Seven cures for a lean purse
1. Make your purse – or wallet – fat.
That doesn’t mean filling it out with receipts for all the items you bought with your credit card. It means, fill your purse with money. And the best way to do that is to spend less than you earn. This cure stems from the first grade of gold we discussed last week: aim to save 10% of your income. Minimum. Save more than that if you can. Save in the long term, for your mortgage or pension deposit, depending on where you are in life. If you need to save for things in the short or medium term, like a vacation or a car, it should be additional and separate from the 10% + you save for your long-term needs.
Your 10% may include your contributions to the pension, ISA, premium bonds, or any type of high interest / restricted access savings account. With compound interest, your portfolio will become very abundant in the coming months and years, even if interest rates remain low.
2. Control your expenses.
If you are going to save at least 10% of your income in the long term, you need to make sure that your current expenses do not exceed 90% of your income. This means that wherever you are on the income scale, you will need to apply some self-discipline when it comes to treating yourself and your loved ones.
To get started, keep your credit card (s) for emergency use only, and if you do use them, pay before you start accruing interest. Similarly, avoid borrowing unless you can justify the interest you will end up paying for that privilege. A car purchased under one of the popular leasing schemes can be justified if it is essential to your job or business. But a loan for a vacation? Holidays at home would be a better option. Learn to distinguish between wants and needs. A roof over your head and food on the table are necessities; A month in the Maldives is desired. Enjoy that when you’ve saved 10% of your income for a year or two and can afford to fly to paradise without having to dip into those savings.
The secret to managing your spending is creating a budget and then sticking to it. If you have Microsoft Excel, you can download a template that will help you keep track of your expenses for a week or a month. You can also find ready-to-use templates on the web or applications for your phone. Calculate how much you spend on mortgages, rent, trips to work, etc. and set limits on things like eating out, entertainment, travel, etc. This will help you stay under 90% of your income.
3. Make your money multiply.
Look for consistent long-term returns, not a lottery. What you need is a steady increase in your capital, your principal equity, such as compound interest from an ISA or a savings account, or, riskier, dividends from stocks you own in well-run companies, including your employer, if They have an employee stock ownership scheme. If you are not an expert on financial products and investment vehicles, find someone who is. Don’t commit until you speak with a professional financial advisor. Explain what your investment goals are and ask them to help you develop a plan to achieve them.
4. Protect yourself from loss.
The sickening nightmare of watching your dreams of wealth turn to dust when Bitcoin crashes or the guy you met at the pub the other night disappears with your life savings. One way to guard against losses is to make it an unbreakable rule that you don’t touch that core wealth that you are saving and investing for the long term. Keep a ring of steel around it! If you are tempted to try your hand at Bitcoin or currency trading, only use money that you can afford to lose. That means whatever money you have left after you’ve saved your 10%, paid the bills, and filled your stomach. Money that you might otherwise spend on nights out can be turned over to online bookmakers, if you can budget for it; see second cure above. Never use a credit card or loan to make margin bets, gambling, or high-risk investments. However, before engaging in high-risk investing or betting, make sure you’ve thoroughly researched the field and understand what you’re getting into. If online poker is your dream, first practice with your partners to get match sticks.
5. Make your home a profitable investment.
Owning your own home (and ideally a few buy to rent properties) has become an obsession for the past thirty to forty years. Given the way property prices have skyrocketed during that time, it makes perfect sense to get on the property ladder as soon as possible, particularly when home prices are rising at a much faster rate than current ones. income.
However, be aware that at some point the bubble may burst. Yes, people have been saying that for years and it hasn’t happened yet. But authorities are increasingly likely to take steps to let some air out of the housing market. Possible measures include revaluation of property tax bands and punitive purchase taxes to allow properties and properties to go vacant. A major increase in home construction is unlikely to have a big impact on house prices on its own, but when combined with potential tax changes, we could see prices stabilize and stay there for some time.
