Surprising Stings In The Tail Of A Financial Future You Thought You Had Sorted
The last eighteen months have provided us with an unwelcome insight into the fact that nothing financial can be relied upon. Of course, a pandemic that threw the country, and the vast majority of the world, into the worst recession we’ve seen in our lifetimes is an extreme example of financial instability, but the lessons inherent in the job losses and general monetary struggles of the past year, especially, have highlighted the need to better protect ourselves against risks we weren’t even aware we were facing.
Where our financial futures are concerned, especially, the sudden realisation that nothing is set in stone has got us all thinking about the steps we can take to ensure we always have enough money. Outside of the pandemic, this has highlighted some pressing but previously unrecognised stings in the tail of so-called financial security, and we’re going to unravel the worst of them here.
Savings that will struggle to stand the test of time
Average recommendations suggest saving as much as £26,000 by the time you reach 45. But, even people who are so-called ‘on track’ with this tend to miss one crucial factor – inflation currently rests at around 0.6%. In other words, static savings are never going to provide a secure future when left in the bank for ten or more years. Ongoing saving is obviously an unrealistic goal, meaning that ongoing security truly comes down to a high-interest savings account that ensures your savings are forever topped up, regardless of what’s happening elsewhere.
The mystery of the missing pension pot
Employer pensions are a blessing, but siloed pension schemes don’t always transfer automatically when we change jobs. A failure to realise this means that pension pot losses currently add up to around £1.94 billion. To avoid this, it’s essential to either take steps to transfer one pension to another (which can be incredibly convoluted) or, often more simply, to look into pension consolidation which makes the loss of any pension far less likely. Only then can you rest 100% easy that you’ll receive all the money you’ve saved towards your retirement when the time comes.
The instability of your income
Unstable incomes also mean that even a salary that seems as though it will buy you a decent future could be pulled from under you in the face of increasing tech advances and even company closures as consumer interests shift. Money management and savings play their part in offsetting this risk but, as discussed, even these aren’t guaranteed. Instead, financial futures are increasingly coming to rest on income diversification that’s seen as much as 25% of the UK population embracing side hustles. Only by ensuring that money is coming from several avenues can we finally now say that we’ve truly sorted a financial future we can rely on.
The unpredictability of money is undeniably daunting, but it’s important to realise that, the more we understand this uneven financial footing, the better poised we are to overcome it. So, consider, is your financial future really as stable as you thought?