I’m not big on new year’s resolutions – usually because I throw the towel in well before quitters’ day arrives (which is 17 January next year, in case you’re wondering). But at the same time, I find January is a timely juncture to examine where I stand in relation to my financial goals.
Some tasks are an annual affair. Every year I take the time to check under the bonnet of my portfolio to make sure I’m still invested in the right things for each goal, review my fees and charges, and get my tax affairs in order.
But the planning process often involves setting new objectives, and giving extra attention to existing ones, particularly those which may have drifted off track.
So, with the new year fast approaching, here are the short, medium, and long-term goals that I aim to move closer towards in 2024. As always, it’s a bit of a balancing act. Allocating sufficient funds towards each goal without compromising the others is often the trickiest part.
Short term: move property and update will
I’ve lived in my current home for five years and recently decided it’s time to up sticks. I’m located in zone 2, central London, which is great for convenience but not so great for space – you don’t get much for your money round here.
As I’m sure many of you have found, moving home isn’t cheap. From stamp duty and valuations to mortgage advice and estate agent fees, costs can mount up quickly. It’s therefore imperative that I have sufficient savings when the time comes.
Given my short time frame, this money must be easily accessible and capital secure. The stock market offers the best prospect for long-term returns but for more immediate goals shares are a dicey approach. If markets tumble next year, my house-moving pot could diminish, and might not have enough time to recover.
I’m reluctant to dip into my stocks and shares ISA (as I need it for goal two - below) so have plumped up my savings over past 12 months to make sure I have enough to foot moving costs, and also keep enough spare to cover six months’ expenditure for future emergencies.
I must also factor in that higher interest rates mean my mortgage costs will inevitably rise. Hopefully interest rates will be lower in two to three years’ time, so I’m wary about fixing for too long. One of the big decisions is whether to secure a fixed or variable rate. If interest rates do fall sharply, the latter might be the best bet. But, as always, it’s a gamble, and my finances could suffer if I get things wrong.
Something else I really need to do is update my will. It’s been almost a decade since I made one, and my circumstances have changed dramatically since. Either making a new will or updating my current one will ensure my assets are distributed in line with my wishes should the worst happen to me.
Medium term: fund a trip around the States at 50
Although I haven’t ruled out having kids, not being a parent makes saving for my future much easier – there are no nursery or future university fees to fork out for. Not being a spendthrift also helps.
I’m equally aware that any spare income or capital needs to work as hard as possible. And although pensions should be the first consideration when saving for your future – because of up-front tax breaks and employer contributions - the lack of accessibility means alternatives must be sought for pre-retirement goals.
I’d like to build up a sum of money for when I hit age 50 to do something I’ve always wanted to do, which is to take a month’s trip around the US. It’s difficult to put an exact figure on how much this is likely to cost, so I plan to tuck away as much as I can to avoid having to scrimp. It would be nice to have some left over to complement my pension savings in retirement.
For me, the best place to save and invest for my stateside trip is in an individual savings account (ISA). As this goal is still nine years away, I have plenty of time to ride out the stock market’s ups and downs, so investing in a diversified mix of assets in the stocks and shares version should serve me well. ISAs are exempt from capital gains tax (CGT) and income tax and can be accessed at any time without penalty, so I can get my hands on the money at age 50 without paying a penny to HMRC.
What’s more, drip-feeding money into the market every month can smooth out some of the volatility.
As I need to keep my portfolio fairly secure right now with a home move on the cards, I plan to make further headway towards this goal later this year.
Long term: supercharge my retirement pot
Around this time last year I turned 40. Hitting this milestone didn’t prompt any kind of midlife crisis, thankfully, but it did cause my retirement plans to shift into sharper focus.
I like to think I’ve been reasonably shrewd with my later-life savings so far. Like most, my pot is nowhere near as big as I’d like it to be, but making the most of employer pension contributions in my mid-to-late twenties has given me a solid base to build from.
Earlier this year I consolidated several pensions into a single plan, which has made things much easier for me. I have a clearer idea about where I stand in relation to my retirement goals, and what I need to do to save enough once I hit old age.
Right now, I have no plans for a hard-stop retirement. The thought of packing up work completely and having no purpose makes me feel a bit uneasy, in truth.
Being a writer hopefully leans in my favour. Provided my cognitive abilities remain intact, I should be able to work part time well into my 70s.
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However, planning for a phased retirement has its risk. A great deal can happen over the next two to three decades. I might reach my late 60s and decide (or perhaps be forced) to down tools for good. With the prospect of this in mind, I want to set enough money aside so I can choose to retire on my own terms.
So one of my big goals for 2024 is to give my retirement savings a shot in the arm. Due to the power of compound returns, the money I set aside today should make the greatest difference towards my target pot size. Next year, I intend to nudge up my regular monthly payments and add a lump sum before April to trim some proverbial fat off my tax bill.
By the same token, I’ve decided to increase allocations to racier assets within part of my retirement portfolio to turbocharge growth. UK smaller companies seem a good bet over next 20 years or so, in my view. I’m aware this comes with extra volatility but given I don’t plan to phase out work for another 27 years, I feel it’s a risk worth taking. This will inevitably change as I approach retirement and my capacity to bear investment losses reduces.
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