Financial Planning

How to avoid running out of money

How to avoid running out of money

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.

Everything seems to be getting more expensive in 2022. The energy price cap stood at £1,277 in October 2021, yet it is forecast to hit £3,549 this October. Monthly rent and mortgages are also increasing as the Bank of England (BoE) raises its base rate to try and counter rising inflation. Even food at the supermarket is going up in price as the war in Ukraine pushes up the price for farmers. With the UK now facing the biggest drop in living standards since 1956, even wealthy households are looking for ways to increase their financial security and stability.

In this guide, our financial planning team offers some thoughts on how to avoid running out of money. These principles apply even in the “best” of economic times, but come into even sharper focus during challenging ones. We hope this is helpful to you. If you want to discuss your own financial plan with us, please contact our team for more information or to access personalised financial advice:

020 8366 4400 or


Maintain a sustainable asset-to-liability ratio

It sounds obvious, but failing to live within your means is guaranteed to lead to trouble. Whilst people know this in theory, however, it often fails to translate into practice – even for older people with more life experience. Going over budget when buying a house, for instance, can leave you with a mortgage that is difficult to afford even during “good” economic times. If, later, interest rates go up (and perhaps utility bills go up too, as they are doing in 2022), then this can put a lot of pressure on your finances. 

Younger people are in a strong position to make good choices about money early on. It is much easier for a first-time buyer to choose a smaller, more affordable property when getting onto the housing ladder than it is for a young family to downsize (which could involve a lot of “uprooting” and disruption). However, it is never too late to take another hard look at your financial plan and reassess whether your asset-to-liability ratio is healthy. 

Do you have a car on a monthly lease, for example? Perhaps you could move to a cheaper deal involving another model. Or, maybe it would be cheaper in the long term to buy a car outright (taking away the monthly payments).


“Stress test” your finances

Have you taken time to ask yourself what would happen to your finances if certain “worst case” scenarios transpired? Losing work would, naturally, lead to a loss of income that may threaten your financial stability. Here, it can help to have an emergency fund ready – e.g. 6 months’ worth of living costs – to help prevent you from resorting to credit as you seek new employment. 

In recent years, banks have been required to run an “affordability test” on your finances when applying for a mortgage. As an example, a borrower taking out a deal with a revert rate of 4% may need to prove they could still pay the mortgage on a rate of 7%. However, this is no longer required and so the onus is now more on borrowers to run these kinds of “stress tests” on their own. This will be even more important in 2022-23 if inflation continues to rise, as expected.

Other important scenarios to consider relate to financial protection. In particular, would you still have income streams if you could no longer work due to injury or ill health? Here, policies like income protection and critical illness cover can play an important role in your financial plan. A household with dependants (e.g. young children) should also consider life insurance, to provide a much-needed lump sum should a caregiver die prematurely.


Build a sustainable retirement

People who are still active in the workforce have the option to seek paid work if their current job falls through. However, retired individuals may not have the ability, nor inclination, to re-enter the workforce. To avoid this, you need a strong pension plan which provides a sustainable income throughout retirement – ensuring that you do not run out of money in old age.

Here, it can help to discuss your options with a financial planner. Those under the age of 66, for example, will likely benefit from building the best State Pension they can using their National Insurance (NI) contributions. The full new State Pension provides £185.15 per week in 2022-23 (assuming you have 35 “qualifying years” of NI contributions on your record), and the income rises each tax year by at least 2.5% – helping the income to keep pace with rising inflation.

Do not neglect your own pension savings, however. A workplace pension – and even a personal pension – can help build the nest egg required to meet your financial goals. A financial planner can examine your scheme(s) and help you consider areas where you could make savings (e.g. on platform fees) and improve performance in light of other options on the wider market. 

When your immediate finances are under greater pressure than before, it is easy to lose sight of your retirement plan. Many are tempted to stop their pension contributions altogether. Take care not to rush to a decision like this impulsively. Seek professional advice to ensure you maintain a wise balance between your current financial needs and goals, and those for the future.



Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:

020 8366 4400 or


Posted in Financial Planning