Why financial future-proofing is now a top priority
According to new figures, late millennials belong to one of the most financially fragile groups in the UK. Mike Perry, CEO at PG Mutual, discusses the challenges and choices for this financially strapped generation.
New research from LV suggests that adults aged between 25 and 34 are among the least financially resilient in the UK. 34% of people within this age bracket would only be able to survive for a month or less if they lost their income. The picture is more bleak for those late millennials who live in rented accommodation, with only 45% of those interviewed able to survive loss of income - that’s almost double the national average.
Mirroring the findings of this research are new figures released by UK debt charity StepChange, who revealed a 10% increase in the number of people under 40 contacting looking for debt advice.
The overheads overload
The Money Advice Service recommends having enough savings to cover three months’ worth of overheads, but for late millennials stifled by student loan debt that’s a luxury they can ill afford.
Worryingly, two-thirds don’t have enough in savings, and half aren’t confident in their ability to handle a personal financial crisis. Whilst student loan debt is the primary cause of the savings struggle, credit card debt and loan repayments are also obstacles to be overcome.
If you have debt worries, you are by no means alone. 8.3 million people in the UK are living with problem debt. And in September 2017 the Financial Conduct Authority urged action from the government to help tackle the debts being racked up by vulnerable consumers.
Unsecured consumer credit – such as credit cards, bank loans and overdrafts - has increased by 19% in the last five years and is growing at 10% per year, six times faster than the economy’s growth. Meanwhile council tax arrears have increased by 12% in the last five years.
StepChange’s latest data tallies with this - more than two in five of their clients are behind on household bills. In short, UK consumers are struggling to meet their overheads and rely on credit to make ends meet.
Financial future proofing
What can millennials can do to improve their financial forecast?
Set savings goals
Studies show that those who set specific financial goals save more than those who don't. Whilst it’s not always easy, creating a balanced plan will help you manage your cashflow. Readjusting spending priorities is a key part of this process – determine what you absolutely need to spend money on (paying your credit card bill, for example) and what you definitely don’t (the £5 morning caffeine hit). Shifting your mindset might be challenging, but it’s the quickest way to that all-important “rainy day” fund.
Plan for loss of income
Income protection cover may not be something you have considered before, but could you cope financially if you were temporarily unable to work, because of injury or ill health? The government’s statutory sick pay is just £89.35** per week. It costs less than you think to give yourself a crucial financial safety net and should be a key part of any financial planning strategy.
Are you ready to start financial planning?
About the author
Mike has over 25 years’ experience in financial services, having worked with large corporate organisations as well as being a successful consultant within the mutual sector. Mike was delighted to be nominated for the Hertfordshire Business Awards’ ‘Business Person of the Year’ and ‘Judges’ Award’ in 2013. Mike is a member of the Board of the Association of Financial Mutuals.
** DWP, April 2017 ^ The amount you can cover is limited to 70% of your gross income or £1,200 a week (whichever is lower). For full Ts&Cs, visit www.pgmutual.co.uk.
This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.