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Do you need a financial health check? Here's how to tell

By Sam Instone - May 15, 2024

Do you need a financial health check? Here's how to tell

I love catching up with my colleague Damien, Managing Director of AES Health. 

He's never shy in sharing his views on how we can improve corporate health insurance/employee benefits, much like me with personal financial services. 

We also enjoy the parallels between our prospective professions.

Personal finance, like medicine, requires discipline, prudence, and timely actions.

And just as physical health depends on preventative care and informed decisions, monetary well-being relies on sound financial habits.

While every investor has unique circumstances and challenges, it’s helpful to lay out the path for those who want to embark on a successful journey.

As we navigate our financial journey, having a clear and precise plan is paramount.

So today, I aim to provide just that with a well-crafted financial prescription.

By mirroring a medical prescription, it aims to curb financial 'bleeding', stabilise your finances, and guide you towards sustained financial health.

Financial healthcheck

Stop the bleeding

The first step in any financial recovery is to "stop the bleeding".

Addressing poor-quality debt is crucial in this phase.

High-interest debts can drain your budget and impact your ability to save. Pay your debts promptly, prioritise them appropriately, and prevent unnecessary financial stress.

Another crucial element in stopping the bleeding is controlling your expenses to avoid "lifestyle creep".

A conscious effort to live within your means and forego unnecessary expenses can preserve your wealth in the long term. You can take tangible steps to control your spending by setting a budget and consciously tracking it.

An emergency fund is an underappreciated but vital part of any financial plan. It acts as a buffer against unexpected expenses and enables you to sustain financial shocks without going into debt.

Lastly, insure yourself against unexpected health surprises. This should not be considered an "extra cost" but a necessity. With this safety net in place, you can prevent health surprises from derailing your financial plan.

Stabilise the patient

Once you've effectively stopped the financial bleeding, it's time to stabilise your financial health.

Begin by "paying yourself first". This principle encourages you to invest regularly and even slightly more than you feel comfortable with. Invest wisely into diversified assets.

Investing in global equities makes you a part-owner of the 'Great Companies of The World' (GCTW). You know these companies because you likely buy their products regularly. Owning a whole basket of them means you are diversified against any one company going out of business.

Make sure you understand what tax breaks are available to you. In most countries, this will be pensions and tax-free investment accounts. These offer valuable opportunities to increase your saving and investment potential.

Path to recovery

Having stabilised your finances, the focus now shifts to long-term financial recovery and wealth building.

This involves updating your financial plan at least annually. Regular updates ensure your plan adjusts to life changes and market fluctuations.

Become a person who acts proactively rather than reacting emotionally to world events.

Responding to market noise can lead to poor investment decisions caused by panic or euphoria. Instead, maintain a long-term perspective and let your financial plan guide your actions.

Understanding the financial side effects of being a long-term investor, especially market volatility, is paramount.

Familiarise yourself with the idea that markets fluctuate naturally and that temporary declines are to be expected. A diversified portfolio can help insulate against these declines while benefiting from long-term market growth.

A well-trodden path

The journey to financial success will require hard work and dedication, but it's achievable.

There are no shortcuts to success, but every successful investor has walked the path laid out above.

By following the above prescription with consistent action and discipline, you’ll be well on your way to achieving your cherished financial goals. If you want your financial blood pressure and pulse check - just email me and I can send you a quick link that will help with these key numbers.

And if you need help with any group medical insurance, why not give my colleague Damien a follow on LinkedIn, to find out what he prescribes.