How to set yourself up for financial success

By Sandro Forte
Credit: Getty Images
Credit: Getty Images
Sandro Forte, CEO of Forte Financial, shares his top tips in response to his most frequently asked question: ‘How do I become financially successful?’

At some point in life, we’ve all asked ourselves how we can make smarter financial decisions, whether that be cutting down outgoings or researching how best to invest. As a financial expert, Sandro Forte shares his top 8 tips on how you can set yourself up for financial success. 

Don’t make emotional decisions 

Whether it’s property, cryptocurrency or shares in a particular company, the number of people who succumb to the ‘consensus principle’ is frightening. Human beings are programmed to seek comfort, and so when we see others seemingly making money from Bitcoin or letting a property, our instinct is to follow suit. Unfortunately, for most of us, it takes a while to make the decision and by the time we take action we are buying at an inflated price or once the opportunity has gone.

As a general rule, the time for a great financial decision is before everyone else, but since that is not realistic for the majority of us – since we don’t have a ‘crystal ball’ – the best way to achieve financial success is to adopt a logical approach. By sticking to the following ‘rules’ we won’t go far wrong.

Education is power

Too many financial advisers simply tell their clients what they need to do – but by not educating them, the steps to achieving greater financial success are less likely to be taken. By contrast, we take a view that knowledge leads to confidence – and confidence inevitably leads to the commitment needed to stick with the agreed strategy.

In summary, we should take time to understand exactly what we are doing and why.  We don’t need to become financial experts, but we should know enough to make an informed decision.

Maintain liquidity

Whilst keeping too much cash isn’t necessarily a good thing (bear in mind interest on bank deposits are significantly lower than the cost of living, leading to ‘real’ loss over time), it is always worth holding at least three to six months' household expenditure in cash. Not only do we have the means to meet short term emergency needs, it prevents the cost or tax consequences of having to access other investments.

For the more cautious of us, a greater level of ‘emergency fund’ is important, whereas for those who have a greater level of surplus income and who have more liquid investments, the figure could be lower. There’s no right or wrong; it’s a matter of individual need.

Understand the real value of money

Put simply, a loaf of bread in 1980 did not cost the same as it does today. Things go up in price over time, driven by inflation. For that reason alone, we need to ensure our assets rise in value by more than the cost of living or they diminish in buying – power terms.

Of course, to achieve greater investment returns, we need to take more risk, but the opposite is true when inflation is low. The most sensible approach is to work on the assumption inflation is 3%, which is higher than the 2.53% annual average since 1989, but takes into account the recent spike in the cost of living. 

Utilise reliefs and exemptions

Whilst we all tend to complain about tax, inflation and other things which reduce what we have, the fact is that there are plenty of reliefs and exemptions we can use to our advantage.  In the UK the first £12,570 (2022/2023) we earn is free of tax, we can make profits, tax free, on certain assets of up to £12,300 in each tax year, receive tax free dividends of up to £2,000, pay no tax on savings of up to £1,000, benefit from tax relief on pensions and even reduce Income Capital Gains and Inheritance Tax using Enterprise Investment Schemes and certain types of trust.   With careful planning these are considerable tax savings available.

Stick to the plan

Once we have a good plan in place, it's important to stick to it. This may sound obvious but deviating rarely produces better results: ‘Time in’ rather than ‘timing’ is key to financial success.

Risk and reward

We would all love ‘maximum return, minimum risk’ but the reality is that to make more we need to risk more. However, we do not have to take a linear approach to risk; generally speaking we can normally afford to take more risk with longer term investments whilst being more cautious with those likely to be needed within a few years. As a rule, a risk-based approach for different objections over different timelines is a good strategy.

Get good advice

Whilst the most obvious of the lot, good advice should never be underestimated. If we find someone we like and trust, who is suitably qualified, stick to them like glue, because there is a much greater likelihood of achieving financial success by understanding options, asses

sing advantages and disadvantages, agreeing a plan and then committing to it.

Sandro Forte, FCII, FPFS is one of the UK’s most qualified and experienced financial advisers.  He and his company – Forte Financial – have won over 40 awards in the last 30 years and Sandro has lectured all over the world, helping others to achieve greater financial success. His book, Dare To Be Different, is an international best seller.

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