Ever completed a financial MOT? Ever heard of one? According to some money management charities, many households are failing to do basic financial MOTs and could therefore be putting themselves in a difficult financial situation.
According to MoneyFacts, Age UK are calling for regular financial MOTs, often called “road checks” – for pensioners and people approaching retirement. This is because many people are reaching retirement age without any solid financial situation which would allow them to comfortably retire. Their survey showed that 20% of men and 40% of women have no private pension at all, and 50% of women have a private pension worth less than Pounds 22,000.
Tom Wright from Age UK said that, “We believe a series of financial MOTs at significant points throughout retirement, together with a robust state and private pensions system, is the real way to help people make ends meet and live comfortably. We hope the financial services industry, regulators and Government who worked with us during the Commission will now act on the blueprint we’ve laid out as a result of our discussions so that people in Britain can feel financially prepared for and confident about their later lives.”
But we think it’s not just older people that need to complete financial MOTs. The personal loan provider Wonga have made a point of showing they believe a certain amount of financial literacy is vital for a good credit score, healthy financial situation and a life less riddled with money worries. This starts from when you are young – earning money, for example, rather than just being for when you are older.
By being savvy about your savings, outgoings, incomings, and only taking out loans when you 1) know you really need one and 2) know that you can repay it in full, you can be in a much better financial position. Many Brits are taking out loans without really thinking of the consequences.
You should really question why you need the loan before you apply. Of course, credit really can help some people out in a tight spot. But the emphasis here is that you shouldn’t be relying on credit regularly. This lends itself well to your full financial MOT. Taking time out every year to look properly at your finances, means that you can be on top of your money and when it comes to retiring, you should be in a better position.
Sterling and Law suggest 5 questions you should be asking yourself during a financial MOT:
- Are you living within your means?
- Is your money working for you or against you?
- Are you putting any money aside for a rainy day?
- Do you have all the must-haves for your age group? (E.g. a mortgage? Savings? Pension? Assets?)
- What would the financial consequences be if you were made redundant?
A financial MOT can be conducted as often as you wish, and should take everything into account. Some good advice here is to be honest; don’t try to make cover ups. This is for you and no one else, so take the time to do it properly!