If I could only be happy by matching my sister’s ludicrously high achievements, then I’d never have bothered getting out of bed.
As we get older, we’re no longer held to the high standards of impressive siblings. Instead, society has offered us far more wide-ranging goals, so we get to feel a failure on all fronts when we fall short. And our finances are no exception.
Take energy-saving, for example: it’s essentially the only way we can keep our bills down while the market is in such disarray, so we’re all making a bit of an effort. Previously I thought I was doing OK, especially given my habit of patrolling the house and turning things off at the wall.
Yet, it emerged last week that this doesn’t actually save as much money as most of us think – because of the assumptions baked into the calculations. Apparently, I’m not single-handedly saving the planet after all. I need to do more.
At the same time, it turns out that my super-efficient gas boiler is no good – despite the fact I paid extra for one with a higher energy rating. Now, the Government is going to offer a grant for me to switch it for a heat pump instead.
It’ll cost thousands of pounds to switch over, and my bills won’t be any lower, but if I don’t, in a couple of decades’ time, it’s going to end up being the kind of societal taboo that means house hunters will take one look at the airing cupboard and run for the hills.
It’s easy to think it’s not worth it, and I may as well just leave everything on, turn the thermostat back up, and go to hell in a handcart. However, I’m not going to let perfection be the enemy of the good. I can just do my best with what I have and upgrade when my shiny new boiler is older. It’s not just energy either. There are rules of thumb governing all kinds of areas of your finances, which can seem offputtingly hard to achieve.
Take the rules around your savings safety net: you should have three to six months’ worth of essential spending in an easy access account, which rises to one to three years’ worth in retirement. That’s very roughly between £3,000 and £6,000 for a single person of working age. If you’re currently sitting on emergency savings of next to nothing, this can seem like an enormous mountain to climb, and it’s easy to give up on the spot.
Likewise with your pension. After my years of single parenting and working for myself, my pension contributions had been pretty minimal for the best part of a decade, and I’ll never forget the horror of putting the details into a pension calculator and thinking there was no way I could ever afford to save what I needed to.
So it’s important to bear in mind the other key rule around pensions and savings: rather than aiming for perfection, we should save whatever we can afford, as soon as we can afford to do so. You don’t need to be perfect to improve your situation, and once you’ve started, and narrowed the gap, it’ll all start to feel far more manageable. Personally, after a good few years of playing pensions catch-up, I’m starting to feel more comfortable about my retirement prospects.
And it’s not just the world at large telling us we’re not getting close enough to perfection: we’re doing it to ourselves too. Among would-be first-time investors, often we’re so afraid of making a mistake, and falling short of perfection, that we don’t invest at all. And we miss out on the potential growth of our money while it sits in a savings account for years instead.
Pension investors can be put off in the same way, so they leave their pension pot in the default fund, because they don’t feel they have the perfect answer. And while these funds are designed to be averagely fine for the average person, it may not be right for you.
So, for example, the default will tend to have a broad mixture of different assets in it, so it aims for lower growth and lower risk. Early in your working life, it may make sense for you to have a bigger balance of your investments in shares, which will rise and fall in value far more, but tend to have more potential for growth over the long term. Sticking with the default could mean missing an opportunity.
We need to drop the idea of perfection, and think of investments in the same way we think of holidays. In the same way there’s not one perfect holiday, there’s not one perfect investment either. Instead you need to work out roughly what you want from it. With a holiday that might be a beach and a nice town, so you pick any one of the thousands of holidays offering those things.
With your investments you might want reasonable growth without taking too much risk. You can then use any number of portfolio tools online which will suggest a number of possible portfolios to suit you. You’ll need to read up on anything they suggest, to make sure it’s aiming to achieve exactly what you’re looking for, but it’s a really good place to start.
Perfection is great. If you’re like my sister, who has never met a team she couldn’t captain or an academic achievement she couldn’t ace, then good for you. But if you’re more like me, and perfection doesn’t come naturally, then don’t give up, doing your best is more than good enough.
Stark differences in house prices
The government issued some figures last week, looking at house price growth between April 2010 and April 2020, in towns across the country.
It found some stark differences.
The average price of properties in towns in 2020 ranged from £39,000 in Ferryhill, County Durham, to £1,050,000 in Northwood, North London.
Yorkshire and the Humber was one of only four areas where prices dropped in any towns over the decade: in Stainforth prices were down 4 per cent.
Overall, the price of flats and terraced houses have fallen during the decade more than other kinds of properties.
Most strikingly, the price of terraces in New Waltham dropped 55 per cent and in Dunscroft they fell 26 per cent over the decade.
At the other end of the spectrum in Yorkshire and the Humber, the highest price rises were in Royston (up 62 per cent), followed by Stocksbridge (53 per cent), Burley in Wharfedale (50 per cent), Guiseley (48 per cent), Kippax (47 per cent),Pickering (46 per cent) and Otley (46 per cent).
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