With the Chinese New Year fast approaching, your thoughts may be turning to the 12 months ahead.

In the wider economy it’s likely to be an uncertain year. Inflation across the world is rising to levels not seen in years, meaning interest rates are likely to rise in 2022. Stock markets could also be in for a bumpy ride after markets across Asia fell in the final quarter of 2021 as the Omicron variant surged.

While you may not be able to control markets or the economy, you can make 2022 the year you take control of your own finances. So, at the start of another new year, here are eight financial habits that could bring you good fortune in 2022.

1. Define your long-term goals

As the old saying goes, “fail to plan, plan to fail”. One of the key steps we take when working with clients is to define their long-term goals. What are their ambitions for the future? What would they like to do with their life?

Only by making firm plans and setting long-term financial goals can you take steps towards meeting them. It also helps you to measure your progress towards these goals.

Establishing how much is “enough” for your retirement is a crucial part of financial planning. So, if you’ve never sat down and really defined what you’d like from your future, the new year is a great time to start.

2. Be prepared for the unexpected

As the last couple of years have shown us, you can never be quite sure what’s around the corner. Illness, an economic downturn, or job insecurity could happen at any time, leaving you and your family with a potential financial headache.

One good habit to get in to in 2022 is to maintain a good emergency fund. This should ideally contain three to six months’ expenditure, so you know you have access to cash if something unexpected happens.

In addition to this, make the new year the time when you review the protection you have in place. Would your family receive the financial support they need to maintain their lifestyle if the worst happened? If not, it’s time to look at putting the right cover in place.

And, if you have existing cover, is it still appropriate? If your salary or earnings have changed, it’s important your cover keeps pace.

3. Filter out the noise

It’s easy for your attitude towards your investments to be swayed by the news headlines. With 24-hour bulletins telling you every single market movement and economic worry, it’s no surprise that you may feel as if you need to act when you hear bad news.

The truth is that markets don’t always behave as we hope. So, a great habit to adopt is to try and filter out the noise and focus on the long-term goals you defined in point 1.

Over time, markets generally move in the right direction. Being patient, staying calm, and remaining invested will often be the right approach.

4. Make a habit of saving

Saving money every month is a great habit to get into. While many people focus on the investment returns they receive, most of your future wealth will likely be determined by the amount you save over time, not by the return you receive on it!

If you don’t already siphon some of your income into a savings or investment account each month, now is a good time to start.

Meanwhile, why not ensure you pay yourself first before others. Make your savings and pension contributions immediately after you receive your income and then spend what you have left, rather than the other way around.

5. Plan for your retirement

Simply put, the value of your balance sheet dictates your retirement lifestyle. If you have an idea of what your retirement lifestyle would be, then you can define how much is enough for your balance sheet.

The earlier you plan for your retirement, the better off you will be. Compound returns mean that starting early can significantly boost your fund as your money has longer to grow. Here’s an example from Unbiased that illustrates this point.

Consider two pension savers, Clare and Jack. Clare starts contributing to her pension at the age of 20, investing £50 a month. Jack waits until he is 40 but invests £100 a month.

Assuming an average return of 4%, when Jack is 60 he will have a pension pot of just over £36,500. Clare, however, will have a pension pot of nearly £60,000 at the same age.

Notice that both savers have invested the same amount of money over time. However, because of compound interest, Clare has ended up with nearly twice as much.

6. Rebalance your portfolio

When we build an investment portfolio for clients, we ensure it’s carefully balanced to manage risk and reward. However, over time, that balance can shift.

For example, strong stock market performance might mean that a portfolio is suddenly overweight with equities.

We rebalance our clients’ portfolios regularly, so they don’t need to worry about this. If you’re not a client yet, a good habit to get into is to rebalance your portfolio regularly to ensure the level of risk remains appropriate for your needs. It can also ensure that your investments are well diversified across sectors and regions.

If you haven’t recently rebalanced your portfolio, we can help.

7. Protect your estate

An estate plan will ensure your legacy is protected and that your wealth is passed on to your loved ones when you’re no longer around.

Waiting until later life to do this could be too late. There are simple steps you can take to create an estate plan that ensures your family benefit from your assets if you’re incapacitated or, worse, you pass away.

A good plan can also help you to minimise the tax payable on your wealth when you die, ensuring more is left to loved ones. Make 2022 the year you set up (or update) your estate plan.

8. Work with a professional

Studies have shown that working with a financial planner can add value. This is both in terms of your wealth, and the peace of mind that a professional can give you.

As well as helping you define your goals, a financial planner can help you to reach them. And, if you’re internationally mobile, they can help you to navigate complex issues around tax and domicile to ensure you retain more of your wealth.

If you’re looking for good fortune in 2022, get in touch with us to find out how we can help you. Email info@bmpwealth.com or call +852 3975 2878.