In more than a decade working as a financial planner, Elliot Watson CFP® has met with hundreds of clients and learnt a great deal about what it takes to build a wealthier and happier life. Above all, he believes planning for a better future is as much about people as their money. Here Elliot shares 7 key insights into how you can transform your fortunes.
1. Time is critically important
When it comes to superannuation and savings it’s very important to remember that time waits for no one. So I’ll always encourage my clients to start saving right away, even if it’s just a modest amount. Compound interest is your best friend when it comes to saving but it needs time to work. Although starting to save early is the ideal, it’s never too late and doing something now is better than continuing to do nothing.
2. No one has a crystal ball
Anyone that tries to time the market to make a quick killing should know by now that it’s impossible to predict how the market will act. Just look at the changes that have occurred over the last 10 years; the Global Financial Crisis of 2008, the abrupt end to the mining boom in 2012, Brexit, Trump’s election, and most recently, escalating tension in North Korea.
Some of these events have affected markets less than we might have expected. Others – like the GFC – were catastrophic. I was fortunate (or not) to start working as a financial planner right before the GFC. It was considered to be the worst financial crisis since the Great Depression of 1929. The Australian market fell from a high of 6,800 points in November 2007 to a low of 3,120 points in March 2009, a drop of 54%.
It was an extremely difficult time for anyone with investments. It was also a profound example that the most important things to remember when investing are diversification and ‘time in the market’. It’s taken less than a decade for the ASX to get back up to it’s current level of 6,100 points.
3. Cure yourself of debt
Debt is like an illness. If you just keep treating the symptoms, and don’t address the cause, you’re going to keep getting into debt and suffering the consequences for your life. It’s relatively easy to implement debt reduction strategies to reduce and eventually pay off your debts. What’s much harder to do is deal with the behaviours which got you into debt in the first place.
There are two important lessons to be learnt here. The first is to stop trying to keep up with everyone else with what you have in life. Try to make decisions on what you spend based on your own values and goals. The other lesson is simply learning to say no to things you can’t afford instead of just putting them on the credit card and worrying about it later.
4. Face the music, feel the pain
It’s human nature to take the path of least resistance and spending habits are no different. I’ve often had clients who had short-term debt trouble only to have their parents bail them out when they can’t afford the repayments. Often these debts have come about because of a whim – loading up the credit card to take a holiday they can’t really afford or taking on a personal loan to finance their new car. And when people don’t have to face the music and repay the loan themselves, they can end up doing it all over again, expecting someone else to come to the rescue.
The lessons of repaying your debts are only truly learnt if you feel the consequences of your actions. Taking on the burden of paying off your credit card and then experiencing the joy and satisfaction of finally being about to say you’re free of debt, are beneficial for changing your behaviour for the better. Learning these important life lessons can set you up for long-term success and financial mindfulness.
5. Make the leap
In my job, I get to hear many people tell me how unhappy they are in their careers. When you’re stuck in a job you hate – even if it pays well – this can really stand in the way of you and your best future.
As well as hearing about the struggles people have with their jobs, I’ve also had the privilege of helping people take that leap of faith and have a crack at whatever it is they’re passionate about. I’ve seen the proof of that old saying ‘if you love your job, you never have to work a day in your life.’ It has been an absolute joy to watch many of my clients take that step and see the change in their lives. Financial planning isn’t just about setting you up for retirement; it’s also about helping you achieve your dreams along the way.
6. Being retirement ready
For many of us, our job is one of the most important things in our lives. Over the years, I’ve learnt that working means more to people than just providing financial support for their families. It’s also about having a sense of purpose and belonging. Work gives us a reason to get up in the morning, connects us to other people and helps us feel we’re contributing to society.
When working with clients who are getting ready for retirement, this sense of purpose they get from the workplace is an important issue I like to raise with them. What will give them purpose and satisfaction in retirement? Their main reason for seeing a planner is to make sure they’re provided for financially. But a sense of purpose in retirement is just as crucial for happiness as having enough to live on. So it’s important for me to ask my clients questions about how they’ll continue to live fulfilling lives in retirement.
7. Bring your ideas – and commitment
One of the best things about my job is all the different people I’ve been able to meet. I’ve seen clients on the verge of bankruptcy pull themselves out of debt. I’ve witnessed the beginning of new exciting ventures. And I’ve learnt that anything is possible. We are only limited by our ideas and more importantly, our commitment to making those ideas happen.