There is no question that 2023 was a challenging year, and the cost of living crisis continues to pile on financial pressure.
The latest UK inflation figures caught many by surprise when it was announced that CPI rose to 4 per cent in December from 3.9 per cent in November – the first rise since the eye-watering rate of 10.4 per cent in February last year.
Against this backdrop, consumers have seen their spending power significantly reduced. Meanwhile, borrowers will suffer increased debt repayment costs brought on by high interest rates, with the base rate currently sitting at 5.25 per cent.
With high costs for households being driven by massive food inflation, record energy bills and growing rent prices, it is more difficult for people to save. As such, medium and long-term goals such as holidays, homes and retirement have taken a backseat.
For example, the number of UK first-time buyers in 2023 was the lowest in a decade, down a fifth compared to 2022, while a YouGov 2023 study found that more than a third (36 per cent) of people in Scotland stated that they could not afford a holiday.
Accordingly, the new year’s fresh beginning provides the perfect opportunity for families to assess their financial standing and devise plans that will set them and their finances up for success in 2024.
The importance of having long-term financial planning
Consumers may find formulating the next steps in their financial planning strategy overwhelming in the context of the cost of living crisis. However, this need not be the case. Breaking down the process into simple steps can alleviate the complexity.
From the start, it is important for savers to begin by reflecting on their current situation. While this may be a challenging step for some, it is crucial that they understand that planning should start with a clear understanding of their financial position.
A brief assessment of savings, investments, debt, income, and expenses provides a clearer perspective on the actions they will need to take.
Once they have assessed their current financial landscape, the focus should shift towards establishing clear and achievable objectives.
Whether aiming for a dream holiday, a new home, or a comfortable retirement, setting specific and measurable goals provides a roadmap for financial success.
To boost their savings, consumers should evaluate their spending and explore opportunities to reduce expenditure. Every little helps, and even small contributions can make a difference when saved consistently.
Making the most of savings
Now more than ever it is important to encourage consumers to seize the opportunity of high interest rates before they likely drop in the second half of this year by actively seeking out the best savings products and providers.
With more than 900 savings accounts now giving returns higher than inflation, now is the a moment to be proactive and navigate through the host of options, pinpointing those that best align with their financial goals for the year ahead.
