Editor’s note: This article was first published in June 2018. The financial advisers’ firms and affiliations it mentions reflect that time.
Although when it comes to personal finance there is universal advice such as controlling spending, saving and investing, there is also a necessarily individual side for each type of person: each person’s ambition, the risk they are willing to take, their fears and their priorities. And this is where we should listen to the advice of some financial advisers to help us create wealth, achieve financial freedom or simply improve our finances.
There is no ideal, profitable investment for everyone, because the type of investment, and the plan to follow, should be unique to each person.
Good financial advisers should take these factors into account, so when a client asks them, “What can I invest my savings in?”, the adviser or financial planner should stop and ask that person a series of questions: “Do you want to speculate or to invest? What financial goal do you have, and over what time frame? How much risk do you want to take? Do you want a small annual return while protecting all your money or, on the contrary, a higher return with a greater risk of losing some of your capital?”
Here is the best advice from several certified financial advisers.
1. Investing should be easy and boring at the same time
The more complex the investment and the more active you are when investing, the more likely you are to get into trouble.
Investors are their own worst enemy when they let their emotions make decisions for them. “How much money you save” is sometimes far more important than “what you are investing in”.
Michael Solari, Solari Financial Planning
2. Your earning potential is your best asset when you are young
My advice is for young people, because earning potential is your greatest asset while you are young. That means you should look for ways to increase your income, negotiate your salary, learn new skills that make you more valuable, know your worth, not be in a hurry and not be afraid to take risks in pursuit of new income opportunities.
Sophia Bera, Gen Y Planning
3. Having a plan is essential to building wealth
You should have a formal written plan that includes a list of your financial goals, and automate your savings to reach each goal. After all, a goal without a plan is just a wish.
A young couple who had recently married came to my office for their first meeting with a financial planner. They wanted to rein in their spending habits and had only just paid off all their credit card debt. They were excited about being debt-free, so we had to start designing a plan that would help them grow financially.
But we needed a plan of financial priorities
- Have an emergency fund covering at least 6 months.
- Set aside some money for the long term (retirement).
- Save for the down payment on a home.
- Save for the university education of the daughter they were expecting.
- Save a little money to look after their elderly parents in the future.
Once we reviewed their monthly cash flow (budget), we found they could comfortably save 20% of their income to reach their financial goals. To simplify the process, we set up an automatic savings programme.
That way, the money that is put aside automatically becomes a kind of “tax” that you do not count on, and that starts to give shape to your financial projects.
Living within your means and following a formal written plan based on your goals leads to steady saving and investing, and almost without noticing, your money starts to accumulate and grow, gradually bringing you closer to your financial goals.
See also: 5 money conversations you should have with your partner before getting married
Joe O’Boyle, Voya Financial Planning
4. We really need to focus on figuring out what we want in life
All too often we get caught up trying to make a lot of money and end up feeling miserable.
Finding a balance between what you love and what will pay the bills is the real challenge. Once you find your passion, work out how it can be improved to earn more money, give yourself more flexibility and, ultimately, live your great life.
Alan Moore, Serenity Financial Consulting
5. Before chasing wealth, define what being rich means to you
Because being rich does not necessarily have to revolve around an amount of money. Sometimes wealth is achieved by having time for your family, or through a life rich in travel and adventure. Sometimes being rich can be defined as a lifestyle that replaces the obligation of a nine-to-five job.
Do not sacrifice your family, your life and your friends to chase something until you are 100% sure you know what it is you are chasing.
Jeff Rose, Alliance Wealth Management
6. Grow your net worth: the best advice you can get in finance
The best financial education advice for growing your net worth, and absolutely the starting point for healthy finances, is none other than automating your savings. The concept of “paying yourself first” guarantees success on its own.
It is almost certain that a person who automates their saving and investing will reach their financial goals ahead of anyone who only saves and invests if they have something left over at the end of the month.
See also: The first money mistake young people should avoid when they start earning
The fact is that people who only save what is left over rarely have anything left over at the end of the month. You have to do it the other way round: first we save the agreed percentage of our income (20 or 30 per cent), and then we will see whether there is anything left at the end of the month.
There is no better advice than this to get started.
Neal Frankle, CFP, NealFrankle.com
All of these tips are genuinely useful, and everyone should bear them in mind. That said, other kinds of advice that we have mentioned in previous articles on financial education are missing, such as not investing anything until we have paid off our toxic debts: those whose interest rate is so high that it would be foolish to invest before clearing them, because, as we said in our article, the most profitable and safest investment is paying off your debts.
And by toxic debts, as you know, we mean credit cards. We gave an example of how an out-of-control credit card works, and as you can see, no investment can beat that “reverse return”.
Further reading
Featured image: Self Scanned, Public domain, via Wikimedia Commons.
