3 mind-boggling lessons Alice in Wonderland could teach you about managing your finances in unpredictable times

If you feel as if your finances have been everything but “normal” this year, you aren’t alone.

Following the Covid-19 pandemic, which put financial pressure on many families, came a cost of living crisis that has seen inflation reach 10.7% in November 2022.

Plus, the Bank of England (BoE) has raised interest to a 14-year high of 3.5%, meaning your borrowing expenses could have risen alongside household costs.

What’s more, market volatility has caused concerns for some investors over the course of the year.

While we all hope 2023 will bring a smoother economic climate, there is no guarantee these turbulent times will be over soon. So, it could help to become accustomed to dealing with volatility in your finances.

During periods of unpredictability, sometimes it is useful to turn to the classics for inspiration. January 2023 marks 125 years since the death of Lewis Carroll, author of the universally renowned children’s tale, Alice in Wonderland.

In the story, Alice follows a white rabbit down a mysterious hole, in which she discovers a topsy-turvy land where nothing is as it seems.

If you feel like you’ve fallen down a similar rabbit hole when it comes to your wealth this year, read on to find out three mind-boggling lessons Alice in Wonderland could teach you about managing your money in an unpredictable world.

1. Take care and do your research before acting

When Alice finds herself in a deep, dark rabbit hole filled with doors, mysterious “drink me” bottles and “eat me” cakes, she doesn’t panic. Instead, she activates her curiosity and considers all options before proceeding.

On Alice’s finding of the bottle marked “Drink me”, Carroll writes, “but the wise little Alice wasn’t going to do that in a hurry. ‘No, I’ll look first, to see if it’s marked poison,’” she remarks. Her diligence pays off, and the potion helps her on her way into Wonderland.

If you find yourself in unfamiliar territory with regards to your finances, you might feel you are at a crossroads. You could wonder: should I act on my emotions, or consider all options before I proceed?

In all honesty, there is no hard and fast answer to this question – it depends on your unique circumstances and goals. Often, we forget that our relationship with our finances is emotional, and it can be tempting to act on a whim instead of considering the facts. Following your instincts is important, but so is doing your research.

So, if you come to a difficult decision in the months ahead – such as deciding whether to overpay your mortgage before interest rates rise, cashing in investments to create disposable income, or taking your pension early to help with costs – acting cautiously, avoiding knee-jerk emotional decisions, and working with a planner could help keep you on course.

2. Work with the allies you meet along the way

Although following your instincts can be a great place to start, nobody ever achieves financial success alone. Indeed, we all need trusted allies to make the best of a tricky situation.

As Alice weaves her way through Wonderland, she meets a slew of bizarre characters – many of who impart surprising wisdom that helps her on her journey.

For instance, when she meets the smiling Cheshire Cat, Alice is distressed about getting where she wants to go – although she admits, “I don’t much care where – so long as I get somewhere”.

You might relate to this quotation when it comes to your financial goals. You could know that you wish to accumulate wealth, but in such unpredictable times, have no idea how much you need, or how to achieve it.

Luckily, the Cheshire Cat has some wise advice to bestow: “Oh, you’re sure to get somewhere, as long as you walk long enough.” In the financial world, this could be helpful, too – by staying invested and continuing to chip away at your debts, eventually you could find yourself in a prosperous position.

For example, a study by Nutmeg found that, if you had invested for any given decade between January 1971 and July 2022, your chances of seeing positive returns stood at 94.2%.

As the time spent invested decreases within that period, so too would your chances of yielding returns. If you need guidance, your financial planner can help you keep “walking long enough” through the world of investing.

All in all, by turning to trusted allies, such as your financial planner, you could more easily manage your money in turbulent times.

3. Trust that eventually, things will return to “normal” again

While it’s unlikely you will wake up and realise that 2022 was all a dream, Alice in Wonderland could teach you to trust that usually, financial storms become calm again.

Although past performance is not a reliable indicator of future performance, history teaches us that the likelihood of the economy stabilising in the coming years is high. Just like the stability that followed the 2008 financial crash, it could be that things become calmer in 2023 and beyond.

What’s more, turbulent times can offer valuable lessons. Just as Alice’s dream of Wonderland teaches her to trust her curiosity, stand up to her enemies bravely, and to embrace her imagination, the economic volatility of 2022 could teach you financial resilience and problem-solving that comes in handy in future.

Plus, just as Alice returns to normal life after her trip down the rabbit hole, you could learn to enjoy the prosperous moments when they arrive, and appreciate the relationships – especially the one formed with your financial planner – you have nurtured during this topsy-turvy year.

Get in touch

For friendly advice that can help you on your journey through economic Wonderland, email enquiries@prosserknowles.co.uk or click here to request a callback from one of our advisers. We promise they’ll be human!

Please note

The value of your investment 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.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.