4 tips to plan your finances for 2021
Year’s end is a good time to take a periodic audit of your finances – more so after such a rollercoaster year. ADIB is here to help with some friendly advice
With the COVID-19 pandemic upending life as we know it, 2020 pushed many of us out of our comfort zones. Along the way, we’ve re-evaluated the luxuries we once considered essential and have changed our outlook on several fronts. That sentiment could continue well into 2021: in August, 65% of respondents in a
McKinsey survey of 516 UAE consumers said they expected changes to their financial situation would last more until the end of the year, and 15% felt adjustments would persist into next summer.
As we look to 2021 with relief and hope after a year or surprises, it makes sense to re-evaluate our personal situations and plan for the near future. Use our four-step guide to audit your finances and prepare for the year ahead.
Re-examine your goals: Thanks to the pandemic, some of us now recognize the importance of close relationships, others find value in bigger homes with more space, and want more meaningful pursuits that enrich our lives beyond work. Take a moment to understand how recent experiences have led you to re-evaluate your outlook on life, from work to family to retirement. Redefine your long-term ambitions into a short list of action points to make it easier to achieve them.
Fine-tune your portfolio: Has the coronavirus changed your personal tolerance for risk? Many people have found themselves unwilling to endure the kind of sudden swings that affected equity markets this year. In addition, our appetite for risk changes with age, and we become more conservative. Take an audit of all your investments and realign your portfolio in line with your new priorities, exiting equities and adding in debt instruments if needed, or perhaps planning for a retirement home. Remember to diversify across asset classes.
Restructure your budget: The changes of 2020 should have already prompted you to consider changes in your outgoings. Perhaps you’re buying fewer luxury items. Certainly, you’re going to fewer brunches and eating out less. Take a moment to look back on how your personal burn rate – the amount of money you need to make it through the month – has changed. Then take action to live according to this new budget, while making small adjustments such as closing credit cards to save fees or cashing in on loyalty points.
Meet with your financial advisor: With new priorities and goals come new questions about investment asset classes. Regardless of whether you are making major changes to your financial situation, a new year is an excellent occasion to meet with an independent financial advisor to discuss your financial situation – if only to confirm you are on track to meet your goals.
A little careful planning goes a long way to ensuring lifelong financial security – but only with periodic reviews and audits. Take a moment to
do so today; your future self will thank you.