Focus on Contractor financial planning

With many household budgets now tighter and low interest rates making a dent in the return from savings, what can you do to ease current pressures and make the most of your contract income?

Cutting down on unnecessary spending

The first and most simple step is to cut back on your spending. Cut those empty expenses that gnaw away at your financial security and you'll be better placed to ride out the tougher economic climate.

One quick and easy way to save money is to make sure you have the best deal on your utilities. IN NZ we now have a choice of provider for some basic utilities like telcom and energy. 

Also Review expenses such as mobile phone bills and broadband packages to ensure that you are making the most of your current tariff. If you don't use a monthly allowance for text messages for example, then switch to a lower rate - a number of small savings can soon add up.

Clean up credit card debt

With banks keen to repair their balance sheets you will probably find that their margins on debt will have jumped in the last few years. If you're someone who doesn't clear their credit card balance in full every month, then shopping around for a better rate is advisable.

Even though base rates are at a 100 year low you wouldn't think so by looking at credit card and personal loan interest rates so try to pay off as much of this debt as possible and avoid using your credit card for day-to-day expenses unless you can afford to pay the balance each month.

Are you paying as little as possible for your mortgage?

As borrowing becomes trickier, going to a broker can make good sense and it's no surprise that enquiries to the UK's Independent Financial Advisers are up 50%. Whilst a broker can't magic great rates out of the air, the can help hunt out the best schemes for your circumstances.

The current market presents a very confusing picture, where tracking down the best deal takes time and a keen eye to check for small print and hidden charges. Those good rates that are around are being withdrawn with very little notice.

Although specialist contract based mortgage underwriting has been looked at by various lenders who were considering whether to drop it, thankfully we've been able to convince them that using your contract rate alone still has a place and that contractors represent a sound credit risk even with a slowdown in the wider economy.

Borrowers with mortgage schemes due to end in the next 4 to 5 months who have relatively small amounts of equity in their property could benefit from looking at options now, securing current deals ahead of any further tightening of lending criteria or greater falls in house values.

Explore the merits of flexible mortgages that allow over/underpayments and payment holidays to preempt potentially lower earnings or times between contracts and if your current mortgage rate comes to an end and we are unable to find you a sufficiently low rate due to the current market circumstances then we can look to extend the term temporarily to reduce monthly payments.

Get the most from your savings!

Unfortunately, savers have been one of the major victims of the credit crunch, with interest rates at crippling low levels. You will be lucky to get 3% on a High Street savings account now and this situation looks set to continue well into the new tax year.

If you can afford to leave your savings for a period of around five years or more then you could see significant growth in an equity and shares based ISA although there is a level of risk involved. Despite its vulnerability to any volatility in the market, the potential for growth is much higher than a cash ISA so you have to weigh up the risks depending on your individual circumstances.


Don't put all your investment eggs in one basket

Too many investors are solely focused on one asset class.

Diversification is the key to a solid investment strategy regardless of whether we're in times of stability or volatility, so keep a level head and make sure your investments are giving you the widest possible exposure to a variety of different world stock markets and that you have exposure to commercial property, bonds and also gilts.

You should try to ensure that whatever happens to one particular part of your portfolio, you will have other investments that will counter the effects and level out any volatility.

Drip feeding your investment, referred to as 'pound cost averaging' is often an effective way to reduce the risk as you spread it over a number of small deposits. This allows you to minimise the effect that volatility in the markets might have on your ISA and other investments as you are avoiding piling all of your money in on the same day.


Seek advice

When it comes to your finances, don't bury your head in the sand. It's all about being proactive rather than reactive and expert advisers can help you to make informed decisions to better your financial future and make the most of your contractor income.