Five Keys to Planning Your Personal Finances and Making Better Decisions

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Five things to know when making financial decisions

In times of uncertainty such as these, it is essential to make informed and responsible decisions about your finances, which requires setting specific short- and long-term goals, as well as seeking expert advice to guide you along the way. Investing is key to wealth building, however, it is difficult to get started without the support or knowledge of experts along the way. Here, we’ll walk you through five keys to planning your personal finances and making better decisions

Managing money in a level-headed way will never be a simple task, even more so when the immediacy of online platforms leads people to make hasty financial decisions without sufficient guidance.   Although there is a lot of advice out there, sometimes it is hard to learn through the noise. We gathered five essential keys to planning your finances and making better decisions in 2022 and beyond:

1. Plan: Investing without planning is like traveling without a clear destination Lack of planning is one of the reasons that lead people to feel anxious and stressed by the management of their money, generating regret for attitudes such as impulsive purchases or lack of savings.  A report by the U.S. bank holding company Capital One and the research firm The Decision Lab revealed that 77% of Americans surveyed feel anxious about their financial situation. In fact, 58% acknowledged that finances control their lives, thus generating levels of stress which, in turn, are associated “with worse financial attitudes and practices” such as not saving regularly or simply not planning, according to the report.  By establishing a plan, and sticking to it, you can feel more in control of your life and future, thus reducing stress.  

2. Learn: Make Informed Decisions Although people now have vast flows of information to analyze available investment options and make better decisions, reliable sources are often ignored and this becomes “a major barrier to financial wellbeing,” according to a report released by The Decision Lab. In this regard, the Development Bank of Latin America- CAF explains that misinformation on financial matters leads people to limit “their ability to make responsible, conscious and competent decisions.” To mitigate this situation and contribute to financial education, Wizest created a platform that democratizes access to investments by allowing potential investors to dive into the stock market guided by experts. Investors simply select the expert profile that best aligns with their values and start replicating the movements of their portfolios with a click, which they can monitor on a dashboard.

3 INVEST: Generate More Passive Income The lack of information about investment opportunities leads people to ignore the option of generating passive income and new sources of wealth, an alternative that despite its characteristics also requires knowledge and responsibility. Generating this type of income is not as simple as leaving the pilot on autopilot since most people who opt for this alternative have studied it or have the guidance of experts to get into options such as the stock market, government bonds, and other instruments. The stock market is an option that seduces many investors, but first-time investors are often intimidated by the lack of knowledge of how it truly works.  In these cases it is essential to have the guidance of experts, who through technological solutions such as Wizest can accompany and guide them on this journey by removing barriers and opening a window of opportunity to generate new income.  

4. Diversify: It’s Cliche but True. Never place all your eggs in one basket! In crisis situations such as the one the world went through due to the coronavirus, the importance of not relying solely on one source of income and not betting all your cards on a single investment proved more true than ever.  With the ‘boom’ of fintech companies that use technology to generate disruption in the financial sector, it is increasingly simple to access these savings and investment options, allowing potential investors to have greater control over their resources and obtain returns without having to go to traditional banks.  Accessing the stock market has never been easier thanks to the openness that technological solutions offer, but it is important that each investor evaluates their risk profile and is clear about the extent to which it is convenient to diversify his portfolio.  Investment management firm BlackRock explains clearly how portfolio diversification is useful at times when an investor is looking to mitigate risk and volatility, enhance returns, as well as “flexibility to achieve a trade-off between liquidity and income-generating assets in the short and long term”.

5. PROTECT: Don’t Keep Your Money Static Keeping money static or investing in alternatives that do not shield investors against inflation, at a time when prices are growing at an accelerating pace in most economies, does not contribute to healthy finances. Money has to circulate to avoid inflation and devaluation, but every move must be made with conscious planning and taking into account the horizon of each investor.  Meeting financial goals involves making important decisions such as reducing liabilities (such as debt) and saving with a focus on investment, so it is generally recommended to allocate at least 20% to 40% of your income to investments that will generate passive income, while also creating an emergency fund in case of situations that require this cushion.  With this in mind, Wizest accompanies investors who have been excluded from the opportunities offered by the stock market, but who have the capital to access this universe, democratizing access and giving potential investors the tools to take control of their finances. 

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