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Financial New Year’s resolutions for 2022

2021 was, it could be said, a year of ups and downs. Bookended by two variants of Covid-19, the year held an extended period of relative normality, with the virus under control in relative terms and people finally getting much-needed holidays and social events. 

We’re looking to 2022 with cautious optimism. We can’t control the progression of the pandemic or the economic repercussion of it but, as the world learns to live with an everchanging landscape, we can get a handle on our own personal finances. 

So, with January ordinarily being a time for organisation, rejuvenation and groundwork, let’s make financial peace of mind our top priority. We’ve put together a list of a few key resolutions that can help you get closer to your financial goals in 2022.

Before we get started, let’s say that the biggest financial decision you can make is to start investing. If you don’t already hold an investment portfolio and are interesting in what one could do for your long term finances, click the link below to get started.

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Focus on beating inflation

At its core, investing for the long term is all about beating inflation. With cash savings growing slowly, people invest their money in the hope that it will grow faster than inflation to retain and appreciate its value. Rarely has this been more relevant than in 2022. 

According to the Office for National Statistics, inflation recently neared 5% in the UK, hitting 4.6% in the 12 months up to November 2021. This is the highest it’s been in over a decade and one of the highest points since the 1980s. It seems that, contrary to expectations earlier in 2021, inflation may take some time to settle in the UK, owing to a number of different factors. 

For investors, the goal is still to beat inflation. The rise in inflation figures just makes the argument more compelling. Any money sitting dormant in cash or very low-interest accounts is often eroded slowly at the best of times. In times of high inflation, it loses its value relatively quickly. In 2022, ensure that your wealth is protected from inflation and that your existing investments are up to scratch (more on that later). 

Keep looking to the long term

If 2021 was a reminder of anything, it’s that we’re living in deeply uncertain times. We began the year battling the Delta variant and ended it contesting the Omicron variant. In the summer, it seemed to many that the virus was, temporarily at least, under control. 

The turn towards the end of the year – coupled with things like higher inflation expectations – teach us that it’s difficult to plan for the short term at the moment. Ultimately, investors need to maintain a long-term view and see the current uncertainty as part of a much wider financial plan. 

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We’ve written a few times about how much it pays to stay invested, even through difficult times. The data is fairly clear – those that remain invested have a better chance of seeing their money grow than those that either exit and return or disinvest completely. If 2022 is to bring with it any further disruption and uncertainty, remember to stick to your guns.  

Invest regularly

This is a simple but important point and it’s one that’s only become more necessary over the last couple of years. In times of fluctuating markets and uncertain conditions, investing little and often can be an effective way to ride any peaks and troughs. 

None of us have a crystal ball; predicting what markets will do is difficult, so drip-feeding your investments into the markets over an extended period of time can help smooth out the impact of any movements. We call this ‘pound cost averaging’ and, back in 2020, we wrote about how effective it can be during times of volatility

It is ultimately a sound investment strategy under any circumstances, but with 2022 potentially holding more periods of uncertainty, we strongly recommend setting up a regular direct debit or investing any excess cash at the end of the month. No one wants to buy at the top of the market, but it’s near impossible to predict where the ‘bottom’ will be during any dip – the only decision you need to make when using pound cost averaging is how regularly and how much you top up. 

Review your investments

If we’re honest, this one belongs on every New Year’s resolutions list. It’s a part of financial housekeeping that so often gets forgotten about: regularly reviewing your existing investments to ensure they’re still fit for purpose. 

We touched on this earlier, but circumstances change. Changes in inflationary pressures, global economics, your personal financial goals or your financial situation itself – these are all factors to consider. No investment strategy is infallible and it’s unlikely your investments will suit you now as well as they did a decade ago. 

Take the time in 2022 to review your existing investments and ensure that your money couldn’t be put to better use elsewhere. You might also choose to bring your investments together in one place for a clearer overview of performance and the potential for lower fees. 

At Moneyfarm, for example, the fees our investors pay go down the more they invest or make with us. This means that, with one simple transfer, a Moneyfarm investor could lower the overall fees they pay on their investment portfolio significantly. It goes without saying that, the sooner you can consolidate your investments, the better.

Don’t lose track of your investments in 2022, or sacrifice the potential for better performance and a more supportive wealth manager. There have never been so many options out there for ISAs, SIPPs and GIAs – make 2022 the year you start regularly reviewing your investments. 

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