“9 Simple Tips for Financial Success”

Having success with finances doesn’t have to be complicated or chalked up to some mystery that only ultra-wealthy individuals know.  Success also isn’t necessarily about being smarter or working harder than everyone else.  Most of what contributes to someone’s success comes down to avoiding mistakes and repeating good habits.  This week we look at some simple tips towards financial success and highlight the fact that while it might seem simple, common sense isn’t always so common.

1. Saving a little today is better than saving a lot tomorrow. The earlier you can start saving for a goal, the easier it will be to accomplish that goal.  Thanks to the phenomenon of compound interest it is all about “time in the market” NOT “timing the market”.
2. Money lessons are expensive. Since most people don’t go to school to study personal finance, they tend to reactively consume financial content and often utilize bad resources or listen to inexperienced or ill-intentioned individuals. Two common themes that we see among financially successful individuals are consuming quality information and outsourcing money decisions to a qualified professional.
3. Our human instincts are often the obstacle to making good financial decisions. That means we must build a system that works around our faulty hardwiring rather than trying to rewire our brains to think like computers. The mental shortcuts our species developed over thousands of years usually conflicts with the behaviors required for financial success. Therefore, automation is your friend.
4. Time is more important than timing. Everyone wants to buy and sell at the perfect time. (which is impossible anyway). Unfortunately, that Uncle at your next family get together probably isn’t the person to listen to about when to buy or sell the next “big stock”.  It may sound boring but staying in the market throughout the booms and busts will be the key to capturing all of the upside potential.
5. Knowing what not to do is just as important as knowing what to do. This is true with all things finance, but it is particularly true with investing. 99 times out of 100, the best thing an investor can do is absolutely nothing.
6. Don’t try to beat the market. There are millions of investors all over the world, and by the time you have formed your opinion a particular stock or industry it is likely that opinion is already priced into the value of the stock. It’s not to say you don’t have intelligent ideas or thoughts about how the market might perform, rather it is the reality of the market where even the brightest and most intelligent individuals struggle to be right more than 50% of the time.
7. Insure against potentially devastating risks. Nobody buys insurance for the fun of it. Your future income is your most important asset – we recommend protecting this with term life insurance and disability insurance.
8. Avoid credit card debt at all costs. Credit card debt is usually the result of unnecessary consumption or poor planning. High interest rates and low minimum payments make the cost of carrying credit card debt enormous.
9. Focus on what you can control. You can’t control when the next recession will hit. You can’t control how your investments perform. You can’t control the big political, economic, and societal issues facing our planet…Things you can control such as your savings rate and asset allocation are good topics to consider when working with a professional.

Financial success isn’t magic; it’s engineering. Good systems also create positive long-term habits and fight the temptation to deviate from your plan.  I encourage you to think about 2020 as an opportunity to start putting these systems in place to set your “future self” up for success.

January 17th, 2020