Dealing with the financial ‘downs’ of daily life

13th December 2023

At a glance

  • From redundancy to unexpected tax bills, a sudden change in your financial situation can cause stress and sleepless nights.
  • If things take a turn for the worse, you may be tempted to take drastic action such as raiding your pension pot or pausing savings contributions.
  • Regular financial advice can help you make practical decisions as a family.

Life has a habit of lobbing us curveballs, even if we have the best laid plans for our finances. You can’t predict when you’ll need to help your children out, or if you find yourself between jobs unexpectedly. But when you hit one of those bumps in the road, it can damage both your budget, and your personal wellbeing too. Read more about how to maintain your mental wellbeing when you have money worries.

Some big expenses you can plan for, such as buying your first home, launching a business, or saving enough for retirement. You might also have done a bit of disaster planning by taking out life insurance or income protection, if you’re self-employed. But how do you deal with those short term, high impact financial challenges that we all face from time to time? Anything from redundancy to an unexpected tax bill.

Money worries can have a huge impact on our overall emotional wellbeing. Any change to our financial situation makes us feel uneasy, and less in control.

Don’t deal with the ‘downs’ alone

As financial advisers, we have conversations about money with families every day – in good times and bad. But we know that for many people, talking about money, and budgets, isn’t easy, and it can be even more difficult among family members.

Many families are feeling the pinch right now. The cost of living crisis isn’t over, and it’s a challenge for everyone. Even if you’ve always felt comfortably off, you may now find yourself needing to tighten your belt. Money is the top cause of arguments between couples, a survey by Starling Bank confirmed1. And many of us will know from bitter experience that a conversation about money can be a major flashpoint in families. It’s easy to let a family brainstorm about money turn into a family ‘blame-storm’.

Keeping quiet about rising debts and unpaid bills can be even worse for our mental health. Feeling guilty that the situation is somehow your fault can make it even harder to discuss the situation, and the solutions openly.

Having expert, family-led advice– from someone who’s one step removed – can be a relief for everyone. It can also help you avoid more drastic action, such as cancelling insurance or stopping your pension contributions. These might be appealing short-term solutions, but your long-term plans could be seriously affected. Taking money out of your pension while markets are falling, or increasing your withdrawals if you’ve already retired, could put significant pressure on your pot.

How a financial adviser can help you make a plan

Forgoing luxuries is a no brainer, but there are often other practical ways to trim your spending, or save on your taxes, to cover the immediate future.

If you’re thinking about retiring, or reducing your work hours, the current economic climate may be making you think twice. Can you even afford to retire? Or, if you’ve already retired, how much can you safely draw from your pension;to ensure it lasts as long as you need it to?

This is why it’s always good to chat to us whenever your financial circumstances change, so we can put a plan in place and set your mind at rest.

What if you suddenly need a lump sum?

Sometimes, you need to find a big lump sum for an unexpected expense. You might be doing building work on your home that’s rumbling on longer than you’d anticipated, or perhaps costs are going through the roof. You might be a business owner and need to find some short-term finance to cover a VAT bill. Or you might desperately want to help one of your children who’s struggling to balance rising costs and a young family.

A financial adviser can talk you through a variety of solutions, such as remortgaging or taking out a short-term bridging loan. If you need to liquidate assets, we’ll talk you through the tax considerations and make sure you’re selling the right ones first.

If you have a pension and are over 55, you might be tempted to dip into that pot of cash. But taking money out of your pension before you retire could land you with a significant tax bill.

Be prepared – and plan ahead

Not everyone has a contingency fund they can draw on in tough times. However, working with a financial adviser helps you plan ahead, so if you hit an unexpected expense, you’ve already made some plans.

You could consider taking out an income or mortgage protection insurance policy. These can cover your most important bills if you’re made redundant or suffer a short-term health problem that means you can’t work for a while.

Alternatively, we can help you build a dedicated ‘rainy day’ pot of cash, so you have money that’s easily accessible to deal with a financial ‘down’. By planning ahead, you’re less likely to get knocked off course when life throws you a curveball. And you don’t have to lose sleep worrying about how you’ll manage if disaster does strike.

Advising families, protecting futures

We’re here to help you and your family deal with the ups and downs of daily life. We’re always here to help you start the conversations.

Get in touch with us today.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Source

1Starling Bank, accessed 8 May 2023

SJP Approved 04/12/2023