Wednesday, September 30, 2009

Using the right type of loan for your spending needs

In a perfect world, you would save up the entire amount before you buy the item, buy the item on your credit card and then pay the credit card balance off before interest is incurred. So basically by your superb account management, you've picked up reward/frequent flyer points which translates to goods and holidays for free (excluding the annual credit card fee that you pay of course).

Unfortunately however, this does not work for many people because they don’t save up the amount before they rush off to buy on the credit card. So when the bills arrive, they scramble around trying to find the money to pay the bills because their income isn't sufficient to pay everything by the due date.

The most important thing I can ever write about how to utilize loans is to match the loan type to your needs. If it’s a long term need, don’t match it with a short term loan or else you’ll be penalized by paying higher interest than you would normally be paying if you had organized the correct loan type in the beginning.

Companies know this. They don’t use a credit card or overdraft to buy a company car, they use leases and car loan financing. They don’t use a credit card or overdraft to fund office renovations. They analyse whether they can afford to buy goods upfront. If they can’t and they really need to buy the goods, then they analyse what type of financing they need, find the best loan type and deal (financing) and then they go and buy the goods.

Most consumers lack this critical research and analysis stage. They want something and they go buy it immediately.

Ordinary folks get into all types of difficulties because of this lack of awareness. If you have no choice but to buy an item that you can’t pay off before the interest free period ends then you shouldn’t be using a credit card. You’re better off using a longer term loan such as a Personal Loan or a Line of Credit to fund your purchase.

DO NOT use a credit card to pay for it. DO NOT use a payday loan to pay for it. In other words, do not use short term loans to buy something that you can’t pay off in the short term. That will be the best advice you ever need regarding loans.

Tuesday, September 29, 2009

In Your 20s, flushed with "Good Debt"

"You're beautiful, dirty rich" sang Lady GaGa. Young, beautiful, rich, intelligent and switched on. You're the master of your credit card and multiple investment loans, know where you're headed in life and you've had successes. Great. Where to from there?

What is "good debt"? If you're reading this and you've got "good debt" then I presume you're looking for something to validate yourself or your choices. Or maybe to compare how you've progressed in life and where your peers are. Good debt - loans on assets that provide you with investment income or capital growth. Margin loans and investment/mortgage loans are good debt. You borrow money, you buy some shares or buy an investment property and it pays you back in the form or dividends, rental income and/or capital gains. Life is just peachy!

If you find yourself in this situation then you are either a child prodigy, a trust fund kiddo, an ambitious person, operate your own business, high income earner, had an education in finance or had financially literate parents who taught you by their actions or directly. It's not a common scenario at all to be in your twenties, have plenty of savings, assets and also experienced the shady and crazy side of life in your twenties.

So what are you hoping to learn from this?

1) Buy more investment properties
2) Buy more shares/stocks, grow your portfolio
3) Increase your superannuation/retirement savings
4) Watch your asset allocation and rebalance when necessary
5) Keep repeating all of the above for your wealth strategy

That was simple wasn't it? ;)

Ah but now you say, I just wasted my time on reading crap. You know so much, and you've achieved so much but you lack the finer points and the finesse which is probably what led you onto reading about these matters. Congratulations but you've reached the pinnacle of the investing pyramid, early in your life and you are going to be a millionaire.

You should be perusing financial advice for those in their 30s and older, learning the finer techniques of investing in multiple properties, refinancing loans, directly investing and trading stocks, the finer points of calculating returns and reading financial statements, the ideal vehicles to buy your investments under (company or trust structure) and have a fantastic team of accountants/financial advisors/lawyers/solicitors working for you.

Articles about financial management in your twenties should not really apply to your scenario anymore. They focus too much on debt management and how to handle credit cards.

Monday, September 28, 2009

In Your 20s - What to do with your savings?

So you're in your twenties. You've been on holidays, had some fun and now you've got some savings. You've got no idea what to do with your money or what you need to learn or think about. You've heard about the scams, you're wary about where you put your hard earned savings. You want to invest but you really haven't got a clue about where to start. Or maybe you have some idea but hesitation and lack of confidence is the culprit for your inaction.

It's great that you have savings and have either no debt or minimal debt (which is managed and the credit cards are paid off in entirety before interest is incurred). It really is the best place to be in your twenties. You've given yourself a head start and can easily, with some planning, be a millionaire simply by regularly continuing to save and invest. It really is that simple. There is no secret to becoming a millionaire.

Most people will earn between one to a few millions over their working life. Virtually anyone could be a millionaire. The only ones who will be millionaires are the ones who are intelligent enough to realise that they need to save and invest regularly and the earlier the better!

It's a bit of a conundrum to be a twenty something year old. On one hand, you want the lifestyle, the partying, the holidays and exotic overseas trips, the experiences and the desires for toys, whether it be fast cars, electronic gadgets, or high end, luxury brand shoes, handbags and accessories. On the other hand, you know you've got to start saving for a deposit to buy place of your own, you maybe be already renting or thinking about moving out and buying furniture, maybe you would like to get married and have some kids in your future. Obviously you will need to balance your needs and desires with your financial goals.

Asset allocation. This is probably one of the trickiest thing you will ever have to learn in terms of managing your money. It concerns how you split your money and what you invest in. Your asset allocation should change as you get older. Generally, it can be broken up into five main categories: cash, fixed interest, property, shares (international vs domestic) and Retirement/Superannuation accounts.

