Ten tips to managing your money in a crisis

Before; How can I prepare for the unexpected?

It may sound odd to say that you can manage your finances before a crisis; after all when will crisis hit? Well that is kind of our point. What the coronavirus pandemic has taught us is that we can’t predict what life will throw at us.

We hope that we will never face anything quite as devastating as a global crisis such as this again but the sad reality is that many people suffer personal or familial crisis on a much more frequent basis. Serious health conditions, grief and job losses can all put us in unexpected financial turmoil. So how do we hope for the best but plan for the worst?

1. Budgeting & clearing debt

This is back to basics stuff but if you’re building a house, you need to get your foundations right. Keeping tabs on how much your spending every month is the easiest way to work out how much you can save. Clearing credit card debt and loans as quickly as you can is important before you move to the next step. There is no point having that hanging over your head while you try and save money. You can find a budget calculator here. 

2. Emergency fund (3 – 6 months of expenses)

A rainy-day fund should cover all of your monthly bills for 3-6 months. You should know how much this is every month; if you don’t go back to step one. This could be used to cover your mortgage or rent if you lost your job or an emergency car repair for example.

3. Savings & Investment planning

Now you can start planning the bigger things you want to achieve in the next 5, 10 or 15 years. Savings accounts are suitable for money you need to access in the 7 years whereas investments can be used more longer term as you will need time to yield a return. If you’re not sure what you need, this is when speaking to an Independent Financial Advisers can help. We offer complimentary financial reviews with IFA’s which you can book today.

4. Financial Protection

Nobody likes planning for something to happen to them but if you had a money machine that paid your bills for you, you would do everything you can to keep it going. Income Protection is designed to give you a regular monthly amount while you’re unable to work due to injury or illness. Life Insurance pays a lump sum to your loved ones upon your death and Critical Illness Cover pays out if you’re diagnosed with a serious medical condition (as detailed in your policy terms). All these things are designed to give you a sense of financial security if something horrible befalls you. It is somber to think about but should form part of a robust financial plan.

During; What do I do now?

Whatever crisis you’re facing, it is likely to be a very emotional time. We start to prioritise those things we can’t replace; our health and our loved ones.
Money matters can feel like a particularly sensitive topic as well so it is important to think rationally.

5. Don’t panic

Markets go up and down over time so even if the value of your investments has fallen, now is not the time to start moving money around unless you’ve agreed it with your IFA.

6. Focus on what you can control

What emergency fund do you have? How long do you think it will last? How steady is your income?

7. Use the time wisely

If you’re keeping track of your outgoings, now is the time to shop around if you think you can save money.

After; Life is short so let’s have some fun!

When you’re fortunate enough to live through a crisis, it’s natural to want to have some fun and enjoy life again. You’ll have a renewed sense of freedom and opportunity. Holidays don’t just feel well overdue but almost necessary if you can afford them. That new car you’ve fancied for a while or the home improvements you’ve been uming and ahing about? Why not go for it now?

Review your financial plan with your IFA before you start moving money around and visiting car dealerships.

8. Remember why you invested in the first place

There isn’t any reason you can’t review your financial plan with some new short term goals, just don’t forget that your original goals were there for a reason.

9. Where are the opportunities?

As market cycles peak and trough, inevitably new opportunities for investors arise. Even before the outbreak of Covid19, there was increasing demand from consumers and pressure groups to change the way we live for the betterment of the world. Socially Responsible Investing has increased in popularity in recent years and offers the potential to make the world a better place, without compromising on return.

10. Review your financial plan

Talk to your IFA about reviewing your financial plans as your priorities are likely to have changed.

Book a complimentary financial review

This advice is what we would consider best practice but we understand it may not be possible or applicable in all circumstances. We recommend speaking to an Independent Financial Adviser before making any significant decisions about your finances. We’ve been advising BDA members on how to manage their money for over 20 years. To book a complimentary financial review you can contact us;

Not ready to speak to someone?

It might feel a bit scary talking to a stranger about money – it’s ok if you’re not ready yet. If you want to be better with money but don’t know where to start, try using the BDA Financial Healthcheck and receive a personalised report. This will help you work out which areas of financial planning and protection to focus on first;