Despite the title, successful personal finance isn’t about “get rich quick” schemes.
Nor is it about picking the right hot stock or impressing your friends with the latest high-tech toys.
Yet success can still be “meteoric”.
Unlike the views on social media, the news, in books and spouted by stock market gurus, successful personal finance is all about finding a sense of security, giving your children a head start in life, providing for your family, both during life and after death, making intelligent choices and realising some — ideally most — of your life’s dreams.
Attaining this isn’t only for the super-rich. Although the wealthy, by definition, are often best at good financial planning.
Anybody can follow some common-sense principles that will put them on the path towards greater financial freedom.
All it takes is your time, a commitment to educating yourself, following through on your decisions and perhaps a bit of luck. While it sounds simple, it is not always easy.
If you’ve not yet started on this personal finance journey, I have developed 20 short vignettes of wisdom to help you begin.
Whether you already have more than enough money or you’re just starting your big plans for the future — keep these timeless principles in mind each time you make a financial decision and you’ll start to see true progress towards your goals.
1. Take time to define what 'success' means for you
At the end of your life, if you looked back, what do you want to see?
It probably won't be a pile of money in a bank account somewhere. It will most likely be a comfortable home, a sense of security, a nurturing environment in which to raise a family and some meaningful experiences that make great memories.
2. Successful financial planning is all about balance and trade-offs
Recognise that you’ve got the power to choose among varying trade-offs. If life sends you setbacks, there may be creative solutions that allow you to realise a portion of your goals. It's crucial to consider the pros and cons of any financial decision.
3. Educate yourself
To make intelligent financial choices, you’ll need to do some basic research into the topic at hand. That means understanding various terminologies, applying the concepts to your own personal situation and coming to a realistic conclusion.
4. Diversification is not just an investment strategy
You can use diversification in your approach to taxes, school or university fees, among many other topics.
5. Financial planning is dynamic
What works today may not work tomorrow. Changes in tax policy, regulatory parameters or your personal circumstances can have an effect on your finances.
You won’t be able to rely on a financial solution just because it’s always worked in the past. Things change — fast.
6. Use common sense
If you don’t understand it, you’ll never successfully execute it.
Investing and other aspects of personal finance don’t have to be intimidating. Don’t let anybody sell you something that doesn’t pass the “smell test”.
For expatriates, this means avoiding commission-heavy, insurance-based investment schemes.
7. Keep it practical
If you’re like most people, you need down-to-earth advice on how to get things done. Focus on the nuts and bolts of taking action once you’ve made a financial decision. Apathy is normally the most costly action you can take.
8. No magic tricks
Throughout time, people have looked for instant solutions to life’s problems. It’s not that easy. Solid financial planning takes time, commitment and long-term follow-through.
9. 'Idiot-proof' your financial decisions
We're all human. Once you’ve made a good financial decision — do it. Set up a structure that runs on autopilot. The less you have to rely on remembering to do something, the better.
10. Don’t panic
I guarantee there'll be times when you’re tempted to act impulsively — that’s almost always a mistake.
11. Do be defensive
Get your ducks in a row to protect your family and your finances. Topics like estate planning and insurance may not be very appealing, but without them, you may be jeopardising your entire financial future.
12. Avoid costly errors
If you watch any kind of sport, you’ll know that the surest way of winning is by avoiding costly errors. The same principles apply to personal finance.
13. There's no one 'right' answer
When you make a financial decision, it’s going to come down to choosing what’s most appropriate for your situation and what you can live with over time. What’s right for your friends and family won’t necessarily be right for you.
14. The right answer for you will be part psychological, part number crunching
The reason it’s called “personal” finance is just that. Your decision will be influenced by your psychological make-up, as well as what the numbers tell you.
15. You don't always have to follow conventional wisdom
The right answer for you may not be what everyone else is doing or what’s been done in the past.
16. Don’t be greedy
You’re setting yourself up for a fall. Remember your financial goals and celebrate when you reach them.
17. Control what you can
You’ll find many things are out of your control, such as stock market volatility, but you can manage variables like investment costs, savings levels and spending patterns.
18. Don’t forget the risk side of the equation
Most of the investment hype is about getting returns. You don’t hear nearly as much about managing risk. When the market is going up, it’s easy to take on more risk than you can successfully tolerate.
19. Learn from your mistakes
Everyone makes financial mistakes — learn from them. Don’t repeat them over and over. Typically, “fail fast and fail forward”.
20. You’re not alone
Whatever is scaring you or causing you to lose sleep, is probably something others are also experiencing.
We can all help each other by talking about our concerns and finding solutions to move closer to our financial goals.
There are lots of great online communities where enthusiasts can get support or the views of other people.
In Dubai, you will find a welcoming group called SimplyFI.
It is the local chapter of the “Bogleheads” — investors who follow the investment strategy of the late Vanguard Group founder, John Bogle, who championed a low-cost, simple investing philosophy — and ChooseFI, a community of financial independence enthusiasts.
Its members are caring and very knowledgeable people, while its resources will help you to learn and get you started on the path towards greater financial freedom.
Sam Instone is co-chief executive of wealth management company AES