is the only place where people run a mile

when things go on sale. During the volatile times, most retail investors tend to shy away from investing when a lot of the time this could present some of the best buying-in opportunities if held over the long-term. • We always look back in hindsight and wish we had invested during various market dips but in reality, when the 'dip' occurs, fear takes place and investors are naturally more hesitant. • You have to be comfortable with seeing your money go down in value as the volatility is the price you pay for increased returns over the long-term compared to keeping cash in the bank.

Cashflow modelling for confidence

• During times of uncertainty, cashflow modelling can be an exercise that brings clarity to your overall financial position and can stress test any income strategy against any range of likely and unlikely events. • If you're using assets to create an income, such as your pension, you need to be aware of how increased withdrawals may affect you. Could taking a higher income from your pension now to cover costs mean that you deplete your savings faster than you expect? if so, it could mean you face an income shortfall later in life.

The above steps are only a few of many other steps that you could take to navigate your way through the cost-ofliving crises. It is therefore important to speak to an expert so that you can have clarity on your specific circumstance.

FLM is an Appointed Representative of and represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Groups wealth management products and services, more details of which are set out on the Group's website www.sjp.co.uk/products. The title 'Partner Practice' is the marketing term used to describe St James's Place representatives. FLM is a trading name of Financial Lifestyle Management Ltd which is registered in England and Wales, No. 04426632. Registered Office: 37 Warren Street, London, W1T 6AD.

For more information visit www. flmltd.com or contact Jean-Pierre Stone by email: jean-pierre.stone@ sjpp.co.uk