We look at some of our readers' biggest financial worries and how to reduce the fear.
At lovemoney.com, we want to get as close to our users as we can. We want to know what you’re concerned about because then we can try to help.
One way to find out what you’re thinking is to run surveys. Since Christmas we’ve been asking what you think about your long-term financial future. We kicked off the survey with this question: What are your financial fears?
I was really intrigued to see what you’d say and we got a very clear answer. Many of you are fearful about your old age.
- 44% of respondents said they were scared they wouldn’t have enough money to enjoy their retirement.
And in second place?
- 23% of respondents were worried they wouldn’t have enough money to pay for long-term care when they were old and infirm.
Frankly, I’m worried too. And that’s even though I earn more than the average UK salary, have inherited money, and don’t have any children to hoover up a large chunk of my earnings.
The population is ageing and we face a future where there will be more pensioners and fewer workers supporting them. The government’s current provision for pensioners is already pretty stingy and I fear that’s only going to get worse.
Sadly, there are only no easy answers, but, if you’re still of working age, here are four things you can do to improve the outlook for your retirement:
- When you choose a job, don’t just focus on the salary and the working conditions. Take a close look at the company’s pension scheme (if it has one). The best way to have a good retirement is to work for an employer who offers generous pension provision.
- Save as much as you can for your retirement. If your employer runs a pension scheme where you can contribute, pay in as much as you can. If not, try to save by paying money into an ISA.
- Become as pension-savvy as you possibly can. The more you know, the more likely you’ll have a decent retirement. Become a pensions expert in five days is a good place to start.
- When you’ve become a bit more knowledgeable, draw up a financial plan for your retirement. Work out what your retirement goals are and how much money you’ll need to achieve those goals. An Independent Financial Adviser could help you do this.
Not just retirement
According to our survey, you’re not just worried about retirement. The question about financial fears was primarily a multiple choice question where we offered you a range of potential fears to choose from. But we also gave you the opportunity to highlight some fears that weren’t in the menu of choices.
I thought I’d take a look at a couple of these individual fears:
“I’m worried that my life savings will become worthless as they inflate away the national debt.”
To an extent, I share these worries about inflation. The Bank of England’s inflation target is 2%, yet the government’s favourite inflation measure – consumer price inflation – has stayed stubbornly above 3% for a year now. What’s more, the more accurate measure – retail price inflation – is at 4.7%.
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I also understand why some people believe that, deep down, the Bank of England and the government actually want inflation as it will reduce the size of the national debt. It’s been done before.
But, at the risk of sounding naive, I think policymakers have learned the lessons of the 1970s. They won’t let inflation get completely out of hand. And don’t forget, there are still some significant deflationary forces out there which will keep a lid on rising prices. In particular, I’m thinking of big banks’ poor balance sheets. If the banks are lending less, there will be less money around to drive up prices.
Yes, I can see retail price inflation rising a fair bit from here, but I’d be very surprised if it went over the 10% level.
Of course, 10% is too high and it will reduce the value of all our savings. The only answer is to keep a close watch on your money and make sure it’s always in a top-paying savings account.
“Worried I won’t have enough money to start a family.”
Several people said something similar. It’s terribly sad there are people out there who want to have kids but feel they can’t afford it.
I know what my Mum would say. She’d say, go on and have the baby now. Once you’ve had the baby, you’ll find a way through financially. That’s what millions of people have done throughout history.
Being a good son, I agree with my Mum! Financially, all you can do is pare your spending to the bone and try to boost your income as much as you can.
I haven’t got space to write about any more fears in this article, but I will return to this topic!
More: Four ways to save for retirement | Five top tips for pension late starters