New Year resolutions are a bit of a cliche, but they’re a cliche for a reason. With last year done and dusted and a new one up and running, it’s a good time to do a bit of a “stocktake” and think about what kind of investing you’d like to do in the new year. It also tends to be a quiet time of year, so it’s easier to sit down and think about your investments.
So with all this in mind, we thought we’d put together a little guide of some things to think about when you’re reflecting on last year and making plans for this one.
Have you changed jobs? Been promoted? Did you get a pay rise, or (hopefully not) a pay cut? Your income is where your investment money comes from, so it’s essentially the “engine” of your investing. So have a think about whether your engine is faster or slower than it was last year. If your income’s gone up, then you may be able to invest more than you did last year.
It’s also worth thinking about how often you get paid. If you used to get paid monthly, but now you get paid fortnightly, you can invest a bit more each year by matching your investing to your pay schedule. After all, $200 a month is $2,400 a year. But $100 a fortnight is $2,600 a year! That’s an extra $200 a year!
On the other side of this, have your expenses changed? Maybe you sold your car this year, and got rid of a big ongoing expense. Or maybe you moved in with your partner, or into a flat, when you used to live alone. Maybe you had a kid, and your expenses have gone (way) up! All kinds of life events can impact our expenses, so it’s worth thinking about how yours have changed, and whether you’re happy with your expenses at the moment.
But your income and expenses, while important, are kind of just details. The much more important thing to think about is...
Your goals and your values
Investing is all about achieving a goal. This can be as simple as investing to make more money than you have, and as complicated as investing towards a specific thing—like a home, a holiday or a wedding.
But life can change really quickly. So the best thing you can do with your down time this year is think about your investment goals. Some questions you could ask are:
Am I still happy with the goals I set?
When do I want to achieve my goals?
Have my time horizons changed? Do I want to achieve my goals sooner, later, or about the same as I did last year?
Do I have any new goals?
After all, your goals are a function of your life. You’re going to set goals based on your ambitions, and your ambitions are going to come from your experiences. So as you have more experiences, your ambitions may change.
For example, maybe you were focussed on travelling this time last year. But in the meantime, you got comfortable in your job, got really involved in your community, and you’re really happy where you are. So perhaps your goal needs to change from travelling to buying a house. Does your investment strategy need to change to meet this goal? It might, and it might not—but you won’t know unless you ask.
At the same time, it’s worth thinking about whether your investment values have changed. You may have been quite risk-averse this time last year—but now that you’ve been investing for a bit, and riding the ups and downs of the market, your risk tolerance may be a bit higher. These are all things that impact your investment decisions, so make sure to consider them.
Where to from here?
It’s all well and good to think and talk about your investing, but to really make a difference, you need to look at what changes you might want to make this year. Here’s a checklist of things you could look at:
How much you’re investing, If your income has gone up, or your expenses have gone down, you could invest more.
How aggressively you’re investing. The further away your goal is, the more aggressive you can be—but the opposite is also true!
What kind of investments you’re making. Have your values changed? Have certain things become more, or less important to you? The start of the year is the perfect time to make sure your investments reflect your values.
If you don’t end up making any changes, that’s fine too! But it’s important to sit down and have a think every now and then—and what better time to tick that box than now?
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed a return, and you might lose the money you started with. Before investing, you should read your fund’s product disclosure statement. It contains the investment objectives, risks, fees and other information. You should carefully consider this information in relation to your investment time frames and goals.