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The 2020/21 tax year hasn’t even finished yet, but it’s the perfect time to start thinking about the next 12 months. While this time of the year is often associated with using up allowances before the deadline, getting a head start on 2021/22 can be just as beneficial.

The new tax year starts on April 6, with the weeks before the deadline often associated with making financial decisions to use up allowances. From moving money into an ISA, to investing through Venture Capital Trusts, using allowances can help reduce tax liability and make your money go further. In some cases, leaving decisions until the last minute can make sense, but there are reasons to set out a plan at the start of a new tax year. Here are six of the most important:

1. Avoid last-minute decisions

Leaving your financial decisions until the last minute can mean you need to rush, which could lead to mistakes being made or not fully exploring all your options as you simply don’t have the time.

In some cases, how you use allowances will have a significant impact on your finances. If you decided to use your pension Annual Allowance, for instance, you would not be able to withdraw this money until you reached pension age, which could be decades away. It’s important you consider how making use of allowances will affect your short- and long-term plans. Thinking about your plan for 2021/22 now means you have plenty of time to consider your options.

2. No worries about delays

Sometimes things outside of your control can have an impact on plans. Delays with providers and other parties are one example. If you decide to invest through an ISA with just a few days to go until the new tax year, there is a risk that you’ll end up missing the deadline. In some cases, that could mean paying more tax than you need to.

Deciding how you’ll use allowances over the next 12 months means you can minimise the impact of delays or other factors that you can’t control.

3. Spread your contributions across the year

If you plan to put a significant sum of money away, whether in an ISA, pension, or an investment portfolio, spreading out contributions across the full year can make it more manageable.

The ISA annual allowance, for example, is £20,000. If you want to make full use of this, adding around £1,650 per month from your income or other assets can mean it becomes part of your regular outgoings rather than a lump sum you need to find at the end of the tax year.

The same is true for pension contributions. It’s also worth noting that your employer may match or increase their contributions in line with your own when it’s coming straight from your income, but are unlikely to do so if you make a one-off contribution.

4. Benefit from interest and the compounding effect

Not only can spreading out contributions make managing your finances easier, it can also be financially beneficial. If you’re using a cash account, such as a Cash ISA, you’ll receive interest on your contributions. Depositing money sooner in the tax year, whether as regular contributions or a lump sum, means you have more time to benefit from interest. The compounding effect means the longer your money is held in an account, the greater the interest it will deliver over time.

Although interest rates are low, over time the process can deliver sizeable benefits, especially if you’re making full use of allowances.

5. Drip feeding investments could make sense for your financial plan

Much like a cash account, spreading investments across the tax year or adding a lump sum at the beginning can mean you have longer to benefit from potential returns and the compounding effect. However, with investing, spreading your contributions throughout the year can also provide some protection from market volatility.

Investing regularly with smaller amounts means you’ll buy stocks and shares at different points in the market cycle. Timing the market is impossible to do consistently, so drip-feeding investments mean you’ll buy at high and low points, which can balance out over time.

6. Take the opportunity to set goals

Finally, a new tax year provides a good opportunity to review what you want to achieve in the next 12 months and beyond. It can help ensure your financial plan reflects your wider goals and will help you reach them.

Please contact us to discuss your financial plan and the steps you should be taking in the 2021/22 tax year.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A year after lockdowns around the world began, Covid-19 continues to affect economies and investment markets. While the volatility experienced almost 12 months ago may have calmed, uncertainty remains and it’s important for investors to focus on their long-term plan.

In February, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), called on leaders of the G20 to deliver strong policies to support the global economic recovery. She set out three points to achieve this:

Speed up vaccinations
Provide more support to households and businesses
Provide additional support for the poorest countries.

With millions now vaccinated, there is light at the end of the tunnel. However, Covid-19 continues to present risks and there are concerns of new waves emerging when restrictions ease.

UK

Official figures from the Office for National Statistics show UK GDP suffered its worst annual slip on record, falling 9.9% in 2020. However, we avoided a double-dip recession following growth of 1% in the final quarter. After introducing a third national lockdown at the end of 2020, it’s uncertain if the growth will continue into 2021.

Highlighting the challenging economic circumstances faced by the UK is a recent Bank of England announcement. The central bank opted to keep interest rates where they are, at a historic low of 0.1%, but said banks should prepare. Negative rates aren’t guaranteed but consideration suggests the bank is preparing further hardship. It’s a move that would have a significant impact on savers.

