Having been in the wealth management business for three decades now, friends and clients often ask me what is the best financial advice I have to offer.
Through the years, I’ve determined that the “best” advice may sound simple, but it truly can help increase your chance of achieving financial security. Attaining mastery in any task is about understanding the fundamentals – inside and out – and practicing them again and again. Here are several financial fundamentals I believe are important.
Pay yourself first. I can’t stress this enough. Unlike our parents’ and grandparents’ generations, the security of a pension is not something most of us can rely on. It’s up to each of us to prioritize saving for the future. The easiest way to do so is to make yourself the first line item in your budget. It is perhaps one of my most important money-savvy habits.
Diversify. The idea of not putting all your eggs in one basket is true. I still recall sitting in my grandfather’s office as a young girl and watching him clip bearer bond coupons. He owned his own business, which he sold when he was in his fifties, but didn’t stop working until he reached his eighties. He was the first to model for me that having different types of investments and asset classes is key.
Last year was a good year to be in the markets, but it’s important to rebalance and make sure that you are maintaining your risk tolerance and asset allocation. Research shows asset allocation is the most important determinant of risk exposures and investment outcomes in comparison to market timing, security selection and other factors. Diversification aims to maximize returns by investing in multiple areas that each may react differently to the same event. Although diversification doesn’t guarantee against loss, it is a necessary component of potentially reaching long-range financial goals while minimizing risk.
Commit to lifelong learning. As the great inspirational speaker Zig Ziglar once said, “If you are not willing to learn, no one can help you. If you are determined to learn, no one can stop you.” The willingness to embrace learning throughout your life will serve you well, and the knowledge and different perspectives you gain will be like assets that pay dividends. Continue to educate yourself on your portfolio investments or new potential investments you want to make. Be willing to learn more, not just about your chosen profession or area of study, but about a variety of topics that are interesting to you. With the proliferation of online classes and webinars, you can learn about financial topics and more without leaving home.
Find a mentor, be a mentor. Mentorship is a powerful practice that helps us grow personally, professionally and financially. I’ve found that I get as much out of being a mentor as I get from the mentors I have been privileged to have in my career. To find a mentor who can help you achieve your financial and life goals, look for someone who has achieved what you envision for yourself and who embodies qualities and values that are important to you. You may find a potential mentor at the organization you work for, you could seek one in a professional organization or you might even find one away from work altogether.
The idea of what financial security means may be different for each of us, but the fundamentals of achieving it are very much the same: know the basics, practice the basics and repeat the basics.
Photo by Monica Melton