It's January 2023, you know you have financial issues but don’t know where to start, but where do you even start?
When it comes to our finances, we tend to stick our heads in the sand until the problem becomes so obvious that it is nearly too late to apply a solution.
With inflation, increasing interest rates, and energy crises we have come through it all so it is imperative that we do not ignore the telltale signs of any personal financial ill-health.
So here are 10 essential questions you should ask yourself or if you have family or loved ones, they should ask themselves to kick-start their financial well-being:
1. Is my expenditure greater than my income? Am I spending more than I am earning? Not 'living within your means’?
2. What am I doing to balance my books? Can I earn more income or spend less? Or do a little of both? A budget plan is essential.
3. Am I claiming all the reliefs and allowances legitimately available on my income and are there promotional or overtime opportunities in the job that might increase my income? A second job?
4. Can I negotiate lower interest rates on any loans? Consolidate or negotiate a complete moratorium, if possible, on my loans (capital and interest).
5. Am I adopting the sniper approach to debt – paying off the most expensive first?
6. Have I looked at all expenditures – every sector of spending, economising where I can and doing without when I must? Asking those two questions: do I need it, and is there a cheaper or better alternative?
7. Do I have a Rainy Day Fund (RDF – which should be ideally three to six months of annual income with a minimum €5,000) for:
- Emergencies (expenditure not budgeted for e.g. washing machine breakdown)
- Sudden loss of income (bonus dries up or you are put on a three-day week)
- Investment opportunity (saving for that home deposit)
Am I availing of the best investment strategy on any lump sum saved after ensuring my deposit-taker is safe and secure with my funds? Have I a Regular Saver scheme set up?
8. Is there a pension in place? Have I provided anything for retirement? Will I be comfortable living off the State Pension at age 66? Do I need to supplement an existing pension as it may not then be enough to pay for the lifestyle I have become accustomed to?
9. Have I provided for my dependents – education, life cover (in case I die), health cover (for them if applicable, and myself should I be incapacitated plus hospital and redundancy cover), and inheritance (leaving my hard-earned wealth to my loved ones in the most tax efficient manner possible, starting with drafting a Will)?
10. Have I planned the next year, three years, five years, or 10 years? Have I even completed a simple annual household Budget? Email me if you would like this form in a spread sheet format sent to you at jlowe@moneydoctors.ie.
Family, careers, and your own interests take priority when it comes to dealing with your own financial issues. It is also a little like work… boring, tedious, and not really enjoyable, but as inevitable as the sun coming up, it has to be done.
It takes a little time - ideally two hours every month - to be put aside each month to sort it out.
We must address our financial issues. No point in leaving the head in the sand. Planning is crucial and those who cannot afford a financial consultant, must do it themselves and consult with their family or friends.
Take it one step at a time. Your very first activity should be to extrapolate all the relevant financial information so that you can see the big picture. You will soon know if you are solvent and what you now need to do to steady the ship.
Like the advert says – just do it!
For more information click on John Lowe's profile above or on his website.
The views expressed here are those of the author and do not represent or reflect the views.
