More people feeling the financial pinch

It’s that time of the year again when the great and good meet up at Davos for the World Economic Forum. The event is not without its critics especially when topics such as climate change and poverty are discussed by some of the richest and most powerful people on the planet, many of whom have travelled on private planes to attend the event.

The opening day of Davos now coincides with Oxfam’s annual global wealth check report. This is not a coincidence and in recent years the report has been drilled down into individual country reports. In the case of Ireland, a mere 1 per cent of the population owns a quarter of the country’s wealth says Oxfam’s research.

The changing economic landscape locally over the past 12 months is key to understanding how consumers’ financial wellbeing has been affected. The cost-of-living crisis has resulted in a deterioration in Irish consumers’ overall financial wellbeing as households grapple with the cost-of-living crisis that closely followed a global pandemic.

Echoing the Oxfam report, Bank of Ireland’s annual Financial Wellbeing Index recorded a dip in the national financial wellbeing score in 2020 vs 2021 figures. And the cost-of-living crisis is gender indiscriminate. Men and women have been equally affected, experiencing a decline in their financial wellbeing score.

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When faced with this uncertain financial future, individuals need to feel that they are in control and can manage their financial wellbeing

Ireland’s overall Financial Wellbeing score remains in the “managing” segment but slipping towards “stretched” with notable declines for the spend and save metrics.

For example, from a spending perspective, people who said they spent “little or much more than their income” has risen from 14 per cent in 2021 to 24 per cent in 2022. And when it comes to saving, 70 per cent of people say that they are “slightly or not confident” that they have enough saved for long-term goals versus 61 per cent in 2021.

If you are feeling the cost-of-living pinch, chances are you’re not alone. John Lowe of Money Doctor fame likes to leaven his financial advice with humour quoting Woody Allen who once said: “money is better than poverty if only for financial reasons.”

Lowe says there is never a better time to look at setting up a budget. “People who were comfortable a year ago are now starting to feel the pinch, but bills still need to be paid,” he says.

He says people should take out a blank piece of paper or open a spreadsheet on the laptop and look to plan their expenses.

“If you are spending more than you are earning, you have three choices,” he says. The first choice is to earn more which is really tough, especially for people in PAYE employment. Depending on your age and dependents this can be difficult if not impossible. For someone on a social payment this is not possible.

The Bank of Ireland Cost of Living hub has a range of content around general money management, including budgeting tools and calculators

For self-employed people there might not be enough hours in the day to increase income. The joy of being your own boss normally means you work all the hours anyway and it can be hard to add in more.

The second option is to cut costs. Obvious costs bandied about include not having takeaway avocado toast, bringing in lunch and not buying takeaway coffees. These are at the more lightweight end of the spectrum.

The third choice is to prioritise costs. This is more significant but is also why more than 300,000 Irish citizens opted to drop their health insurance over the past five years.

Lowe says budget and money management sounds more complicated than it sounds. It comes down to keeping track of all the money you receive, keeping track of all the money you spend or give away and making sure your money is somewhere safe where it can’t be stolen.

“But we need to pay out bills and sometimes there are difficult choices to be made.”

Supporting the financial wellbeing of customers, communities and colleagues is a top priority for Bank of Ireland. With soaring energy bills and food prices, people have difficult choices to make when it comes to managing their personal finances and household budgets. As the cost of living continues to rise, many are worried about making ends meet.

The Bank of Ireland Cost of Living hub has a range of content around general money management, including budgeting tools and calculators. For those who are struggling to meet loan, credit card or mortgage repayments, the hub also includes advice on steps to take.

To get supports to some of the most vulnerable in society, Bank of Ireland has donated €1 million to organisations supporting those most at risk from cost-of-living pressures. The donation will be targeted to a range of groups including children and families at risk, older people, those with disabilities, lone parents, international protection applicants, and low-income families.

“The rising cost of living is a real challenge for many people. As a large employer we have supported our colleagues with a one-off cost of living payment and have been doing what we can to support customers through a challenging winter. We have made a donation to support a range of groups working with some of the most vulnerable in our society, and appreciate the support of Community Foundation Ireland in helping get this to those who need it most as quickly as possible,” says Myles O’Grady, Bank of Ireland Group CEO.

When faced with this uncertain financial future, individuals need to feel that they are in control and can manage their financial wellbeing. Financially savvy consumers are better able to manage their financial affairs and improve their financial wellbeing which in turn makes for a financially healthy nation which has a positive impact on individuals, their families, businesses, communities and the wider economy.