Everyone can do it
No matter how little or how much money we have, we have the opportunity to grow the total by good money management systems. The great thing about that is the equality of it all.
YOU DON’T NEED TO BE EARNING HUGE SUMS OF MONEY TO BENEFIT FROM THE SKILFUL HANDLING OF MONEY. You can benefit if you are on benefits or a modest pension, and you can benefit if you are running a multi-million pound business or earning a six figure salary.
So if you are thinking this blog is not for you – think again! The steps I identify are relevant to individuals, households and businesses.
1 – A money plan
Without doubt, the first and most important thing is to work out how you want to grow your money, what you want to achieve, your GOALS. You need to carefully think about your position – considering not only yourself but also those depending on you, such as family, business partners and employees.
Write down your plan. It need not be incredibly detailed but it should be realistic, have a timescale, and be reviewed and revised regularly.
There are people that can help you with money planning – such as independent financial advisers. Where your plan involves investing in property, you can seek the assistance of an experienced property mentor or coach, or other property specialist.
2 – Smart budgeting
BUDGETING IS EXTREMELY IMPORTANT. You could create a budget based on what you are actually spending each month or what you would like to spend each month. My approach is to itemise my spending based on what I absolutely need to spend each month.
The advantage of this approach is that my spending is minimised and my excess income, the amount I can save or invest, is increased. A win-win situation.
Your budgeting is successful if, at the end of the month, you have income left over after paying all you need to pay out.
3 – Save and invest
But successful budgeting on its own is not enough. You need to see a REWARD for your efforts in keeping your spending below your income. That is where savings come in.
Keeping your excess income in your bank account will only tempt you to increase your expenditure in the future, disrupting your budget, putting you at risk of over-spending going forward.
EXCESS INCOME SHOULD BE SAVED OR INVESTED, taking care to find the best home for your money given your own particular circumstances.
4 – Don’t spend like you’re rich
Spending like you’re rich is spending all or most of your earnings every month, putting nothing or very little aside – not having enough in the event of emergencies or unexpected bills.
This is often coupled with a taste for the good life – for buying the best things and not compromising on quality. That is great for your status and ego and you will doubtless have lots of fun, fabulous memories and some great Facebook pics. But the long-term consequences are negative.
YOU SHOULD BE LOOKING TO MAXIMISE YOUR SAVINGS AND INVESTMENTS IN YOUR BEST INCOME-EARNING YEARS because, almost inevitably, you will have lean and difficult times – perhaps coinciding with high-responsibility periods when you are weighed down by:
5 – Take advantage of compound interest
When you save or invest for a long time you usually get the benefit of compound interest – in simple terms, interest on interest.
- You have £100 in the bank and you are getting 10% interest.
- At the end of year 1 you get £10 interest which is added to your £100, total £110.
- At the end of year 2 you get £11 interest, which is added to your £110, total £121.
- And so on.
Each year the amount of your interest increases. This has a spectacular effect. At 10% it doesn’t take 10 years to double your money as you may think – it takes 7 years.
Compounding can be yearly as in the example given above, but it can be more frequent such as monthly. The effect of compounding is that the longer you save, the more you benefit from compound interest. There is a similar effect where you own and retain shares, property and other income-bearing assets for a long time.
Therefore, THE SOONER YOU START SAVING OR INVESTING, THE LONGER YOUR ASSETS HAVE TO GROW, the greater the benefits from compounding. Avoid the temptation to think you are too young or not earning or receiving enough to start – such lame excuses often end up as reasons for never starting.
6– Grow your knowledge
Since it usually costs very little, it is great news that KNOWLEDGE IS ONE OF THE GREATEST SOURCES OF WEALTH
Whatever you are looking at in terms of making your money go as far is it can, take the time and expend the effort to find out as much as you can to maximise your success, wealth and profits.
The Internet provides a vast amount of free information. Use that information and seek out suitable advice where necessary.
For instance, if you looking to open a savings account, don’t just open one with this or that bank just because you have an account with them. TAKE THE TIME TO FIND OUT THE BEST PRODUCTS AND DEALS OUT THERE – REMEMBERING THAT THEY CHANGE ON A REGULAR BASIS.
