Financial Tips for Personal Investment (Part 1)

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Ten Financial Tips for Everyone (Part 1)

I have seen and read stories of great entrepreneurs who create spectacular businesses, amazing investors who pick stocks prophetically and currency traders who could time the market with prescience. I have none of these gifts.

I wrote the following Ten Financial Tips back in March 2009, I still find them relevant. I will share the first fives tips in this post.

Tip #1.    Be a super saver, not a super spender. Don’t save what is left after spending; spend what is left after saving. Acquire assets and not liabilities. Credit cards, cars, and club memberships are all liabilities.

Tip #2.    Start early. Start saving early, but it is never too late to start. Everyone must save at least 10% of their income, preferably 20% to 30% of your income.

Tip #3.    Basics first. First, plan for emergencies, illness, disablement and death. It is important to have term and health insurance. Do not hesitate nor delay in getting these basics.  If you do, it is like going on a long car journey to a remote area without sufficient gasoline or spare tires. It is simply asking for trouble.

Tip #4.    Education and retirement are important building blocks. Always plan for your children’s education and your own retirement. This is best done by saving regularly (monthly) for long periods. Be committed to finishing a plan once you have started on it.

Tip #5.    You are no expert. Do not buy stocks directly, unless you are a financial expert or are prepared to spend a lot of time managing your stock portfolio. I believe in averaging in and averaging out when investing in lump sums. In doing so, I minimise my risk. The truth of the matter is that no one knows the market top or market bottom. Neither do I. Remember, it is not about timing the market but time in the market that matters.  

In the coming week, I will share the next five financial tips. It touches on the psychological aspect of investment. Stay tuned!