As the new year rolls onwards, many might find themselves picking up the pieces of their last new year budgets. Charles Stanley’s chief analyst Rob Morgan shared seven ways investors, savers and consumers can get 2022 on the road to success.
Consumer spending, economic stability and inflation over the past year have produced worrying numbers but as the world gets to grips with what a post-pandemic world might look like it may be the perfect time for people to get their finances back on track.
Mr Stanley shared his seven methods for new year financial success.
Many new year resolutions fail because they are broad and vague, simply “saving money” or “earning more” is not a clear enough goal for individuals to actually work towards.
Fleshing out these goals, both short term and long term, can help one realise what it is that they actually want to achieve and potentially reveal ways they can do so.
Mr Stanley added: “Are you saving for a rainy day, to get on the property ladder, a holiday, or your retirement? Having an idea of what you would like to save for will spur you on to save more and set about reaching your goals.”
Watch out for the investment gap
The investment gap is essentially the difference in wealth between those that keep their savings in cash and those that invest it.
In recent years, as inflation continues to rage, cash savings are starting to seem more redundant as they lose value over time.
However, Mr Stanley noted that having cash on hand it still vital, as the pandemic showcased, in case of emergencies.
He added: “But for longer term goals of five years or more it’s worth considering investing. Interest rates are exceptionally low at the moment, and a long way short of rises in the cost of living.
“Over the long term having more of your wealth invested rather than in cash can help you preserve the spending power of that money and help you meet your goals.”
With any goal dedication, commitment and focus is key, and investing is no different.
Mr Stanley explained: “Ignoring short-term market ‘noise’ to keep focused on a long-term investment strategy can be hard. But short-term declines should not detract from the potential of riskier assets to help meet longer term goals. Markets are unpredictable and allowing emotions to drive investment decisions rarely serves investors well.
For those who already have their investment portfolio up and running, Mr Stanley advised that they re-examine their funds to ensure it’s still aimed towards investments that will meet their goals.
He added: “Another route is aiming to pick funds with a reasonable chance of long term outperformance. ‘Active’ funds try to beat their benchmarks, though there are no guarantees they will do so and they often come with higher charges than passive funds. Active managers need to justify their higher charges by being sufficiently differentiated from simple, low-cost trackers – usually by holding a significant amount in stocks that are different to the large ones in the index.”
Get help if needed
Finances are complicated, and beginners stand the chance of potentially making costly mistakes. However, there is assistance available to those who need it.
Mr Stanley advised consumers look to financial advisors for assistance: “Whether you have a specific question about your finances or looking for someone to help you create a holistic financial plan, a financial advisor can help you.”