Don’t worry about your investments, focus on your budget

It’s understandable that people are worried about their investments as we hit yet another turbulent time in the financial markets. But the truth is, we need to focus more on our day to day financials, if we want to weather this storm. The days of ultra-low interest rates and inflation are not set to return any time soon, which means we need to take stock and reassess our household budgets.

What can we do to ease the pain?

There’s no denying that the vast majority of us are seeing increases in shopping bills, energy bills, mortgage payments, rental payments. These are the everyday finances that you can’t take a step back from and watching them rise is stressful.

Now’s the time to start focusing your efforts and attention on your budgets versus your longer term investments. Take some time to review how you can make sure there is more money at the end of the month. Check your budget. Have access to cash reserves. Spend a £1 not £1.10. Do some worst case scenario planning.

For those of you that have mortgages or other debt, make sure you can afford the monthly repayments, and if not, speak to a professional about this debt because you should never be too proud to ask for help with this.

For those of you that are planning for your longer term financial future, ask us to help you check if you will run out of money. We have some great tools that can help provide you with an idea of your financial future and our experience and expertise can truly help you understand your financial position and offer reassurance. Just don’t leave it too late to plan.

Every storm runs out of rain

But what about investments? Our team is regularly being asked, “Is there anything that I should be doing differently with my investments?” And the answer is simple. Unless something has dramatically changed in your personal circumstances then no, stick the course. Investing is for the longer term. I would suggest you’ll only get a real sense of your investment’s performance over a period of seven to 10 years, so sit tight.

With that in mind, I’d recommend reducing the amount of time you spend checking your investments and remember that markets recover. They did after the pandemic. In fact, if we look back over the last 30 years, the markets have recovered after every crisis. It’s just a question of when.

If you’d like to take a closer look at the wider financial markets, please do take a look at our most recent Investment Insight, written in conjunction with our investment research partner, Square Mile.

It’s time to accept that the party’s over

Mrs O recently took me to watch the musical “Aint Too Proud To Beg”, a story about the group, The Temptations. Afterwards I wanted to have a debrief (drink) to discuss the performance. “That’s so you KO, you just don’t want the party to end”. It was a Tuesday night.

Well, let’s have an honest chat about the current economy. The party is over. Since the induction of Quantitative Easing in March 2009 on the back of the Financial Crisis in 2007/8 we, as an economy, have benefited from a very low interest rate environment.  Asset prices increased, people borrowed more money and so did companies. Now interest rates have gone up from 0.5% to 5% with potential for further increases. Inflation was c2.5% two years ago, now sits at c10% and who knows whether it will reduce or increase.

I continually read that this period is comparable to others. In my opinion it’s not. We have not had a period like this before which has involved a financial economic crisis, QE, Brexit, a pandemic and a war happening within a 14 year period,. The effects are really starting to bite.

As always, the SK Team is here for you.