Financial Planning

Five ways to help your finances add up this year

Lynn Bolin, Head of Communications, M&G Investments

If your New Year’s resolutions for 2022 includes trying to boost your finances, a wise idea may be to focus on just a few key steps to help improve your chances of success. At M&G Investments, we believe there are lots of investment opportunities out there to take advantage of in the current market conditions, and don’t want anyone to miss out on them. So here are five tips to get a fresh start on managing your finances this year.

Set goals

Your financial plan probably considers your goals already, but the start of a year is a great time to review whether these goals still resonate with you, and if you are on track to reach them. A lot of things can change in a year, like inflation, interest rates, asset prices or your family situation. 

You can change your financial goals as you please, but keeping a realistic, selective list of achievements you hope to reach can be an easier, more attainable approach, and prevent you from getting discouraged.

Using a budget is a tried-and-tested method of reaching financial goals. The trick is being consistent by sticking to that budget every month. A budget has many benefits beyond monitoring your monthly spending: it helps you resist overspending and to assess where you can cut costs, freeing up income to invest for the future instead.

Ignore the daily news and just invest

Due to the (mostly) bad news that dominates the airwaves every day, It can be easy to fall into the trap of believing that market conditions are never right for you to invest: the rand is too weak; share prices might fall; growth is too slow; etc…. The truth is, there are so many moving pieces to the investment environment that there is likely to always be at least one negative factor prevailing at any given time. But equally, that means there can also be many positives to take advantage of.  

Rather than being afraid, ignore the daily news and/or let the experts invest for you. A large part of having enough money means investing for the long term. Small, consistent contributions can really add up through the ups and downs of the market. So if you’ve fallen behind your plan or haven’t even started investing, let 2022 be your year to get back on top of investing for your future. You’ll need both shorter- and longer-term investments, which require different types of funds. 

Don’t get into more debt

When you already have debt, it’s easy to feel overpowered by it. A powerful move to make, however, is to avoid taking on any more debt – remove your credit card and store cards from your wallet or internet payment history; don’t take out any more loans or readvances and enforce a stricter policy on only spending money that you won’t have to pay back later. And lastly, don’t borrow funds to invest them in financial markets, as it’s a risky way to try to make money. All this might be easier said than done, but if you stick to only one resolution in 2022, make it this one: do all you can to stop incurring debt and pay off what you owe.

Don’t necessarily follow the herd

Through the Coronavirus pandemic conditions, many investors decided to invest in the “safest” available assets – cash and near-cash –  so that they wouldn’t lose money in equities and other “riskier” assets. But in reality, in the past two years (from December 2019 to 30 November 2021) riskier equities and bonds returned far more than cash, having recovered very quickly and sharply. It was those investors who went against the prevailing fear and stuck to their equity and bond investments who earned significantly more. And if they had opted to buy even more equities and bonds at cheap prices, like we did at M&G Investments, they could have earned even more and would be set up to benefit from further above-market returns over the next three to five years, in our view.  So in 2022 don’t simply follow the herd, do your homework and choose the best investment option for you. 

Get some good advice

Seeking good advice about your finances, even if you only get assistance with putting a plan together, can be an invaluable step towards keeping your resolutions in place. Working with a qualified financial adviser tailors the process of investing to your unique circumstances, including the optimal way to construct your investment portfolio. An adviser also helps you to handle market noise and emotions as you go, through their support and guidance.

Make the most of the year ahead and the time you have to invest, and make it a habit to keep your finances in good shape this year and always.

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