Sustained investment success requires a framework that enables you to understand the role of money in your life and the choices to support the life you desire. We call this framework our Bridge of Well-being and the three pillars that underpin it are:

• Understanding and defining your values and goals.

• Deploying financial strategies that use your resources in a way that is consistent with your values and achieves your goals.

• Developing your investment strategy.

Your values and goals

The reality is that many of us spend too little time thinking about what would make us happy and a disproportionate amount of time and effort chasing goals that don’t bring the satisfaction we seek. When setting goals, it’s important to look forward, not back. Suspend reality and the limitations of the past and think about the things to which you genuinely aspire.

Planning for security in retirement is one aspect of determining how much money is enough. The general rule of thumb is that once work stops, the kids leave home and expenses fall, most people find that they need something like 75 percent of their final working income to sustain a good lifestyle in retirement. Of course you can get by on less, but it’s worth aiming high.

Applying your resources

Professors Richard Thaler and Shlomo Benartzi of the University of Chicago have identified the following constraints to having enough money in retirement:

• Many people want to save but lack self-control.

• Investors are very sensitive to perceived losses.

• People procrastinate about making changes to their savings plan.

• Identify your current income and expenditure by doing a budget.

• Estimate your income and expenditure in the medium-term (3 years) and longer-term (5-10 years).

• Balance your current and future needs and goals.

To develop a sensible investment strategy, all you need is to understand four key investment principles and get sound advice. Having a simple strategy that you understand, plus a sensible investment portfolio will keep you in good stead during periods when the markets are working against you.

A sound investment approach comes down to four principles: quality, value, diversity and time. Investing in a diverse range of quality investments at prices that represent good value, and investing for sufficient time, will bring you the rewards you seek.

The only way to identify quality companies is through rigorous analysis. Look for attributes that include sound longer-term earnings, good return on equity, capable management with a solid track record, a sound balance sheet and reliable core business franchises.

Value is a function of quality and price. Some of the worst disasters have arisen from people paying too much for what are, essentially, quality assets. The key to assessing value and quality is to know whether an asset can produce an attractive return relative to its risk.

Diversification is important because it provides access to a wide range of investment opportunities, rather than one or two. It also provides insurance against inevitable mistakes in assessing value. Diversity involves having investments across different asset classes, countries and funds.

The ultimate test of a successful portfolio, however, comes with time.

Over virtually all longer periods in markets, say five to ten years or more, strategies based on the four principles have greater upside potential, with less downside risk than chasing fads. Ultimately, crossing the bridge of well-being means integrating all aspects of your money and your life to help you answer that most important question: how much is enough?

From 'How much is enough?' by Arun Abey and Andrew Ford.