Another key indicator of the economy is unemployment figures. Official statistics show the UK jobless rate was 5.1% in the final three months of 2020. This compares to 3.8% at the end of 2019 and represents a five-year high. Crucially, the furlough scheme is providing some cushioning. Provisional HMRC estimates show there were 4.7 million jobs furloughed at the end of January.

Despite supermarkets being among the “winners” of lockdown, Asda has announced a major shake-up to operations that will put thousands of back-office jobs at risk in a further blow to the unemployment figures.

There are some positive signs for the retail sector, however. According to figures from data company Springboard, footfall is rising. In the last week of February, the company reported a 10.5% increase in high street footfall, as well as a 4.5% and 1.2% increase in shopping centres and retails parks, respectively. The reopening of non-essential shops is still several weeks away but the increase suggests pent-up demand that could deliver a much-needed boost to the sector.

The pandemic has overshadowed Brexit, but two months after the UK left the EU, companies are reporting trade challenges. A report from the Chartered Institute of Procurement and Supply found two in three supply chain managers are experiencing delays of at least two or three days. This compares to 38% that said the same in January. It could signal that businesses will face further obstacles as markets and businesses reopen.

Europe

Statistics from Eurostat suggest the eurozone could be on track for a double-dip recession. In the final quarter of 2020, the economy shrank by 0.7%, adding to the 6.8% decrease for the whole of 2020. The dip follows many governments introducing new Covid-19 restrictions towards the end of the year.

Despite this, confidence is rising in some parts of the economic area. German business confidence beat expectations, rising to 92.4 in an index run by the Ifo Institute, a few points higher than the 90.5 forecast. The index also showed renewed confidence in the constriction, retail, and other service sectors. As the largest economy in the eurozone, this is a welcomed sign.

US

With Joe Biden’s inauguration taking place on 20 January 2021, February was his first full month in office, and it was a month of mixed signals.

The Chair of the Federal Reserve warned the US economic recovery was uneven and “far from complete”. Echoing this, the University of Michigan’s monthly consumer sentiment hit a six-month low. The results found future economic prospects are a concern for the general public. Despite this, there are positive signs. Retail sales, for example, jumped 5.3%, far stronger than the 1.1% expected, according to the Commerce Department.

There are also signs that the travel industry is picking up, although Boeing has faced another blow. The company has already endured the worst period in its history after its failings were found to be the cause of two fatal crashes, leading to its bestselling plane being grounded, which was then followed by the pandemic. Now, further questions are being asked about the safety of some of its 777 engines, leading to additional bans and stock prices falling.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

On Wednesday 3 March, Rishi Sunak delivered his second Budget as chancellor. The Budget outlines the state of the economy and the government’s spending plans.

The World Health Organization declared Covid-19 a pandemic on 11 March 2020, the same date as the 2020 Budget. Since then, the pandemic has led to lockdowns, restrictions, and an enormous rise in government spending.

The Office for Budget Responsibility (OBR) estimates borrowing for the current tax year will be £394 billion, the highest figure seen outside of wartime. So, it’s no surprise that Covid-19 continues to influence Sunak’s decisions.

The chancellor noted the economy has been damaged, with GDP shrinking by 10% in 2020, and that the road to recovery would be a long one. However, he added: “We will continue doing whatever it takes to support the British people and businesses through this moment of crisis.”

As usual, the Budget began with an overview of the economy.

The economic outlook

The OBR expects the economy to grow faster than previously forecast. The economy is now forecast to grow by 4% in the coming fiscal year, and then by 7.3% in 2022.

However, Sunak noted that the pandemic is still inflicting profound damage on the economy. The OBR predicts that, in five years, the economy will still be 3% smaller than it would have been otherwise.

The improved outlook also means peak unemployment is expected to fall. It’s now expected to reach 6.5%, compared to the initial forecast of 11%.

Covid-19 support measures

As expected, Covid-19 support has been extended to cover the spring and summer months.

The Coronavirus Job Retention Scheme, often known as the “furlough scheme”, will now run until the end of September. It will continue to provide 80% of wages (up to £2,500 per month) to workers unable to work due to the pandemic. From July, employers will need to pay a proportion of their wages.

