Sandro Forte is the CEO of the Forte Financial Group, one of the UK’s most respected financial advisory and wealth management firms, with more than 40 advice and service awards to its name. Sandro holds the highest professional designation in the UK as the only person to achieve the prestigious Fellowship award with three distinctions, and he proudly leads a business which has never had an advice or service-related complaint in its existence. In his first column for Mind Jump Monthly, Sandro advises on how to make your money work harder for you
Whether you are looking to get a better return on current assets, pay less tax, save more or simply budget better, these 10 rules for becoming financially more successful will help you with your objectives.
Don’t make emotional decisions
Good examples of emotionally-led decisions include the purchase of cryptocurrency and buy-to-let properties. The vast majority of people who make significant financial mistakes either ignore the risks – they only see the positives because everyone else seems to be doing so well at that particular moment – or do not properly carry out their research. The reality is that most people buy assets at a high price (because it takes them a while to become confident enough to invest) and sell after the value of an asset has fallen because panic (a strong emotional response) sets in.
Education is power
“The more you know, the more you grow” is a simple adage to adopt. At Forte Financial we spend far more time sharing information and educating our prospective clients than we do making formal recommendations – and this is because having a good understanding of things empowering us to make decisions and stick to the plan. Education does not necessarily mean acquiring an expert level of knowledge but never make financial decisions without having a good understanding of what you are doing. The internet, books or advice from a reputable advisor should provide the information needed to at least provide some comfort.
As a general rule, it is important to maintain access to enough cash to cover any unforeseen events or short-term emergencies. For most, this would be an amount equal to three to six months of total household expenditure, although many simply choose a figure which provides sufficient peace of mind. Having too much tied up in illiquid assets, such as property, can create significant problems if there is a need to access capital quickly.
Understand the value of money
A loaf of bread in 1980 cost about a third of what it costs today. Therefore, unless we are receiving a rate of investment return of at least the general increase in the cost of living (referred to as inflation), we will lose the “buying power” of that money over time. However, simply seeking the best possible returns ignores the fact that, in general terms, higher rates of return mean taking more risk. That said, some risk can be reduced through diversification.
Many people have created financial security for themselves by building a huge property empire or amassing a portfolio of shares – but it takes a good deal of knowledge, an even greater amount of courage and a few financial setbacks to do well from having all one’s eggs in a single basket. For most of us, a diversified mix of assets is best, which will likely include cash, property, stocks and shares, gilts (government securities) and alternatives, which are other assets not classed as stocks, bonds and cash. With a good, well-balanced portfolio of assets, a target return of 7% per annum over time is realistic – and this should ensure investments double roughly every 10 years.
The price v value conundrum
Many of us get far too distracted by price. A good, well-capitalised asset offering steady returns is likely to be a better bet than one with no track record. Similarly, a fund returning an average of 8.5% per annum for which there is a management fee of 1.5% per annum offers better value than one returning 6% per annum charging 0.5%. Value always beats price!
Utilise reliefs and exemptions
If Person A has £100 and is taxed on that money and Person B, who has the same amount but doesn’t pay tax, invested in the same way, Person B would make more money over time. There are a number of tax planning and legitimate mitigation strategies which very few people take full advantage of when thinking about improving their financial position. Most of us know we are taxed on earned income at 0%, 20%, 40% or 45%, but few know we can pay as much as 60% income tax if we aren’t careful. Fewer still know about how to reduce or defer capital gains tax or that inheritance tax is entirely voluntary!
Stick to the plan
Financial success almost always comes from “time in’” rather than “timing”. Many of us obsess with making sure we make financial decisions at the “optimum” time, but the reality is (a) buying at the lowest possible price and selling at the highest price is something not even the most experienced investors manage; (b) the power of compound growth over the medium-long term is extraordinarily powerful.
If it seems too good to be true it probably is!
Get good advice
Choose your advisor carefully. Look for experience, qualifications, and testimonials from existing clients – and ensure you like them, because this is the person you will be working closely with for many years.
Wealth creator, speaker, author and philanthropist, Sandro Forte started his business in 1996. Its success has seen him become a professional speaker, helping other business owners and over 400,000 advisors achieve greater success. He is a Fellow of the CII (Chartered Insurance Institute), its premier qualification, and of the PFS (Personal Finance Society). Sandro is the author of the bestselling book Dare To Be Different and hosts The Sandro Forte Podcast, which has been running weekly for three years. And if all that wasn’t enough, he has raised over £15.5m for charity.
For more information contact: Sandro Forte at email@example.com http://www.forte-financial.co.uk