Hello and welcome to 2015. We hope your lights are on, and ready to shine in the new year. It has been an interesting start to the year and oil has shown its value can move in many ways very rapidly. The rand is not the only thing subject to wild price moves. We’ve already got one new ‘word’ going – GREXIT (Greece exiting the Euro), and the parliamentary squabbles look set to resume. To ensure our finances don’t follow bad paths today we look at the basics we need to get right in 2015, and some global investment themes for the year ahead.

Get the basics right and never forget to get back to basics

In the management of personal wealth and personal finances the basics matter.

1. Money In versus Money Out

Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence],

result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six,

result misery.

Mr Micawber, David Copperfield

The desirable situation is when Money In is greater than Money Out. If, on a consistent basis it is less than, debt mounts. Debt mounts exponentially. Debt is more costly when interest rates are rising, and this could happen in 2015. Call it living within your means, spending less than you earn, smart money management. It’s basic, easy to understand, not hard to like.

2. Money Out must include saving and investment

Expenses always rise to meet income.

C. Northcote Parkinson

If you are waiting for the day when you spend less than you earn to save – you may end up never saving. This is the pay yourself first maxim. Your savings account and retirement plan and financial goals are as important as other expenses. Compromise at your peril.

3. You really need a budget that you will follow

Engage in some financial forensics that will show you where the money goes, and then tailor it to where it should go. Peter Sander writes in The 250 Personal Finance Questions Everyone Should Ask that financial forensics is the first step in coming to grips with your finances and building a plan.

There must also be some flexibility in a budget – take into account spending habits – not all expenses are evenly incurred throughout the year, you may need extra funds (think back on past years’ unexpected expenses.)

4. Get or review a financial plan

Your financial roadmap to your financial future. It must reflect you, your family, your future hopes and dreams and your current situation. An independent eye of an expert is always a good idea. We are not objective about money, and many of us have money baggage – a professional financial planner can make sure we minimize this in our money management.

Sander says there are three character traits to be financially successful:

1. Awareness – financially aware people keep track of their finances and how they are doing versus their plans

2. Commitment – for everyone affected by your budget

3. Control – keep the big picture in mind and avoid the impulse spends and temptations.

Global investment themes

If we are truthful we know very little about 2015. It is longer than 2014 by one leap second (the second is being added on June 30th – something to do with atomic time) – but will comprise 365 days. There will be elections, market moves in many directions, currency moves, turmoil, weather issues, more talk on hot topics and some new tech gadgets. There is also a cricket world cup and a rugby world cup.

Much of what we experience in 2015 is still an unknown that at best we make an educated guess on and plan around various possible scenarios.

“Things will almost certainly pan out differently to how we expect, sometimes very much so,” says Tristan Hanson, head of asset allocation at Ashburton Investments (International).

“The future is highly uncertain,” but as Hanson notes it is the fund manager’s job to generate returns not predict the future. Major investment themes he lists for 2015 are:

1. Low inflation, reasonable growth and low interest rates

There is much speculation on a rising rate cycle in the US, with some forecasts already putting a month to the event. In current conditions, a rise looks likely in 2015 – but a small rise is expected and rates are forecast to stay low in 2015.

According to Hanson expectations are for slightly higher growth globally in 2015 – led by the US – around the last 35 years’ average of 3.5%.

Inflation – that’s doesnt look like being a big global issue.

2. Monetary policy divergence

Already starting to be seen in Europe and the US and Japan. “Reflecting relative economic conditions, we expect the Federal Reserve to raise interest rates, likely starting some time between June and September, while we forecast the ECB to announce a large-scale Quantitative Easing (QE) program in Q1,” says Hanson. “This will represent a huge divergence in policy, which has already been reflected to some extent in the recent strength of the US dollar against the euro.”

Write off America at your peril. Hanson comments: “We expect the US dollar to continue its 2014 trend of appreciation against the major developed market currencies and many in emerging markets (EM). This view is already shared widely, which admittedly is a concern to us, but nevertheless seems the most likely outcome in our eyes.With many emerging market currencies having depreciated significantly late in 2014, it is quite plausible that on a total return basis some EM currencies outperform the dollar. That said, we expect the general trend in spot exchange rates to favour the US dollar. Despite its 2014 gains, the US dollar does not look expensive in valuation terms against a basket of currencies.”

4. Moderating Chinese growth

An ongoing theme as the Chinese economy changes and matures. “China is on a multi-year path of slowing growth,” says Hanson.

5. Delivering the promised reform

“2015 will be a very important year for those political leaders who have promised significant reform over the past year or two. Prime Ministers Modi of India and Abe of Japan, as well as President Pena Nieto of Mexico spring to mind in particular; but the reform process will also be crucial in China too.”

The aim of these reforms is to promote growth and investment.

Unfortunately, Hanson says they have low expectations when it comes to Russia, Brazil and South Africa. But anything can happen.

6. Consequences of a lower oil price

An excellent example of a surprise. Some will benefit, some will not.

7. Political risks in Europe

Greece needs to vote in January, Spain is going to the polls later in the year. The emergence of strong left-wing parties, Hanson notes, does heighten uncertainty and risk.

8. UK general election uncertainty

In May the UK votes. “As in 2010, no party is likely to achieve a majority, meaning another hung parliament requiring a coalition government,” says Hanson. “But the collapse in popularity of the Liberal Democrats, the rise of the UK Independence Party and resurgence of the Scottish National Party (at Labour’s expense) creates enormous uncertainty as to which government will emerge following the election.”

Whichever party wins – “some big political questions will remain.”

For the investor: “We continue to favour equities over bonds within our Multi Asset Fund range, although we expect overall global equity returns to be more muted in the next five years compared to the previous five when they averaged around 10% (nominal USD terms).”

The opinion and comment in this newsletter is comment and opinion only and is not intended as and should not be taken as personal financial advice. For all investment, and financial decisions please consult a professional financial planner.