“I’ve always been careful with money, but how can I protect myself now that I’m feeling the pinch?”

Question: I work in the private sector with a modest salary, but I have always been careful with my money and I am able to manage well. However, I start to feel the pinch each month and can see my weekly shop going up all the time. Some experts are warning that inflation could exceed 10% in the fall, which makes me nervous. I have a car loan and some small savings, and I have a variable rate mortgage. Can I do anything to protect my situation over the next few months?

Answer: The rising cost of essential items such as food and fuel has started to have a real impact on the daily lives of many. In the short term, the situation will continue to worsen with the continued increase in the cost of mortgage repayments and increased demand for fuel during the winter months.

Unfortunately, wage inflation is significantly lower than consumer price inflation. This affects most people’s purchasing power. The main priority should be to maintain your current lifestyle while meeting your financial obligations.

You have entered into agreements with financial institutions for a car loan and a mortgage. Failure to pay on these loans can have a significant impact on your future ability to borrow and make future borrowing more expensive. So, making any possibility of default less likely is the right course of action.

You mention you have savings, do you have a goal for them? It’s good financial planning to try to build up a three to six month net paycheck, put it on deposit, and classify it as an “emergency fund.” This will not keep up with inflation and earn little interest, but serves a purpose of having liquid funds if needed. Apart from this, it is advised that any savings should be invested in long-term goals or used to reduce debt. Do you have the capacity to reduce your car loan from your savings? If so, this will free up cash each month to offset some of the rising cost of living.

Compared to your mortgage, you are on a variable rate. Arrange to speak with your lender now to make sure you get the best rate they offer. If you have a solid loan to value your home or if it is identified as a green property, you may qualify for a better interest rate. Additionally, you may want to consider a fixed rate mortgage if it suits your situation and to protect against rising rates.

Make a comprehensive budget, there are many online calculators available on financial planning websites. Identify areas where you might be able to save on expenses. You take the right course of action by exploring the options.

Query: My employer insisted that the staff return to the office and I don’t like it at all. It’s high pressure work and I found I could balance things much better when we were working remotely. Daily journeys have been particularly difficult since the end of the confinements. The bottom line is that I really think retiring early would be fantastic. I have a decent company pension, but I still have several years to go before retirement age. Is retiring early a pipe dream or is there a way to make it happen?

Answer: Covid and the different circumstances of the past few years have changed the mindset of many. The question many have asked is what do they work for?

Work-life balance and well-being are central points of reflection in this regard. When decisions are made, everything is underpinned by financial viability. Dramatic changes won’t work if the finances don’t add up.

You must be wondering what retirement would look like for you. What lifestyle do you want and can your current plan fund it?

It is often more realistic than to stop now to put a plan in place. The time scale depends on your calculation of the income needed to live off your retirement fund. Can you afford to maximize your pension contributions now? By maximizing the contributions to your plan, you will obviously have a better chance of reaching your target figure more quickly.

It is important to consider the risk profile of your investment when making your decision. For example, if you are 15 years from the normal retirement age and this is reduced to five years, it is advisable to reduce the risk profile of your investment accordingly.

A growing trend is that people never stop working. They are simply reducing their workload as they enter the traditional retirement years.

It is worth factoring into your thinking and financial planning around retirement.

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