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How To Manage Your Finances Without An Advisor

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With the next Pirates of the Caribbean set to hit theatres in coming months, one of its popular stars Johnny Depp has made the headlines – not for his involvement in the thrilling film series, but because he’s suing his former business managers for both mismanagement and outright fraud.

Depp sued them for $25 million dollars and blamed them for failing to file and pay taxes on time, and he’s not the only celebrity to have done so. More recently, it’s former boxer Mike Tyson who’s suing one of his financial advisors.

The question then is, how can we ensure that financial advisors are acting in the clients’ best interests? We can’t say for sure, but possibly the best way would be to entrust your money in the most reliable entity – yourself.

You’re likely to  understand your own finances better when you manage them.

It came to light that Johnny Depp was alleging living a USD $2 million-a-month lifestyle when his former business managers hit back at him in an ugly spat.

For someone as famous as Depp who’s able to earn millions just from the production of yet another Hollywood movie, this is something that he can cope with. Unfortunately, for a significant number of people, such a lavish lifestyle is unsustainable.

When you manage your finances at a deeper level – understanding which investment vehicles to place your hard-earned money in, you are likely to develop a keen eye for a suitable investment medium best catered to your financial goals as well as bearable risks.

For instance, conservative investors can choose to invest in Exchange-Traded Indexes, usually a combination of stocks taken from the top-performing companies, while investors with an appetite for risk can look to buy equity in emerging start-ups or dip their hands in the foreign-exchange markets.

If you’re serious about early retirement, regular planning ought to become a habit.

Financial freedom is a goal more common than superstitious parents looking to have a baby during the Year of the Dragon.

The basic three-step process would be to (1) set realistic and achievable goals, (2) finding the cash flow, (3) picking your investments in accordance with your risk appetite and (4) review and adjust your investments along the way.

As planning for early retirement usually takes on a long-term perspective, understanding how compound interests and the concept of reinvesting your capital is crucial for you to gain an edge.

Make use of free information that is readily available

Today, we are witnessing the growth of websites and blogs (like this website-cum-app) dedicated to niche topics on reviewing your insurance plans, critiquing investment packages and recommending new money-making schemes.

As of a decade ago, even with the advent of the Internet since the 1980s, such information were not widely available, and were best left to professionals (or supposed professionals) specialising in a certain financial field.

While it could be argued that going through an advisor has benefits for someone who is strapped for time, it’s important to scrutinise the rate of return over time with regards to the policies that the advisor has bought in the past. Then again, such information is not readily available to clients unless specifically requested for.

Conclusion

With the market saturated with financial advisors, it’s probably wise to say no to entrusting your money to a friend who has recently joined a financial advisory firm. Unfortunately, friends and money do not go together, with the financial interests of the agent continually in doubt. With a ton of technical financial knowledge, it’s not difficult to grasp financial concepts and grow your retirement nest.

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