How to prosper in 2021

Much like Christmas, New Year’s Eve is bound to be very different this year. But despite not being able to get out and ring in the New Year with friends and family, it will still be a good opportunity for self-reflection. I’m sure there are a number of 2020 goals and resolutions that weren’t met due to the unprecedented circumstances alone, but it doesn’t mean you can’t set new ones – or even try again this year. If 2020 showed me anything it’s that I don’t need to leave the house or spend money to have a good evening. I’m very capable of painting my own nails and don’t actually need my hair done as often as I thought.

Here are four important money habits, and three funds to invest in, for a prosperous 2021.

“The beginning is the most important part of the work.” — Plato

Four money habits to start today

Make a budget
Set some clear goals. In terms of saving, what have you lived without in 2020 that you can continue to forgo in 2021?. In terms of spending, what have you really missed and want to prioritise for the coming year (um, travel anyone?)?. Write it all down and either update last year’s budget or start a fresh one. To get the maximum impact, work backwards – starting with your biggest expenses, and leaving the smaller costs like morning coffees towards the end – to see what you can cut back on. Remember to regularly check in with your budget. There’s no point making a budget if it’s quickly forgotten.

Revisit your emergency fund
I’ll be the first to admit we dipped into our emergency fund this year (dogs are expensive). Regardless, now is a good time to take a look at what you have saved and give it a top up, even if it means saving your Christmas loot instead of spending it. Reminder, your emergency fund should cover three to six months’ living expenses.

Refinance (if you can)
Refinancing or consolidating debt can help save on repayments and take the potential strain out of your monthly budget. The New Year is a great time to get up-to-date statements so you know exactly where you stand. See if you can switch providers to get a better deal – or even consolidate for lower monthly payments. Better yet, pay them off early, if you can! And if you can’t, at least you know what you owe and can make a plan going forward.

Start investing
If you’re new to investing, start small. Take a second pass at your budget and see where you can find some money. I’m sure you can find £20 a month to transfer to your ISA. Trust me, before long, you won’t even notice it’s missing and maybe this time next year, when you’re reviewing your budget again, you can find another £20 a month as well.

Choosing an investment fund can be a tough decision but getting it right (or wrong) can have a huge impact on your money. So you might want to have a quick look at our short guide on how to choose a fund.

And here are three ideas to get you started:

Baillie Gifford Japan Trust
The Baillie Gifford Japan Trust was launched 40 years ago this January and is run by Baillie Gifford’s exceptional Japanese equities team. The trust invests primarily in small and medium-sized companies and has an excellent track return. New to investment trusts? You can read more about the benefits of a trust in your ISA here.

M&G Episode Income
The term ‘episode’ refers to those periods of time when investors’ emotions cause them to act irrationally. The M&G Episode Income fund uses behaviour finance to pinpoint these actions in the wider market and find added value. It is also a multi-asset fund, with around 50% in equities at the moment, but just 3% of this is in the UK*.

Artemis Monthly Distribution
Overseen by two veteran managers, Jacob de Tusch-Lec and James Foster, this multi-asset fund invests in both bonds and equities from around the world with currently 46% in equities, 26% of which is in the UK*.

*Source: Fund factsheets, 30 November 2020

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Remember, all investments can fall in value as well as rise, so you could make a loss. Before you make any investment decision, make sure you’re comfortable and fully understand the risks.Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.