You might think the biggest risk to your financial success is a stock market crash or losing your job. And while these significant events will have an impact on your finances, these potential trials aren’t the biggest risks you’ll face when it comes to financial freedom. The biggest risk comes from your everyday decisions and actions that impede your potential growth. So how do you make the right choices for your financial future? Easy, just don’t make these mistakes:
1) Not planning
Sometimes it’s hard to get started on planning for goals. Be it short term, like a much-needed holiday, or long term, like retirement or business growth. But if you avoid thinking about the future – accurately – then you are setting yourself up for disaster. While your head might be saying ‘hold out for that lotto win and all your dreams will come true’ the reality is, you can achieve exactly what you want without having to rely on pipe dreams. Simple planning can create the future you want.
2) Being “too much” of anything
Investing is a very tricky game. Not because it’s hard to learn, or there are hidden tricks, but because it requires you not to be Too Much. That is, you can’t be too cautious, or you might risk not going forward at all. And you can’t be too risky, or you risk losing everything on a whim. The trick to securing your financial success is to be pretty level headed when it comes to investing and making long-term goals. To know the right way forward, arm yourself with all the facts. Do your research, and that doesn’t mean researching where and how to invest, it could be researching who is best to advise you. Researching which financial advisor is most aligned to your thinking, so they will be able to provide the best support can be just as valuable.
3) Not consulting a professional
And to add to the last point, not consulting an expert in the field can also be the undoing of your financial security. The secret of business success is to employ the right people to do the role – you don’t need to be an expert in marketing or productivity – you just need to find the right expert that is & work with them. Same goes for your finances; you need to put the right people in place to help you achieve your financial goals. The trick is consulting someone who can guide you in your vision and not just implement plans regardless of your long term or short term goals.
4) Not reviewing your budget/expenses properly or Not being honest with your budget
This point seems so straightforward to anyone that ‘budgets’. But how many times do you go over your set budget? Do you see the returns you thought you would on your investments? Not many people can answer yes to these points. That’s because it’s often really hard to look accurately at what you spend. But by going through your actual expenses, by accounting for every cent on your credit card or bank statements, you get an accurate picture of what you can achieve – not just what you hope you can.
5) Not letting sleeping dogs lie
If you’ve financed for long-term investments, the temptation to dive in and make changes when the market moves or you see some hysterical headlines can be great. But the point of long-term investments is that they can whether the volatile storms. So make sure you don’t react or make drastic changes if your goal is long-term investing. Talk to your financial advisor or analyse your position with yearly changes, rather than make ad-hoc reactionary changes.
Clive Barrett is the Executive Chairman of First Class Financial Group, Australia’s largest financial support services franchise providing bookkeeping, finance and tax services.