Financial Best Practices for 2020


2/01/2020 9:27:21 PM // Written by Phil Stockton

Financial Best Practices for 2020

2020 is off and running. Here are our easy to execute financial best practices for 2020 and beyond. Taking note of one or all the suggestions will stand you in good stead for the year ahead.

Revisit your Plan. As with the cart and the horse, the order is everything when it comes to your finances and planning.  Your plan comes before the portfolio, always. Kick off the new year with a review of your existing plan or get to work on creating your plan if you don’t have one. Have your goals changed? Have your circumstances changed?  Either way, taking time to periodically review your plan will ensure that it remains relevant to you and your personal circumstances.  You can formulate your plan and self-execute, or you can do this with a trusted adviser.  A good adviser can save you a lot of money and potentially a lot of worry. Choosing one is not easy and requires some work, but it is worth the perseverance and investment in terms of time spent on the task.

Do nothing. Once your plan is in place the plan will determine the overall shape of your investment portfolio. Other than periodically rebalancing your appropriately structured portfolio the single best thing you can do to your portfolio is to leave be. Obviously, this assumes that your portfolio is built using low-cost, strategically focused index funds that are appropriate to your plan. Other than the plan itself the ‘action’ of ‘doing nothing’ as markets move up and down and the media obsess about market falls and rises is your top priority. Some people need help with this, and a good adviser is well placed to provide a disciplined framework for those that need it.   

Stuff happens. The roof springs a leak, the car exhaust falls off… near-term spending needs can be both expected and unexpected. You need enough liquid reserves (rainy day fund) to meet such bills, as a rule of thumb we suggest six months of net expenses are kept as cash buffer; some take comfort with more than this and some with slightly less. Regardless, knowing that you can cover unexpected bills will boost your chances of leaving the bulk of your portfolio fully invested as per your longer-term plan even when the markets and media are doing their best to unnerve you.  

Stay cyber-safe. Cybercriminals will take what they can when and where they can. Protecting ourselves with a few basic actions such as changing passwords and checking your credit score is time well spent. Identity theft is on the rise, strong passwords and knowing about changes to your credit score early will help keep you safe. It’s not just mum and dad who are at risk, children’s accounts get hacked too – everyone needs string passwords and to be mindful of online risks.  

The ‘money talk’. It’s never too early to set your children on the path to a financially literate adulthood or to have ‘that’ conversation with loved ones about what will happen if a loved one falls ill or worse. Conversations with children will be simple when they are young (or story based – there are some great books on this) and get more involved as they age.  Financial independence rarely happens by accident; parents have an important role to play in the process and these conversations will underpin and inform the journey. As we and our parents age then the whole family will step-in to assist if dementia, disability or death take their toll. Families who have had the initial and ongoing annual ‘money talk’, got wills in place and have set up powers of attorney will be well positioned to cope with life’s twists and turns.  Another part of the ’money talk’ will relate to any legacy you or your parents might wish to leave. ‘Taking care of the heirs’ and ‘giving with a warm hand’ are often mentioned when we talk to clients as it should be with your family members.
 
There we are. That’s our short list of suggested ways to bolster your financial well-being. The list isn’t exhaustive, and we could write many more words on each topic.  But instead of writing about them, we’d love to help you with them. Indeed, the implementation is often the hardest part.  At Private Capital, we work with families every day and over the years to transition their dreams into plans, and their plans into achievements. You are welcome to get in touch in 2020, so we can do the same for you. 

In the meantime, focus on what you can control and tune-out the unhelpful media chatter, financial news and marketing. Walk away, put the kettle on or do something fun with those who you cherish.   
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