Despite the title, successful personal finance isn’t just about get-rich-quick schemes.
Nor is it about choosing the right hot stock or impressing your friends with the latest high-tech toys.
However, success can still be “dazzling”.
Contrary to opinions on social media, the news, in books and stock market gurus, successful personal finance is about finding a sense of security, giving your children a head start in life, providing for needs of your family, during life and beyond. death, make smart choices, and achieve some – ideally most – of your life’s dreams.
Achieving this goal is not just for the super-rich. Although the rich, by definition, are often the best when it comes to good financial planning.
Anyone can follow some common sense principles that will put them on the path to greater financial freedom.
All it takes is your time, a commitment to educating yourself, following through on your decisions, and maybe a little luck. Although it sounds simple, it’s not always easy.
If you haven’t started this personal finance journey yet, I’ve developed 20 short vignettes of wisdom to help you get started.
Whether you already have more than enough money or you’re just beginning your big plans for the future, keep these timeless principles in mind every time you make a financial decision and you’ll start to see real progress. towards your goals.
1. Take the time to define what “success” means to you.
At the end of your life, if you looked back, what would you like to see?
It probably won’t be a pile of money in a bank account somewhere. It will most likely be a comfortable home, a sense of security, a nurturing environment in which to raise a family, and meaningful experiences that will make fond memories.
2. Successful financial planning is about balance and compromise
Recognize that you have the power to choose among different compromises. If life sends you setbacks, there may be creative solutions that allow you to achieve some of your goals. It is crucial to consider the pros and cons of any financial decision.
3. Educate yourself
To make smart financial choices, you will need to do some basic research on the subject in question. This means understanding various terminologies, applying the concepts to your own personal situation, and coming to a realistic conclusion.
4. Diversification is not just an investment strategy
You can use diversification in your approach to taxes, school or university fees, among many other topics.
5. Financial planning is dynamic
What works today may not work tomorrow. Changes in tax policy, regulatory settings or your personal circumstances may affect your finances.
You won’t be able to rely on a financial solution simply because it has always worked in the past. Things change — fast.
6. Use common sense
If you don’t understand it, you will never be able to execute it.
Investing and other aspects of personal finance don’t have to be intimidating. Don’t let anyone sell you something that doesn’t pass the “smell test”.
For expats, this means avoiding insurance- and commission-based investment schemes.
7. Keep it handy
If you’re like most people, you need some actionable advice on how to get things done. Focus on the nuts and bolts of action once you’ve made a financial decision. Apathy is normally the most costly action you can take.
8. No magic tricks
Over time, people have sought instant solutions to life’s problems. It is not so easy. Sound financial planning takes time, commitment and long-term follow-up.
9. Protect your financial decisions from idiots
We are all human. Once you’ve made a good financial decision, do it. Establish a structure that operates on autopilot. The less you have to rely on remembering to do something, the better.
10. Don’t Panic
I guarantee there will be times when you’ll be tempted to act impulsively – it’s almost always a mistake.
11. Get defensive
Gather your ducks to protect your family and your finances. Topics like estate planning and insurance may not be very appealing, but without them you risk jeopardizing your entire financial future.
12. Avoid costly mistakes
If you watch any type of sport, you’ll know that the surest way to win is to avoid costly mistakes. The same principles apply to personal finance.
13. There is no “right” answer
When making a financial decision, it’s all about choosing what’s best for your situation and what you can live with over time. What’s good for your friends and family won’t necessarily be good for you.
14. The right answer for you will be partly psychological, partly numbered.
The reason it’s called “personal” finance is just that. Your decision will be influenced by your psychological makeup, as well as what the numbers are telling you.
15. You don’t always have to follow conventional wisdom.
The right answer for you may not be what everyone is doing or what has been done in the past.
16. Don’t be greedy
You prepare for a fall. Remember your financial goals and celebrate when you achieve them.
17. Control what you can
You will find that many things are beyond your control, such as stock market volatility, but you can manage variables such as investment costs, savings levels, and spending habits.
18. Don’t forget the risk side of the equation
Most of the investment hype is about getting returns. We hear less about risk management. When the market goes up, it’s easy to take on more risk than you can successfully tolerate.
19. Learn from your mistakes
Everyone makes financial mistakes – learn from them. Don’t repeat them over and over again. As a general rule, “fail fast and fail forward”.
20. You are not alone
Anything that scares you or makes you lose sleep is probably something other people are going through as well.
We can all help each other by talking about our concerns and finding solutions to get closer to our financial goals.
There are many great online communities where enthusiasts can get help or other people’s opinions.
In Dubai, you will find a host group called SimplyFI.
It’s the local chapter of “Bogleheads” – investors who follow the investment strategy of the late Vanguard Group founder John Bogle, who championed a simple, low-cost investment philosophy – and ChooseFI, a community of passionate about financial independence.
Its members are caring and very knowledgeable people, while its resources will help you learn and get started on the path to greater financial freedom.
Sam Instone is co-chief executive of wealth management firm AES
Updated: July 22, 2022, 6:02 p.m.