How to be financially secure


🤔 How financially secure are you❓

➡️ If you are an employee, are you more secure than a business owner❓

➡️ If you see yourself as wealthy, are you more secure than those less wealthy❓

➡️ If you are a low-risk investor, are you more secure than a high-risk investor❓

🅰️ It depends.

⚛️ Employees can be made redundant, just as companies can go bankrupt🔥

⚛️ Wealth is relative, mainly to what you spend 💸. If you spend more than you should, you could be doomed no matter how much money you have.

⚛️ In the short term, a low-risk investor is 50/50 to be better off. But in the long term, you’ve always needed to take risk to beat inflation 📈

I have two clients of similar ages. Client A is worth 10x as much as Client B, but Client A is paranoid about running out of money, quite insecure and only happy with a low-risk investment strategy. He tracks his spending and checks the value of his investments most days.

Client B might not have anywhere near as much money, but he will never spend it during his lifetime, lives well within his means, and is therefore happy with a higher risk investment strategy. He waits for me to tell him the value of his investments twice a year and gets on with his life. I think this makes him wealthier.

✅ Who is right?

❎ Who is wrong?

They’re both right as it depends entirely on what each is comfortable with.

I can tell and show both Client A and Client B that they are financially secure. But no matter how many times I tell them or show them, only one of them feels financially secure.

And there’s elderly Mr and Mrs C, who I advised many years ago to convert their bank accounts and household bills to joint names. Everything was in one of their names and had been for decades. But if either died or lost mental capacity, the other spouse would face administrative hell 🔏 when they could least cope with it. They’d never thought of this themselves and now they feel better about their finances.

🔢 Financial security is not just a number.

😊 It is definitely more of a feeling.

Beyond your own innate personality, financial security comes from awareness, and this is driven by focussing on what you can control and not worrying about what you can’t. The latter half of that sentence is harder than it sounds.

Spending versus income is the biggest factor here and this is very easy these days via the Chatfield portal or another app.

Having a plan and sticking to it is next. Direct debits and Standing Orders are very good here for instilling discipline by default for very little effort. If you need to save or invest a certain amount each month, do it automatically and on autopilot ✈️. If you spend on a credit card, clear it in full each month, again on autopilot.

Risk is another important factor. Just like Client A versus Client B above, there is no right or wrong answer, it depends entirely on how much risk you need to take and how much risk you are comfortable with. This is art and science. If your investments worry you or keep you awake at night, that is not good. You need to be comfortable with your portfolio.

What else can you control? The investment charges you pay, the taxes you incur and your own behaviour, reactions and decision making.

What can’t you control? Don’t worry about inflation, the stock market📉📈, interest rates, the weather 🌦️, house prices 🏠, idiot drivers 🚗, whether Russia 🇷🇺 invades Ukraine 🇺🇦 or not. You can’t control them, you can only control how exposed you are to them and how you react when things happen.

I’ve been saying this stuff for years…

To be financially secure you have to know your numbers and feel financially secure.