Here are some steps you can follow to make informed financial decisions:
- Set Financial Goals:
Define your goals. Sounds simple but a lot of clients can find goal setting hard to do. Break them down into short, medium, and long-term objectives. The goals you start with, will change as life changes, so try not to get stuck at this stage. Have fun with it.
- Know your Income and Expenses and Budget accordingly:
Develop a realistic budget that aligns with your financial goals and helps you live within your means. You will be surprised how affective small adjustments are over the long term.
- Know Yourself:
We all have cognitive biases that can affect our ability to make informed decisions. We have pre-conceived ideas of what will or will not work without considering the evidence. Be aware of your biases and acknowledge that they can impact your judgment.
- Diversify your Investments: Don’t put all your eggs in one basket
This does not mean don’t invest with one investment provider but rather diversify your investment portfolio by spreading your money across different asset classes like shares, fixed income, property and absolute return funds. Investing in assets that behave differently in the various economic cycles helps reduce risk and increase the potential for returns.
- Review and Revisit:
Regularly review your financial decisions and your goals to ensure they are aligned. Circumstances will always change over time, and you need to adjust your approach. Stay informed about changes in tax laws, regulations, and economic conditions that may impact your financial decisions.
Making informed financial decisions requires discipline and patience. Financial wellbeing is a result of consistent, well-thought-out decisions made over time. It is an ongoing process and by continuously learning, adapting, and staying informed, you can improve your financial well-being and work towards achieving your financial goals.