Most people don’t have the time, inclination or understanding to give their personal finances the attention they deserve. Natasha Abudarham offers seven tips for remaining financially healthy and independent.

Ahead of the Brussels seminar 7 Steps To Financial Independence - inspired by the plight of a trailing spouse who found herself in extreme financial difficulties after splitting from her partner - Natasha Abudarham offers 7 tips for remaining financially healthy and independent.

FINANCIAL INDEPENDENCE
We’ve all heard the saying ‘money can’t buy you love’ but money will certainly determine the kind of lifestyle you will have now and in the future.  The biggest problem is that most people don’t have the time, inclination or understanding to give their personal finances the attention they deserve.  It’s not that we plan to fail, we just fail to plan and it is this lack of planning that can seriously affect your lifestyle.

Here are some top tips that you should always keep in mind when it comes to your own personal finance.

1.     Review your finances on a regular basis
It is extremely common for people to keep a list of their outgoings, incomings and financial assets in their head.  A good idea is to start your own financial file and keep track of what you own and what you owe,  in particular if you have any kind of home loans, loans in general, savings plans, stocks, shares, bonds etc. 

Write down your outgoings each month and know how much surplus cash you have on average each month.  Likewise, know when you will have finished paying off loans. 

Know your assets.  How much you paid for them, the value of them of them now, how much you expect them to be in the future and when they mature. 

Managing your finances doesn’t have to be every day but it should be a regular occurrence, so you know where you are at financially each month.

2.    Emergency Cash Cushion
Always make sure you have a cash cushion of between 3 – 6 months of your average monthly expenditure in your bank account.  This cash should always be there for you to access immediately if you need to.  Do not use this cash for anything but an emergency and if you ever need this money, make sure you work to building it back up again as soon as you can.

If you don’t have a cash cushion, then this must be the first area that you begin to build up.

3.    Understand why money is important to you
Have a good think about why money is important to you right now and why it will be important to you in the future.  You may not be obsessed with money but we all need money to survive. 

Ask yourself ‘why do I need money right now’? Is it just for the necessity of living or do you enjoy buying new clothes, travelling, buying antiques, spending it on your family?  What would be the impact on your life if you couldn’t enjoy these things?

4.    Have Financial Goals – Financial Road Map
Set out some financial goals for yourself.  How would you like your finances to look in 1 year, 5 years, 10 years, 20 years? Have you put the wheels in motion to reach these goals?  If not then set your own financial goals and plan how you are going to reach them. 

5.    Always maintain your financial independence
Whether you want to be in a relationship or you are in a steady relationship, getting married or married, you should always make sure you maintain your own financial independence.  Relationships do end, marriages do fail, partners do lose jobs.  None of us want these things to happen, but it is a fact that they do.  It doesn’t mean that you have to be a cynic, just make sure that you always maintain your own bank account and savings, so that you could comfortably survive financially if you were to end up on your own.

It is also helpful to keep credit in your own name.  You never know when you might want to take out a loan to start your own business or buy something new.

6.    Keep up to date with your pension
Long gone are the days where we work for the same company for 40 years and enjoy a healthy pension.  If you have moved from country to country, your state pension could end up being very little - likewise if you have moved employer several times.  You may also have children and have stopped working altogether.

Whatever circumstances you find yourself in, no matter what age, it is vitally important that you have a pension and you know how much it will pay out and when you can expect to receive it.

You may also find that your company pension will not be enough for you to survive comfortably; if this is the case then you should consider starting your own personal pension.

Many people would like the option not to work earlier than the fixed retirement age.  If this is the case, then you should know how much your pension would be reduced by if you took it early. 

7.    Teach your children how to plan their finances
It is so important that your children grow up understanding the importance and value of money.  This can be taught at home very easily once you start giving them pocket money.  If you can teach your children good principles when it comes to money when they are young, they will carry that through to adulthood.

By Natasha Abudarham
Guardian Wealth Management
Senior Financial Consultant

www.guardianwealthmanagement.com

[Expatica, 2008]