Financial review: Nobody knows what's coming - so be prepared for the worst heading in here

MONEY worries are on the rise in Scotland, according to research marking Financial Planning Week, and with job cuts on the way it's a good time to review how your finances could withstand redundancy, a pay cut or an interest rate rise. Scott Mackintosh, director of Edinburgh Investment Consultants, shares his top tips on stress-testing your finances.

1 Basic budgeting

It is critical that you get to grips with what you bring in each month compared with what goes out of your bank account. Work out your net income (what's left after tax and national insurance is paid) and then complete a "fact find" on yourself (or with your adviser) which will detail all costs and expenditure. Be brutal and honest about what you spend - don't underestimate or talk it down. It is vital that you get a true picture of your income vs expenditure.

2 Save whatever you can

Any disposable income should be saved, regularly or as an ad-hoc payment. Use your annual 10,200 individual savings account (Isa) allowance (up to 5,100 in cash) to prevent the taxman eroding the returns you get. At the very least, utilise the cash Isa allowance of 5,100 as this offers a vehicle to build an emergency fund and has the potential for tax-free growth if you can avoid touching it. To maximise the tax benefits of an Isa you should leave your money in it for at least five years. If need be, Isas can be accessed anytime and without cost, offering tax efficient savings whilst having easy access.

3 Redress the balance

Get to grips with your cashflow quickly if you identify that your expenditure exceeds your monthly income. Burying your head in the sand and borrowing on high interest rates or relying on credit or charge cards can lead very quickly to your financial problems spiralling out of control.

Isolate the "must pay" items, such as mortgage, council tax and utility bills, from those which have more flexibility - such as food and drink, entertaining, clothes and so on - and, again, be brutal about what you can cut. Talk to your bank, financial adviser or your local Citizens Advice bureau - seek advice before you get in a mess.

4 Use it wisely

Any savings you have been enjoying due to a reduction in interest rates on mortgages should be used to reduce other debts, such as credit cards and loans, or to support overpayments into mortgage and reduce costs there over the longer term. Don't be tempted necessarily to see this as extra spending power for consumer goods. It may be worth speaking to a financial adviser to make sure you can best allocate any funds you have effectively and efficiently.

5 Pension is for life

Don't neglect your pension, or other essential long-term planning.

It may be tempting, if things feel tight, to focus only on the "now", but it is crucial that you keep preparing for the future.Good advice can help you optimise tax efficiency (including around inheritance tax) and build in flexibility for retirement from new plans available on the market. As so many individuals now frequently change jobs, it makes sense to seek advice and consider consolidation of your existing arrangements or start up ones you don't yet have...

6 Safety net

As a rule of thumb, the typical level of emergency funds should sit at around three months' net salary; however, closer to six months is recommended in terms of what you can access immediately, with anything additional being placed into Isas and other medium to longer term plans.

7 Household costs

Regularly review expenditure and see where costs can be reduced - potential areas for savings include house and car insurance, life insurance, personal protection insurance and energy bills. Numerous comparison websites are available which support the review of such costs and help make analysis and switching easier.

8 Plastic peril

Regularly look at different credit card providers and hold 0 per cent interest wherever possible on balances. Most importantly, don't just pay the minimum amount. You'll never clear your outstanding balances managing them this way and tempting though they might be, credit cards are one of the most expensive forms of borrowing.

9 Mortgage management

Regularly review your mortgage provider and ensure you are on the most suitable product for not only your current but your future needs and objectives.

Seek specialist advice in this area to help you compare like with like and navigate the small print.

10 Advice and guidance

Take financial advice for the longer term, bigger picture - not necessarily when problems arise, but to ensure you are prepared for any of life's eventualities by designing an appropriate financial plan to support you and your life.