Lockdown and its impacts have been felt by many people, for very individual reasons. And when it comes to their finances, that has resulted in worrying times for lots of people. Independent Financial Adviser, Paul Mason, explores the reasons why…
Having worked in financial services for a long time, there is not much I haven’t seen when it comes to our boom and bust economy. Normally, we see cycles of changes which can often be predicted or have been seen before, so we know how to deal with them. However, earlier this year, we saw changes which none of us have ever experienced before. And as has been proven, not only does a global pandemic cause health and social concerns, it can also have a big impact on your pocket.
But looking at that impact means exploring how this has affected different age groups, at different stages of their lives, careers and financial position.
For those individuals just starting out in their careers, the jobs market will be crowded and a reduced number of new roles available will mean increased competition for vacancies which could drive down wages. It will also mean the opportunity for development and progression could be stifled, so those already in post may not see incomes grow as they had previously expected. These people will need to make ends meet more effectively so obtaining the best value mortgage and insurance products will be a priority; making any savings work as hard as possible will also be key.
Those who have families may experience a change in household income with schools and childcare providers affected by restrictions on the number of spaces available. Households that previously would have had two full time incomes may be forced to rely on one full and one part time income or maybe just one. For this group effective income protection is an essential part of financial planning to ensure that all ongoing commitments can be met even if the main wage earner is unable to work.
For the more mature families with children in their teenage years or those thinking of leaving home, covering the costs of a University education or providing a deposit from the bank of mum and dad may prove more difficult.
Prior to the virus outbreak this age group may have felt financially secure and independent – maybe even having one eye on early retirement. With careful planning, these aims won’t necessarily be out of reach. Investments may have fallen in value during the downturn so revisiting fund selection could help to power a bounce back or a mortgage further advance could be accessed to keep family plans on track.
For the minority who have been able to work throughout lockdown without any interruption, there could be an accumulation of income in current account or cash savings. With returns on cash at all-time low, seeking advice on how to invest or whether to pay down long term finance debts would be beneficial.
Ready to retire
Finally, for anyone who had plans to retire shortly or who, having spent more time at home recently, has decided now is the time for a change of pace, there are new challenges to overcome.
The economic downturn has adversely affected pension and investment valuations meaning pension pots are smaller and income will need to be carefully planned. This is where cashflow modelling and tax planning can come to the fore or for those who simply don’t have enough saved the ability to release equity from property could help.
We will be keeping a close eye on how our economic position pans out over the coming months, but we may see some of the shockwaves from the pandemic lasting for much longer.
If you would like any advice about your own financial position, whatever stage of life you’re at, please get in touch with us on 01228 711888 or email firstname.lastname@example.org.
Source: Bank of England and Office for National Statistics.
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