For example, look at websites like: MoneySavingExpert, the Money Advice Service and the many price comparison websites showing the best deals for thousands of services and goods including: savings/investment accounts, mortgages, insurance, gas, electricity, bank accounts, phone plans, TV plans, household goods, holidays and hotel rooms. Listen to relevant podcasts such as the Financial Times’ FT Money Show and the BBC’s Money Box.
Read the money sections of online newspapers daily and subscribe to money-related blogs relevant to your money plan and goals.
7 – Understand debt
Thanks to Robert Kiyosaki’s mega-selling book Rich Dad Poor Dad there is a wider understanding of the nature of debt and wealth creation.
‘Good debt’ is borrowing money and investing it in a wealth-creating asset such as:
- a machine that makes goods which can be sold for a profit
- a buy-to-let property which is rented out to tenants whose rent pays the mortgage.
A ‘bad debt‘ is an asset which is basically non income-earning, such as your car or your super-expensive smart phone.
If we buy our home, some commentators refer to that as ‘tolerable debt’. Homeowners pay for the mortgage and upkeep of their home and so home ownership is not really an example of good debt, even though, with time, house prices normally rise – giving homeowners a large capital gain.
GOOD MONEY MANAGEMENT MEANS FAVOURING GOOD DEBT OVER BAD DEBT. We need to have our eyes fully open. Our society is built on millions of us buying consumer goods which we don’t really need and will rarely use. Advertising and marketing encourages us to wallow in bad debt, often relying on expensive credit cards and personal loans.
To grow your money, to have a good chance of achieving your financial goals, it is vital to minimise bad debt – as early in life as possible. Starting at 16 is great, but starting at 60 is in no way too late.
8 – Seek professional advice where necessary
Learning as much as you can about money matters is a must. But avoid the temptation to think you can always do it yourself just by your own reading and Internet research.
THERE WILL BE TIMES WHEN YOU SHOULD SEEK OUT EXPERT ADVISERS – such as accountants, solicitors, tax advisers, property advisers and financial advisers – to make sure that you are doing the right thing, the best thing.
The Internet is great for obtaining information – but as yet it cannot replace the benefits of having a face-to-face consultation with an expert who can advise you by taking into account your unique circumstances.
9 – Avoid get rich quick schemes
MANY PEOPLE GO WRONG BY GETTING INVOLVED IN GET RICH QUICK SCHEMES. They can be incredibly tempting and include anything from turning to crime to signing up for an investment ‘opportunity’ which involves earning exceptionally large sums of money in a short period of time.
These schemes are often very high risk, and with high risk the prospect of failure is high. If you are investing your money, schemes which seem too good to be true are often exactly that and may involve some sort of scamming, illegality or fraud.
Our prisons are full of people who thought drug-dealing or robbery is a shortcut to wealth-creation.
10 – Positive mindset
The right mental approach is for me the biggie. Without a genuine, positive belief in your ability to follow the money management practices highlighted, it is hard to see how you can succeed in the long term.
Not only do you need to start good money management practices, you need to continue with them – often for years, perhaps for decades – until you achieve your goals as set out in your money plan.
There is no quick, easy way to achieve the mindset you will need. You will gain it with time as you continue to put the practices into effect and see the tangible financial benefits of your actions.
- Constantly gathering and assessing information and knowledge is important.
- As you increase your knowledge, experience and expertise, you will realize how much you will lose by stopping and that should help to keep you going.
RELYING ON APPS MAY ALSO HELP. The structure and systems of an app may get you into a routine which sustains your interest, especially if there are alerts reminding you when to take this or that step or action.
If you search your app store under the headings ‘budgeting’ and ‘saving’ you will find a wide range of apps including some which can link to your bank or savings accounts – providing a convenient single hub for your money matters.
Working with someone else – such as a husband, wife, partner, friend, housemate or business partner – may be the best thing of all. It gives joint working and accountability – two things which are known to drive people on to achieve their goals.
Rebel Property Coach
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Categories: 01 Finance