How to manage your money during challenging times

There is absolutely no doubt, that with rising energy prices, food costs, and interest rates going up impacting the cost of our lending, we are all feeling the pinch.

Even if you are carefree with your money!

I hear you, you don’t believe in checking your bank account, you spend what you want, when you want, on a lifestyle that feels great. That’s why you went into business, for financial freedom right?

However, even for the carefree ‘financially free’ business owners out there, the ones that don’t like to budget (I mean who does), at the end of the month, even you are now wondering where your money has gone.

Nobody can hide from the impact of high inflation.

Inflation, the measure of how much the goods and services we buy in the UK rise over time as measured by the Consumer Price Index, is at extremely high levels. Currently, as of April 2022, the annual CPI rate was 9%*. The current high inflation has been driven by a number of factors. One being that those who had lots of savings after the pandemic is now flooding the economy by spending, naturally causing prices to rise, and not forgetting the impact of the war in Ukraine on oil and gas prices.

This happened in the 1970s and it lead to an ‘Inflation, wage-price spiral and recession’ as stated by Mike Bell Global Market Strategist at J.P. Morgan Asset Management.**

As a business owner, the challenge to meet inflationary demands and potential wage-price increases ultimately means you need to be smart with what you:

  1. Charge for your services and;

  2. How you manage the money you make.

Even if you feel that right now, you need to focus on revenue generation, as this is what you are conditioned to do, and you don’t have enough to be investing if the business suffers, you need to stop burying your head in the sand if you are serious about being wealthy and achieving financial freedom.

Taking the necessary action to manage your money is going to be vital and it is what will set you apart.

How to manage your money during challenging times

It is natural to fear investing when you fear that a recession could be on the horizon.

Here are three simple ways you can navigate these challenging times:

  1. Ensure that you have a personal and business emergency fund. This will give you financial security to feel that you can ride out the ups and downs and give you breathing space. You can hold 3 – 6 months of essential expenditure in a segregated bank account. For personal emergency funds, I am a fan of Premium Bonds and for businesses, if you bank with Starling you can create a space for this without evening needing to open a new bank account.

  2. Work out what you need to be charging to make a profit, that means you can maintain your own standard of living. If you set prices based on what your time and energy are worth, and the service you provide but tie it back to what it is that you need, you can ensure that you are always charging your clients enough. As business owners, we give away way too much of our time for free, again we are conditioned to believe we do what we do for the love of it and we want to help everyone. But who is looking out for you? Only you can do that.

  3. Continue to invest. Invest into your pensions and investments, and if you aren’t yet investing, you still need to start. But invest in a well-diversified portfolio of global investments.

As explained by Matthew Tylor in Investment Times issue 152 ‘Investing in the stock market has historically been the best long-term option to help avoid inflation eroding the value of your money.’

As explained by Matthew, different types of investments do better than others during inflationary markets, such as value stocks. A value stock refers to shares of a company that appears to trade at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors. Whereas growth stocks are usually expected to suffer. Bonds, which are loans to companies and usually carry lower risk than shares, can suffer during inflation due to rising interest rates which means their fixed returns are of less value. And commodities, such as gold, coffee, and copper, tend to do okay.

The moral of the story is to invest broadly and delegate to an expert. If you invest via a fund that gives you global diversity, you are likely to navigate the storm. However, holding on to your money in cash won’t necessarily protect you from high inflation.

You need a wealth review now

If this resonates with you, arrange a complimentary wealth review HERE. I have many ways of working with you, whether 1-2-1 or in a group environment. I am passionate about helping business owners navigate these challenging times and not losing out by not taking any action at all.

Time is your biggest asset, don’t waste it and be the one in 10 years' time saying ‘I wish I had…..’.

Emma Wright, a Chartered Financial Planner and Certified 'Vouched For' top-rated Financial Coach.

This isn’t financial advice, it is education. I do not know your personal circumstances and I do not know what will happen moving forward.


**source : Investment Times issue 152

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