Self-employment grants will also continue, with two further instalments over the coming months. The scheme has been extended to include the newly self-employed who missed out on previous grants and have now filed a tax return.

The chancellor said total Covid-19 support measures are now worth more than £400 billion.

Personal finance

The Personal Allowance – the threshold before you need to pay Income Tax – will increase from £12,500 to £12,570 as planned in the 2021/22 tax year. The threshold for higher-rate taxpayers will also rise from £50,000 to £50,270 in 2021/22.

However, both these thresholds will then be frozen until 2026. So, while you may not face an immediate tax rise, the freeze will affect income in real terms over the next few years.

The chancellor also announced that several other allowances will freeze, rather than rising in line with inflation:

The pension Lifetime Allowance (£1,073,100)
The Capital Gains Tax allowance (£12,300)
The Inheritance Tax nil-rate band (£325,000) and residence nil-rate band (£175,000)

Again, these freezes could affect personal finances in the long term.

Business

The headline announcement for businesses is the rise in Corporation Tax.

From April 2023, Corporation Tax, paid on company profits, will rise from 19% to 25%. However, small businesses with profits of less than £50,000 will continue to pay the current 19% rate and there will be a taper.

Only businesses with profits of more than £250,000, around 10% of firms, will pay Corporation Tax at 25%.

However, a new “Super Deduction” will allow companies to reduce their tax bill when they invest.

From 1 April 2021 until 31 March 2023, businesses can reduce their tax bill by 130% of the cost of investment in a bid to encourage firms to invest for growth. It’s a move that hasn’t been tried before, but the OBR predicts it could boost investment by 10%.

Other important announcements include:

Restart grants to help businesses reopen as lockdown restrictions lift. Retail firms can apply for up to £6,000 per premises, while hospitality businesses can receive up to £18,000.
Recovery loans will be available to provide businesses with a capital injection. The scheme will offer loans from £25,000 to £10 million until the end of the year, with the government guaranteeing 80% to encourage lenders.
The business rate holiday for retail, leisure and hospitality firms has been extended for a further three months until the end of June. There will then be a six-month period where rates will be two-thirds of the normal charge.
The reduced VAT rate of 5% for the hospitality industry will remain in place until the end of September. There will then be an interim 12.5% VAT rate until April 2021.

Businesses can also take advantage of the government’s drive to encourage apprenticeships and traineeships. Incentive payments for firms hiring apprentices will double to £3,000. Sunak also revealed he is launching a programme to help firms develop digital skills.

Housing

The chancellor announced two key measures for the property sector.

First, the Stamp Duty holiday will be extended by six months. Until the end of June, homebuyers purchasing a property worth up to £500,000 will not have to pay Stamp Duty. The threshold will then fall to £250,000 until the end of September. From October, the threshold will be £125,000.

Second, the government will provide mortgage guarantees to lenders offering 95% mortgages. The move aims to support first-time buyers with small deposits. These mortgage products will be available from April.

Culture

Cultural venues have been significantly affected by Covid-19. The Budget revealed a new £300 million “Culture Recovery Fund” to support arts, culture, and heritage industries.

In addition to this, a £150 million fund has been set up to help communities take ownership of pubs, theatres, and sports clubs that are at risk of closure.

Fuel and alcohol duty

Despite plans to increase fuel and alcohol duty, both have been frozen. The freeze means fuel duty will not rise for the 11th year in a row, while alcohol duty has not increased for two.

Infrastructure

A new “Infrastructure Bank” will launch this spring, with around £12 billion in initial funding and will be located in Leeds. It will invest in both public and private sector green projects across the UK.

It’s expected the bank will support at least £40 billion of total investment in infrastructure.

Questions?

Please get in touch if you have any questions about what the Budget means for you or your financial plans.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A year ago, Rishi Sunak delivered his first Budget just as the pandemic began to take hold. While his £30 billion package sounded significant, it’s a sum that has paled into insignificance over the last 12 months as the chancellor has spent £280 billion shoring up the UK economy.

As the chancellor acknowledged in his speech: “The damage coronavirus has done to our economy has been acute”.

So, who are the winners and losers of the 2021 Budget?

Winners

Retail, leisure, and hospitality businesses

It’s been a tough year for many sectors, and retail, leisure, and hospitality businesses have been particularly hard hit.

The chancellor announced £5 billion in government grants to businesses in these sectors. Non-essential retail businesses will receive grants of up to £6,000 per premises, while hospitality and leisure businesses will receive grants of up to £18,000.

