Your 3-step prescription to financial success

The parallels between medicine and personal finance are noteworthy, as both require discipline, prudence, and timely action.

In the same way that your physical health depends on preventative care and informed decisions, your monetary wellbeing also relies on ensuring you’re following sound financial habits.

While you will have unique circumstances and challenges, some generic guidelines can help you to go on a successful journey. As you navigate your financial journey, having a clear and precise plan is paramount.

Today, I’m looking to provide just that with a well-crafted, three-step financial prescription. By mirroring a medical prescription, I’m aiming to curb any financial “bleeding” you may be suffering, stabilise your finances, and guide you towards sustained financial health.

1. Stop the bleeding

The first step in any financial recovery is to ensure any issues you currently have do not get worse, so – in medical parlance – to “stop the bleeding”.

Addressing any poor-quality debt you have is crucial in this phase. High-interest debts can drain your budget and affect your ability to save. As a result, you should pay your debts promptly, prioritise them appropriately, and prevent unnecessary financial stress.

Another crucial element in stopping the bleeding is controlling your expenses to avoid “lifestyle creep”. A conscious effort to live within your means and forego unnecessary expenses can preserve your wealth in the long term. You can take tangible steps to control your spending by setting a budget and consciously tracking it.

An emergency fund is an underappreciated but vital part of any financial plan. It acts as a buffer against unexpected expenses and enables you to sustain financial shocks without going into debt.

Lastly, insure yourself against unexpected health surprises. This should not be considered an “extra cost” but a necessity. With this safety net in place, this may help you to better manage unexpected health events, reducing the risk of derailing your financial plan.

Once you’ve effectively stopped the financial bleeding, it’s time to stabilise your financial health.

Begin by “paying yourself first”. This principle encourages you to invest regularly and even slightly more than you feel comfortable with. You should be looking to invest wisely in diversified assets.

Investing in global equities makes you a part-owner of the great companies of the world. You know these companies because you probably buy and use their products regularly. Owning a whole basket of them means you are diversified against any one company going out of business or underperforming.

Make sure you understand what tax breaks are available to you, such as tax relief on pension contributions and the tax efficiency provided by an ISA. These offer valuable opportunities to increase your savings and investment potential.

2. Step on the path to recovery

Having stabilised your finances, the focus now shifts to your long-term financial recovery and wealth building.

This involves updating your financial plan at least annually. Regular updates help ensure your plan adjusts to life changes and market fluctuations.

You should be looking to become a person who acts proactively rather than reacting emotionally to world events. Responding to market noise can lead to poor investment decisions caused by panic or euphoria. Instead, maintain a long-term perspective and let your financial plan guide your actions.

Understanding the financial side-effects of being a long-term investor, especially market volatility, is paramount. Familiarise yourself with the idea that markets fluctuate naturally and that temporary declines are to be expected. If you have a diversified portfolio, you will insulate yourself against these declines while benefiting from long-term market growth.

You will be following a well-trodden path

Your journey to financial success will require hard work and dedication, but it is achievable.

There are no shortcuts to success, but every successful investor has walked the path I’ve laid out above.

By following the above prescription with consistent action and discipline, you could be well on your way to achieving your cherished financial goals.

Get in touch

If you’d like to talk about your own financial prescription, then please get in touch.

You can call me on 07769 156 250.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Equity investments do not afford the same capital security as deposit accounts.