Might just get spooky! Planning your cash flow

29 October 2021

As the nights draw in, the thought of the winter ahead might seem a little more onerous this year, even spooky (please excuse the Halloween link).

The media has been full of fearmongering for a good month or so now, focusing on fuel prices, shortages of what seems to be everything, and some concerning money stories around the State Pension (see our recent blog) and high inflationary price increases. Some have suggested that it might be another 'Winter of Discontent' (see 1979), although we hope this is unfounded.

However, you view the news, and from whatever medium you gain your information, the over-riding message seems to be that households might well need to manage their finances carefully over the next few months in preparation for any unforeseen costs, or increases, especially in the lead up to Christmas.

We have always advocated that clients maintain an emergency deposit fund to provide instant access to cash in the event of immediate need. You never know when the roof will leak or the car will break down and having three to six months income ready to meet these costs, or the needs of the family, can be imperative.

Many clients have aired their concerns that returns on deposit type funds are poor at this time and with rising inflation, real purchasing power is being lost. Even the returns through National Savings & Investments (NS&I), including Premium Bonds (average winnings 1.0% pa AER), have been reduced over the last year, although most NS&I products still offer prompt accessibility.

Checking your cashflow situation for the next few months through to the end of the financial year (beginning of April 2022) might be sensible now, adding on increased costs for food, fuel, clothes, gas and electricity to make sure that you remain within the tolerance of your anticipated income, whether this is salary, pension, or self-employed earnings. It's also important to remember that much of the support the government put in place over the pandemic for those of working age, such as the furlough scheme, ceased at the end of September, and this may well be a concern for some.

Whatever you do, keep on eye on your money position, and check your regular direct debits and standing orders on your bank statements. If cash flow is not an issue at this stage, put a little extra aside just in case. If we are wrong, you will have extra to spend later. If we were right, it might just smooth your financial path through to the spring of next year.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899