Let us commence, with two spectacularly appropriate quotes in these unprecedented times, beginning with the elegance of T.S Eliot, “For last year’s words belong to last year’s language and next year’s words await another voice”; coupled with “An optimist stays up until midnight to see the New year in. A pessimist stays up to make sure the old year leaves” spoken by Columnist and Author Bill Vaughn.
There has probably never been a New year where we would toast goodbye and good riddance to the previous 12 months: wishing all too much, that words like ‘Pandemic’, ‘uncertainty’, ‘victims’ etc, could all be consigned to the past, never to return, and believe that 2021 will bring a host of positive expressions and declarations from which we can rebuild.
So if you did wait up and watch the seconds tick away of 2020, were you the optimist or the pessimist?
Resolutions come in all forms from the tiniest inclination of musings, through to massive changes; a slightest shift in mindset, or a complex blueprint of plans. And no doubt we start off with the intent to achieve a desired outcome; our finances possibly one of our greater focuses following 2020. As you review your financial ‘scorecard’, you can embrace and implement strategic ways that are sensible and worthwhile.
If you have not done so already, now is a good time, to determine overall what you are worth financially. This a key step to assessing financial goals, to see where mistakes may have been made, where gaps are and how these can be corrected and filled both short and longer term.
If you have debt, commit to paying down a portion of this during 2021. Credit cards can be the quicksand that catch us out, so make realistic plans to see how much can be paid off during the year. It may well pay to re-balance card options against the lowest interest rates, or consider a consolidation loan instead, which is usually at a lower interest rate.
Improving your credit score is of course essential for access to bigger loans and mortgages and remember there are companies that offer time limited or review limited options to allow you insight into your current score. Do bear in mind that sometimes the results can lag behind any activity you may have engaged in to improve it.
If nothing else, 2020 has shown how critical it is to possess an emergency fund. You may have been fortunate to have amassed additional savings as our freedoms were curtailed, or you could be in a position where previous savings have been sorely depleted. It’s a standard rule of thumb to acquire 3 – 6 months of living expenses should these be needed. After 2020 it could be argued this period of time should be extended, however find what works for you, whether an app that lets you round up your expenditure each week, to investing through your financial adviser, or finding the best easily accessible savings account.
If you’re employed, schemes within your workplace help to make retirement evaluation and forecasting an essential part of grasping your future finances. Always know your workplace pension worth; communication with your pension provider should be more conversational than investigative and you should receive access to regular updates. If you believe you have a lost pension, then you can make enquiries through a pension tracing service at gov.uk/find-lost-pension.
However, if you’re self-employed or a business owner, you won’t necessarily have the benefits of auto-enrolment (unless through previous employment). Whilst the here and now may appear to be priority, and if you have lost significant income due to Covid-19 this is probably true, commit to reviewing retirement savings at the earliest possible opportunity – it is so easy to let this slip by, from one year to the next.
Pension rules changed in 2015 regarding flexibility in accessing what you have accrued, be aware of tax conditions though, and it’s still worth considering annuities as a form of ‘insurance’ to try and guarantee reliable pay-outs.
Rebalancing your portfolio is as necessary as ever, some sectors will underperform and some will yield, and while the landscape has set some arduous and not unanticipated upsets, there are still healthy investments to be made. There are still climates to be gauged, and it’s possible to lock into those sectors who have flourished during 2020 with encouraging returns – do of course seek independent professional advice first.
Life insurance, disability allowances, funeral expenses, and other such categories that are wholly unpleasant to have to consider, need further weighing and balancing at such times. The prevailing importance is to know exactly what your life insurance covers so it represents a worthwhile investment of funds and is thoroughly understood rather than just filed away for a later date. If you have multiple policies, make sure there are no hidden catches, and that they will bring you the security that your loved ones will be cared for comfortably when the time comes.
As Michael Josephson, former law professor and attorney, who founded the Josephson Institutes of Ethics, quotes most encouragingly, “Approach the New Year with resolve to find the opportunities hidden in each new day”, and you can’t get more realistically optimistic than that.