We’ve reached the end of another financial year and so it is time to set my financial goals for the next 12 months.
Previously, I’ve tried to maintain a 50/50 split between my savings and investments, however I’ve now reassessed this strategy for two main reasons.
- Firstly, current interest rates for savings are so appalling that the return from them hardly seems worth the effort.
- My savings balance currently sits at around £10,000 – assuming a £1,500 per month personal spend, this gives me a little over a 6-month emergency fund to fall back on if my income dries up. Do I really need any more?
So, this year I plan to plough a lot more money into my investments than my savings for the opportunity of bigger returns.
Savings for 2021/2022
As mentioned above, I currently have £10,000 in instant access savings. These are split as follows:
- £5,000 in my Club Lloyds Current Account earning 0.6% on the first £4000 and 1.5% on the remaining £1000.
- £5,000 in my Marcus Savings Account earning 0.4% interest.
Over the course of the year, I aim to save another £8,000, bringing the total value of my savings to £18,000 (or 12 months emergency fund). I will probably put this in my Marcus account, however I will be on the lookout for better deals.
Investments for 2021/2022
In addition to my savings, I also want to use my entire £20,000 ISA allowance for my investments.
My primary investment vehicle is my Vanguard ISA, which is invested in their Global All-Cap Equity Fund (this returned around 40% over 2020/2021 and I’m hoping for something similar this year).
I’ve already banged £2,500 into my Vanguard this financial year (earlier today when I was rebalancing my portfolio) so I have £17,500 ISA allowance left.
I will be looking at other options for investment but the Vanguard is the most likely product I will use.
Goals and Plan
When goal-setting, I aim to set a high bar whilst also being realistic.
My financial goals for this year are:
- Save £8,000.
- Invest £20,000
Therefore, I need to ensure I earn at least £28,000 after tax, however I have already invested £2,500 into my ISA so this brings the total amount I need to earn to £25,500.
In addition, I will need to earn my living expenses of £1,500 per month or £18,000 over the year, which brings the total to £43,500 after-tax). Assuming a tax rate of 40% I would need to earn pre-tax profits of £73,000 per annum or £6,084 per month.
This is quite a lofty ambition, however, I believe it is doable. I earned just shy of £60,000 last year and last month (my best month on record) I earned £6,200. Also, I have some ideas to create additional profits this year.
So a monthly breakdown forecast would look like this:
|Tax & NI||£2,433|
I have forecast that the first few months of the year (during the Summer) will probably not hit the total needed but this will be made up during Autumn, Winter and Spring as my new ideas come to fruition.