Sleep easy with 10 simple steps to peace of mind

Sleep easy with 10 simple steps to peace of mind

I am astounded by the number of investors who part with their hard-earned cash on get-rich-quick schemes, then can’t get their cash back. We may be surprised that successful business people can get involved in schemes that, on the face of it, seem too good to be true. However, usually at the heart of such schemes is a person who is very convincing, good at what they do, and appears rich to boot. Coupled with the lure of making a highly attractive return, normally in a short space of time, it can be very tempting to go against your instincts.

How can you safeguard yourself from falling into such traps? Here are 10 simple steps which, if followed, can help give you financial peace of mind.

Step 1: Seek advice from professional financial advisor

Even if you are an astute investor, there are benefits to receiving professional financial advice on your investments. Make sure this is from an independent, fee-based CERTIFIED FINANCIAL PLANNER®, and that the advice is in writing. A CFP® can provide an objective framework within which investment strategies can be evaluated and discussed. You must have a plan – without one, you set yourself up for failure.

Step 2: Understand your financial plan

Don’t be scared to ask questions. Advice from a financial advisor may sound full of industry jargon. Continue to ask questions until you fully understand the investment, and the reason behind the investment. The investment should always be made within the framework of your financial plan, which outlines your strategy. Investing without a strategy is speculating.

Step 3: Know what is going on with your finances

Revisit your financial plan, and related investments, on a regular basis. This should at least be an annual review. A CFP should facilitate this review process for you. It is simply good sense to be proactive, and to be aware of how your investments are performing in line with your overall plan.

Step 4: Let compound interest work for you

The longer your time horizon, the more powerful the effect of compound interest. A financial plan should outline your long-term strategy, and by sticking to this strategy through the rise and fall of markets, you allow compound interest to work its magic.

Step 5: Take advantage of the taxman’s gifts

Saving tax and investing at the same time kills two birds with one stone. The government has incentivised you to save, so ensure that you maximise these incentives. Your planner will be able to calculate your maximum retirement annuity contribution in order to fully utilise your tax deduction. Ensure you get these figures in November or December each year, so that you can top-up your retirement annuity, if required.

Step 6: Remain flexible with your investments

Circumstances can change, and can change quickly. Your personal circumstances, investment markets and financial legislation will change over your lifetime. Make sure your investments are flexible enough to change with the times, and as cheaply as possible.

Step 7: Don’t let inflation eat away at your money

Inflation is the biggest threat to your money. Ensure that your financial plan targets real returns, i.e. they beat inflation. Having all your money in cash will erode the real value of money over time. You need to ensure that you target the returns that meet your financial and risk requirements.

Step 8: Asset allocation is the key

Don’t put all your eggs in one basket. It is imperative that you diversify not just across asset classes, but geographically as well. Spread your investments across the different asset classes, namely shares, property, bonds and cash, and across different managers within those asset classes as well. The greater the diversification, the more resilient your overall portfolio will be to serious financial loss.

Step 9: Can you sleep easy at night?

From a financial perspective, can you sleep easily at night? Are you waking up in the middle of the night worrying about your investments or concerned about the level of risk you face? If so, you may well be in an incorrect investment for your particular circumstances. Financial advice may differ so it is never a bad idea to get a second opinion, particularly if this results in peace of mind. If that does not make you sleep any better, revisit your plan and ensure your investments tie in with your overall strategy. Often the fear factor is alleviated by understanding, so meet with your investment professional as often as need be.

Step 10: Clear that debt

You find you have excess cash after making your maximum tax-deductible contributions to your retirement annuity. What should you do with this excess cash? If you have debt, work at clearing this debt first, as the cost of debt is often more than the after-tax return on your money. Short-term debt (credit cards, store cards, motor vehicle financing) is the most expensive. Clear that debt, and then work on the long-term debt, such as the bond.

The 10 simple steps of this financial advice provide a lifetime guide and can help you better understand your financial goals and financial plan. Sticking to these sensible, simple steps should help you avoid the myriad of get-rich-quick offerings that people may try and sell you. Instead, you have the basis for long-term financial security.


Ian Beere CFP® was Financial Planner of the Year in 2007. His business partner, Debbie Netto-Jonker CFP®, was the founder of Netto Financial Services and Financial Planner of the Year in 2001.

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