Are you re-evaluating your financial priorities as a result of coronavirus?
The pandemic crisis may have changed how you feel about your plans for the future
When the coronavirus pandemic hit the UK in March and the country went into lockdown there was a sense of households battening down the hatches to wait out the storm.
In financial terms, that meant working out – as quickly as possible – all of the implications, and how to navigate the rapidly changing landscape.
The most obvious impacts of the pandemic, of course, have been on those who have seen their income hit – by redundancy, pay cuts or the effects of being furloughed. And with job losses expected to rise sharply in coming months, the financial pressures are only likely to intensify.
Nevertheless, for the most part, people have been fairly sensible with their money, reckons Tony Clark, Head of Retirement Marketing at St. James's Place Wealth Management.
“For a majority of families - such as those in which parents have been working from home, while also home-schooling their children - the Spring lockdown period offered little time to understand the potential financial knock-on effects of the crisis, or to adjust.”
The result, says Clark, was that plenty of people adopted a more risk-averse attitude – certainly when it came to their approach to investments.
“Even where they’ve seen their spending fall and savings rise – as commuting costs have been removed or slashed, holiday plans have been aborted or socialising opportunities have been restricted – people have typically been very, very cautious.”
The same is true of those in retirement, who might be taking less income amid the ongoing volatility – but are also seeing their monthly outgoings reduced.
People across the board are hyper-aware of what’s happening in the world, Clark says, and keeping a close eye on the economy – as well as a tight rein on their funds. Any savings goals have been deferred in favour of a cash in hand mentality. We have taken comfort in having an easy-to-access financial buffer available, in case of emergency.
It’s hardly surprising, Clark adds: “The pandemic has served as a brutal reminder of the importance of ‘rainy day’ funds - not just for our peace of mind, but because our finances can so easily be undermined by events outside our control.”
But now, he says, as we approach a winter of discontent in which varying levels of social restrictions seem likely to be a feature – and where spending will once again be curtailed – “we should take the opportunity to refocus on our financial wellbeing and direct our efforts towards building up longer-term financial resilience”.
Melloney Underhill, Marketing Insights Manager at St. James’s Place Wealth Management, agrees: “In times like these, we have a heightened sense of the important role things like protection and savings have on our future and peace of mind – a welcome increase in general financial awareness. But we don’t yet have the confidence to act upon it.”
The coming period may be one in which, when it comes to personal financial situations, people will take the time to be better able to see their bigger picture and make more informed decisions in their long-term interests, she suggests.
“People should recognise that the effects of coronavirus, and the recession we’re in, will be around for some time, and that if they’re in a position to put some money aside, they’ll create space for reprioritising goals… to reflect on what they now want from their finances.”
For many, the upheaval of recent months has meant the goals they had in place at the start of the year may no longer be fit for purpose and might, in some of these cases, need a more urgent review.
The uncertainty may even have nudged people to, for example, reassess how long they want to continue working, or whether to do something different with their lives. It should also prompt them to talk openly about their financial ambitions and seek out expert support when renewing their financial choices.
Our goals help to determine what we do with our finances and how we think about them. They are also inherently emotional drivers, reflecting our attitudes, hopes and aspirations for ourselves and our families. And when emotions get involved, understanding how to achieve those outcomes can be far from easy. This is where professional advice can come into its own, believes Clark.
“Advisers will help you to focus on your goals and work out how you get there. There are so many moving parts and it’s very easy to make the wrong decisions,” he explains.
“For instance, if you’re suddenly made redundant, it might mean your retirement plans need to change. Advisers will give you the hard truths around this and help you plan for it.”
Using tools such as cashflow planning, advisers can assess someone’s holistic financial situation, match the insights to their ambitions, and build up a picture of how their finances will (or won’t, as the case may be) support them in the future.
“Part of the adviser skillset is building the emotional drivers into rational objectives, and then developing a plan around them,” says John O’Driscoll, Divisional Director, Business Development & Advice at St. James's Place Wealth Management.
“This is a goals-based approach, grounded on what the individual wants to achieve. In scary times like this, there’s peace of mind in knowing that there’s a robust plan in place, beyond the investments.”
Want to review your financial plans? Or take advice on reprioritising for the future? We’re always on hand. Just ask.