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How are you at managing your Finances ?

By Chris Webb
This article is published on: 17th July 2014

As the old saying “Practice Makes Perfect” seems to suggest, we are bound to improve at everything over time. However, there is something about “money” that just appears to get the better of us.  Nowadays, we only need to look at the level of debt defaults to see that this is an area where most of us just don’t seem to be making much progress or improvement.

Here are just a few reasons why people, in general, do not successfully manage their finances:

  • They have never been able to predict what the market will do next. However, this doesn’t deter them from trying to predict the markets!.
  • They’re thrilled that the credit card they’re paying 22% interest on offers 1% cash back!
  • They think dollar-cost averaging is boring without realizing that the purpose of investing isn’t to minimize boredom.
  • They try to keep up with friends and family without realizing that friends and family are actually in debt.
  • They think €1 million is a glamorously large amount of money when, actually, it’s what most people will need as a minimum in retirement!.
  • They associate all of their financial successes with skill and all of their financial failures with bad luck.
  • Their perception of financial history extends back about five years. This leads them to believe that bonds, for example, are safe and that the average recession is as bad as the recession of 2008.
  • They don’t realise that the single most important skill in Finance is control over your emotions.
  • They say they’ll take risks when others are fearful but then they seek the foetal position when the market falls by 2%.
  • They think they’re too young to start saving for retirement when realistically every day that passes makes compound interest a little less effective.
  • Even if their investment is over a period of 20 years, they get stressed when the market has a bad day.
  • They size up the potential of investments based on past returns.
  • They use a doctor to manage their health, an accountant to manage their taxes, a plumber to fix their plumbing. Then, with no experience in the financial market, they go about their own investments all by themselves.
  • They don’t realize that the financial “expert” giving advice on TV doesn’t know their personal circumstances, goals or risk tolerance.
  • They think the stock market is too risky because it’s volatile, without realizing that the biggest risk they face isn’t volatility.  The biggest risk is not growing their assets sufficiently over the next several decades.
  • When planning for retirement, they don’t realize that their life expectancy might be 90 years or more.
  • They work so hard trying to make money that they don’t have time to think about or plan their finances, especially for those days when work will no longer take up all their time.

You may read this, identify a few points that relate to your own position and now find yourself asking “What can I do about it though?”

Without doubt the answer to that question is to seek professional advice so speak to a qualified and regulated Financial Planner. They will be able to analyse your position from both an investment and an emotional perspective, ensuring that your plan of action is tailored to you as an individual.

You should expect a detailed consultation process and only after this process has been completed can the correct advice be presented, ensuring you avoid the pitfalls detailed above.

The steps to the consultation process are as follows:

  • A full and thorough financial health check on your current and future situation including the completion of a Financial Review questionnaire.
  • Identifying areas of strengths and weaknesses in your financial planning and understanding your specific goals.
  • Designing a strategy to help ensure your financial aspirations are met. Also reviewing any existing portfolio’s to ensure they are working effectively and efficiently.
  • Once your strategy has been finalised, a full financial report based on your Financial Review will be provided to you along with a concise recommendation.
  • Ongoing consultations consisting of regular monitoring of your selected strategy and face to face meetings to ensure that your financial goals are achieved.

To explore all of your options and to discuss how this consultation process can benefit you please contact your local Spectrum IFA Group consultant.

Article by Chris Webb

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