Why a strong financial mindset is crucial in a time of changing fiscal policy

14 October 2024

The UK’s financial landscape has been shifting at a rapid rate for several years, especially since the Covid-19 pandemic hit unexpectedly in 2020.

For instance, in the last two years, the government has frozen or decreased several key tax-efficient thresholds and allowances. This is known as “stealth taxation” and has affected those who pay:

• Income Tax
• Capital Gains Tax (CGT)
• Dividend Tax
• Inheritance Tax (IHT).

What’s more, with inflation  having reached a 40-year high in 2022, and interest rates remaining higher now than in the 2010s, we’re living in a time of high costs that are having an effect on many households.

Plus, chancellor Rachel Reeves is set to deliver her first Budget on 30 October. According to the BBC, speaking at the Labour Party Conference on 23 September 2024, Reeves assured the audience that there will be “no return to austerity”. However, she does claim that the “Budget for economic growth” will enact firm changes to make up for the “worse-than-expected inheritance” left by the Conservatives. More positively, Reeves promises there will be no increase to Income Tax, National Insurance, or VAT in her upcoming Budget. 

Anticipating these potentially significant changes to fiscal policy, while managing the effects of recent shifts in the UK’s economic landscape already, you might find yourself losing confidence in your financial plan – and if so, you are not alone.

Keep reading to discover how to achieve a strong financial mindset and why this is important.

3 ways to build a strong financial mindset

1. Tune out the media noise

While it can be helpful to keep up with financial news, constant media noise could blow any changes out of proportion and make you more worried than you need to be.

If you tune into this noise too frequently, especially ahead of the Labour Party Budget on 30 October or US presidential election on 5 November, you could find yourself feeling anxious and overwhelmed by the news. This could even lead you to take drastic action, which may not be necessary at all, and may even hamper your progress towards your financial goals.

So, while it may be impossible to completely ignore all headlines about the UK economy, the stock market, or policy changes, it may be wise to limit your exposure. And, when you do decide to do some reading and find out the latest news, make sure you’re taking your information from reputable sources.

2. Envision your goals

Did you know that envisioning your future self could actually help you build wealth more easily?

A study published by the BBC in 2022 revealed that participants who could clearly visualise their future self were more likely to be responsible with money.

The study (which tracked participants for a decade) found that a person’s “future self-continuity”, meaning their ability to imagine themselves in the future they want, could predict their life satisfaction 10 years later.

For example, as part of the research, participants were offered two choices: a reward now, or a larger reward later. Those who had better future self-continuity were far more likely to delay gratification and wait for the larger reward.

This research teaches us that it is crucial to keep your life goals in mind, even when unexpected events knock your financial confidence. Being able to picture what you want to achieve could help you remain calm and focus clearly on the financial steps you may need to take in order to get there.

3. Think long-term

If you’re worried about the upcoming Budget and any other future changes that may have an impact on your money, remember to think long-term.

There have always been uncertainties on the horizon when it comes to your wealth. From interest rate changes, to inflation, to stock market volatility, consumers have always had to adapt.

Remaining invested, staying calm, and talking to a professional could allow you to take practical steps and create a new plan of action if needed. Putting these steps into practice could strengthen your mindset over time, making you an unflappable saver and investor.

Get in touch to build a robust financial plan with the help of a professional

Here at Depledge, our mission is to help our clients confidently work towards their most treasured life goals. If you’re feeling anxious about fiscal policy changes, either recent or upcoming, we’re here to offer professional guidance.

Our financial planners can work with you to form a robust financial plan that can adapt, if necessary, to any changes that might affect you and your family.

You can also read our recent articles, which may provide additional insights and peace of mind:

• What is the 60% Income Tax trap and how may it affect you?
• Five failsafe ways to save cash in a time of rising costs
• Two common financial mistakes over-70s may wish to avoid
• Three lessons about retirement you could learn from the Olympics and Paralympics
• What is the chrysalis mindset and how could it help you enter retirement with optimism?
• Bereavement: Five actions your financial planner could help you take in a time of grief.

To speak to a qualified professional about what you’ve read here, or any other financial matter, email info@depledgeswm.com or call 0161 808 0200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change. The Financial Conduct Authority does not regulate tax planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.