05 Oct 2022

Feeling the pinch? Here are 4 ways to build your financial resilience

Feeling the pinch? Here are 4 ways to build your financial resilience

Feeling the pinch? Here are 4 ways to build your financial resilience

As prices surge, many people are focusing on how they can get by financially in the here and now. But for some, it may also be worth taking a step back to see if they can improve their financial resilience in the longer term, too.

Emma-Lou Montgomery, associate director for personal investing at Fidelity International, has some suggestions that may help safeguard your short and long-term finances…

1. Review where you shop and what you buy

“Now is the time to review exactly what you’re spending money on and where the best deals are – whether this is for your mobile phone, broadband, car and/or home insurance, or even your savings,” says Montgomery. “The same attitude should filter across to your weekly or monthly shopping habits.”

2. Build a savings pot

Many people will struggle to have any spare cash right now to put into savings, but Montgomery suggests starting with small amounts, if that’s possible, and hopefully scaling your pot up over time.

Could it be worth doing a review of your savings?

“Recently, more people may have had to dip into these savings to cover surging energy and/or fuel costs, but as long as you keep a record and try to manage how often you do this, then you’ll be able to replenish what was spent slowly over time,” she says. “Don’t forget to also review whether your savings account is offering you the best rate, as with interest rates going up, so should the rates your bank offers.”

Some providers have recently increased the interest rates paid on deposits, for example Nationwide Building Society’s FlexDirect account now pays 5% on balances up to £1,500 for the first year, subject to terms and conditions. Many banks are also offering cash to switch current account, which could be used to start a savings pot.

3. Be smart about investments

“During this turbulent time, it’s understandable if you have the urge to pull back on your regular investments – however, it’s important to keep a cool head, avoid knee-jerk reactions, and focus on your long-term goals,” says Montgomery.

She suggests investors could consider holding more in companies that may be more resilient during downturns, such as consumer staples and pharmaceuticals. “A well-balanced portfolio in uncertain times is also important,” she adds, “as this will ensure you’re well diversified and can protect your investments against social, political, and economic changes.”

4. Consider your options if you’re close to retirement

Montgomery says: “Ideally, your plans should allow you to cover the of essential spending with income that can rise as prices rise.”

Some people may want to consider buying a retirement annuity that has some protection against inflation, or leaving money invested in assets that may have the potential to keep pace with higher living costs.

Pension Wise offers free guidance to people aged 50 and over ( People considering pensions or investments may also want to seek independent financial advice when weighing up their options.

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