Do you remember your class at school? There was someone who was good at music, someone who was good at Maths, someone who could draw and – damn it – someone who was really good at asking girls out…
And the more time I spend in financial planning, the more I’m convinced that money is exactly the same. Some people can just ‘do’ money. Irrespective of what they earn they save, they plan, they invest and – inevitably – they accumulate. Then there are people at the opposite end of the spectrum: it doesn’t matter how much they earn, they’re always in debt. They’re always lurching from crisis to crisis. Whatever advice they’re given, they go their own sweet way – and it always ends in tears. The vast majority of us are somewhere in the middle.
Identifying we need help with money
We need some help with financial planning – help with seeing the bigger picture and benefiting from the technical advice that a qualified financial planner provides – but we also recognise that there’s a lot more we could be doing ourselves.
Today, that’s never been easier. There are an increasing number of websites and apps that will allow you to ‘automate’ your money.
What do I mean by ‘automating’ your money?
Simplifying what you do, and arranging your financial affairs in such a way that they require the minimum amount of thought every month.
And having some sound, basic financial planning principles in place that make sense of – and underpin – everything you’re doing.
Whatever stage of the journey you’ve reached, these 5 principles hold good:
- Your first priority is yourself – especially your ‘future self.’ So ‘pay yourself first.’ Put money into your pension and – if you have children – Junior ISAs. Even small amounts (which you don’t notice going out every month) add up to significant amounts over time
- Virtually everyone needs some sort of protection policy – for life cover, income protection, critical illness cover or a combination of all three. Put the policies in place, ask your financial adviser to review them once a year to make sure the premiums are still competitive – and then forget about them
- Pay your bills monthly – because it’s often cheaper and it makes your cash flow far more predictable. Yes, by all means have a separate bank account for your bills – and spend a little time researching the best bank account, or ask your financial adviser to do it for you
- Track your income and expenditure. Any company that expects to stay in business does this: individuals and families are no different. If you don’t know what you’re spending money on you’ve no hope of controlling your expenditure
- Finally, invest in your health as well as your wealth – even if it’s only a pair of walking shoes! Health problems can blow you off course financially with frightening speed.