Very recently I was reminded of a best practice my Father taught me when I was a young adult venturing into the world of DIY. “Measure twice, cut once, boy” he would say to me. ‘Measure twice, cut once’, at the time, seemed a bit of a waste of time but as my DIY activities continued throughout my 20’s, 30’s and now into my 40’s I have learnt from experience it is always best to ‘measure twice, cut once’! I am sure many can relate to that.
This same best practice can be related to most aspects of financial planning.
None less than when dealing with your hard earned savings. In fact I would suggest measuring your savings against inflation every year.
Low interest rates can have a devastating effect on the long-term wealth of savers. With inflation currently running far in excess of base rates, even though the value of your capital may be safe, the buying power of your money is being eroded.
Therefore, you need to keep a close eye on the interest rates you are earning.
Nowhere is this more apparent than with cash Isas. According to Moneyfacts, at the start of 2013, the average cash Isa paid just 1.74%, compared to 2.55% 12 months earlier. With rates of 3% available, however, it suggests consumers are not shopping around.
It is good practice to retain some cash in an easy-access; readily available deposit account to make sure you can cover unforeseen emergencies and short-term needs. However, there is no reason to tie up all your cash holdings in this type of account. It is estimated that around three-fifths of cash Isa holders never withdraw money from their account. Interest rates can be significantly higher for those willing to sacrifice some flexibility.
So, what does the old proverb ‘measure twice, cut once’ really teach us?
‘Plan and prepare in a careful, thorough manner before taking action’
– Now that can apply to all financial planning.
For help and advice please do not hesitate to contact me at Hoskin Financial Planning.
Until next time Paul Hoskin.