For some, the traditional start to the year, such as making New Year's resolutions, encourages you to reflect and ask yourself questions like; "Do I need to start saving money?" and "Am I planning properly for my future?". The new year means a fresh start with spending habits and a chance to meet financial goals. Is one of your resolutions to stop spending unnecessary money and begin saving?
Our clients often cringe when we ask them about their annual expenditure, namely their discretionary expenditure. Discretionary expenses can be defined as nonessential spending whereby you spend your money on things you want, rather than something you need. When you go for an expensive meal or buy that designer handbag, these are all examples of discretionary expenditure.
However, you would be surprised by how many people have no idea how much they spend and where their money goes. A few pounds here and there really make a difference, and our clients are quite often surprised by their total expenditure figure.
Since Covid-19 and the lockdowns, we have all began to assess our expenditure. Many began to notice a huge difference in spending habits. No more cappuccinos on the morning commute, quick visits to the shops at lunchtime, travelling costs and drinks after work. When life starts to get back to normal, I wonder if any of these spending habits will stay with us or will we slip into buying expensive coffees again every day?
Here at LIFT, we build a long-term financial plan for our clients and through the use of a cash flow planning exercise, we can assess how small changes can really make a difference over the longer term. We do this by plotting each stage of your life and modelling different scenarios to formulate a plan which we revisit each year. As a Financial Planner, the exercise helps me plot how small changes in the early years of your planning can make substantial differences both in the short term and the long term. For example, increasing your pension contributions slightly, or by regularly contributing to an ISA. And importantly, switching the takeaway coffees' expense for a monthly life insurance premium to ensure your family is well catered for should the worst happen.
If you would like to take control of your spending habits in 2021, please get in touch with our team, and we can help you create a financial plan for your future.