Is it time to reassess your financial situation?

28 Jan, 2020

The reality of adult life is having to take more responsibility for the state of our finances. Long gone are the days of receiving a little pocket money from mum and dad for doing the chores; instead, we’re faced with the big bad world of credit scores, loans, mortgages, bills and much more.

Unfortunately, these concerns can take their toll and it was recently revealed that 55% of all adults have seen their mental health affected as a result of money issues, while 63% have been concerned about someone they know.

There are some events in life – planned or otherwise – which can necessitate a re-think of our financial strategy. So, what might these events be and how can we assess our monetary situation accordingly?

Having a child

Recent data suggests that the average cost for two parents raising a child until the age of 18, including childcare expenses, is £155,100. Such a staggering figure, as well as the obvious responsibility of bringing another human being into the world, means careful consideration is required before deciding to extend your family.

Dealing with a drop in income

Should you or your partner be unfortunate enough to suffer a reduction in salary – perhaps due to redundancy, illness or because of professional negligence that affects your ability to work – then you may have to cut your cloth accordingly and review how you spend your money.

Buying a house

If you’re seeking to get on the property ladder, it may take a significant financial commitment. As of November 2019, the average price of a house in the UK was £235,298, which means a standard 10% deposit would require a payment in excess of £23,500. Many people would not be in a position to readily come up with such a sum, which is why it could prove prudent to asses your finances and see where you can make savings.

How to evaluate your financial health

The above are just some examples of periods we go through in life where careful planning becomes paramount. The first step is to sit down and assess all your regular incomings and outgoings, perhaps recording them on a spreadsheet for ease of calculation.

By adding up the combined salary of your household, you’ll know how much money you have coming in every month and by totting up all your expenditures – such as rent or mortgage payments, bills, food and fuel, you’ll gain an idea of your living costs.

At that point, you should be able to work out how much expendable income you have and whether that is going to be enough to cover the initial costs of having a baby, saving for a deposit or dealing with a drop in salary.

If it’s not, then it’s time to see where you can make savings – perhaps by changing where you shop for food, altering your TV subscription or making plans to car share more often. If you start doing this, you’ll be taking the first steps towards improving your financial picture.