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Opinion Keeping your money working for you - how to deal with rising costs

Financial expert David Quinn says it’s tricky at the moment as the cost of living rises – but there are little changes you can make to help your pocket.

AS THE COST of living continues to rise, how do we make our money work harder? What can we do to stretch our income from the beginning of the month to the end?

There’s no denying that living has become increasingly expensive and once cheap commodities are now very costly, thanks to the perfect storm of supply chain issues post-pandemic and the war in Ukraine. It is always a good idea to be fully aware of your financial situation but nowadays even more so.

While we know that having lots of disposable income doesn’t necessarily make people happier, having too little cash can cause a lot of stress and sleepless nights. Worry or anxiety about money can affect people’s mental health.

Planning helps

One of the reasons people go to financial planners is for peace of mind and the luxury of being able to sleep well at night! A recent survey of our own clients found that almost 45% of respondents agreed that since engaging a financial planner they feel ‘generally more confident’, almost 41% agreed they feel ‘generally less anxious’ and 57% said they have a ‘clearer sense of direction’.

In the same survey, when asked ‘Do you feel happier when you save, spend or share money?’ 48% said they felt happier when they saved, 40% when they shared and just 12% when they spent money.

Anxiety and avoidance create a vicious cycle, but is it really possible to make our money stretch further and be smarter about spending? The good news is yes, the bad news is, it takes a bit of planning and work to do so.

My top 10 tips for making money work harder include:

1. Review all incomings and outgoings so you have a clear picture of your monthly cost of living. Review all subscriptions and direct debits and assess if they are all necessary.

2. Pay for items in full instead of spreading the cost across the year. While this can be challenging, particularly as the cost of living rises, it costs less in the long run to pay for insurance and motor tax, for example, in full and up front instead of spreading the cost across 12 months in monthly direct debits.

3. Ask for a pay rise – as the cost of living rises, it makes sense that wages rise to match. Take time to think about how to present this to your boss. Generally speaking, women are less likely to ask for a pay rise than men but remember – it is an employees’ market at the moment. Obviously, the best time to do this is if you are negotiating a new job or a promotion. Make sure you present your request in terms of what you can bring to your role/the business in return. I would also ask for an employer pension contribution. This saves your employer in the long run as they don’t have to pay Employers PRSI when compared to a similar salary increase. Let your employer take some responsibility for your retirement fund!

4. Shop smart and consciously – take time to shop around for the best deals. The weekly grocery shop is key – we throw out a huge proportion of the food we buy. Plan your weekly meals and shop accordingly.

5. Change your mortgage and utility providers – we all know it’s something we should do but we rarely do it. Paradoxically customers are punished for loyalty! So, switch providers to make savings.

6. Pay off debt – sometimes people save money while also paying off debt. While it can be comforting to know that you have some spare cash put by, it may not make much financial sense due to the interest included in the cost of the loan. While it is wise to have some money available for emergencies do pay down some of your loan if possible.

7. Keep your old car – people are spending significant sums on new electric cars and of course, we must all play our part when it comes to climate change. Psychologically, it can feel like you’re saving money; road tax and insurance can cost less. There’s also the reduction in carbon emissions but remember there are emissions involved in building that brand, new, shiny car and waste involved in getting rid of your old banger that is perfectly good for what you need! So, instead of taking out a loan or PCP finance for a new car, stick to your old car and no loan repayments.

8. Passive income is something we should all aim for where possible. For example, do you have a spare room to rent?

9. Invest in yourself by upskilling and enhancing your education. The talent and expertise you have to offer is the best way to increase your income and ensure your time spent working delivers you the best possible return. This can be the best investment you will ever make.

10. Invest – banks are charging to keep money on deposit. With inflation as it is, your money in the bank is losing 6-7% annually. On top of that the cost of living – everyday items as well as bigger ticket and longer-term costs like school or college fees – are rising so your money will be worth so much less. The solution is to invest. While there is an element of risk involved in investing, you are guaranteed to lose out if you leave your money in the bank.

If you do decide to invest, get independent advice. Self-managed investing through low-cost online platforms is growing in popularity, particularly among younger people.

Due to the significant deposits needed to buy a home young people are looking for ways to ‘get rich quick’. This is fraught with danger and risk, and unfortunately, ‘get rich slowly’ is the more apt mantra.

There is no easy answer to stretching funds further and as the cost of living rises some people are in very challenging situations but it is possible to make some savings by taking steps to smarter money management.

David Quinn is Managing Director, Investwise Financial Management offering financial planning, pension and investments advice to people wishing to invest in their future.

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