Sunak also confirmed an extension to the temporary 100% business rates relief for hospitality, retail, and leisure until the end of June. He will then discount business rates by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

The chancellor also extended the temporary VAT reduction in these sectors from 20% to 5% until 30 September. There will then be an interim 12.5% VAT rate until April 2021.

Alcohol duties were frozen for the second year in a row.

Businesses with staff on furlough

In a pre-Budget statement, Sunak summed up his Budget: “We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.”

Sunak most clearly demonstrated this commitment by announcing the government will extend the furlough scheme until the end of September 2021 – longer than businesses expected.

The government will cover the wages for workers who have been put on leave due to the pandemic (up to a maximum of £2,500 a month) at the following rates:

80% until the end of June 2021
70% in July 2021
60% in August and September 2021

Employers will have to pay the difference to 80% – so 10% of wages in July and 20% in August and September.

This is a major commitment by the Treasury as the scheme costs around £5 billion each month.

Self-employed workers (including the recently self-employed)

The fourth Self-Employed Income Support Scheme (SEISS) grant for February, March, and April 2021 will cover 80% of monthly profits up to a maximum of £2,500 a month.

People who became self-employed in the 2019/20 tax year, and have filed a 2019/20 tax return, will also be eligible for the fourth and fifth grants, helping an additional 600,000 workers.

A fifth grant, covering May, June and July 2021 will also be available.

For self-employed workers whose turnover has fallen by 30% or more, the grant will continue to pay 80% of monthly profits up to £2,500 a month.
For self-employed workers whose turnover has fallen by less than 30%, the grant will pay 30% of monthly profits up to £2,500 a month.

Homebuyers

As expected, the chancellor announced a three-month extension to the Stamp Duty holiday. This tax break will now finish at the end of June, at a cost of about £1 billion to the Exchequer.

The Stamp Duty nil-rate band will then be increased from £125,000 to £250,000 until the end of September 2021.

Sunak also relaunched the Help-to-Buy scheme to bring back 95% mortgages, which are mainly used by first-time buyers and have been in short supply due to the pandemic.

Here, the Treasury will offer lenders a guarantee covering 95% of property value, up to £600,000. This will encourage banks and building societies to lend to first-time buyers and current homeowners.

Sunak said: “By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

Lenders including HSBC, Lloyds, and Halifax will offer these deals from April 2021 onwards.

People claiming Universal Credit

The government have extended the temporary £20 per week uplift in Universal Credit benefits until the end of September 2021. This will be a one-off payment of £500.

The National Living Wage will rise to £8.91 from April 2021.

Businesses looking to invest

After announcing a hike in business tax rates (see below), the chancellor announced what he called the “biggest business tax cut in modern British history”.

A new “Super Deduction” will come into force for two years. This means that, when companies invest, they can reduce their tax bill by 130% of the cost of the investment.

Sunak gave the example of a firm currently spending £10 million on equipment. At present they benefit from a £2.6 million tax reduction but, under the Super Deduction they would get a tax break worth £13 million.

The Office for Budget Responsibility say it will boost business investment by 10%.

Drivers

The chancellor cancelled the planned increase in fuel duty.

People living in the East Midlands, Liverpool, Plymouth, and other freeport locations

Goods that arrive at freeports from abroad aren’t subject to the tax charges that are normally paid to the government. The tariffs are only payable when the goods leave the freeport and are moved somewhere else in the UK.

To help regenerate deprived areas, Sunak announced the creation of eight new freeports: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.

Losers

Medium-sized and large businesses

The first step to repairing the public finances came in the form of a Corporation Tax rise which will come into force in April 2023.

From April 2023, the Corporation Tax rate will rise to 25%. Despite a significant six-point increase in the rate, the chancellor argued that the UK will still boast lower Corporation Tax rates than the likes of Germany, Japan, the US, and France.

Small businesses – those with profits less than £50,000 – will benefit from a “small profits rate” of 19%. This means 1.4 million businesses will be unaffected and pay the same rate.

There will be a taper for profits above £50,000, so the 25% Corporation Tax rate will only apply to businesses who make profits of £250,000 or more. Sunak says that just 1 in 10 companies will pay the full higher rate.

