Comprehensive Spending Review…It might be personal!

Is it me, or is the whole of the UK waiting for the sword of the Governments Comprehensive Spending Review to fall and make the proposed cuts that so many print pages have been exhausted over in the last few months. Whichever way the cuts are made, I am sure that it is not going to be a pretty sight on the 20th October 2010. Let’s see what George Osborne has to say.

In a simplistic way, any business manager or owner will tell you that there are only two real ways of managing a business. One is to keep costs low and income high. Sprinkle some cash flow in between and away you go. Balancing the budget of the UK is likely to be very much more complicated, throwing in things such as additional bouts of quantitative easing and keeping our sterling currency sound, however, the principals are the still similar.

This is all very interesting to economists, but what does it mean to the person on the Omnibus? Clearly cuts are likely to lead to reduced spending and this may lead to cost cutting with the reduction of manpower. Redundancy, unemployment, severance packages and employment are likely to be key words in the winter and not for the right reasons. I am sure the employment solicitors/lawyers will be busy! All gloomy reading, but what can the person on the Omnibus do to help ensure that he or she is financially ready if this is to be last trip on the bus for a while?

Returning to the analogy of how a business works, they can entertain the same logic of looking at reducing or cutting outgoings and increasing income. I have expanded on this below with a few examples, although this list is not exhaustive:

Budgeting

Irrespective of your circumstances, it is always worthwhile looking at your household budget to ensure that you are extracting value from your outgoings. It’s worth doing this regularly and don’t wait for a redundancy to arrive to find out that you can’t afford to make ends meet.

Your household will need to ‘buy in’ to the process, and keep your debts under control and make sure you maintain an emergency deposit fund of 3-6 months income available to meet any short term liabilities as they arise. You might want to use a Cash ISA (ISA) arrangement to achieve this, or, as an alternative, Premium Bonds, which offer tax free winnings. If your spouse has a lower income tax band than you then you might want to consider having any taxable savings in their name.

Income

If you are fortunate enough to have a few investments behind you then check if these can provide you with income if needed. You might want to leave any pension benefits untouched until you retire, but seek independent financial advice (IFA) if you have this potential fallback position. Approximately half way through the tax year 2010/2011, as October is, might be a good time to review your ISA’s and Capital Gains Tax position (CGT) if you have one and make any necessary changes to meet you current circumstances and any future situations.

Summary

Whatever happens, as we move into these times of austerity, make sure that you keep your financial planning up to date and ready to meet your needs.

This should not be seen as individual advice and you should speak to your independent financial adviser about your individual circumstances and needs.

To expand on the issues of business planning for SME’s and the fundamentals, I have been able to outline the full process in my new book, Sign Here, Here and Here!…Journey of a Financial Adviser.

Further details of this are available at our websites, www.signherehereandhere.co.uk or www.churchouse.com

Keith Churchouse, Chartered Financial Planner

Director of Churchouse Financial Planning Limited, High Street, Guildford, Surrey

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority