If your everyday costs feel harder to predict right now, you’re not alone. The higher cost-of-living is hanging around like a bad smell. With sticky inflation and a disrupted shipping route de-stabilising oil prices – it’s hard not to feel a sense of déjà vu.
In today’s global world, events happening thousands of miles away can feed into your daily finances – and hit your wallet fast. The tension in Iran is impacting the price we pay at the pump, interest rates on mortgages have crept higher, and food costs could rise next.
You can’t control those larger forces, but you can control how prepared you are to deal with them. And the start of a new tax year is a natural moment to take stock of your finances.
The good news? You don’t need a crystal ball to get your finances in a stronger position. Small, deliberate steps now, can make a big difference for when the unexpected shows up tomorrow – and help you feel more confident for whatever comes next.
This article isn’t personal advice. Investments can go up and down in value, so you could get back less than you invested. If you're not sure what's right for you, ask for financial advice.
Here’s five ways to add resilience to your finances and in turn, protect the day-to-day lives of you and your loved ones.
Check your budget for flexibility
Do you know exactly where your money goes each month?
Take a proper look at your income and outgoings. The aim is to understand and separate your essential costs from the areas you could cut back if you needed to free up cash. Then if your essential costs rise, you can act quickly to adjust your spending habits and redirect the cash.
Budgets shouldn’t be ‘set and forget’ – revisit them as your life, prices, and priorities change. If you’ve got high-interest debt, tackling that sooner rather than later will ease pressure if prices rise and your budget tightens.
Our household budget planner can help you get started and take care of the maths.
Build an emergency fund you can rely on
A cash buffer is for life’s unexpected twists and turns, and lately, those are feeling more common. A good rule of thumb is to keep three to six months’ worth of essential spending in an easy or instant access account – one to three years’ worth if you’re retired.
The exact amount should reflect your monthly spend – this is your needs, not wants – as well as a level of savings that will help you sleep at night.
It’s worth considering what financial support you’d have if life threw you a curveball or you got an unexpected bill – could family help you out, or would you be on your own? Those going it alone, families with one income or a main earner, and those with irregular income, may feel more comfortable erring on the side of bigger is better.
Building a safety net can feel daunting, especially if money is tight. But starting small and contributing consistently will add up over time – and you’ll be glad of every penny if you ever need it.
Setting up a direct debit to move money on pay day to a separate account can be a great way to build the habit and your cash buffer. Check that the account pays a competitive interest rate, this will keep your savings working harder.
Check out Active Savings for consistently competitive interest rates with HL.
Give your bank balance a boost with a side hustle
Extra income usually makes things happen faster. Whether it’s paying down your debt quicker or growing your emergency fund. A side hustle doesn’t have to be huge, just consistent, whether it’s part-time freelancing using skills from your day job, selling unused items, or turning a creative hobby into cash.
Importantly, it helps diversify your income, reducing your reliance on one source of cashflow. This is especially useful if your main industry is impacted by wider economic conditions.
Protect what matters most with insurance
Some risks are too big to handle alone. That’s where insurance comes in, providing a safety net for the ‘what-ifs’ we all hope will never happen. So, while you focus on managing changing day-to-day costs, you and your nearest and dearest will have peace of mind that you’ve got the right insurance to cover the big surprises that could really rock your financial security.
For example, income protection can help replace lost earnings if you become unwell and unable to work. It will ensure you can keep the lights on and food on the table, without wiping out the savings it took you years to build.
Don’t let market noise derail your investment plan
Uncertainty shows up in stock markets too and when values dip, your instinct may be to pull back, sell or avoid looking altogether. But market ups and downs aren’t necessarily something to fear – they’re part of investing.
Reacting emotionally and selling investments can turn a short-term dip into a permanent loss. In many cases, the best course of action during uncertain times is to do nothing, hold your nerve and stay focused on your long-term plan. Remember the investing golden rule – it’s time in the market, not timing the market.
A well-diversified portfolio is your best form of defence against market swings. This means spreading your investments across different geographies, sectors and even company sizes, the idea being that they’re likely to react differently to the same event.
If you’re able to keep investing, market dips can actually work in your favour. Investing regularly means you invest when markets are higher and lower – helping reduce the average the cost price you pay for an investment over time.