The start of a new year is commonly seen as the time to make resolutions and pledge to make changes to your lifestyle.
Setting new year resolutions is a popular tradition. You may well have already made some for 2024, and you certainly will not be alone if you have.
Last year, for example, the mental health charity, Mind, reported that 30 million people in the UK made at least one new year resolution.
The most common subjects included resolutions relating to:
- Health (28%)
- Money (27%)
- Family (24%)
However, while making resolutions is commonplace, very few are actually kept to for more than just a couple of months.
Indeed, the same Mind research revealed that seven weeks is the average length of time between setting a resolution and breaking it, and more than 1 in 5 people had given up on theirs before the end of January.
Interestingly, although there are benefits to setting financial resolutions, not making any changes to your financial plan can be the most sensible course of action.
Discover why you may want to stick to your plan in 2024, and only make changes you have to, rather than because you think you ought to.
1 January is just another date on the calendar
While the end of a year is clearly an important event, all that really happens as far as your finances go is that the calendar clicks round to another year.
That is because, in reality, when it comes to your wider financial plan, it is really no different to most other dates in the calendar.
Indeed, if you are looking to make major changes, there are likely to be far more appropriate times to do so during the year.
These could include:
- On 6 April at the start of a new financial year
- If you start a new job or your current contract is reviewed
- When you have your annual review with your financial planner.
In each case, it is often worth making any major decision based on a holistic overview of your financial position, rather than a one-off decision in isolation.
The decision to do nothing is an active one
We would strongly recommend that you resist the temptation to make any major changes to your financial plans, simply because it is now 2024.
While it can sometimes be counterintuitive to do nothing, consider that the expression “do nothing” contains an active word: “do”. So, you are effectively making a conscious decision to take no action, hopefully after considered thought.
For example, a common maxim used among financial planners is that the growth you get on your investments is in inverse proportion to the number of times you check the value.
Clearly, that is an exaggeration for effect, but it contains an element of truth. If you are constantly checking fund values, such as pension funds and other savings, you are more likely to overreact to periods of adverse performance and make changes to your portfolio that could prove harmful.
The most effective action is more often than not to leave well alone and do nothing.
Long-term financial goals are more likely to succeed than new year resolutions
By definition, a new year resolution is ideally kept to for a maximum of 12 months, although as you have already read, most do not even last anywhere near that.
In contrast, your financial plan is a much longer-term proposition. It will be the outcome of a great deal of thought and analysis, reflecting what you want your life to look like in the future and driven by your objectives.
As a result, any changes you make to it should equally be as a result of similar analysis and will usually be in response to certain events, rather than the arrival of a new year. These could include:
- Changes to your personal or family circumstances
- External events affecting your finances
- Your long-term objectives changing.
So, rather than setting a new short-term goal every year in January, a more effective way to build your wealth and plan for your future could be to think about your long-term objectives and where you want to get to.
Some resolutions can still be useful
Having said all that, some finance-related new year resolutions can have a positive effect on your wealth. In fact, you may have read the five powerful new year resolutions we wrote about last month.
The sort of resolutions you might want to consider are:
- Aiming to save more each month
- Putting a plan in place to clear any unsecured debt you may have
- Regularly checking your outgoings.
When you are setting these, and then striving to keep them, you might find it beneficial and improve your chances of success if you break them down into small, manageable steps. It may also be sensible to keep them simple and positive, and ensure that they cannot fail to improve your financial circumstances if you follow them.
For example, if you do have excessive debt, your resolution could be to steadily reduce the outstanding amount each month, perhaps with a direct debit from your bank account rather than simply pledging to pay an unstated amount at the end of each month.
Your annual review is the key event in your financial calendar
Rather than the start of a new year, the most important milestone in your financial year will be your annual review with your planner.
This is the ideal time to chart your progress when it comes to your financial goals.
If it looks as though you are not on track, that may be the time to make changes. But crucially, those changes will be based on an overview of your holistic position and a result of considered and informed analysis alongside a professional, rather than because it is the start of a calendar year.
Get in touch
If you would like to talk about any issues relating to your financial planning, then please do get in touch with us at DBL Asset Management.
Email email@example.com or call 01625 529 499 to speak to us today.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.