Even if you're doing your best to be responsible with your money, there might be forces outside of your control that can pose a threat to your financial stability. We’ve put together some tips, so these common financial nightmares don’t keep you up at night.
The nightmare: You can't get a loan when you need one
How to sleep easier: If you maintain a good credit score, you’re more likely to find it easier to get a loan for a car or a house (as long as you can afford the payments). You can read about credit scores and how to find out what your credit score is on the government’s MoneyHelper website.
If you have less-than-perfect credit, start taking steps to fix it. First, set up your bank account to automatically make the minimum payments on all of your outstanding debts, including credit cards and student loans. That way your score won’t be damaged by an accidental late or missed payment.
Then, set to work methodically paying down the debt to reduce the amount of overall credit you're using (and boost your credit score). If you have extra cash, put that towards an extra payment on the debt with the highest interest rate.
Once that debt is paid off, take any extra cash along with the money that was going towards that payment and move on to the account with the next-highest interest rate.
The nightmare: You lose your job
How to sleep easier: The most immediate financial problem when you lose your job is that even though your salary stops, the bills don't. Even in a strong economy, it’s not uncommon to find yourself out of work for a period of time. Prepare yourself for these times by setting aside some money in a contingency fund to help tide you over until you get a new job.
You could start with £1,000 and then build up. Aim to eventually have three to six months' worth of expenses saved and keep it in a separate account, so you won’t be tempted to tap into it for everyday spending.
In addition to preparing your finances for a potential job loss, it's also important to make sure that you're set up to easily find your next role. That means making sure that your CV is always updated, and you are networking and connect with peers even when you’re happily employed.
The nightmare: The state pension age is increased - again
In announcing further rises to the state pension age - from 67 to 68 in 2037–39, seven years sooner than is currently legislated for - the government repeated the case laid out by Sir John Cridland for why such rises are necessary.
The change means that anyone born in the period 6 April 1970 to 5 April 1978 will have to wait longer for their state pension.
Our ageing population means that, with no action, the amount we spend supporting people after work is going to rise dramatically, from 5.2% of GDP to 6.2% by 2037. If applied today, that would mean £725 of extra funding would be needed each year from every household in the country.
This is why it is essential that you contribute as much as you can to your workplace pension scheme. Who knows what age the State Pension age could rise to and how much eligible retirees will eventually get?
Being 68 years old in 2037 is not the same as being 68 in 1948, when the modern state pension was introduced. By the government’s own figures, someone entering retirement back then could expect to live 23% of their adult life in retirement. By 2007 this had risen to 32% and for many will be far higher and much of that time will be lived in good physical health.
We’re living longer and so making provision for our own futures is crucial. Check you are getting the maximum contributions from your employer; many employers match the employee's contributions up to a certain percentage and this is a key benefit of working for an employer. Review your contribution and see if you are eligible for a match.
Login to PlanViewer to check your making the most of your contributions and check the age you have selected for your retirement.