How Your Wealth Mentality Impacts Your Relationship with Money

If you want to achieve long-term wealth, how you think about money is just as important as what your do with it.

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Brigitte Tamine CFA, CFP is an Independent Financial Planner at Verso Wealth. She is passionate about building long term relationships, and guiding clients through important financial life decisions. She enjoys analyzing numbers and developing unique, workable solutions for clients in all stages of life. 

Verso Wealth

1. What is the most valuable learning or piece of advice you’ve had that has been fundamental to the way you think about money and investments?

You need to have a plan. This includes a budget, detailing your monthly expenditure, as well as an investment plan on how you will attain your goals.  When looking at your budget, it is important to distinguish between wants and needs and determine which of those want items are unnecessary and can be saved. 

2. Do you see a correlation between a wealth mentality and successful financial management – what has been your experience in observing this in self or others?

Yes, your wealth mentality plays an important role in how you deal with money and the decisions you make. It is the way you think about the opportunities available to you, the risk inherent in the decision and achieving your long-term goals. It is the same concept as the power of positive thought and The Happiness Advantage, by Shawn Anchor. 

3. What mistakes have you seen people making when it comes to personal investing and wealth building?

The biggest mistake people make is to dwell on the negative news and noise available to us, which lead to quick, emotional decisions. This brings us back to having a plan and ensuring that the plan is adhered to. Behavioural investment decisions erode wealth. 

Another big mistake is landing in the debt trap.  You need to consider the type of debt you are taking on.  Credit card debt to finance your cost of living is bad news. It’s expensive and does not build an asset base. A mortgage bond to finance a rental property is potentially good debt (you need to do the numbers). It assists you in attaining the asset, as well as income in the form of the rental. Bad debt should be avoided.   

4. Einstein referred to compound interest the 8th wonder of the world; are there other powerful levers many people don’t know about or take advantage of?

Compound interest is one of the most powerful tools we have available to us in building wealth.  However, it entails keeping invested. Another important concept is diversification and having the correct asset allocation, which is suited to your individual risk profile. With the correct asset allocation, it should be easier to avoid emotional decisions and adhere to your plan, and ultimately benefit from the benefits of compound interest. 

5. What is the one tenet you ascribe to above all else?

Have a plan. The plan needs to include all important aspects: Your asset allocation, your allocation to various investment vehicles, your investment goals, etc. Make sure this plan is reviewed at least annually to account for changing circumstances and stick to the plan. 

6. What lessons are you teaching your kids from a young age?

I have tried to teach my children that they need to differentiate between their wants and needs, to identify situations where they can save (for example: do it yourself vs paying somebody a premium to do it) and encouraging to save their money rather than spending it.                            

In today’s instant throw-away world it is very difficult for children to understand that they cannot have everything when they want it.  I have always asked my children if they need it, how it will change their life, and what impact it will have on the environment. I am trying to steer them away from consumerism, spending when it is not needed, and teaching them that in doing so they can save.   

7. Which single book, podcast, blog or youtube channel would you recommend to people interested in investment?

For readers that are starting out on the investment journey, a fantastic introduction to the concepts of Financial Planning and investment is Become your own Financial Advisor by Warren Ingram. This book is well written, simple and concise. It will give you a better understanding of financial concepts. 

8. Outside of unit trusts and stocks, what investment vehicles are you interested in and why?

I think this question needs to be broken into two parts. When we talk investment vehicles, we refer to things like Unit Trusts, Endowment policies, Retirement Annuities, Exchange Traded Funds, Personal Share Portfolio, just to name a few.  In most cases, you can invest in various types of investments (asset classes) within these investment vehicles. The various asset classes include shares (stocks), bonds, cash and property.

As a Certified Financial Planner, I need to understand the workings of the various investment vehicles: the benefits, accessibility of funds invested, tax implications, etc. In addition, I need to understand the asset classes that make up the underlying investment (shares, bonds, cash, etc).  and how this relates to the individuals needs and their overall Financial plan. 

9. What’s the latest fad influencing investment decisions you think is over-rated?

Cryptocurrencies are the latest fad in the investment world.  Although there may be a place for Cryptocurrency in your overall portfolio, any investment in Cryptocurrencies should be seen as speculative, and money you are willing and able to be without. 

Another very common topic at the moment is investment in Section 12J. Again, we need to exercise caution, understanding the risks involved in Venture Capital, and the possibility of loss of capital. 

Speculative investments should only be done with money you are prepared to lose; money you can do without. Success of a sound investment strategy takes time and patience.