Business

What's in store for your finances in 2022?

Businessman putting wooden block cubes for upload preparation progress 2021 to 2022 , Merry Christmas and happy new year business concept.

ARE your finances in order for 2022? If not, there are a number of things you can do.

This year has been a turbulent time, in all respects.

The second year of the Covid pandemic has taken its toll on us, not least on the financial side.

Inflation reached 5.1 per cent in November, putting pressure on us all as we look around for ways to preserve the value of our money. There is not a savings account alive that can compete with that.

No matter where you put your cash, its spending power is being eroded.

The government, meanwhile, was forced to fund the furlough scheme and other economic interventions this year, and, inevitably, they have now been presented with a whopping bill.

The costs of that expenditure have to be recouped. That will be the major financial challenge of 2022. Unfortunately, we will all be asked to chip in.

It’s no surprise. The writing was already on the wall.

One part of the triple lock on the state pension, which would have raised the pension in line with the average wage, has been suspended, as it would have been a massively expensive increase.

The coming year will be a time when we will need to look to our money like never before. Why? For a number of reasons.

First, our bills will become more expensive, and in particular the cost of petrol and diesel, domestic fuel and energy.

We will feel this next April, when the energy price cap review kicks in, and we are fully hit with increases in wholesale prices, particularly of gas.

Given the high inflation rate, Mr Bailey and our good buddies at the Bank of England are unlikely to keep interest rates at the current low level of 0.1 per cent. Any increase could hit those of us who have variable rate mortgages by driving up our monthly repayments.

Tax on investments is also to be increased, and if you are lucky enough to make more than £2,000 in dividends, the taxman will be wanting his cut. Except, that is, if you have your money in an individual savings account (ISA), in which case it is protected from him, and you pay no tax.

Could 2022 be the year to open an ISA account, if you don’t already have one?

Unexpected bills are also likely to be a topic of conversation this year. The Office for National Statistics (ONS) is telling us that almost half of people (44 per cent) faced one of those this year, with the average amount of £1,269.

The ONS also said in November that over a quarter (27 per cent) of us would be unable to meet a bill of £850, if it were to hit us out of the blue.

The experts recommend that we build up a nest egg equal to at least three months’ expenses, or six months’ expenses if possible, in order to prepare ourselves for such unexpected events.

There are many ways to make your money work harder for you in 2022.

One good way is to talk to a financial adviser!

Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com

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