If you don't have a financial plan, you won't have any accountability and direction.
Without this, what's driving your thoughts and actions?
I encourage you to give this some thought today and once you have an idea of where you're headed...
These 21 ideas will help keep you on track.
Most of you are investors already.
That’s great news.
But I encourage you to invest more.
Ask yourself where you can cut down on your spending.
Or find extra to add to your portfolio.
It may seem like a small amount now but, over time, compounding can turn your million-pound investment into multi millions.
2. Find a professional 'new model' financial planner
It’s no secret.
International financial services has chequered history.
'Product salespeople' at private banks, brokers, insurers and IFAs have been extremely successful at exactly that.
But not all hope’s lost.
There are a few advisers and planners who are certified as fiduciaries and put clients first before anything else.
3. Reviewing your will
No one wants to think about their mortality especially after the year we've just had.
But tomorrow’s uncertain.
Despite our best efforts to be healthy and cautious, it’s prudent to be prepared for any and all eventualities.
Review the will you have in place to give yourself peace of mind that should anything happen to you, your family will be taken care of.
4. Spend less than you earn
There’s a general rule of thumb called the 50/30/20 rule to wealth.
It says that 50% of your salary should go towards things like accommodation, food and bills.
30% should go towards things like entertainment, eating out and shopping.
20% should be saved.
It helps prioritise where your money goes.
But to actually keep track of individual spending, a budget is a good idea.
(As boring as that sounds).
Keeping on top of each purchase is vital if you want to control your spending.
5. Don’t ignore inflation
You’re investing for your goals, have a plan in place and you’re saving regularly.
You also know how much you need to make those goals happen.
But have you accounted for inflation?
The fact that your money loses value over time by up to 3% a year?
This means every year, you should invest at least 3% more than the year before so you won’t come up short in the long run.
6. Teach your children about saving
Warren Buffett has shown us how powerful investing early can be.
Teach your children about the importance of saving from a young age and how compounding works in their favour.
Get them to make saving a habit as early as possible.
They can earn money from chores or good behaviour, spend part of it and save the rest.
Then, watch the money grow.
7. Get additional insurance
If you’re living and working in the UAE, healthcare cover is mandatory.
That means your doctor’s bills, medication and overall general health are taken care of.
But what if you’re injured or have a chronic illness?
Maybe you’ll need time off from work temporarily or even permanently.
Critical illness or disability cover will help cover those costs so you can focus on recovering without the burden of stressing about your money.
It’s worth looking into especially when you have a family.
8. Have more than one financial goal
Retirement is everyone’s ultimate goal.
It’s where most of us most likely prioritise our saving.
But what about smaller goals like buying property?
Your children’s education?
Those require different investment plans with a short to medium-term view.
Different risks and asset allocations may be necessary.
Having various goals to look forward to along the way to retirement makes life even more enjoyable.
9. Read more
I’m going to mention Warren Buffett again.
Not only is he the most successful investor ever, he is also a voracious reader.
Apparently consuming 500 pages a day.
Getting to grips with the world of finance is important if you want to have clarity, confidence and control of your future.
10. If your estate is large – don’t manage it alone
The larger your wealth, the more complicated financial matters become.
Have you considered all tax implications?
Do you review your will regularly?
Are you 100% certain you haven’t missed out on anything important that may cost you or your family dearly?
A properly set up financial plan frees up your time to do things you actually enjoy.
Leave it in an expert’s hands.
They’ll go through the drudgery and make sure every detail has been considered…
Quite often saving you from expensive mistakes or oversights.
11. Look beyond the headlines
Daily market news and commentary can challenge your investment strategy.
They may confuse you and possibly cause anxiety.
And because bad news sells…
Things like market crashes are emphasised.
Making even the most head-strong high-net-worth investors question their discipline.
If you ever feel worried or doubtful, get an expert second opinion.
Better yet, block out the noise and focus on your end goal.
12. Avoid market timing
I’m sure there’ll be many market predictions around this time.
A new year brings new forecasters and market gurus out from the woodwork.
The evidence has proved time and time again that the markets are random.
No one can guess how they will perform tomorrow, next month or next year.
Maintain a globally diversified portfolio that will reward you when the markets flourish and protect you when they don’t.
Your patience will be greatly rewarded over the long term.
13. Focus on what you can control
Investing is emotional.
As humans, it’s normal to feel angry, anxious, happy or sad depending on the markets but no one can control their movements.
It’s best to focus on what you can control.
Cost, asset allocation, risk, discipline and patience all greatly impact your returns.
How you control them is up to you.
14. Be comfortable with your risk
You can’t get away from the fact that all investing involves a degree of risk.
Risk is defined as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
It takes on many forms (concentration risk and liquidity risk for example).
In fact, not taking on enough is also risky itself!
In general, markets reward investors for the risk they take.
Remember, taking on more doesn’t guarantee higher returns.
But if you stay invested and are able to resist the temptation to dip in and out of the market, you should eventually be rewarded for the additional risk you take.
15. Resist chasing market performance
I said this many times.
Chasing market performance is a waste of time.
Sure, you might get lucky now and again but this will be just that…
There's a mountain of evidence which supports the randomness of markets and proves that chasing performance is basically akin to gambling.
So if that’s how you get your endorphin rush, I’d suggest you stick to roulette.
16. Have emergency savings (3 times your salary)
Your future self will thank you for this one.
An emergency fund is a pool of liquid money set aside for unforeseen expenses like a medical expense, car repair or even keeping yourself afloat between jobs.
Having this money can be the difference between a small bump in your financial life and complete disaster in your entire life.
Give yourself some freedom and peace of mind.
Plus, keeping that money separate from the money you use to pay bills can help curb frivolous spending (see tip 4).
17. Review your portfolio once a year
Remember, because different assets perform differently, the initial weighting of your portfolio will drift over time.
As equities outperform bonds over the long term, a portfolio will generally become riskier.
It’s usually a good idea, therefore, to rebalance your portfolio, perhaps once a year, to restore the original asset allocation.
18. Get to grips with compounding
Compounding is the return on your returns.
It’s what mathematicians call a geometric progression and the curve only gets steeper over time.
The American economist Burton Malkiel said:
“The majority of investors fail to take full advantage of the incredible power of compounding – the multiplying power of growth times growth.”
Why not try our compound interest calculator today.
19. Cut your IHT bill down to size
International professionals from the UK risk making a number of expensive tax mistakes – and not planning for IHT is one.
Depending on your personal circumstances...
You may be able to use a trust or trusts, wrapping assets and investments like an offshore investment bond inside to reduce your estate’s future liability.
This requires careful planning and, most likely, the expertise of a financial planner.
20. Get to know your investments
It's entirely possible that what you have now may have been the best policy available at the time.
But times change and so do your needs.
Is your investment really keeping up?
Better, cheaper, higher-returning options now exist.
What was right for you 5, 10, 15 or even 20 years ago might not be serving you so well now.
Which leads me into my final tip:
21. If you are facing a storm, run INTO it
In Rory Vaden’s podcast, he explains the interesting behaviour of buffaloes and cows.
When cows see a storm approaching, they run in the opposite direction.
Because they aren’t very fast, the storm catches up with them.
They end up running with the storm, prolonging the amount of time they have to endure it.
Buffaloes, on the other hand, actually run directly toward a storm.
So, it passes over them quickly and their exposure is limited.
See where is this going?
If you know your current banker, broker or adviser isn’t acting in your best interests, or your investments are performing as they should…
Or worse, you aren’t sure….
Tackle it head on.
Sacrifice brings desired results quicker.