Healthy Financial Habits

We all know people who aren’t sure whether they need a financial planner, don’t need a financial planner, or don’t know what a financial planner is. Two years ago, I was discussing some ‘rules of thumb’ with a friend whose son had recently left university and, for the first time, had become financially independent. My friend passed the tips on to her son and recently told me that they’ve helped him to feel financially on track.

Passing on some common sense when it comes to personal finance can be seriously powerful and occasionally life changing. With that in mind, if you know anyone who needs help with their finances, here are a few basic tips you can pass on to them to offer a little help:

  1. Tell them to write down their income and expenditure (and tell them to be generous on expenditure, they don’t want to spend a lifetime struggling to stay within the lines). When they have this, they should review it and stick to it.
  2. It is good practice to write down financial goals (maybe they’d like to help with their children’s education or pay off large debts such as a mortgage? It’s also worth remembering that, if they haven’t already, one day they’ll want to stop working). This will help them to stay on track for a comfortable future.
  3. Should they get the urge to buy something big (I’m thinking 6 months in the Bahamas…), suggest that they give themselves a 72 hour ‘cooling off’ period before reviewing the purchase again, checking that it wouldn’t compromise their financial goals and then, if they’re still keen, have a cocktail for me!
  4. Keeping an ‘emergency cash fund’ will give them some level of security should something unexpected pop up. This could come in handy to provide them with extra time if they need to search for new employment, but more than this, it will provide them with valuable peace of mind.

These four habits require effort, practice and they are only the beginning of a true financial plan (let us not forget inflation!) but they can really build a solid foundation for a financially secure future and we all want that for the people we care about.

Finally (and this will probably be the most uncomfortable part of the conversation), tell them to plan for the worst, insure any loans that they take out (mortgages for example), find a couple of people they trust and set up Lasting Powers of Attorney and remind them that it’s only polite to your family and friends to speak to a solicitor and leave a Will.

I hope this does help someone in your life as much as it has helped those in mine, but at the very least, I hope it answers the question of whether your friends and family need a financial planner or not, or even just gives them an idea of what a financial planner is!