With all of that in mind, the best approach is to find an affordable house or flat in an area where you would like to live for the foreseeable future, taking into account things like local amenities, schools, and commuting. Also think about the benefits of paying off a mortgage and gradually acquiring full ownership (aside from lease and freehold issues) in your home over 25 or 30 years, compared to being in debt to a landlord who may raise the rent or evict him a month in advance. and who will still own the roof over your head despite all the thousands of pounds you put in your pocket.
If you can’t afford to buy directly in the area where you want to live or work, consider options like shared ownership and self-build. See what schemes are available in the area where you want to live.
If you already own your own home, you can use it to generate additional income by having a tenant. If you live in a major city, a good source of tenants is contractors – professional people working on a local project for you who need a place to stay for a few months and don’t want to use hotels. They will often go home on the weekend so you have the place to yourself. Another option is to host exchange students. Usually they will come for a week or two. You provide them with accommodation, breakfast, packed lunch and dinner, and they pay you to do so. Another option is to use your home for vacation rentals while you are on vacation yourself. This works particularly well if you live in a major city or a historic city.
Even if you rent, hire a tenant (if your landlord allows it) or run a business from home (see below). You can still make your home a source of additional income, even if you don’t own it.
Two other things to consider. First, home and contents insurance. Make sure you have adequate coverage for the worst that can happen: fire, flood, theft. Second, if you have a mortgage, consider insuring it against unemployment and illness. Take the advice and make sure the policies you take are fit for purpose and will pay off if the worst happens.
6. Develop a future income.
Who wouldn’t want to wake up in the morning knowing that whatever happens, they are assured of a steady income for eternity? Well, you can achieve this through your long-term savings, that 10% + that you put in month after month, year after year.
When talking to your financial advisor (as you should!) About your savings and investment goals, the first two topics to focus on are a pension for yourself (and your partner, if you have one) and supporting your family when You are no longer, that is, life insurance. Your financial advisor should also direct you to other investments that can generate additional income for you and your family, such as ISAs, unit trusts, and government bonds.
Its objective is to guarantee an adequate income for a prolonged old age. Remember, people live longer, but they are not always healthier. It’s not pleasant, I know, but think about the worst that can happen to you (except an early death). You or your partner have a chronic illness or disability and need long-term care. How will you finance that? If you sell your house, what will you leave for your children? This is the type of problem that you should discuss with a financial advisor. You need a pension, in addition to other sources of income, to cover all your needs for about thirty to forty years after you stop working. Develop a plan, implement it, and then continue to enjoy life.
7. Increase your ability to earn money.
There is no job for life anymore. These days, even professional occupations like lawyer, accountant, and insurer are threatened by automation and offshoring. So it makes sense to develop additional skills that you can use if you find yourself out of work.
If you think you are at risk of being replaced by a robot, you should carefully consider “future-proofing your career.” Think about the jobs that are unlikely to be automated or offshored in the future. These are usually those that involve face-to-face contact, for example, complementary therapies, nail technician hairdresser, personal trainer, life coach, counselor. Also, jobs where a local presence is essential: electrician, plumber, locksmith, builder.
Of course, many of these jobs are relatively low-paying and in highly competitive industries. That means you need to find a unique selling point – something that you do that no one else does, or that no one else does as well as you. Focus on something that really interests you, or better yet, that you are passionate about, and that you know can be brilliant. Be realistic about potential revenue, competition, and the time and energy it takes to make it work. Unless you already have experience in your chosen field, you will need to spend a lot of time, and perhaps money, acquiring the necessary skills and certifications. You will also need to decide how you will operate: sole trader, limited partnership, franchise? Follow the advice before committing to anything.
A popular option for generating additional income is selling online. Even if you work full time and are happy with your income, you can give it a try in your spare time and get familiar with what it entails. A regular order will reveal all kinds of things you can sell: clothes, DVDs, cell phones, unwanted gifts. If you enjoy online sales, you could build a successful business without risking your principal capital.