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Regrets, I’ve had a few - have you?

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

From Black Friday to Christmas and everything in between, the season of over-indulgence, greed, gluttony and regret is upon us.

We might not feel the effects until the New Year, but come January you can bet a fair few of us will be nursing sore heads, sore wallets and a general sense of unease as we wonder why, oh, why we did it - again.

Call it FOMO (fear of missing out) FOMAD (fear of missing a deal) or good old fashioned impulsiveness, but it’s estimated that we each spend more than £20,000 over our lifetime on needless spending.

And according to the findings1, women are the biggest culprits, with 45% claiming they get regular FOMO, compared to 36% of men.

Overall, 37% of Brits feel jealous if their friends are having a night out without them, while 30% feel envious if a friend has landed a good deal on something in a sale.

The study shows we spend £3,276 in an adult lifetime on nights out that we do not really want to go on, and a further £3,087 on clothes we only bought because someone else was wearing them.

We will also splash out £2,772 on stag and hen dos we actually dread but are too afraid to turn down because of- you guessed it - a fear of missing out.

A not insubstantial £3,087 is the overall amount we will spend going to new bars and restaurants we’ve seen friends at – or on social media, in a bid not to feel left out – while £2,709 will be spent on “must have” tech items which everyone else seems to have.

Overall, it adds up to a grand total of £22,270 that we blow simply due to fear of missing out.

Regrets? Oh yes, we clearly all have a few.

It’s time to face the music

But while a little frivolous or impulsive spending here and there may not cause too much harm long term, there are some financial regrets that you want to avoid altogether. And pensions and retirement is one area which, if you ignore it, can cost you dearly.

The way to avoid financial regrets is to face facts – and plan ahead. If you recognise yourself in any of the following it’s time to take steps now. That way, when the time comes you will be able to confidently say, Moi? Je ne regrette rien.

1. If you’re suffering from FOLITL (fear of leaving it too late)

If you’re nearing 55 and have yet to retire, and you’re the one out of the one in three who, according to one survey2 haven’t even started your retirement planning yet, it’s time to get your skates on.

Even if you have a workplace pension it pays to build on what you’ll have for retirement, and a SIPP is a good way to save and still get those all-important top-ups from the government.

If you pay into a SIPP or another personal pension, HM Revenue & Customs will top-up your contributions at your basic rate of tax. This means you only have to make contributions of £2,880 a year to have a total of £3,600 added to your pension pot. Higher rate tax payers can claim the additional tax break through self-assessment.

In the tax year 2017-18 the standard rule is that you’ll  get tax reliefon pension contributions of up to 100% of your earnings or a £40,000 annual allowance, whichever is lower. And that is in total, across all your pensions.

Even if you can only afford to put a tiny amount away each month – do this regularly and it could make all the difference to your financial security when you do come to retire.

2. If you’re suffering from FOBTY (Fear of being too young)

You can never be too young to start a pension. In fact, the sooner you do, the better. Time is on your side, so you can save a small sum and then sit back and watch it grow.

Any contribution from your employer into your workplace pension scheme is a no-brainer. Grab it with both hands, because that’s money you’re getting on top of your salary. While you can’t actually get your hands on it until you’re at least 55, by then it will have grown into a nice little pot of cash for you.

Any additional contributions you make will attract tax relief. This means that if you pay through your pay slip you end up paying less income tax, because contributions are taken out of your gross i.e. untaxed pay, so reducing the amount you pay tax on.

3. If you’re suffering from FOPYF (fear of putting yourself first)

As a mother it may be counter-intuitive to put yourself first - ever - but it’s essential that in this instance you do.

The fact is that too many women are increasingly putting their future financial security at risk by focusing on motherhood and neglecting their own financial futures.

One report3 shows how women’s otherwise strong focus on saving for their future, tends to get forgotten once they have a child.

It found that, while nearly a third (30%) of women at 30 think they are likely to save more for retirement in the next 12 months than they do currently, by the time they reach the age of 35, when 56% of women have at least one child, other priorities take centre stage and that figure drops to just 12%.

With over half (52%) of babies born to mothers aged 30 and over, women at 30 are on the brink of a major shift in priorities. Four in 10 (40%) expect their financial priorities to change in the next 12 months because they plan to start a family.

With the pensions gender gap currently sitting at 40%, the fears of experiencing a shortfall in retirement is still a reality for many women.

The remedy for it all

Generally, the longer you have, the easier and cheaper it is to make your money grow and, most importantly, the harder you can get your money working for you.

For ‘big ticket’ items with a long timeframe, like buying a property, saving for your children’s education and planning for your retirement, time is on your side, which makes it easier to save without the sacrifice.

Make sure you use your annual ISA allowance and make regular savings part of your plan. This enables you to drip feed money into the stock market, which means you can save more modest amounts as well as get the benefits of pound/cost averaging, so you buy more shares when the markets are down. The longer you have, the better off you will be because you also benefit from the power of compounding, which is when your money really works hardest for you.

With a Fidelity ISA you can save as little as £50 a month and choose where and how you invest with our Select 50 range of specially-selected funds.

And in these situations it almost always pays to opt for the stock market over cash savings. While it’s good to have some cash to hand, so you have financial security and resources to fall back on in an emergency, overall, investing in the stock market will get your money working harder for you.

Sources:

Research of 1,500 Britons was conducted in October 2017 via VIGA research,for Broadbandchoices.co.uk

The Real Retirement Report is designed and produced by Aviva in consultation with ICM Research and Instinctif Partners. The Real Retirement tracking series referenced within this report has been running since 2010 and totals 24,791 interviews among the population over the age of 55 years, including 1,193 in May 2016 for the latest wave of tracking data (Q2 2016).

Data has been taken from the Scottish Widows Pensions Index and the Scottish Widows Average Savings Ratio. The research was carried out online by YouGov amongst a sample of over 5,000 adults, including samples of 30-50 women aged 30.

Important Information

The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change. The Select 50 is not a recommendation to buy or sell a fund. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.