What are the most important financial lessons you have learnt this year?

Little DebtBoy starts school next year. He’s more excited about it than Christmas.

More than anything, I’m desperate for him to love learning. If I can instil in him a passion for knowledge, my most important job as a dad will be done.

Constant learning deepens your understanding of everything – even outside the area you’ve just read about.

I can’t think of new lessons I’ve learned this year. But I have had two financial concepts reinforced – brutally – through companions’ experiences.

The first is diversification. No matter how well you think you know an investment class, spread your investments. Don’t have half of your wealth obliterated when that one, unforeseen, disaster strikes.

The second is insurance. Two stories. Only one has a Cinderalla ending.

A man in his late 40s watched his health start to deteriorate about five years ago. He hasn’t worked since.

His wife earns just too much for him to get a disability pension. His medical costs are astounding. Over time, he has had to sell everything – including two investment properties – to survive.

The second is proof that the “grudge purchase” of insurance can literally save your bacon.

This guy’s world fell apart after his marriage collapsed. He was self-employed, but could barely work which caused his income to halve. He also had a few investment properties.

He was properly insured. As a result, he held onto those investments while his world slowly returned to something resembling normality.

Diversification and insurance are not new lessons to me. But through reinforcement, those two concepts will lead me to make different decisions in the future.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.

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