Three Questions That Could Make You Better With Money

When people think about becoming better with money, they often assume they need to know more.

Perhaps they need to understand Investments better, follow the markets more closely, become an expert on Tax or finally work out exactly what all those different Pension rules mean.

Knowledge certainly helps. But after years of Financial Planning, we’ve come to believe that some of the biggest differences aren’t created by knowing more. They’re created by thinking differently.

You can have a beautifully constructed Financial Plan, a well-diversified Investment portfolio and all the right paperwork in place, but you still have to live with that plan through changing markets, unexpected events and the occasional temptation to do something that feels right today but may not help tomorrow.

So, rather than giving you three more Financial Planning rules to remember, here are three questions we think are worth asking yourself.

1. Am I buying something today, or buying more choice tomorrow?

We’re certainly not going to tell you to stop spending money.

Quite the opposite. One of the reasons we spend so much time helping people plan is so they can enjoy the money they’ve worked hard to create. Holidays, experiences, nice meals, helping the children, changing the car or buying something simply because you want it can all have a perfectly legitimate place in a Financial Plan.

But there is another side to spending that we don’t always think about.

Every pound has more than one possible job. It can buy something today, or it can be saved or invested to give you more choice in the future.

That future choice might mean retiring earlier, reducing your working hours, helping your family, travelling more or simply reaching a point where work becomes something you choose to do rather than something you have to do.

Seen that way, saving isn’t simply about being disciplined or “good with money”. It’s about gradually buying yourself greater freedom.

The aim isn’t to always choose tomorrow over today. That wouldn’t make for much of a life. It’s about finding the balance that allows you to enjoy both.

2. Does feeling safer today actually make me safer tomorrow?

Cash feels reassuring.

You can see it, you know what it’s worth and, unlike Investments, it doesn’t appear to have a bad Tuesday because somebody said something unexpected on the other side of the world.

That’s why having an appropriate amount of cash available for emergencies and shorter-term spending is an important part of Financial Planning.

The difficulty comes when our desire to feel safe today starts working against what we’re trying to achieve tomorrow.

Money that won’t be needed for many years may need the opportunity to grow, particularly when inflation is steadily increasing the cost of the lifestyle that money will eventually need to fund. Investments involve risk and their value will rise and fall, but avoiding Investment risk altogether introduces another risk: that your money doesn’t keep pace with the life you’re asking it to pay for.

So Financial Planning isn’t really about choosing between “safe” and “risky”. It’s about understanding which risks matter for which money, and over what period of time.

Sometimes the thing that feels safest today isn’t necessarily the thing that gives you the greatest Financial security over the next 20 or 30 years.

3. Am I spending my energy on something I can actually control?

This might be the most important question of the three.

At any given moment, there are hundreds of things we could worry about financially. Markets. Inflation. Interest rates. Governments. Budgets. Wars. Elections. House prices. Tax changes. The next recession.

All of them matter to some degree, but there’s a problem: you can’t control most of them.

What you can control is how much you spend and save, whether your Financial Plan remains appropriate, how diversified your Investments are, whether you’ve protected your family, whether your Estate Planning is up to date and, perhaps most importantly, how you respond when something unexpected happens.

That last one matters enormously.

One of the easiest ways to damage a good long-term Financial Plan is to abandon it because the short term suddenly feels uncomfortable. Markets will fall from time to time, governments will change the rules and life itself will occasionally throw something at us that wasn’t in the original plan.

Good Financial Planning isn’t about predicting all of that correctly. It’s about creating a plan capable of adapting when it happens.

Perhaps being “good with money” is simpler than we make it

None of these three questions requires you to understand the latest Investment market forecast or become an expert in Financial Planning.

They simply encourage you to think about money differently.

• Am I enjoying today without unnecessarily sacrificing tomorrow?
• Is the way I’ve positioned my money giving me the right kind of security for when I’ll need it?
• And am I concentrating on the things I can actually control?

You won’t always get the balance exactly right. None of us does.

But if you keep returning to those three questions throughout your Financial life, you may find that making smarter Financial decisions becomes considerably simpler.

And ultimately, that’s what a good Financial Plan should help you do.