Income Tax payers

While the chancellor announced no Income Tax, VAT or National Insurance rises, the decision to freeze the Personal Allowance at £12,570 and the higher-rate tax threshold at £50,270 from 2021/22 to 2026 equates to, essentially, stealth taxes.

A freeze drags more people into paying Income Tax and will also push 1.6 million people into the higher tax bracket by 2024, raising around £6 billion for the Exchequer.

Pension savers

In an expected move the chancellor announced he was freezing the Lifetime Allowance – the amount an individual can save into a pension before incurring tax charges. The allowance will remain at £1,073,100 until 2026.

This is another stealth tax, as it means that anyone whose pension savings are above this amount could face a levy of up to 55% on any additional lump sums or income taken from their pension pot.

Wealthier individuals and families

Just as the chancellor froze the pension Lifetime Allowance, he also announced a freeze in the Inheritance Tax (IHT) threshold and the Capital Gains Tax (CGT) annual exemption until April 2026.

The IHT threshold will remain at £325,000 with the “residence nil-rate band” at £175,000.

The annual Capital Gains Tax exemption will remain at £12,300 for five years.

As the value of assets such as house prices and investments rises over the next five years, this freeze will see more people face a CGT or IHT liability, raising additional revenue for the Exchequer.

Get in touch

If you want to chat about how the 2021 Budget affects you, please get in touch.

Our latest guide is in partnership with Neil Bage, founder of Be-IQ, a fintech company focused on behavioural insights. The guide gives a fascinating overview of how our behavioural biases can affect the decisions we make. It could help you better understand your own decisions and what you can do to reduce your biases.

We start with an explanation of what financial biases are and where they come from, as well as looking at ten examples that you may recognise. While bias can influence many financial decisions, from what to spend money on to your relationship with saving money, one of the most researched areas is the impact it has on investing. Our guide explores how bias can sometimes lead you to take too little or too much risk.

Finally, we list some of the steps you can take to reduce your biases when making financial decisions.

Please download Behavioural biases: How they impact your financial decisions to read more.

If you have any questions about this guide or your financial plan in general, please get in touch.

The current tax year will end on 5 April 2021, a date when many allowances and tax breaks will reset. In some cases, it will be your last chance to use them. Making use of appropriate allowances can help you get the most out of your money.

Our guide explains seven key allowances you should consider to ensure you’re ready for the 2021/22 tax year. This includes:

Marriage allowance
Pension Annual Allowance
ISA allowance
Gifting allowance
Gifts from your income
Capital Gains Tax
Dividend allowance

Click here to download your copy of the guide.

Keeping on top of allowances and how to use them can be challenging. But creating a financial plan that helps you get the most out of your money can put your mind at ease. Please get in touch to discuss how you can make the most of allowances in the current tax year and put a plan in place for 2021/22.

2020 has been an eventful year for investment markets. Impacted by the Covid-19 pandemic and government responses to this, there have been many valuable investment lessons that will apply in 2021 and beyond.

As the extent of the pandemic became known in March, stock markets around the world suffered sharp falls. In fact, fears of a recession meant the FTSE suffered its biggest fall since the 2008 financial crisis and trading was temporarily suspended on Wall Street as circuit breakers were triggered, according to the Guardian.

Since then, markets have bounced back but continued to experience volatility. The uncertainty of the situation, with governments changing restrictions and support as they try to control the virus, affected markets throughout the summer and autumn.

So, 2020 has been useful in highlighting the investment lessons we should keep in mind.

1. The unexpected does happen

A year ago, who would have predicted that a global pandemic would have occurred? It’s probably not something you’ve ever considered when weighing up investment risks. Yet, it’s had a huge impact on investment volatility and opportunity in 2020.

This year has taught us that the unexpected does happen. We can’t consider every eventuality but preparing for the unexpected can improve your financial resilience. In terms of investing, this may mean having liquid assets or a rainy-day fund you can use if investment values fall. This is particularly important if you’re drawing an income from investments. Having options for when the unexpected does occur should be part of your financial plan.

2. Volatility is part of investing

No one wants to see the value of their investments fall. But volatility is part of investing. When you invest, you need to be aware of the risk that values can fall.

This is why a long-term time frame and goal is so important when investing. Short-term volatility is often smoothed out once you look at investment performance over a longer time frame. It can be frustrating to see that investment values fell in 2020, but when you look at performance over the last five years, for example, you’ll probably still see an upward trend.

