7 lessons we’ve learned from 2020

Published on December 14, 2020 by TFP Team Category: News

It’s no exaggeration to say that 2020 has been the strangest year many of us have lived through. Go back twelve months and who would have predicted that you might be working from home, wearing a mask to the supermarket, and meeting your financial planner by video call?

While we have lived through unprecedented times, this year has taught us many things. Here are seven of the lessons we’ve learned from 2020.

1. It’s important to keep calm, and think long term

One of the early consequences of the coronavirus arriving on European shores was that stock markets fell sharply. Indeed, in March, the FTSE 100 experienced its biggest daily fall since 1987.

At the worst point, markets were down by around 30%. So, it was entirely natural that you might have worried about your pension, savings, or investments and what such a downturn might mean.

2020 has taught us the value of patience. It’s likely that you’re investing for the long term – for your retirement, to help your children when they are older, or to provide a legacy when you’re no longer around. None of this changes just because a virus has spooked the stock market.

If your long-term goals and your attitude haven’t changed, It’s unlikely your plans will need to either.

Stock markets rise and fall. They did this year, they will again in the future. As Warren Buffett says: “The stock market is a device for transferring money from the impatient to the patient.” 2020 has taught us that we need to be patient, stick to our plans, and not make knee-jerk decisions that affect our long-term security. Which brings us to…

2. We need to be mindful of our own psychology

Over the years, behavioural economics has revealed many ways that investors — and investment advisers — can make mistakes or be fooled by things that are not what they seem.

In 2020 we’ve seen that there are many emotional biases and errors that can undermine our best intentions. From overconfidence to an overreaction to chance events, it’s easy to be swayed by biases.

In his fascinating blog, Dan looked at five common biases and how they might hinder your investment journey.

3. REAL financial planning is about more than money

We talk a lot about the life-changing power of financial planning. For example, we can show someone they have ‘enough’ to retire. This gives them the confidence to enter that stage of their life, and to do all the things they want to.

One of our key beliefs is that financial planning should be a means, not an end in itself. It should support you in your ambitions, help you to meet your goals, and enable you to do all the things you want to do with your life.

To showcase the key benefits of REAL financial planning, and how it can add huge value, we looked at how it differs from simple investment management, why it’s not the same as financial advice, and how financial coaching can benefit you.

4. Your business is not your pension

One of the biggest challenges that business owners face is to distinguish between how much they want to sell their business for and how much they need to sell their business for.

  • The ‘want’ number can cause stress, anxiety, less time with the family, long hours etc.
  • The ‘need’ number will provide clarity, focus, peace of mind and a sense of freedom.

As the two numbers are significantly different, it can pay to work with a financial planner to establish exactly what your ‘need’ number is. When you’ve found it:

  • You will be able to fully enjoy your business
  • You will reach a point where you are not reliant on the sale of your business
  • You will achieve financial freedom.

Read more and, if you’re a business owner, here are five things you should do to protect your financial future.

5. It’s important to have a plan

2020 has thrown many of our lives into disarray. So, it’s never been more important to put a plan in place – particularly if you’re planning to retire in the next few years.

If Covid-19 has led you to think differently about your future – perhaps you’ve decided you might want to retire sooner than you expected? – then you’ll need to start planning now.

Indeed, we even created your own Bucket List Oath that you should print out and display somewhere you’ll regularly see it!

From establishing how much is ‘enough’ to working out what provision you have already made, read our useful blog about why planning for retirement is so important if that day is on the horizon.

We also looked at what coronavirus means for you if you’re planning to retire in the next few years.

6. We can learn lots about financial planning from sport

In many ways, our role as financial planners is a bit like being a personal trainer. We’re here to coach you and guide you to help you reach your goals.

We’re no stranger to a sporting analogy, so this year we’ve learned why you should be careful of financial DOMS, why drawing down your pension is like a game of football (but not like the 2005 Champions League final) and what Ryder Cup star Rory McIlroy can teach us about financial planning.

7. It’s important to focus on things other than your money

2020 has been the most unusual year many of us will ever live through. So, as well as all the tips and insight we’ve provided concerning your finances, we’ve also shared lots of useful advice to support your life.

Get in touch

If you need reassurance and clarity in these uncertain times, please get in touch. Email team@tfp-fp.com or call us on 01621 851563.

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