07/11/2022
The November edition of the Poulton Eye magazine has a discussion piece on how to best manage the cost of living crisis with Jane, Principal Partner here at the Davidson Financial Planning Practice
Poulton’s Jane Davidson has a wealth of financial experience with over 25 years in financial services. She became an Associate Partner of St. James's Place in 2007 and has been running Davidson Financial Planning ever since.
As the nation struggles with the cost of living crisis and winter approaches, Jane offers some practical tips on how to make your money go further whether you are struggling to fill the fridge or trying to make unearned income spread further.
Firstly, a brief resume of Jane’s career. She’s worked in the financial services industry for 28 years, initially training for the ICMA (Institute of Cost and Management Accountants) joining Citicorp Financial Group and then Lloyds Wealth Management before being head-hunted by St. James's Place.
She says she always loved working with figures and money, and financial services was a perfect career because it combined this with the enjoyment of helping people organise their finances, save tax and generally plan money more carefully to get the best from it.
Her first job at Citicorp came about because she had just moved to a new family home after the UK had come out of the ERM and interest rates rose to 16%. She was at home with one child and thought she needed to help pay the huge mortgage. Financial services were far less well- known in those days and it was with some trepidation that she started work there. It proved to be a natural home for her talents and despite having a one year old child, Jane was consistently ranked as one of the top 10 employees so it was no surprise that she was head-hunted by SJP and has what she calls her dream job, with her own Practice with the backing of a FTSE 100 Company, their technical support and compliance.
So, now to the cost of living crisis. Jane, along with so many of us, is a huge fan of Martin Lewis. She urges people to look at his website and follow his tips on saving money. That is tip number one for everyone. He has a great team of people working with him to find and verify the money-saving tips given and there will be something for everyone there.
Secondly, Jane says setting a budget is one of the most important things you can do and really helps reduce financial stress. Whether money is tight or not, it is essential that you look at your outgoings, potential unexpected outgoings, and your income. If you set a budget, you will know whether you are sticking to it and whether you are likely to run into problems later in the month or later in the year. If you’re really not left with anything then you will have to make major cuts to outgoings in whatever way you can, and that’s where Martin Lewis comes in.
If the situation is really looking bleak, do talk to someone. It could be a financial adviser, she says. They are debt and bankruptcy licenced and will be able to give you advice. Otherwise, go to Citizen’s Advice, or another professional organisation. Whatever you do, don’t do nothing!
Burying your head in the sand and pretending it’s not happening is the worst thing you can do. There is help available and there will always be some sort of resolution.
Here are some more of Jane’s suggestions of practical tips for saving money this winter.
Pay off your credit card each month if you can.
Look for interest free credit cards or transfer an existing credit card debt into a loan. It can be useful if a debt is getting out of hand and you can’t see how you are going to pay it off. It can be much cheaper to consolidate it into a loan.
Try having some designated ‘no spend’ weekends.
Set limits on the number of takeaways you have.
Have a freezer month where you try to only eat from the freezer topped up with fresh fruit and veg.
Set up regular savings if there is any spare cash so that you have an emergency fund. It really does take the pressure off.
Think about getting a bus pass. It can be quite an adventure, even with the frequency of rural buses!
Share lifts. It could be a good way to make new friends and spend time with others in your community. Perhaps set up a little transport WhatsApp group.
This winter is probably quite a good time to check that your National Insurance contributions are up to date. If you have missed payments, make sure you catch up with them so you are eligible for your full pension when the time comes.
Can I afford to invest any money or save beyond an emergency budget?
One of the quirky analogies I’ve used over years, especially on paper, is to compare finances to your larder, fridge and freezer when people are trying to work out if they can afford to invest. In the larder is your income. You need to feel comfortable that you have enough to cover bills. In the fridge is your emergency money, which can take the pressure off you and ensure that there is a pot of money available no matter how small. It’s there and you won’t have to resort to credit cards. Emergencies always crop up so we need to have some sort of ballast to protect ourselves. Your freezer symbolises longer-term investments and if you are lucky enough to have accrued some savings, get some advice and think about setting it aside to make it work harder for you. If you hold cash and that’s the way you are and you don’t ever want to invest, then shop around for a decent current and savings account to maximise the financial benefits. Do remember that money sitting in cash will fall below the value of inflation unless you take action.
What about the markets and market behaviour during this economic period of uncertainty? The areas to be in are global investments because fund managers have the remit to invest globally where they feel the best opportunities are and good fund managers will be seeking good opportunities because they know their stocks well. Historically, following numerous major economic disasters, big drops in the markets will be followed by rises which are generally higher than before the crisis. Fund managers like volatility and buy stocks at reduced prices on the assumption they will rise after the crisis. That’s just the way the markets work. But you need to have the confidence that you can afford to take advantage of any volatility and invest because first you need to know you have enough to pay your bills and to cover emergencies so back to the larder, fridge, freezer analogy.
Another thing to mention here is compound interest. Albert Einstein said it was the most powerful force in the universe and the sooner you start, the more choices you have later in life.
If a £10,000 investment was made into a pension scheme for someone aged 30, with certain assumptions made, at age 60, that pot of money would be worth £461,000 but if it was delayed 5 years, it would be £358,000 and if it was delayed 10 years, it would be £266,000 and 15 years it would be £186,000. Please note, this example makes a number of assumptions: The average annual investment growth before charges is 4.61% each year. Investment charges of 1.96% each year. Contributions are invested on the same day in each year in a pension and are shown before charges are taken into account. The example is only an illustration and actual investment returns may be more or less than those assumed in the illustration. Please note that these benefits are not guaranteed. Benefits depend on how the investment grows and its tax treatment. Contributions are not limited by the Annual Allowance or by earnings. Putting money into saving schemes works the same way so you can make money work for you or not, if you can only afford to save on a regular basis into an investment fund rather than bank or building society get something called pound/cost averaging which, as you get ups and downs in the stock market, compensates for the vagaries of the market.
Finally, make sure that you have an up-to-date will. For example, most people think, even if they haven’t made a will, that if they are married, all their money goes to their spouse or civil partner automatically, but it doesn’t. It can be a huge problem for your family and also can cause rifts in families. If a spouse or civil partner dies without a will, only the first £270,000 will go to the partner. Then half the residue goes to the children and other half of that residue to the partner. That may not be the way you want to divide your estate. A straightforward will is quick, easy and costs a couple of hundred pounds to save a lot of aggravation later on.
In future editions Jane will be talking about investments, how to mitigate inheritance tax, more on wills and saving tax.
The value of an Investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested. Equities do not provide the security of capital which is characteristic of a deposit with a bank or building society.
Taxation rules can change at any time and are dependent on individual circumstances.
Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place Wills are not regulated by the Financial Conduct Authority.
Davidson Financial Planning is an Appointed Representative of and represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website https://www.sjp.co.uk/products-and-services. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
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