3. Diversifying is important

We all know we should diversify our portfolio. Investing in a range of assets, industries and geographical locations can help spread the risk. When one investment falls, another may perform better helping to create balance.

Covid-19 has had a far-reaching impact, with countries around the world affected by the virus. However, some industries have been affected far more than others. Travel and hospitality businesses, for instance, have been forced to close for weeks at a time in many places. In contrast, the pandemic has created opportunities for some firms too. While a balanced portfolio will still have suffered volatility, it can lessen the impact.

4. Financial bias can affect us all

Investment markets have featured in the news more heavily than usual this year, thanks to the volatility experienced. If headlines or talk about the markets meant you considered changing your strategy, financial bias is likely to have played a role.

Financial bias simply means other factors besides facts have influenced your investment decisions. When markets fell sharply at the beginning of the pandemic, an emotional reaction that means you considered taking money out of the markets is normal. However, recognising where bias occurs and limiting the impact is important. Working with a financial adviser can help you with this as you have a professional you trust and one that understands your situation to talk to.

5. You can’t time the market

Finally, the events of 2020 have supported the saying: It’s time in the market, not timing the market.

If you’d tried to guess when to put your money into the stock market and exit this year, you’d probably have ended up making mistakes. Trying to time the market to maximise returns is incredibly difficult, as so many factors play a role. Even investment professionals with a huge number of resources make mistakes.

Rather than trying to time the market, creating a long-term plan and sticking to it is usually the most appropriate strategy for investors.

What to expect in 2021

So, what lies ahead for the next 12 months? With lockdowns and restrictions continuing around the world, we expect further investment volatility as we head into 2021. But if 2020 has taught us anything, it’s that we can’t predict what’s around the corner. Think about your aspirations and build a long-term financial plan around these, including investing where appropriate.

Please get in touch if you’d like to review your investment portfolio for the year ahead.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

‘New year, new me,’ goes the common saying. The start of a new year is often seen as a time to reinvent yourself and make plans towards goals. With 2020 causing so many setbacks and challenges, you may be thinking about setting a new year’s resolution to start 2021 on track.

While setting a new year resolution is common, less than one in ten ends up sticking to them. So, whether you want to exercise more, learn a new skill or make lifestyle changes, setting out a plan can improve your chances of success. If you want to make changes in the new year, here are seven tips to help you achieve your goal.

1. Focus on one thing

When you’re feeling motivated and want to make changes to your life, it can be tempting to make sweeping changes in one go. But good habits can be hard to form. Deciding to hit the gym three times a week, increase your savings and learn a new language on the same day can set you up for failure.

Rather than transforming your whole life, pick an area you want to focus on and work towards this goal. You can always add other aspirations once positive habits have been formed with your first resolution.

2. Be realistic, but make it a challenge

Setting a target is the first challenge of sticking to a new year’s resolution. Make it too easy and you can lose focus, but make it too difficult to achieve and you can lose motivation. You need to be able to realistically reach your goal in the space of 12 months but also ensure that the resolution will have a positive change in your life, encouraging you to keep at it.

Make sure your goal is measurable too. Rather than a vague idea like ‘I want to save more’, set a plan to save a certain amount each month.

3. Break your overall goal into smaller chunks

A new year’s resolution can be daunting when you look at it as a whole. Breaking down a wider goal into smaller segments can help you remain positive and focused throughout 2021. For instance, if you’re hoping to lose weight in the coming year, set monthly targets as well as an end-of-year goal.

It’s a process that can make even larger goals seem more manageable and reduce the chances of you giving up because the final target seems out of reach. Remember to make sure these smaller goals are realistic too.

4. Chart your progress and celebrate your successes

Keep track of your progress towards your goals too. Whether you choose a traditional pen and paper or an app, having your progress noted down can help you get through those times when you’re finding it a challenge. Looking at the hard work and progress you’ve already made can be enough to push you to keep going.

Remember to celebrate when you make progress too. If you’re working up towards running a marathon in 2021, completing that first 5k if you don’t usually run is a milestone. Planning treats for yourself when you reach certain points can help keep you on track.

5. Enlist the help of family and friends

A support system can make all the difference when we’re striving towards goals. Letting family and friends know your plans means they can help you towards your target.

