Whether it's the interminable wait for the first payday of the year, a fit of seasonal resolve or simply the wild profligacy of Christmas, January often presents a moment of financial reckoning. Little surprise, then, that John Lowe's financial bible The Money Doctor has been a perennial publishing favourite around this time of year. But even he is aware that 2019 will present its own set of unique fiscal challenges for many.
“I tend to see a lot of couples who ask can they afford to have a child? It’s amazing now that people are thinking that. Others come in [for an evaluation] and say, ‘I can’t do without my three lattes a day. Over a year, that amounts to €2,000.
“I’ve met others who tell me that they have €200,000 income, and they’re just about surviving,” he adds. Asked how that might be even possible, he adds: “Well, take half of that in tax and you’re left with €100,000. That kind of income will get you a mortgage of about €700,000 and then you factor in the running of the house and the repayment of the mortgage, If you have three or four kids, and you want to send them to Blackrock College or Mount Anville, and then you feel you have to have a holiday home. Suddenly, you have huge financial commitments, you’re struggling and you have to reboot.”
Still, it’s not all doom and gloom: “I’m glad to say our credit card debt is going down the last few years,” he says. “People realise that if you’re just paying the minimum off your credit card, it’ll take you 20 years, whether your balance is €500 or €500,000.
Year for entrepreneurs
This year could also present a unique opportunity to those with an entrepreneurial bent: “The costs of starting and running a business are lower in real terms than they have been for over a decade,” Lowe explains. “Suppliers, desperate for sales, are offering great deals and if you are happy to buy second-hand equipment, there are amazing bargains to be had. Professional advisers are charging less and – crucially – there are plenty of skilled employees looking for work. 2019 could be a bumper year for everyone.”
That said, Lowe sees the same financial mistakes in clients time and time again: “I could talk to you on the Irish and pensions without stopping,” he smiles. “It’s an absolute disaster, and people don’t quite understand that a pension is the best investment you can put your money into. We’re in the ninth year of a boom market, and yet half the country doesn’t have a pension. By 2050, it won’t be feasible for the Government to be able to pay pensions [the way they do now]. In the last five years, the prioritisation of other expenses has stopped Irish families, in around 300,000 cases, from paying for health insurance, but it comes to a situation whether you have to put food on the table.”
Creating a budget at the beginning of the year is essential. Budgeting has nothing to do with self-denial. It is simply about making a plan
According to Lowe, the path to better fiscal conditions starts with one boring but necessary measure.
“Creating a budget at the beginning of the year is essential,” says Lowe. “Budgeting has nothing to do with self-denial. It is simply about making a plan for how you will spend your money over a specific period. Very simply, if your expenditure exceeds your income, you need to earn more, cut costs or prioritise certain things. If you’ve pared until you can pare no more, the only thing you can really do is look for a job that pays better.”
Switching providers
Taking an afternoon to avail of offers and switch service providers (electricity, gas, broadband, health insurance) with the use of a website such as switcher.ie or consumerhelp.ie often reaps significant financial dividends over time.
“Review all your insurance every year,” advises Lowe. “Have you got the cover you actually need? It is possible to make huge savings by reviewing your insurance on a regular basis. Do you realise if you have quit smoking over 12 months, you could be entitled to a 50-per-cent reduction in your life-cover premiums?
Don't fall prey to the three reasons we neglect our finances – apathy, ignorance or lack of time
“I think no matter what your level of income, we all want value,” Lowe observes. “I get my value, no matter how small it is – I have all the apps that give me discounts for various retailers, and it soon adds up. Certain apps, like The Money Doctor app, can show you where your discretionary money is going.
“If you have a financial problem, such as debt, then stop doing anything that might be making it worse. There are many options when it comes to getting help, from MABS [Money Advice Budgeting Service] to ISI [Insolvency Service of Ireland].”
Lowe offers the following simple yet fail-safe hacks to boost personal finances in the new year: “Put two hours in every month to sorting out your money issues,” he advises. “Ensure you have a rainy day fund – three-six months of annual income in an accessible and best interest-bearing account, and at best interest rates. Cut down your banking bills – avoid overdrafts, never have a cheque returned, keep your current account in credit and receive interest rather than pay it. Don’t leave your surplus cash in a current account or low-interest bearing deposit account. Don’t exceed your credit card limit, and remember to pay on time, never take cash on the card and be careful using the card in non-EU countries – it will cost you.
“And if you do face difficulty, don’t wait for your lender to call you in if you cannot honour the agreement – face full on and enter into an agreement. And don’t fall prey to the three reasons we neglect our finances – apathy, ignorance or lack of time.”
John Lowe's book, The Money Doctor (2019) edition, is out now via Gill Books
