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Contractor accountants need a financial contingency plan

Contractor accountants need a financial contingency plan

Contractor accountants and other professional freelancers must be prepared for financial changes, especially in these times of economic uncertainty.

The MD of the Debt Advice Foundation, David Rodger, said that everybody should have a Plan B, even if they believe their job is secure.

Rodger pointed out that redundancy might have a massive financial impact on a person’s household budget so having the foresight to plan ahead can lessen the chance of future difficulties.

This is simple to do, he says. Set yourself a realistic budget so that you do not overstretch your finances or spend large amounts on credit and keep a “rainy day” fund to tide you over if you have the misfortune to lose your job.

Contractor accountants working through umbrella companies might find that they are in and out of work due to the nature of freelancing. It is therefore vital for them to have a reserve cash fund in case work dries up for several weeks at a time.

The threat of more job cuts in 2011, coupled with the increase in VAT, could mean that more people fall into financial difficulties. The Money Advice Trust has already forecast that the number of people seeking advice on debt is going to reach a record high soon. Surprisingly, only around 16% of people who currently have money troubles seek advice.

However, consumers are showing signs of concern when it comes to debt, according to quarter four data from R3. 47% are worried about their credit card debt, 28% about their overdraft and 23% are concerned about meeting mortgage repayments.

Last week, the government launched a consultation into the regulation of consumer credit. It wants to transfer the responsibility from the OFT to a new authority; the consumer protection and markets authority. The government hopes this would provide more protection for consumers and remove regulatory burdens on businesses.

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Image: In the shadows by Tyla’75

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