“No one-way bets”: how to survive in 2022 and stay …
2022 promises to be a financial challenge for many people. These New Years Resolutions are designed to ensure that your wallet enjoys a healthy year.
Cash savings are likely to be hit by the double whammy of rising inflation and (still relatively low) interest rates in 2022. Further interest rate hikes may be on the cards, but rising Interest is currently only 0.25% and prices are already increasing by 5%. % one year. As such, money held on deposit will continue to lose value in real terms. Despite this, Laura Suter, personal finance manager at AJ Bell, believes that it makes sense to keep emergency savings in cash, but not more than necessary: ​​enough to cover expenses for three to six months. She also says that you need to be prepared to switch bank accounts to get the best possible rate.
Green your portfolio
After COP26, sustainability may well be high on your priority list. Research by Make My Money Matter and Aviva found that those with an average pension fund of £ 30,000 could avoid 19 tonnes of carbon emissions by switching to sustainable funds. He estimates it’s 57 times more efficient than switching to a vegan diet, 20 times more efficient than driving an electric car, and 40 times more efficient than switching to a renewable energy supplier. Morningstar has a wealth of information and ratings on which investment funds have the best sustainability records.
Reassess your income portfolio
The dividend tax rate will increase from April 2022, which means bigger bills for those with income investments outside of an ISA or pension. Investors can still receive £ 2,000 in tax-free dividends, but face higher fees down the road. AJ Bell says the best way to protect yourself is to transfer money to an ISA or a pension. Remember, however, that the ISA allowance is £ 20,000 per year. It makes sense to make full use of that and ensure that the investments that pay the biggest dividends are within that tax envelope.
Increase your pension contributions
Even a small increase in pension contributions can dramatically change your long-term retirement outlook. If you’re lucky enough to get a raise, use it to top up your monthly payments.
Pay off your debt
Cutting spending and paying down debt are high on the 2022 financial to-do list, according to GoCompare. Banks may be slow to pass interest rate hikes on to savers, but they are usually not so late when it comes to increasing rates on credit cards or loans. Those with excess savings are advised to use it to reduce outstanding credit card balances. If that isn’t possible, consider consolidating your debt and switching to a provider that charges a lower interest rate. There are plenty of balance transfer offers available, so shop around.
Check your bills
Inflation is fueled by rising fuel bills. No one can escape some price hikes, but you may be able to protect yourself to some extent. Kevin Mountford, co-founder and director of Raisin UK, says many energy suppliers are not currently accepting new customers, but customers should always use price comparison sites to verify as that can change. In the meantime, use the sites anyway to make sure you don’t overpay other household bills. It could be time well spent.
Keep calm, diversify
Omicron, climate change, inflation, and global supply issues all have the potential to derail markets and increase volatility. Chelsea Financial Services chief executive Darius McDermott said given the number of unknowns, investors would be wise to play it safe with their asset allocations. “I don’t think this is the year of one-sided betting,†he said. “The best way to get through a year that might be difficult is to maintain a diversified portfolio and stick to regular monthly investments whenever possible. “