The Ghosts of Christmas

LOOKING towards Christmas and all its family traditions, I am always reminded of A Christmas Carol by Charles Dickens. This year I thought a look at the financial ‘ghosts of Christmas past, present and future’ might be a bit of fun. Ebenezer Scrooge turned over a new leaf and everyone benefited; so how might this fable relate to our finances for the coming year?

Looking back, we see months of political and economic turmoil that created volatile investment markets and historically low interest rates. All of this is worryingly bad news for the average investor – particularly anyone relying on investment income.

So, in true Dickensian style, if we carry on as we are, what do we see? Well… more of the same! The political issues still abound, with an escalating stand-off between East and West and turmoil in the Middle East. Compounded by global economic downturns the Eurozone may return to recession, Greece might needing another bailout, the US is turning on the money supply tap again and… don’t forget a plunging oil price!

All of which spells a continuing low interest rate policy for some time to come and continuing volatility in markets.

You might think that a lower oil price is all good news and for some this is true, but it has a knock-on effect and may cause job losses in the Oil & Gas sector and cutting back on research investment as the lower price makes some production uneconomic and this could include Shale Gas developments in the UK.

So how would Ebenezer turn over a new leaf and make positive change? Well the key, of course, is to recognise that to continue without change is not acceptable. We must think about values and priorities and how resources could be applied in a better way.

Perhaps we should have a look in Santa’s sack to see what he might have to offer?

The first thing we can unwrap is a notepad and pen. With that we can make a list of our regular outgoings and any known capital expenditure that will arise in the next year down the left hand side of the page and add that up. On the right hand side, we can write down the sources of income that will be coming in and add that up too. Then we need a list of capital available, including any pension funds and other investments.

If your income is more than your expenses already, then you can look to medium term investments for your capital. If you have an income shortfall, you can see how much you need to make up from your capital and you have taken the first steps towards a financial review.

Now Santa’s sack has a number of other surprises waiting to be opened too ranging from low risk investments producing 4% income to pension fund flexibility in April – the like of which has never been seen before – it’s just waiting to be unwrapped.

As tiny Tim would say, “God bless us everyone”.

Merry Christmas.