What's the best way to plan your finances?

It is important to regularly review your wealth and financial needs year-round

Approximately $30 trillion in wealth is set to change hands in the next decade, according to a study by McKinsey. By planning your legacy, you can provide for your loved ones and determine where you wShow more

If last year taught us anything, it is the importance of having a solid contingency plan in place, especially for one’s finances following the economic challenges of the Covid-19 pandemic.

As the first few months of the year bring with them a renewed and positive spirit, more and more people will be looking to refocus their priorities to prepare for the year ahead. In the context of personal finances, it is an opportune time for some housekeeping. Here are a few key considerations we encourage people to look into:

Learn about ESG investing

The worldwide disruption caused by Covid-19 has resulted in numerous effects on the environment and climate. The global reduction in modern human activity, such as air travel, has caused a large drop in air pollution and water pollution in many regions.

However, it is worth considering whether this record drop is a short-term impact of the pandemic or if now is the time to play a proactive role in making this the “new normal”. Look at your portfolio and direct capital to environmental, social and governance (ESG) investments that reflect your values and make a real difference.

Design a legacy plan

Approximately $30 trillion in wealth is set to change hands in the next decade and women are poised to inherit a sizeable share, according to a study by McKinsey.

By planning your legacy, you can provide for your loved ones and determine where you want your wealth to go, paving the way for the next generation.

Assess your financial risk appetite

Our risk appetite can change over time; it can increase or decrease. While making any investment, it is essential that you evaluate your risk appetite carefully.

When thinking about investment risk, you need to consider financial factors such as inflation, volatility, interest rates, time horizon and investment allocation. Is your level of investment risk reflected well in your financial plans for the year?

Set your budget

Everyone needs a budget. It helps you prepare for retirement and emergencies, realise your financial goals and ensures you don’t spend money you don’t have.

Is your money allocation on track to cover all your financial needs, whether you are saving and investing, buying property, travelling, dining out, or purchasing luxury goods, art or cars?

Entrepreneurial aspirations

Whether you are looking at buying, selling or evolving your business over 2021, maximising your liquidity and managing your wealth will be key to success.

Current trends

With the continuation of working from home, many people are leveraging this period as a time of reflection. They are moving forward with plans that have been on the backburner for a long time. They have also been interested in learning more about ESG investing.

The dawn of a new year is traditionally a time to continue good practices or review areas in your life for improvement, including your wealth and finances. No matter your financial goals, the most powerful tool at your disposal is a plan.

It is important to regularly review your wealth and financial needs all year round, but a small change in behaviour today could make all the difference to your future. So, stay invested.

Ali Hammad is the market head of private banking for the Middle East and North Africa at Standard Chartered Private Bank