Despite the title, successful personal finance isn’t about 'get rich quick' schemes.
Nor is it about picking the right 'hot' stock or impressing your friends with the latest high-tech toys.
But success can still be 'meteoric'.
Read on to discover how.
In contrast to social media, the news, books and market gurus, successful personal finance is all about:
- Finding a sense of security;
- Giving your children a head-start in life;
- Providing for your family, both during life and after death;
- Making intelligent choices; and
- Realising some (ideally most) of your life’s dreams.
And attaining this isn’t just for the super-rich.
Although, the wealthy, by definition, are often ‘the best’ at good financial planning.
Anybody can follow some common-sense principles that will put you on the path toward greater financial freedom.
All it takes is your time, a commitment to educating yourself, following through on your decisions and perhaps a bit of luck.
Simple.
But absolutely not easy…
Key nuggets of wisdom
Much of my time is spent making extremely wealthy people even wealthier.
If you’ve not yet started on this personal journey, we’ve developed 20 vignettes of wisdom to help.
Whether you've already more than enough or you’re just starting your big plans for the future - keep these timeless principles in mind each time you make a financial decision, and you’ll start to see true progress towards your goals.
1. Take time to define what “success” means for you
At the end of your life, if you looked back, what do you want to see?
It probably won't be a pile of money in a bank account somewhere.
It'll most likely be a comfortable home, a sense of security, a nurturing environment to raise a family in, and some meaningful experiences that make great memories.
2. Successful financial planning is all about balance and trade-offs
Recognise you’ve got the power to choose among varying trade-offs.
If life sends you setbacks, there may be creative solutions that allow you to realise a portion of your goals.
It's crucial to consider the pros and cons of any financial decision.
3. Educate yourself
In order to make intelligent choices, you’ll need to do some basic research into the topic at hand.
That means understanding terminology, 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...
And many other topics.
5. Financial planning is dynamic
What works today may not work tomorrow.
Changes in tax policy, regulatory parameters or your own personal circumstances can have an effect.
You won’t be able to rely on a financial solution just because it’s always worked in the past.
Things change – fast.
6. Use common sense
If you can’t understand it, you’ll never successfully execute it.
Investing and other aspects of personal finance don’t have to be intimidating.
Don’t let anybody sell you something that doesn’t pass the 'smell test'.
For expats, this means avoiding commission-heavy, insurance-based investment schemes.
7. Keep it practical
If you’re like most people, you need down-to-earth advice on how to get things done.
Focus on the nuts and bolts of taking action once you’ve made a decision.
Apathy is normally the most costly action you can take…
8. No magic tricks
Throughout time people have looked for instant solutions to life’s problems.
It’s not that easy.
Solid financial planning takes time, commitment and long-term follow-through.
9. 'Idiot-proof' your financial decisions
We're all human.
Once you’ve made a good financial decision – do it.
Set up a structure that runs on autopilot.
The less you have to rely on remembering to do something, the better.
10. Don’t panic
I guarantee there'll be times when you’re tempted to act impulsively – that’s almost always a mistake.
11. Do be defensive
Get your ducks in a row to protect your family and your finances.
Topics like estate planning and insurance may not be very appealing, but without them, you may be jeopardising your entire financial future.
12. Avoid costly errors
If you watch any kind of sports, you’ll know that the surest way of winning is by avoiding costly errors.
The same principles apply to personal finance.
13. There's no one 'right' answer
When you make a financial decision, it’s going to come down to choosing what’s most appropriate for your situation and what you can live with over time.
What’s right for your friends and family won’t necessarily be right for you.
14. The right answer for you will be part psychological, part number crunching
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 tell you.
15. The right answer for you may not be based on conventional wisdom
The right answer for you may not be what everyone else is doing or what’s been done in the past.
16. Don’t be greedy
You’re setting yourself up for a fall.
Remember your goal and celebrate when you reach it.
17. Control what you can
You’ll find many things are out of your control, but you can manage variables like investment costs, savings levels and spending patterns.
18. Don’t forget the risk side of the equation
Most of the investment hype is about getting returns.
You don’t hear nearly as much about managing risk.
When the market is going up, it’s easy to take on more risk than you can successfully tolerate.
19. Learn from your mistakes
Everyone makes mistakes – learn from them.
Don’t repeat them over and over.
Typically ‘fail fast and fail forward.'
20. You’re not alone
Whatever is scaring you or causing you to lose sleep, is probably something others are experiencing too.
We can help each other by talking about these concerns and finding solutions to move you closer to your goals.
There are lots of great online communities where enthusiasts can get support or views from other people.
Around the world, we like Bogleheads.
Here in Dubai – SimplyFI have a lot of caring, very knowledgeable people and resources who will do their best to point you in the right direction.
Further reading
Sitting on cash during a bear market? Here's what to do
What I'm reading #25: Losing money is normal for experienced investors
How to transfer your Shell pension (Shell Overseas Contributory Pension Fund/SOCPF)
Goals vs. capital: Are yours aligned?
