7 tips for managing your personal finances

Discover tips to help you manage your personal finances and prepare for the future with peace of mind.

When it comes to managing your personal finances, the challenges are just as varied as the opportunities. Creating wealth isn’t enough – you need to know how to manage, grow and pass wealth on to future generations in a sustainable and effective way.

At Banco Carregosa, we understand the uniqueness of this journey and that’s why we pay special attention to tailoring strategies to each client’s family dynamics and life goals. From assessing family dynamics to planning for business succession, here are some simple tips to keep in mind when managing your personal finances. 

1. Set measurable objectives

Buying a house, paying for your children’s education, making a large investment or having more freedom in retirement – any financial plan should start with defining a clear goal to achieve.

What to do:

• Define the goal, whether it’s protecting against unexpected risks or planning for the transfer of wealth and responsibilities to the next generations;

• Quantify the capital required to achieve the goal and the timeframe for achieving it;

• If you have several financial goals, you should also prioritise them.

2. Assess family dynamics

The particular characteristics of each family are a key factor in managing personal finances. They can make or break a financial plan.

What to do:

• Encourage an open dialogue about finances within the family to align expectations and plan according to each member’s ambitions and needs; 

• Invest in ongoing financial education for yourself and other family members, especially younger ones;

• Consider setting up a formal governance structure, such as a family wealth management office. This will help coordinate the family’s wealth.

3. Always have a continuity plan at the ready

When preparing for a new life cycle, start by reviewing your financial plan, including sources of income, expenses, assets and liabilities. This will help you understand your current financial position and plan accordingly. Personal circumstances and the economic environment change, so it’s important to review and adjust your financial plan regularly with the help of a trusted adviser.

What to do: 

• Create (or update) a medium or long-term financial plan - for 3, 5 or 10 years;

• Determine the amount available for investment, savings and family spending;

• Ensure you have sufficient liquidity to take advantage of investment opportunities or unforeseen events without compromising your long-term investment strategy;

• Create different scenarios for the plan, some more optimistic and some less so, taking into account possible market volatility. 

4. Always have a business continuity plan ready 

Anyone involved in managing a business or family estate will be aware of the need to plan for continuity. However, even small uncertainties in this area can turn into headaches in the future.

What to do:

• Develop a well-defined succession plan with no room for ambiguity;

• Identify potential successors and their roles;

• Provide the necessary training to ensure a smooth transition;

• Select specialist advisers to provide personalised advice and ensure the best strategy for your specific case.

5. Diversify your investments

This is one of the most common recommendations when it comes to managing personal finances, but one that is not always followed. It is important to diversity your investments. 

What to do:

• Spread your capital across different asset types, classes, sectors and geographies to reduce the risk of large losses if a particular market or asset class falls in value; 

• Consider including sustainable and responsible investments (ESG), which will allow you to invest according to your commitment to ethical, environmental and social practices; 

• Look beyond traditional stocks and bonds, by investing in art and antiques, for example. These investments can offer returns that are uncorrelated with traditional financial markets.

6. Tailor your portfolio to the lifestyle you want

This is an important strategy for managing personal finances when planning for the next 5 to 10 years. For example, if you want to travel and see the world, it’s probably best to delegate your investments to liquid fund managers. If you’re looking to build a community and leave a legacy in a particular region, property investment may be your best option.  

What to do:

• Consider different possible scenarios and lifestyles, and adjust your investment portfolio to ensure it’s in line with your desired lifestyle;

• Determine the capital required to fund this new phase of your life, taking into account its estimated duration.

7. Include social and environment causes

The social or environmental causes that are important to you are also important to your personal finances. This will help you align your contribution with your personal and family values.

What to do: 

• Seek advice on the best philanthropic practices, taking into account impact and efficiency;

• Decide whether you prefer to make significant one-off donations or establish an ongoing flow of support for a cause; 

• You can set up a private foundation or contribute to existing support funds; 

• Establish mechanisms for assessing the impact of your philanthropic activities;

• In addition to supporting causes, consider social impact investments that offer both a financial return and a positive social or environmental impact.

Banco Carregosa, professional support for managing your personal finances

Even if you’re experienced in managing your personal finances, it’s always useful to have specialist financial advice to help you make smart asset allocations and develop a long-term investment strategy. We’re here to help you develop the best strategies to protect and maximise your wealth. Contact us.