Money management in the 21st century is a noisy business.
Everywhere you look, everything you read, the advice on how to look after your assets seems complex and contradictory.
And yet the stakes are increasingly high. Get it wrong, fail to act, have faith in the wrong businesses or people and you’ll lose your money we’re frantically told.
Scams abound, stock markets are jittery and the financial products we think we can rely on have small print exemptions that require you to be an expert to successfully interpret.
But if you step back from all that, as well as the PPI claims adverts, funeral plan free gifts and shouty social media millionaires promising to show you how they make thousands of pounds a minute from a lilo in their pool, the best advice consistently boils down to a few key rules.
Here they are.
New research from Which? this week, suggests thousands of people could be due additional PPI compensation because their bank only checked the policies the customer named in their claim, rather than everything in their name.
Then there’s the news that banks will finally be checking the name of the payee when you make a transfer to ensure the details all match up – in other words making sure that you haven’t hit a single digit incorrectly and instead of sending cash to your beloved six-year-old niece in Wolverhampton, you’re unwittingly boosting the current account of a 40-something telecoms engineer from Edinburgh.
The correct response to these developments is, of course: “Why isn’t this already happening?”
But there are thousands of common sense gaps like this across the endless number of financial, business and government processes that we interact with throughout our lives.
Assume nothing can be left to some vague notion of communal common sense in any transaction, application or complaint. Check everything, then check it again. Keep a record of any important to-ing and fro-ing you have to make, including dates and times of calls or meetings, who you spoke to and what you discussed. And follow up with everything. Just in case.
Assumption goes both ways though. Billions of pounds worth of benefits goes unclaimed every year, for example, often because people simply believe they’re not entitled to them. Be sure before you make decisions based on what you believe is the case.
Take your time
As the Financial Conduct Authority rolls out new adverts in its war against pensions scammers this week, the most pertinent advice for anyone making a financial decision – prompted by others or not – is to slow everything down.
Most of us aren’t city traders who have to make split-second decisions on a minute-by-minute basis, so regardless of how much pressure we feel under, there are, in fact, very few occasions when we have to make a snap choice.
As more and more people become victims of fraudsters who often use pressure techniques to panic people into making snap decisions, the authorities regularly urge consumers to step back and think carefully about whether they’re being told the truth.
Nor are these “act now” messages restricted to illegal activities, as you’ll know if you’ve ever shopped for, well anything. From financial providers to auction sites, clothes to holidays, we are constantly bombarded by those trying to cash in on our £1.06bn impulse spending habit every year.
Don’t fall for it. There are virtually no genuine retail finance decisions that have to be made by consumers that fast.
You’re in the position of power – with fraudsters, with salespeople and with financial providers. Use it by stepping back and assessing the situation objectively and rationally. The world definitely won’t end while you do.
But that doesn’t mean it pays to do nothing either. (Unless you’re an investor with twitchy fingers wondering if you can “time” the stock market and make an extra few pounds. You can’t.)
Yet more data out this week shows the cost of personal finance “paralysis” costs UK consumers almost £19bn every year.
Not switching to a more competitive mortgage rate costs us £2.5bn a year, failing to consolidate credit card debts leaves us £10.5bn worse off and leaving personal loans where they are brings with it an unnecessary bill of £5.7bn.
Overwhelmed by choice, the research from fintech lending platform Freedom Finance found it takes an average of 21 minutes for a consumer comparing personal finance options to feel overwhelmed by the process and give up.
A quarter of consumers said a fear of missing out on “a better deal out there” has stopped them from making important personal finance decisions.
Don’t give up. It pays to persevere.
It sounds obvious, but huge swathes of society are losing their own money because they can’t find their policies and accounts or the organisations can’t find them.
Last month, we reported that the government is struggling to track down millions of child trust fund recipients because their addresses are out of date.
Fears are also growing over the fraud risks to the consumer bank balance when we move house and fail to change our details.
Around seven million people admit to losing track of their finances, NS&I has warned this week.
And now, research by the Pensions Policy Institute for the Association of British Insurers has discovered that about £19.4bn worth of pension savings have been lost – roughly £13,000 per pot.
“Losing track of £13k sounds like a pretty challenging thing to do, but it’s worryingly easier than you think when it comes to pensions, particularly, for the current working generation who are switching jobs frequently and likely to be auto-enrolled into a company scheme each time,” warns Jon Greer, head of retirement policy at Quilter.
“It’s important to keep track of your pensions, but even if you don’t, all is not lost. One of your first steps as you approach retirement should be to track down all your pension funds. The government provides a free online pensions service, which allows you to search for lost workplace pensions or a financial adviser can help.
“Once you’ve tracked down all your funds you should consider whether it is worth combining all your pensions into a single plan. This may provide you with a clearer picture of how best to plan for the rest of your retirement; means you only have to manage one pot rather than several and may also mean your fees are lower.”
We don’t mean to come over all Daily Mail on this one, but it is clear that the level and scope of state support is migrating permanently towards a new leaner model. But our expectations are not going with them.
When it comes to retirement and social care in particular, endless pieces of research show a huge discrepancy between what we expect the state to provide, the quality of life that provision will give us, and how much we need to have saved ourselves to live the life we look forward to after working.
Most of us believe £100,000 in retirement savings should do it and more than a fifth of adults believe they only need up to £50,000 for their pension pot, totalling approximately £3,333 a year, according to the latest data from personal finance comparison site, finder.com, out this week.
That’s dramatically below the recommended pension pot required for a comfortable retirement.
As the current state pension sits at just £8,767.20 per year, the recommended pension pot is from £260,000 to £445,000, depending on whether you’ll still be renting or paying a mortgage in retirement.
If you want financial security these days, you’re going to have to pay for it.
Feel free to stamp your feet over generational inequality or the shortcomings of the welfare state all you like, but put as much cash aside as you can in the meantime or revise down your big retirement dreams.
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