Oran Hall | Financial advice to remember
Perhaps your year has been a memorable one so far, or you just want to forget it. Whatever the case, you want 2022 to be better. There are some things worth remembering to set or keep you on a good and productive path.
Remember that financial markets do not keep on a linear path; they do not keep going in one direction. They go up and they go down. If you remember that, you will be less inclined to panic when prices fall and less prone to want to milk them when they are on a positive path.
It is useful, therefore, to make decisions based on good information and after giving due consideration to the major factors which affect the particular market. Keep clear of the tips of so-called pundits and align your decisions with your own goals, resources, limitations and circumstances.
Do not forget that it is very important to manage risk. In investments, diversification is key to risk management. Balance your portfolio in line with your age, resources, ability to bear risk and your personal and financial circumstances.
Remember to inform yourself about the various types of investment vehicles and the circumstances in which they are most useful. Seek to know how best to put them together to make your portfolio as safe as possible while helping you to achieve your objectives.
Do not forget that the strategies you employ at one stage of your life are not necessarily safe and useful for another stage. For example, the growth strategy that is useful and appropriate for the early stages of your life is less appropriate for the pre-retirement and retirement phases.
Remember to protect your valuable assets with up-to-date insurance coverage and to have the right type of coverage. Do not forget that your own insurance coverage should be relevant to the needs of yourself and those who mean the most to you.
Do not forget that debt, responsibly used, can make you better off if used to fund assets that can generate income or that can have long-term value, particularly if it is not likely you could acquire them if you were to depend on your own ability to generate the funds required in the near term.
But remember that your ability to use debt is constrained by your ability to service it satisfactorily. Debt incurred today eats into tomorrow’s income. Strike an acceptable balance between the two.
Remember always that credit cards, though useful, can wreak real havoc on your finances and credit score and, like other debt, can destroy your ability to access debt in the future when it may be needed.
If you are fortunate to receive a bonus or an unexpected lump sum this year, do not forget that it is unwise to let it go like smoke. Remember to spend wisely by paying down debt or acquiring an asset that has long-term value, but remember to save a portion.
Remember that prices increase so the value of your money values less over time. Do not forget to invest in some assets that appreciate in value as a buffer against inflation but keep your age in mind when investing in financial assets, like stocks, when hedging against inflation.
Do not forget to assess your situation periodically to satisfy yourself that you are on a path that has meaning and value to you and to make adjustments if it is necessary to do so. Remember to seek the assistance of professionals if there is the need to do so.
Remember that a good budget is key to your financial success. Remember to make one for the new year and to have the family involved in making it. Do not forget that your income will put constraints on your ability to spend.
Remember the difference between fixed and variable expenses, periodic and recurrent expenses, and required and discretionary expenses. Bear in mind that they cannot all be treated the same way. Know which you can adjust and which you cannot readily change.
Do not forget to put and keep your affairs in order. Make an estate plan if you do not have one. If you have one, update it and ensure it reflects your wishes. If your circumstances or those of your family change, consider if you need to make changes to reflect the new realities.
Do not forget to put your tax situation in order. It could be to your advantage. Remember also to capitalise on legal opportunities to earn tax-free or tax-deferred income when it is advantageous to do so, and as you look down the road, bear in mind possible benefits from the National Insurance Scheme and the National Housing Trust, as well as any cash and non-cash benefits that your employer may offer.
Make it a habit to remind yourself of the things that can make your life and that of your family better and remember to do what you have to do to make it happen.
Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.