The last year has been a traumatic one in which much has changed, perhaps never to revert to the old ‘normal’. It has also provided some useful financial lessons.
Make sure you have an up-to-date will – Early on in Lockdown 1.0 the importance of having an up-to-date will (or, in some cases, any will) was highlighted to many people just as it became difficult to arrange one.
Always keep an adequate cash reserve – In a world of near zero interest rates, you may be reluctant to leave cash on deposit, earning next to nothing. However, cash gives you valuable flexibility and time to react to changed circumstances.
Don’t panic – Whether you’re an active investor or simply make pension contributions, watching the performance of world markets has been stressful over the last year. The UK’s FTSE 100 hit its low for 2020 on 23 March, the day that the Prime Minister launched Lockdown 1.0.
It was a dark time, but any investor who panicked and sold up at that point, when the FTSE 100 was below 5,000, would have chosen the worst time to pull out. By the end of 2020, the index was 29.4% above its March nadir. That performance was also a reminder of another lesson: trying to predict market timing is almost impossible.
If any of these maxims resonate with you then you may be better prepared for next time.
Looking ahead to 2021-22
Our Tax Matters 2021-22 guide will help to you to prepare for the financial year ahead.
It has ideas on how you can organise and structure your business, personal and family financial affairs tax efficiently so that you have more to invest, pass-on or to spend on the things and people you want to in life.