Why you should opt for gold – not frankincense or myyrh – this Christmas
Given toppy equity market valuations and historically low bond yields, could going for gold be the...
With summer holidays in full swing, my greatest hope for my readers today is that they may be enjoying this blog from a distant beachside hotel, after a day of sunshine, swimming and possibly even a hard-earned siesta!
When you return to the ‘real world’ in a week or so, I also hope you come back with a fresh burst of energy for the second half of the year. What better moment to take stock of your savings goals for 2017? Many of us start off with the best of intentions, but sometimes a half-yearly check-in is worthwhile.
Here are three questions to help you assess your progress so far and to get you back on track if you need a little extra motivation.
Don’t beat yourself up if you’re not saving as much as you had hoped to do in the first few weeks of January. It’s normal to be a bit ambitious with your new year’s goals … just think how many times a week you probably planned to go to gym!
The important thing is not to give up altogether just because you’re not on track with your original target. Like we always say, even small amounts can add up over time – especially when they are invested and their earnings can compound.
For example, if you invested just £50 a month through an ISA, and your investments grew by an average annual rate of just 5%, you could have just over £3,400 in five years’ time*.
If you’re not saving, the next question to ask yourself is what are you buying instead? While unexpected, but crucial, expenses inevitably arise, you might be surprised at how your other incidental costs also add up. Read our blog on the price of looking good, for some beauty regime ideas.
It could be a good idea to use an app for a week or two to track your spending (just Google ‘best apps to track your spending’ for ideas!). Be honest and put in everything you buy – including small things like the £1.50 can of coke you get from the vending machine after lunch, the extra couple of pints you enjoy after work on a Friday or a tube of new mascara.
Most apps should then be able to categorise your spending, so you can see how much of your money goes on what. This might help you to trim even just a tiny bit here and there, which could be added to your monthly investment contributions.
If you are contributing regularly to your savings, that’s fantastic. Now, you want to check-in to make sure your investments are still the right ones for you. This doesn’t necessarily mean selling any short-term underperformers, although of course you should always keep a close eye on your returns.
More importantly, however, checking-in means taking a minute to re-visit your goals and timeframes, and then deciding if the funds you own are still the best options to achieve them. For example, if you’ve been saving to buy a house and the date by which you want your deposit is getting closer, you may want to consider selling out of your higher risk funds, such as emerging markets. Although they offer strong long-term growth potential, these types of funds can be a lot more volatile than those invested in developed markets and you don’t want your savings to drop suddenly right when you’re about to use them.
Remember, equities generally—whether in emerging or developed markets—are usually suggested for investors with a medium to long-term timeframe, and so if you’re very close to wanting to buy a home, you may not want to be holding any of your deposit money in equity funds.
On the other hand, your timeframes may have shifted further into the future. Perhaps you had planned to use your savings for some travel that has now been postponed? If you won’t need your nest egg for a few years, it could be worth reviewing whether you should add a little more risk to your portfolio to generate long-term potential growth.
*The Calculator Site, compound interest calculator: £0 initial sum, £50 monthly contribution, 5% annual interest, compounded yearly