If they’re also working towards the same or similar goal, having a buddy to do it with can make it far more fun and add some friendly competition into the mix. But even if this isn’t the case, loved ones can be valuable support when you feel like giving up. Sometimes, someone giving you a bit of encouragement or even tough love can be enough to boost your motivation, so you keep going.

6. Learn from the past

Have you made new year’s resolutions before? You probably have at some point. By taking some time to review why they were successful and unsuccessful, you can find a way of working that’s right for you. There’s no ‘right’ way to work towards a goal, but by understanding why you’ve given up or didn’t meet expectations in the past, you can set out a plan that matches your mindset.

7. Don’t give up when you slip up

Finally, making long-term changes is hard and good habits take time to stick. Even the most dedicated can experience a setback. Don’t let a small slip up knock you completely off track. It can be frustrating, but look at why you’ve missed a target and learn from it. Finding a way to keep going when things don’t go to plan is often the difference between success and failure.

If you’re setting financial goals this year, please get in touch. Whether you want to save more, start investing or plan your retirement, we can help you incorporate these into your financial plan to set a path for success.

Stock markets in 2020 have been characterised by volatility and uncertainty. If you’ve made financial decisions based on your feeling towards this, it could have cost you money.

Whenever we make a decision, we have to weigh up the different options. While reasons and facts should be the basis for any decision you make, emotions play a role too. Where this happens when making financial decisions, this is called financial bias. It can mean you end up making decisions that aren’t appropriate for you.

In recent months, as markets have experienced volatility and economic uncertainty has featured in the news, this may have affected the decisions you’ve made too.

Moving to cash due to Covid-19 cost investors 3%

According to behavioural finance experts Oxford Risk, investors that responded to Covid-19 uncertainty by moving more of their wealth into cash could have missed out. By switching to cash for ‘emotional comfort’ it’s calculated that investors have missed out on returns of 3% or more a year.

Separate research also suggests that investors moved more of their wealth into cash in response to Covid-19. In the first half of 2020, UK households put away £77 billion in cash, taking the total amount saved in cash accounts to £1.5 trillion. While a cash account to cover emergencies is advisable, it’s estimated that nearly £1.2 trillion of this cash isn’t needed for contingencies.

With cash accounts currently offering low-interest rates, it’s estimated that UK households have missed out on £38 billion in potential investment returns.

While investing does come with risk, it can help your money grow at a faster pace than when using a savings account. However, you need to invest with a long-term time frame, a minimum of five years. This provides an opportunity for short-term volatility to smooth out. Investing for a short period means there’s a higher chance that you could lose money due to short-term downturns.

There are many reasons investors held more of their money in cash during the first half of this year. But for some, financial bias will have played a role.

For example, information bias occurs when investors evaluate information, even if it doesn’t relate to their situation. It makes it difficult to assess what information is relevant. The sheer amount of information can be overwhelming. During the pandemic, investors have been bombarded with news, forecasts and opinions about what will happen. With much of this coverage negative, it’s natural that some investors will have had an emotional reaction and decided that cash was safer.

Trying to time the market provides an opportunity for financial bias

It’s not just a trend that is having an impact due to Covid-19 either. When the markets are performing well, it can be tempting to increase how much of your wealth is invested. In contrast, it’s common to want to move your money to ‘safety’ at times when markets are performing poorly or experiencing volatility.

However, this can mean you end up buying assets while prices are high and selling at low points. Oxford Risk estimates this type of financial bias can cost investors an average of 1.5% to 2% a year over time. Over a long-term investment strategy, financial bias can end up costing you significant sums.

While it can be tempting to move money in and out of investments to maximise returns, trying to time the market is difficult. As the above averages show, you’re more likely to miss out on returns than to increase your portfolio’s value. For most investors, a long-term investment strategy is appropriate.

Minimising financial bias: Stick to your long-term plan

Creating a long-term plan based on your goals and sticking to it can help you minimise the impact of financial bias. That can be easier said than done, though, especially at times of uncertainty. Working with us can help you here. A financial planner will be able to help you understand your long-term financial positions and act as a second pair of eyes when you want to make changes. It can mean financial biases can be highlighted and discussed.

That doesn’t mean you should never make changes to your financial plan. After all, circumstances and goals do change, and your financial plan may need to change to reflect this. However, this should be driven by long-term aspirations and be based on evidence.

Please contact us, if you’d like to go through your financial plan and investment strategy.

Please note: The blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.