Money Tips 41 to 50 Explained
Money Tips 41 to 50 Explained (#MoneyTips)
Time for my fifth set of 10 money tips to gain an explanation, after all, it has been a little while. I have posted my money tips to Twitter (using the hash tag #MoneyTips) and found that some of them were very hard to keep within that magic but annoying 140 character limit. So far, I have managed it, however sometimes a little of the meaning seems to get lost, and occasionally I wanted to add a little more explanation. This is where I do it.
Money Tips 41 to 50:
Middle of the road tips. No real order (as always). And of course, along with past and some future ones, are all listed on the Money Tips Explained page if you are after more.
- Start investing early and small. Learn from mistakes. Grown your investments.
- This tip is true both for investing and for any work you have to do. If you do a small bit regularly then over time it will add up. Like cleaning a house one room at a time, you can start investing one bit at a time. Start with an index fund or listed investment company. The benefit of investing early in life is the amount of time your investment has to grow. Unlike cleaning a house, where things start to get dirty again as you move to the next room, investments tend to keep getting better over time. Years ago I purchased $1500 worth of shares in a small company. That investment is currently worth over $3000. I invested some more in that company recently as I think it has further up side, however that additional (and larger) investment is currently sitting about $800 down. At least I still have time on my side.
- Control impulse buying – buy it another day if it is over $50.
- This one can be hard to do, and there are definitely situations where you have to get something now. Those situations are what your emergency fund is for (just remember to pay it back). I am talking about items that you don’t need immediately (and yes, I really do mean need). For example, I love shoe shopping, but when I go I leave my money at home. Then I spend the time going from store to store finding just the right pair (or pairs normally) of shoes. I make a note of what they are, and go home. After that I will sleep on it. In the morning, I will either decide I don’t need them, I do need them (and will go and buy them), or may decide to wait until an upcoming sale.
- Calculate how many hours work an item costs. Is it worth that time?
- If you are earning $50/hr (a nice $100k if you are working full time) then buying that new $52 AUD Star Wars R2-D2 Coffee Press or a $160 AUD 4.5kg Toblerone may seem like an easy buy. However when you consider that you have to work over an hour for the coffee press and over three for the Toblerone, would you think again? What if you were only earning $25/hr ($50k per year), then that Toblerone now costs almost a full day of work!
- Be careful with subscription services. Monthly bills add up fast.
- Your gym membership may only be $16 a week, but that is over $800 a year. Once you start to add up weekly and monthly subscriptions things can get out of hand. Mobile phone, NBN/ADSL, 4G dongle, iPad sim, gym membership, blog hosting, Netflix, Stan, Foxtel, Amazon Prime, Spotify, Office 365, Apple iCloud, Dropbox etc. And that is ignoring bills like water, electricity, insurance, loan repayments, petrol and public transport. Try taking the cost of buying something outright, and divide it by the amount of time you will keep it for. For some things, it is better to pay monthly and upgrade, for others, a one-off payment is the best choice.
- A car can be your largest financial money pit. Aim for reliable & inexpensive.
- This one should not be news to anyone. The cost of a car can really add up. When you add up the cost of buying the car, servicing, insurance, registration, petrol, and tires, it can be much better to take a Taxi, Uber, or Go Get. This is especially true for families who need a second car, but only use it occasionally.
- If you don’t flaunt your wealth people won’t expect your actions to be wealthy.
- I have a friend who moved up from Melbourne about 5 years ago now. We all knew that he had a good managerial job that paid very well. We knew this because he had a fancy apartment, a fancy Audi Q7, and was always eating out. Unfortunately, the company he worked for was forced to fire staff and reduce salaries by around 30%. He was one of the lucky ones who kept his job as his niche industry was flooded with unemployed people. Unfortunately people had all become accustomed to him shouting drinks or dinner quite often when they went out. This “norm” seemed to lead to a pressure for him to keep doing it. It took almost a full year before the cracks started to appear and take over his life. Thankfully he managed to turn things around, but had a hard time and lost many friends in the process.
- Fine a good IT person. Computers can last many years these days.
- I am typing this on a computer I bought in 2012. I believe it will last me at least another 3 or 4 years (possibly longer). The main reason for this is that I have a good IT person. They set me up without all the useless bells and whistles that new computers often have.
- Buy your mobile outright and get a cheap BYO plan. Keep the phone for 3+ years.
- If one of your little pleasures is the ability to upgrade your mobile every year or two, then definitely consider a contract, as you can find some where the phone and plan cost less than buying each individually. However if you are willing to keep the same phone for 3 or more years, then it is probably best to buy it and then get a cheap BYO mobile plan. WhistleOut is a great place to compare plans. You can get 5G of data, unlimited calls and text for under $24 per month!
- You will never know your true risk level until you have made a bad investment.
- This is a good reason to start early and small when investing. You have time to make smaller mistakes and learn your real risk level. I saved up a lot of cash ($40k of term deposits, and online savings) and then put almost $30k of that into shares (managed funds). Unfortunately, this was just before the GFC, and before long that $30k was down to $15k. That definitely highlighted not only my risk tolerance, but also the need for better diversification.
- Slow and steady doesn’t always win, but they never die in a fireball half way.
- When I was young I used to play share market games. They give everyone a set amount of fake money for you to invest in shares over a fixed timeframe. I have played 11 of these between 10 years old and university. Of those 11, I went all out in 3 of them, and invested in a more “real life” was for the other 8. From the 8 “real life” games I lost a little only in one of them, and made 3% to 10% in the other 7. Finally, the 3 where I went all out, I made about 30% in one, and lost around 40% and 70% in the other two. This is one more reason why the bulk on my investments are boring, long-term, “safe” investments.
So that is it for another 10. I hope you enjoyed them. Let me know in the comments below if you disagree with any. I am always open to having my mind changed.
Oh, and Happy New Financial Year!