The start of a new year is a popular time to get healthy, learn a new hobby, and organise your finances.
The financial resolutions you make today could boost your finances in 2021 and beyond, setting you up for a more secure future.
From investing your money correctly to protecting yourself from the unexpected, here are six financial new year resolutions you’ll want to keep.
1. Save more money for your future
The more money you can put aside for your future, the greater your chances are of achieving your goals in life.
Working out how much to save isn’t always easy, especially if you’re an internationally mobile expat with expensive children’s education fees to contend with. A financial adviser can help you come up with a realistic savings strategy that accommodates your future financial lifestyle needs and expenses.
Savings can grow into a large pot of money, which could enable you to fund a comfortable retirement and, potentially, leave a legacy for your children. This is because of the magic of compound interest – where you earn interest on your capital and on the interest itself. Compound interest is especially powerful when you’re saving and investing for a longer period of time.
2. Will you have ‘enough’ money?
You could spend up to a third of your life in retirement. You need to make sure you save up enough money to last as long as you do and in the lifestyle of your choice.
Putting a solid retirement plan in place, that is flexible enough to accommodate any unexpected ‘what-ifs’, will give you peace of mind that you’ll always have enough money to live the life you want. Not too little, not too much – but enough.
A financial planner will help you understand your aspirations for your life now and in the future. They’ll create a plan that enables you to achieve those goals, while ensuring you remain on track.
3. Make sure your money is invested the right way
Saving money is just one component of building up your wealth. You also need to make sure your money is working as hard as it should be.
If you have sums of money sitting in a cash savings account, it may be generating very little interest. It could be growing at a lower rate than inflation which, over time, will erode your money’s purchasing power.
Achieving the right balance between risk and reward is crucial if you want your wealth to reach its full potential. By spreading your money across different asset classes, such as equities, bonds and cash, you can gain exposure to stock market growth while reducing volatility in your portfolio.
The right asset allocation for you will depend on many different factors, including your goals, how long you’re investing for, and your individual risk profile.
4. Protect your finances from the unexpected
Have you ever thought about how your finances would hold up in an emergency? Events such as unemployment, illness or death could cause you and your family serious financial hardship.
If you haven’t done so already, protecting your income and family should be near the top of your new year to-do list.
The first step is to make sure you have an easily accessible emergency fund. Setting aside three to six months’ worth of expenses could help you cover a bout of unemployment or a large, unexpected bill.
Other risks, such as premature death and critical or long-term illness, can be transferred to an insurance company’s balance sheet and not yours. A financial adviser can help you to decide which type of protection is right for you.
5. Review your Will and estate plan
The start of a new year is a great time to ensure your Will still reflects your wishes. By updating your Will, you can make sure your money, property and other assets are inherited by the right people and at the right time, when you die.
You should also check that your estate plan is still in line with your circumstances and desires. Most people want to leave a legacy to children or grandchildren but, if you don’t plan carefully, you could end up paying hefty taxes and, therefore, passing a significant portion of your estate to the tax man.
A financial planner can help you evaluate different strategies to preserve your legacy, including charitable giving, using lifetime and annual allowances, setting up trusts, and taking out insurance.
6. Speak to your financial adviser
Booking an appointment with your financial adviser is one of the most effective ways of boosting your finances.
A white paper by Vanguard in the US found that by offering cogent wealth management, financial planning, discipline and guidance, financial advisers can increase a client’s net returns by around 3% a year. This means that if you have a US$1 million portfolio, you could be US$30,000 a year better off by working regularly with your financial adviser
A financial adviser will put in place the right strategies for you to build your wealth, including creating a savings plan, helping you prepare for retirement, and ensuring your money is invested in the right way. They can also help you protect your wealth and family from the unexpected, and make sure you don’t pay more tax than you have to.
What does 2021 have in store?
Stock markets are likely to be volatile in the short-term, but it’s crucial to look beyond the headlines and stick to your financial plan. Trying to time the market rarely works and it could cause serious damage to your investment portfolio.
A financial adviser can help you drown out the noise and prevent your emotions from getting the better of you. They’ll help you stick to a robust financial plan that’s based on your individual risk profile and financial goals.
Get in touch
If you’d like help implementing your financial new year resolutions, please get in touch.
At BMP Wealth, we specialise in building, managing and preserving the wealth of Hong Kong’s international community. By creating a personalised, comprehensive financial plan, we can help you realise and achieve your greatest goals in life.
For more information, email firstname.lastname@example.org or call +852 3975 2878.