Opinion How to get financially fit in 2022 - some advice from an expert

Financial expert David Quinn has some advice on how to flex your financial muscles in 2022.

LAST UPDATE | Dec 29th 2021, 11:14 AM

NEW YEAR, NEW you, new finances? It might not have a great ring to it but there’s truth in it. The fresh start of a new year sparks plans for self-improvement with the focus usually on healthier lifestyles. Getting financially fit should also be part of that plan.

Now that Christmas Day has passed and the excesses that come with it are mulled over, many of us will turn our attention to our bank balance and wonder how we’re going to get a bit more organised for 2022.

People in Ireland are by and large great savers – recent figures from the Central Statistics Office showed a record €135 billion in deposits from Irish households. While some in the last two years during Covid managed to save money through working remotely and not socialising, it must be acknowledged that others in certain sectors of the economy have faced financial peril.

Not everyone is sitting on a pile of savings, but the good news is that even if you’ve been living month to month up until now, there are little changes you can employ to help yourself become more financially secure. The most important thing is that you can get to a point where you feel you’re in control of your money.

The links between finances and wellbeing

Research shows a strong link between healthy finances and good physical and mental wellbeing. There is also said to be a strong link between positive mental health and healthy finances.

In London, a pilot scheme called Financial Shield, which has 2,000 participants in Lambeth and Southwark boroughs, is running until September 2022. The pilot involves GPs prescribing financial advice sessions for people with long-term health conditions.

Under the scheme, financial support link workers will help patients claim benefits, grants and manage debts. The scheme will include a cost-benefit analysis to measure outcomes and an independent review to encourage a national rollout across the UK. So, it makes sense that if you want to improve your health and wellbeing for 2022 you should also review your financial fitness.

How do I get there?

But what does being financially fit mean? It involves:

  • Having a financial plan where you are fully aware of your income and expenditure
  • Living within your means and not overstretching yourself financially
  • Establishing an emergency fund equal to about six months of living costs
  • A regular savings or investment plan
  • A retirement and pension plan that meets your future expectations

If you think there might be room for improvement in your financial fitness here are some ways in which you can tackle that:

1. The first step is to set financial goals for the year ahead. Keep them simple and achievable and make sure they are linked to your life goals. For example, instead of simply deciding ‘I want to invest/save for the future’, be specific such as ‘I want to invest my savings to grow them by X% within the next 10 years’.

Being exact with your goals will make it easier to put a workable plan in place to achieve them and make your journey towards those goals measurable. Being able to measure and track your progress will help to keep you on track and motivated.

2. Don’t worry about short term success during January, which is a tough month to get through anyway. Any realistic financial fitness review should take a medium to long term approach. Use January as a time to set goals, establish plans and put direct debits in place.

3) Assess all your financial spending – savings, investments, pensions, insurance, life assurance. Review each and shop around as they come up for renewal. You can do this yourself or engage an independent (non-commission based) financial advisor to do it for you.

I always advise people to make sure any financial advise is fee-based and non-biased. Far too often financial advice is commission-based which can muddy the waters, meaning brokers are not always operating solely in the interests of their customers.

Commissions incentivise brokers to encourage their client to invest in particular products which may mean a better deal for the broker, not necessarily the client. Investors rarely know how much they are paying in commissions as these are presented in a very complex manner.

4) Direct debits are a no-brainer and hugely helpful in establishing good savings or pension habits. The money is gone from your account before you can spend it. This is far easier than trying to do a detailed budgeting exercise. The direct debit amounts can be reviewed over time up or down depending on your income level.

5) Have a look at your tax payments. Can you save some tax, especially if you are self-employed or a business owner? Is your salary at the right level, and are you benefitting from all the reliefs and tax refunds available?

Maintenance is key

Just like maintaining physical health and fitness, achieving your financial goals does require consistency and focus. Often it involves a re-framing of your thinking and incorporating best practices into your everyday transactions.

It’s about building resilience into your finances for the benefit of your current and future self – and that of family or dependants. Being financially fit will help you to feel positive and confident about your current financial situation and your future.

Really, it boils down to peace of mind, knowing your money is working as hard as it should do. And once you’ve mastered financial fitness the next step is financial freedom. Plan your financial fitness today and your future self will thank you.

David Quinn is Managing Director, Investwise Financial Management offering financial planning, pension and investments advice to people wishing to invest in their future.

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