Let’s make it personal

It’s called personal finance for a reason.  It is all about you. Your financial situation has nothing to do with your friend or local shopkeepers. It’s your money, and what you do with it is your decision.

We have always been under pressure to ‘keep up with the Joneses’. It’s part of what motivates us to get out of bed. But this pressure has increased over recent years and our modern consumer society encourages a have-it-all-now mentality. The truth is we don’t know what’s going on in other people’s lives and trying to match the idealistic image we have of others is a not a recipe for happiness.

It takes real strength to ignore all these external influences and to focus on what’s really important to you and those closest to you. What do you really want in life and how are you going to get there? To answer these questions, you need a financial plan.

Making a financial plan starts with some clear objectives, identifies your income and expenditure, your assets and liabilities, and then makes a projection of how these might develop in the future.You may choose to do this yourself. An interest in finance and a knowledge of Excel are all you really need.

You could also choose to delegate any investment decisions to a stockbroker, but the evidence that active stock selection actually adds value (after costs) is inconclusive. What’s more, if neither you or your adviser has a clear idea of how to meet your objectives then this type of service isn’t much use.

A third alternative is to hire a financial planner to guide you through the process. They can help you focus on the things most important to you in life, present the pros and cons of different spending (ie current lifestyle) and saving (future lifestyle) decisions. A good financial planner should help simplify complex issues, act as a rational and impartial sounding board and support you in making your own informed choices.

If you stay in the DIY camp, it would be wise to take any tips with a large pinch of salt. Compare this quote from the Guardian in 2011:

‘Gold is always considered the ultimate safe have and…. silver has performed even better…The consensus among analysts is that both metals will continue to rise.’

And this reader’s question published in the Telegraph in 2014:

I invested in gold three years ago and lost 70% – should I sell?

Temptation is always there to take short cuts, but don’t forget that presenters, journalists and your friends know little or nothing about your objectives or circumstances. They are not qualified or regulated and, it’s not their money.

Ian Thomas is authorised and regulated by the FCA. This article is intended to provide helpful information of a general nature and does not constitute financial advice.

Article is accurate at date of writing.