How to stick to your plans when cash is tight

Financial planning
Views & insights

Rising prices can make it more difficult to stick to your financial goals. Discover five ways to get your plans back on track

Share

28 June 2023 | 3 minute read

Steep rises in the cost of living mean we’re all facing increased demands on our income. Sticking to your plans – whether that’s paying for education fees, investing for your children’s future, or saving for retirement – may feel overwhelming. While these are uncertain times, there are steps you can take to prevent inflation from scuppering your plans.

   


 
     
Download: A guide to tax-efficient investing

Find out how to invest more tax efficiently and reach your goals in our comprehensive guide

Download now


     
     

 
A financial adviser can explain the right course of action for your individual circumstances but, in the meantime, here are five ways to help you stay on track.

1. Review your income and expenditure

From higher mortgage rates to bigger food and utility bills, the past couple of years have seen the cost of nearly everything increase sharply. If you haven’t carried out a budgeting exercise recently, this is the time to do so.

Reviewing your income and expenditure will give you a much clearer idea of whether your plans are still achievable. You might find that your expenditure is well within your budget and that you can maintain, or even increase, how much you’re saving each month. Or it may be the case that you’re overspending and need to make adjustments. Instead of cutting your regular savings and investments, reducing your discretionary spending could help you stay within your budget without affecting your longer-term goals.

2. Check where your money is invested

When your income is under pressure, it’s more important than ever to make your money work hard for you. After all, achieving your financial goals isn’t only about how much you’re investing, but where you’re investing. This is especially the case in a time of high inflation, when rising prices can erode the real value of your long-term savings.

Interest rates on cash savings accounts are more attractive than they were a year ago, so it’s well worth shopping around for a better rate. You might also want to consider investing some of your long-term savings into other asset classes, such as equities. History shows that over long periods, equities offer the greatest chance of mitigating against inflation.

At RBC Brewin Dolphin, we can help you build a diversified portfolio that works hard to preserve your money’s purchasing power and grow your investments over the long term.

3. Make the most of your tax allowances

Making the most of your tax allowances can give your savings a boost and, in turn, help to reduce some of the pressure on your income. For example, you can invest up to £20,000 a year into ISAs to benefit from tax-efficient income and growth. Junior ISAs offer the same tax-efficient benefits and allow you to invest up to £9,000 a year per child.

Pensions are a great way to save for retirement because of the tax relief you get on personal pension contributions. A £1,000 personal pension contribution costs just £800 if you’re a basic-rate taxpayer, £600 if you’re a higher-rate taxpayer, or £550 if you’re an additional-rate taxpayer. You can save up to £60,000 or 100% of your UK relevant earnings (whichever is lower) into pensions each year and still benefit from tax relief.

If you’ve maxed out your ISA and pension allowances, the capital gains tax (CGT) exemption enables you to make tax-free gains of up to £6,000 in the 2023/24 tax year. You can also earn up to £1,000 of tax-free dividends under the annual dividend allowance.

A financial adviser can help you structure your savings and investments tax efficiently, so that more of your money goes towards your goals.

4. Get a financial forecast

You might find it easier to stick to your saving and investing habits if you understand the impact they could have on your future. For example, knowing how much you’re likely to have at retirement could give you the motivation to keep up your pension contributions even when cash is tight.

The best way of understanding your future finances is to speak to a financial adviser. By using cashflow modelling, they can map out your savings and investments year by year, demonstrate how long your money is likely to last in retirement, and help you understand whether you’re on track to realise your ambitions. They can also explore the impact of different scenarios, such as increasing or decreasing your monthly investments, delaying retirement, and gifting money to children. In a time of economic uncertainty, gaining clarity over your finances could be particularly beneficial.

5. Get some smart advice

Sticking to your plans when times are tough isn’t easy, and that’s where getting some smart advice comes in. A financial adviser will take the time to understand you, your concerns, and what you want to achieve in life. They can help build a plan that suits your needs, makes the most of your money, and adapts over time to reflect changes in your individual circumstances. That way, you’ll feel more confident that you’re on track for a secure financial future.


   


 
     
Get financial planning tips straight to your inbox

Sign up to our newsletter for expert insights on investing for the future, saving for retirement, passing on assets to the next generation, and much more.

Subscribe


     
     

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

Take control of your finances

request-a-callback-cta

We’ll help you prepare for the future and meet your goals with a solid financial plan that’s tailored to you.

Financial advice

More on this topic

You may be interested in

How to invest a £500k inheritance in your 60s

Inheritance and estate planning 3 min read
How to invest a £500k inheritance in your 60s

Markets strong as S&P 500 passes 5,000 mark

Market news 5 min read
Markets strong as S&P 500 passes 5,000 mark

Understanding your pension annual allowance

Pensions and retirement 3 min read
Understanding your pension annual allowance

The value of investments and any income from them can fall and you may get back less than you invested.