Being financially fit in 2025
In this article we will look at how to stay financially fit, or how to become more financially fit in 2025.
What does being fit mean? One definition is to be able to withstand uncertainties, and ‘bumps’. Physical fitness may therefore mean we can do more without negative impacts. Physical fitness is the outcome, but it doesn’t happen without the regular planning and work, doing the exercise every week is needed to achieve that position.
It is the same for financial fitness. Being financially fit is a state that you may have achieved, or that you might aspire towards this year. Getting there, and staying there, requires certain actions, planning and discipline.
How to get financially fit in 2025:
Prioritise. Take time to work out what is most important to you, both this year, and in the longer term. What are your goals? As is often said, if you don’t know what you are trying to achieve you won’t know if you have succeeded or not.
With clear targets, you can prioritise and make decisions both more confidently and also that feel better. There are no absolute right and wrongs, it is what is right for you. You may prioritise early retirement, or holidays every six months, knowing that one may impede the other. Your actions can then reflect your goals.
Position for the future not the past. Understand 2025 is different from 2024. Do not expect a repeat of last year. The top performers in investments markets in one year are rarely the top performers the following year. In other words, and in one of the most repeated phrases in financial advice: past performance is no indication of future performance. There are two critical implications of this statement:
The first is aligning your portfolio construction decisions with your goals AND your timeline whilst also taking factors into account such as your risk profile. If your goals are one year in the future you should be making vastly different investment decisions to if your targets are 20 years in the future. And:
Making sure that portfolio construction decisions are made also with a view to where the world is heading in the next 1-5 years, and NOT on what happened last year. And especially not on what the best performer was last year. This is where professional advice can be important, a neat segue to the next point.
Get advice. When it comes to putting your financial plan together, implementing the plan and managing and reviewing it over time, it requires a substantial commitment of time, and a range of skills and knowledge that the team at Black Swan Capital has taken years to acquire. If you want to do your plan justice you should either commit to becoming an expert in the area, or engaging an expert.
The other advantage of getting advice, is that is can provide you with am objective assessment removing personal biases, and helping you to face facts and make tough decisions. There is much research that shows getting professional financial advice can add value compared to those that try and go it alone.
Review. Things change over time. Sometimes dramatically, such as if you change jobs or move countries. Sometimes incrementally and almost insidiously, such as the impact of inflation, or expense creep as our cost of living increases with one item after another of small discretionary expenses, that cumulatively can have a large impact.
Change is not restricted to within our lives. The world changes, markets move through cycles, innovation creates opportunities and renders some sectors redundant.
Because we are living in this dynamic world, it is vital that you regularly revisit your financial plan, the decisions you have made, your goals, and your investments. We recommend clients meet with us at least twice a year for this purpose. If you haven’t reviewed your financial situation, even if you are not a client of Black Swan Capital, get in touch and we can make sure you are on track.
Build contingencies. This is a cornerstone of our advice to all our clients. In the words of Nicholas Nassim Taleb, the author that wrote the book “The Black Swan”, make yourself ‘anti-fragile’ so you are ready for a black swan event. He popularised this term the black swan an economic theory after which we are named.
The explanation is that black swans are events that are unpredictable and impactful on the world and your life. By their definition we do not know what the next black swan will look like, or when it will hit, but there is likely to be one. We therefore recommend that you build in contingencies to your planning so when the next event inevitably occurs, you are prepared. This means items such as having sufficient cash reserves and may also include more specific planning depending on your situation. Having contingencies in place creates peace of mind and reduces stress at times when the world is most unpredictable.
Follow these five points and improve your financial fitness in 2025.
Speak with the team at Black Swan Capital and we can help you to put together and implement a plan and oversee that so you can reach your peak financial fitness.
