Lifelong Learnings after 35 years in the Financial Planning Business
Certified Financial Planner | Mason Wealth Management
Money isn’t everything.
The most important thing is to have just enough money so you can sleep at night, and enough purpose so you can get up in the morning.
Protect yourself against catastrophic life events.
It’s all very well having great money management processes in place, however, if you die prematurely or suffer a life-changing disability this will have a huge impact on your family. Protect yourself and your family by taking out sufficient life cover & income protection cover.
Spend less than you earn.
This may seem like an obvious statement. Many people have no idea how much they are spending each month and they wonder why they are getting further into debt. Spend no more than you are earning.
Ignore the investment media.
The media have their own agenda. They have to tell the news in a way that will help them sell newspapers. When it comes to investments the media tend to exaggerate both good news but especially bad news. The media tend to focus on “the next great investment opportunity” and short-term market predictions which are more often than not incorrect. These short-term predictions are always irrelevant and indeed an unnecessary distraction.
Never try and “time” the markets.
Davy Select had an interesting article recently. If an investor put €10,000 into the market in 1999 and left it untouched for 17 years, it would have grown by 138%. However, if that investor had tried to “time the market” and was out of the market for the best 5 days they would only have seen a return of 56%. If the same investor had missed the best 30 days over the same period they would have seen a return of -33%.
Have a financial plan prepared by a financial planner.
Most successful investors have a financial plan whereas most unsuccessful investors do not have one. If you have a financial plan that is reviewed annually you will not be concerned when things get a little bumpy every so often on the investment journey.
Make sure your savings are automatic and “pay yourself first”.
The author, David Bach, explains that people should “pay themselves first” every month. Everyone should set aside savings each month by direct debit. This is called automatic savings. Rather than leaving this to chance, Bach suggests that you should “pay yourself first” i.e. see the savings as a monthly expense that must be paid as soon as you get paid. If it is automatic you will not have to do anything each month – it will happen automatically. You should also try and increase your savings by 2%-3% every year.
Have an emergency fund
Keep 3 months net income on deposit to cover any unforeseen emergencies.
Invest the maximum amount permitted into your pension fund.
This is one of the smartest decisions you can make. If you do you will receive tax relief of 40% on premiums paid (subject to revenue rules). The fund grows tax-free and you can receive generous amounts as tax-free cash when you retire. If you are an employee make sure you join your employers’ staff pension scheme. Avail of the “free money” given by your employer and make sure you contribute the maximum amount permitted. Finally, start as early as possible.
Cash is not an investment.
With deposit rates at almost zero and inflation running at 1%-2% p.a. the purchasing power of your money is being eroded every year if you are not invested in the markets. Any pensioner who is receiving a pension that is not index linked will know all about the harmful effects of inflation.
Pay off debt early
Pay off debt as soon as you can. Many people have cash sitting in deposit accounts earning no interest and at the same time they have credit card debt that is costing them 12%-14% p.a. Don’t make this schoolboy error.
Don’t meddle too much in your investments
The most successful investors tend to be people that leave their investments alone. They don’t meddle too much with them. Investors that constantly tweak their portfolios generally underperform the market.
Last but not least
Go for a walk by the sea as many days a week as you can. What a start to the day. You can clear your head and fill your lungs with fresh air. Now that’s what I call living.