Have You Stress-tested Your Personal Finances?

2022 promises to be a new beginning

As we emerge back into the sunlight after the gloom of the Covid-19 pandemic, we can look forward with optimism and positivity as the world starts spinning normally again.

As we look forwards, it makes sense to take stock of where we are today. We’re all doing this instinctively in relation to our health, our potentially changed work environment and many aspects of our lives. However as our lives may change in the future, it also makes sense to consider the impact of these changes on our personal finances.

Advice First Financial Services Donegal Stress Testing Finances

When you take out a mortgage or request a loan from a bank, they stress test your finances as part of their process. They want to ensure the loan will be repaid, so  they consider whether you will be able to cope with a rise in interest rates and look at the security of your income. We believe that all of us should carry out our own mini stress test across our finances, to ensure we can cope with any uncertainty down the road. Here are a few areas to consider.

Ensure you’ve sufficient personal finance protection in place

After Covid-19, we’re all much more aware of the fragility of our health. Sometimes poor health visits families unexpectedly, causing a lot of worry and uncertainty. Don’t exacerbate this fraught situation by heaping worries about your finances on top – you can prepare for this in advance by reviewing your Mortgage Protection, Life Assurance, Specified Illness Cover and Income Protection policies. Having sufficient financial firepower in place will help you concentrate on recovering your health and living the very best life possible.

As part of our review service with clients, we can help you to stress test your finances. Please just give us a call and we can get you on the path to ensuring your personal finances are in the best shape possible.

Do you have a sufficient emergency fund?

We always encourage clients to have a nest egg that can be accessed immediately and that will see them through approximately 3 months, should their income source dry up overnight. This doesn’t necessarily mean that you need to keep a large sum in the bank, earning no interest. However your emergency fund needs to be in assets that can be liquidated immediately to enable you to access the money at short notice.

Avoid unnecessary borrowings

Live within your means and don’t fund your lifestyle or indeed discretionary purchases through borrowings. Wherever possible, pay for these the old-fashioned way – by saving first and buying later. Debt is an enormous source of worry when there is a shock to your income.

Advice First | Letterkenny | Donegal