New year, new start – Your 2023 Plan
A new year should start with a new goal and now is a great time to act on your vision of doing more with your money.
Making the decision to improve your finances is simple. For greater financial health it could be as straight forward as spending less and saving more. It is the consistent discipline which is the tricky part. That’s where you need a plan, a route to follow for 2023.
1.Set your goal
Everything starts with a goal, what is yours?
For investing, consider what outcome you want. If it is a financial goal in the shorter term, typically fiver years or less, a Cash ISA could be suitable. If your goal is longer term, five years or more, you might want to consider investing in a Stocks & Shares ISA.
For an even longer term goal like retirement, investing in a diversified Portfolio within a Pension is the traditional route to building wealth. Although this locks away your money until age 55, you will typically benefit from tax relief of at least 20%, depending on your personal tax band.
Once you have decided on your goal and product, you should also consider your attitude to investment risk and reward.
At True Potential an Attitude to Risk survey will show you which Portfolio is most suitable. This should be reviewed at least yearly and whenever there are significant changes in your life to ensure the Portfolio is still appropriate for you, and the new year could be a good time to consider this.
The financial tax year ends in April. You can invest up to £20,000 in a Stocks & Shares ISA, and with a Pension you get tax relief on 100% of your earnings or up to £40,000, whichever is lower. These allowances relate to the current tax year, 2022/23.
2.Work towards your goal
At this time of year, you may also be setting fitness goals, and the principles are very much the same for your investment goals. It is all about having the discipline to maintain a routine of consistent work towards your goal.
Just like losing weight, investing isn’t a short-term win, there’s no overnight transformation. But, just like fitness, over the long term consistently working towards your goal can start to show progress.
Working towards your goal is actually very simple. It just means regular investing to continually close your gap to goal. Many people will choose to do this at the start of the month just after pay day, setting the routine that investing is something you do as a habit. If you invest regularly, then just like doing regular exercise, you’ll start to see transformation over time.
At True Potential, once you have set your goal amount and a target date to reach your goal we’ll show you how much to invest each month in order to hit your goal. You can choose to do this automatically by direct debit or by using our impulseSave® technology to invest little and often.
3.Track your goal
Just like fitness apps, you can track your progress in the True Potential app.
Tracking your investment over time is a useful way to stay motivated towards your goal, and to top up any extra amounts when you have spare money at your disposal.
Just like noticing your improving health metrics in your fitness app after a period of exercise, it can be satisfying to look at your investment app and see an improving outlook on your wealth. This can turn into a self-fulfilling prophecy, if you feel good about your investment, you are more likely to be motivated to engage with your personal finances.
Once you’ve set your investment habit and are in a regular routine, it is important not to become complacent around your personal finances. That means continuing to seek out knowledge around your investment and investment products, engaging with the latest news and insights that could affect your goals.
Subscribing to the True Potential YouTube Channel is one of the easiest and most informative ways to keep updated with markets and investments. Every day you’ll find Morning Markets video updates from our Investment Management team, and every week you can stay informed with the roundtable discussions in our Do More With Your Money shows.
5.Stay the course
As 2022 proved, life and world events are unpredictable. Geopolitical events and rising costs are an inevitability, a constant throughout history. While it can feel uncomfortable in the short term when such events disturb markets, it is important to take a long-term perspective. One or even a few years is considered short term when you’re investing for a long-term goal such as retirement. What happens globally over decades is more related to your investment than what happens regionally in a year.
Stay the course through 2023 and don’t be distracted by short-term noise, remember that disciplined and consistent behaviour is what build towards the achievement of long-term goals. At the same time, keep mind that staying invested isn’t always best for everyone, as this will be dependent on your circumstances. If you are unsure you should speak to a financial adviser.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. This blog is not a personal recommendation or financial advice. ImpulseSave® is a registered trademark of True Potential Investments LLP