In times of plenty, we seek safe haven for surplus cash that shall generate passive income for the future. In times of need, little of us take desperate steps to increase our cash supply to meet the demands regarding the day. Most actions necessitate investment decisions, decisions that many of us are oftentimes not qualified nor experienced to make wisely without help. Thus, begs the should have knowledge of the answers to 4 wives why, when, where, who and one husband how questions with respect to investing and financial planning. This story shall discuss the 3 most important pre-requisites to creating wise investments.
As a licenced financial planner and a business and financial advisor to mini and moderate companies, I am often asked to release investment points or advice. Whether I am a fantastic investment guru or tipster or not is immaterial as I should always stay away from answering such questions without knowing and understanding the financial background, status and financial goals regarding the questioner. This story is not intended to be a primer in investing or financial planning as one can select a pamphlet on the subject in any good high street or online bookstore. Rather, I should like to share what I think about to be the top 3 amongst the many pre-requisites an investor should think about prior to creating an investment decision. Hold a Financial Procedure with SMART goals.
Planning in general is an activity we engage in all the time - planning for a holiday, planning for a wedding, or planning for any other function or planning to achieve an exact objective. However, how many of us really get involved in developing a truly comprehensive personal financial procedure and implement the same? If not, howcome not?. The certified financial Planner Board of Standards, Inc CFPBSI defines financial planning as the process of meeting your life goals through the real management of your finances. Life goals are goals dear to us that we should like look return to pass, mostly during our lifetime. Such goals shall be as simple as saving to buy a car or for a glide around the world, or a bit more challenging in investing to mitigate the effects of inflation in planning for retirement.
In goal setting, it is imperative that we be rational and not ever set goals that shall be too difficult to achieve within the timeframe compulsory else we shall be truly discouraged and discard the procedure altogether. Thus, it is good to follow the SMART principle, taught in Management 101, which states that our goals should be Specific say, keep to buy our specific dream car, Measurable say, keep $50,000 to buy a car, Achievable say, procedure to buy a car costing a sum we can afford, Realistic as in planning to buy a car and not a travels to moon consequently it can return true for some, and Timely say, achievable within a reasonable time period. Knowing our SMART financial goals shall enable us to procedure how to achieve them. If we are not sure how to develop a financial procedure that is workable for us, we can seek the services of a financial planner. A spot to note is to make sure that that we consult a financial planner that is adequately qualified say, possessing the CFPBSI's Certified Financial Planner certification that is recognized worldwide and experienced and perhaps licenced to practice like a financial planner by the appropriate authorities to make sure that accountability and ethical behavior.
Understand your personal financial risk profile. Prior to creating any investment decisions, it is compulsory that we understand ourselves in relation to our lone financial risk profile. All of us take risks in our daily lives and these should with crossing a busy street, or receiving a flight somewhere, or even getting married considering the increasing many separations or divorces. It is important to note that different people have different thresholds within the position of risk they can be willing to take for any many reasons. Assuming a risk that we are not prepared or capable to cope with shall result in adverse consequences and detrimental to our health.
Similarly, the position of financial risk we are willing to assume or can tolerate should be carefully evaluated and such an exercise shall normally be based on a set of criteria relevant to each individual. In addition, the risk profile of an lone can change as his or her personal status changes and it is generally accepted that a younger person can assume a higher financial risk compared to an lone nearing retirement as the former has time to accumulate or recoup losses due to investment decisions not realizing their desired potential. Thus, it is wise to understand our financial risk appetite and risk profile such that the investment decisions we make shall commensurate with our risk profile. Investment opportunities abound within the marketplace for all risk profile types, whether one is thought about a conservative or can take high risk. In summary, the above are what I think about the 3 essential pre-requisites to investing and the others mainly pertain to details in understanding investing, investment strategies, and investment opportunities that shall be located in any good investment text books or articles, advice from investment professionals or financial planners, or perhaps shall be the subject of a follow-up story by this writer.
A final piece of advice is to re-emphasise the fact that we should not make any investment decisions that can adversely impact our financial well-being until we hold a sound financial plan, and if professional advice is required, do always consult a qualified and licenced financial planner to help develop one's personal financial plan. Always do not forget this well-known adage - FAILING TO PLAN IS PLANNING TO FAIL.
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