Adviser group Towry looks at how to get your finances in order

19th August 2013

Andy James, advice policy manager, at wealth manager Towry examines the importance of planning your finances properly and putting money aside

A recent Money Advice Service survey of people’s finances has suggested that 52 per cent of those questioned were struggling to keep up with bills and debt repayments. In certain parts of the UK the figure is much higher with Northern Ireland topping the charts with 66 per cent.

A similar study in 2006 showed the average UK figure at that time was much lower at 35 per cent. With inflation continuing to push prices up – most notably the 4.1 per cent average rise in rail fares announced this month – and wages for those fortunate enough to have work rising much slower, if at all, the increase in those having difficulty making ends meet is unsurprising.

One of the most worrying conclusions of the survey was that with their stretched finances people were not putting money aside, for example by saving into a pension. Whilst pension contributions can potentially be made up at a later date, there was also no emergency money put aside for a ‘rainy day’, such as if the boiler exploded.  This indicates that for many, future financial planning did not take place in the ‘good times’ and therefore when problems appear there is nothing available to fall back on.

Whilst it is understandable that when people are struggling to put food on the table they are not going to be looking to put any money aside, I do wonder whether the lessons will be learnt for the future. When we do finally come out of the current financial crisis and more people find that there is something left at the end of the month, will they look to make plans and save their spare cash or will it be frittered away?

The old adage ‘fail to plan, plan to fail’ springs to mind. Caroline Rookes, chief executive of the Money Advice Service, commented that ‘in theory, money management is easy – spend less than you earn and consider your future. But the difficulty comes when applying this to the real world.’

The real world needs to help. Financial advisers must encourage their clients to plan properly and wherever possible to undertake a cashflow analysis of their spending and check this against their longer-term objectives. Elsewhere, we need to better educate our children in respect of finance. Schools, colleges, parents and the government can all have a role in getting the message across of the importance of saving for the future.

The survey did show that 84 per cent of those asked kept track of their money, and that most of those who made a budget did stick to it, so there is hope in this area. So let’s hope that more people will in future ensure that they have a decent emergency cash fund and also a suitable level of cover for themselves and their families should ill health or early death occur.

Once those fundamentals are in place, there will be a chance for those whose income doesn’t run out before the end of the month to look at more longer-term objectives and hopefully a better planned and fruitful financial future.”

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