2021.08 Changing Times; are you matching it with Changing Financial Practices/Habits

I have just had a whole week of audit! As always the build-up is usually very tiresome; extra checks to make sure all is as should be, all balance sheets reconciled and preparing the financial statement, while trying to stay on top of the day-to-day at the same time! This year’s was a different kind though: a virtual audit (just about completed our audit last year before lockdown 1.0 kicked in). For some reason I can’t quite explain, I was more involved in the field work than I usually am with an in-person field visit (as the week of on-site testing is called), but hey it’s more or less over now; just a few ‘t’s to cross and i’s to dot and that would be it for 2020 audit. I wonder if it would be another virtual one next year… who knows what lays ahead!

Oh gosh, didn’t mean to go off on one there! How’s your week been? Hope it’s been productive; anything particularly interesting happened at your end? Please share in the comments, I am interested.

Having just completed a different kind of audit, I’ve been mulling over how everything has changed! It is my opinion that times are different and there is no going back to how things used to be e.g. I don’t particularly see a time when everyone would be expected to go to work in a designated workspace in the same manner as before; employees have proven that they can be trusted to deliver without being in the office and employers also have saved quite a bit on office space since lockdown (those who have been able to get out of or end their leases) and are not likely to want to incur unnecessary office space bills, if it can be helped. We also gave to get changing I believe!

With regards our finances (which is the main focus of my post, though I seem to have written almost a page of unrelated stuff already) the changes have been long staring us in the face, we just hadn’t paid much attention to it. Gone were the days of high interest rates which formed the reason our parents’ main financial lesson for us being ‘save for the rainy day’; did your mum also use to tell you that? Check out the chart below which shows interest rates on savings accounts (in U.K.) over the years; can you see what I see?
Looking at the chart, I now fully understand why my mum used to remind us about the need to save as I am sure the rates must have been even higher pre-1980! Unbelievable though; interest rate of almost 14% just in 1990 and about 6% in 2008 (I guess that was before the financial crisis)! Only about 3 years ago, it was already down to about 2%! The pandemic has only served to bring the plight to the forefront for most of us; so even though the rates are closer to 0% than 1% right now, it’s been a gradual downward spiral (a change that’s been happening over time), rather than something brought about solely by the pandemic.

Not to belabour the point, the question is what are you doing about it (are you continuing to follow mum’s advice) or making a change and adapting your financial practices to the changing times?

To be honest, looking at the above chart makes me feel like I have been sleep walking for years! Each time I come across facts like this, I ask myself whether prior to the year gone, I had been financially literate (in spite of being a finance professional)! One of the things I am slowly learning is that working in the field doesn’t make you financially savvy (which I define in this instance as utilising your expertise in your own personal life)!

Based on what I have learnt in the last year, it is my opinion that you’ve got to be intentional about your finances (just like everything else). It is only with clearly defined goals that attention gets paid to the things that would enable achievement of those goals.

Anyway, back to the question at hand, what are you doing? I tell you what I’ve been doing, a lot of which I have shared in previous post – diversifying that’s what!

In a previous post , I referenced discussions about negative interest rates. In the last couple of weeks, the Bank of England has been quoted as asking banks to prepare for the possibility of negative interest rates. It seems to me that it is only a matter of time before it happens! Think about it, interest rate of below 1% have been with us for a while and the we are being hit by all sorts of calamities that are inadvertently affecting the world economy, which means it is only a matter of time before it becomes a necessity rather than an option, for monetary policy makers to dig into their toolbox and utilise a different tool (negative interest rate) than one they’ve used for a while now,  and it seems the Bank of England is ready to utilise that tool.

If negative interest rates do kick in, it would be just one more thing to cause the erosion of the value of money. To me therefore, it seems the end to taking comfort from watching your bank balance is already in sight and it is now a no-brainer that it is so much more important now to get intentional about one’s money; what are you holding it for?  Is there a better way to hold it than in a savings account?  If you don’t know what the alternatives could be, speak to a financial adviser, read, research, etc.  

I have tried my hand at different investments and continue to do so; some more than others. I also understand some more than others; but I am trying them all. I am learning that some are more secure than others.  The uncertainties in the world would however not allow me play it safe and only invest in what is deemed safe, because in my opinion, we are in uncharted waters and nothing remains as was; so what might have been safe in prior times, may not necessarily be the case now.  I am as such, trying my hands at it all; in different proportions and doing more of what I am comfortable with, but also a little bit with some of the ones I don’t completely feel comfortable with. I am also not getting carried away by all the hype in the media about bitcoin or the ease of investing in the stock market (made possible by the platforms like Traidng 1-2-1, Freetrade, eToro, etc.) resulting in social media postings of profits being made in investments! In summary, I am staying in my own lane and running my own race as best as I can.  It could be tempting to put all one’s funds in a certain investment vehicle, but I continue to tread carefully and to read and learn, but more importantly; I diversity.

For older people I would suggest a cautious approach, whereas the younger ones could take a riskier approach if they felt comfortable with it, given that they have a lot of time ahead to recoup any losses, but most of all, one’s risk appetite would guide the investment strategy engaged.

Main thing, don’t be overly cautious and watch your hard earned money slowly die! Sometimes, being cautious could be more dangerous than taking action, and this feels like one of those times to me.

(Remember though, before you begin investing, pay off/down bad debts and fill up you emergency pot (at least six months of your living expenses))

Do your own research; these are all my personal opinions and me sharing my personal journey. It shouldn’t be taken as financial advice.

I however invite you to share your own journey and experiences, am I the only finance professional only just waking up to the realities beyond the ledgers and financial statements and finding themselves a bit wanting? I’d really like to know.

Who’s more comfortable watching their bank balance and still thinks that’s the right thing to do? I’d be interested to know why they think so.


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