Financial fitness tips

Lisa Dudson. Photo / Supplied

It's always good to check every now and again that what you are doing is working for you. I find people often fall into habits and become sidetracked with their financial goals.

Recently, a client said to me that they had been wanting to see me for five years but hadn't got around to it. That is a common comment. Imagine how much further ahead they would have been financially if they had taken action earlier. Here are some questions you should ask yourself to check if you are on track to achieve your aims.

Are you running an investment business or are you a hobby investor?

A hobby investor could be one who buys one property then "crosses their fingers" and hopes it will be enough to fund their retirement. If you were running your investments like a business you would, no doubt, do a lot more planning, spend more time on your investments, know what they would achieve for you long-term and, therefore get a better result.

What is more important to you - wealth or happiness?

While in Melbourne recently I heard Robert Holden, who calls himself a happiness guru, speak. He actually has a PhD in which his specialisation is happiness. His studies have indicated continuously that people choose happiness over wealth 90 per cent of the time. I've had a number of clients over the years who have achieved very well financially but I'm not convinced the money has made them any happier. Often there is a trade-off between what makes you feel happy and fulfilled and what is best for you financially.

Destination or journey?

This is linked to the question above in that you must determine if you are focused on enjoying your life daily or believe that when you have a certain amount of wealth you will be happy. Commonly I hear "I want to own 10 properties as then I will be financially free and don't have to work". Is your life going to be much better when you arrive at your destination? Or do you want to take a more balanced approach and enjoy the journey?

Do you have a long-term plan?

Today, retirement is much more than reaching the age of 65, stopping work and collecting NZ Super. It may or may not be a way off but thinking about what you want your life to look like in retirement and what it may cost is worth the investment in time.

What is your current financial position?

In my experience, few people actually know what their financial position is. Do you know what your net worth and cashflow is and how you expect that to change over time? Successful investors and business people always keep a close eye on the financial details.

Do you have a clear strategy or plan?

Have you thought about what you are trying to achieve from buying property and put a plan in place to help you achieve your goals? If you don't have some kind of plan you could end up anywhere.

Are you investing or speculating?

I believe investing is where you have some certainty about what an investment will deliver. For instance, you can work out the cashflow on a property with a simple spreadsheet or property software tool and you can probably guess that property will go up by 5 per cent per annum, on average, over a period of at least 10 years. So you should have a fairly good idea of the return. Speculating is more high-risk and might look like: "They are building a new motorway so it's good to buy now as when it goes in the area is going to really increase in value."

Are you using leverage smartly?

There is a lot more to leverage that just borrowing money. Are you leveraging your time wisely and giving some thought to the best use of your time. Understanding your individual strengths and leveraging them can also help maximise your returns.

Do you have a supportive mindset?

So often we sabotage ourselves because of the beliefs we have. Are you aware of your beliefs around money and wealth and how they might affect you? Or are you on auto-pilot?

Are you keeping an eye on what's going on?

This is probably the most critical of all. Reviewing your situation regularly and checking in with your team of professional advisers can help you stay on track to achieving your goals. Continuously improving your financial education and skills will also have great paybacks.

Lisa Dudson, Acumen financial and property investment adviser.