Cash is simple to understand - you either have it in your bank account or you don't. Fixed interest - bonds, term deposits and anything that is paying a fixed interest/return/yield. The next two, property and shares are considered riskier. Mainly because the value of real estate and shares are volatile and subject to fluctuation. Retirement/Superannuation accounts are a class of their own, and depending on how you allocate those funds, can be as risk-free or as risky as you desire.

How should you allocate? In your twenties, you're still young, still got plans to get married, have kids, travel and party. Last thing you want is to lock away all your funds in a retirement account. If you're in the marginal tax bracket and wish to sacrifice some salary into your super account - then by all means go for it, but make sure that you've taken into account, your future needs and expenditures. Once it's placed into super, it's no longer possible for you to withdraw it without qualifying for hardship or early withdrawal reasons - you really don't want to qualify for this category anyway...if you ever do, you know you're close to living under the bridge in a cardboard box.

Think about what you need to buy and your future expenditures. Anything that is short term (less than 2-3 years away) you might want to place the bulk of these funds into a high interest online savings account or a term deposit. If you have worked out that you have funds left over for investing, after taking into account your future monetary requirements, then you could start investing either directly into shares, buying properties or investing into managed funds. When buying into shares and properties, a general rule of thumb is that you need to invest for at least a minimum of three years and greater.

Your asset allocation will also depend on your own 'risk profile.' You should learn about what 'risk profile' means and where abouts you fall in the risk spectrum. I am writing to address readers who fall into the medium risk profile, not too averse and not too risk taking.

To start you off, I will illustrate how my own funds were allocated and their priorities:

1) Emergency Fund (EF)- 3-6 months minimum that pays for living expenses and bills. This is also determined by how long it would take you to find a replacement job if you lost your job. To be technical, I don't have an EF fund per se myself but I consider all my liquid investments (investments that are easily converted to cash) as part of my EF.

2) Deposit for property - 20% target, this amount is parked in a high interest savings account with the EF, if you need to segregate your funds, then by all means do it but I don't need multiple accounts to manage my finances

3) Investments (if this exceeds 20-30% of your total savings, you are venturing onto riskier territory and a riskier profile) - while you are busy saving the deposit for your property, it's good to start testing the investment waters with $500-$5,000 in shares/stocks/managed funds/REITs/ETFs etc. By using your money, you will learn a lot faster and motivate yourself. See an financial planner or have an investment adviser if you are inexperienced. Otherwise, take the time to learn how to invest directly if you prefer the DIY method.

If you're saavy, then go ahead, go all out and invest 90-100% of your savings. It's a volatile road and you may win a lot or lose a lot but it's something you need to reconcile with yourself in terms of your risk profile.

Insurance. Alright there's a multitude of insurance options out there. You're a twenty something and you're just starting out. Health insurance is one of the best thing you could ever buy for yourself. If anything happens, this ensures that you aren't hit with a hospital bill for tens of thousands of dollars. Car insurance/third party insurance (insuring the cars that you may crash into) is important as well, especially if you've bought a car on a loan or have a car that isn't easy to replace if you had an accident with it.

What about the other insurances? Income protection, TPD (Total Permanent Disability), Trauma Insurance and Life Insurance? One of the most important insurance is income protection, particularly when you've got a mortgage or loans to pay. If you injure yourself, income protection should help to restore a portion of your original income. If you've got dependents already(wife, husband or kids), life insurance is important because if anything happened to you as the bread winner, then the life insurance payout will pay out a lump sum figure that may help with settling your liabilities and loans.

TPD and Truama Insurance, it's really a hit and miss. It's always good to have all your insurance bases covered but this will cost you a lot of money. It's up to you whether you wish to insure yourself against all problems and detrimental possibilities. Health, car, income protection and life insurance is a good place to start.

Pay yourself first, not just 10% but make it 40%. Why should you pay the companies by spending all your money on goods and leave none for yourself? In hard times, you only have yourself to rely on. So by paying yourself first, you can build up emergency funds (EF) and passive income which can support you if you lose your job or anything happened to you and you can't earn income directly from your labour.

10% is a commonly quoted percentage. 40% is much better. Saving $200/month is lame. You want to be saving at least $1,500/month and more. If you are on a low income, you can either cut expenses further or look for ways you can increase your income. Even saving $5 a week is a good start if you're hopeless. What you need is to develop the habit and it will soon be effortless. But why am I harping on about this right? Afterall this article I'm writing is focused on the fact that you've got some savings already!

I'm just hammering in the point that you can save a greater percentage or earn more and it will expedite the size of your investment portfolio/savings a lot quicker.

To illustrate using an simple scenario, assume you have $100,000 in savings, yielding(earning) 10% pa simple interest. That equates to $10,000 in investment income. If you left your investment alone to reinvest and compound, then at the end of year two, the $110,000 would grow to $121,000, earning $11,000 in the second year without you doing anything! That's the beauty of compound interest.

Now if I changed the scenario in year one to have you save $10,000 on top, you've got a total of $20,000 which would have taken your original investment almost two years to earn. At the end of year one, you now have $120,000 yielding 10% pa simple interest, equating to $12,000 passive income. At the end of the second year, your balance would be $132,000. Once again, compound interest is working just like a steroid on your savings/investment.

There's a multitude of ways you can allocate your money for spending, saving and investing. It's very important to understand your risk profile and to consider what your future short term expenditure will be so that you don't mismatch your asset allocation with your needs. I hope that you've learnt something from this and that it may serve you well on your investment journey or otherwise help you understand the financial side of life a bit better, while you're in your twenties.

The best time to plan anything is in your twenties. Don't forget to have some fun along the way :)

In Your 20s, riddled with "Bad Debt"

We are not born with knowledge or experience. The most important time to learn how to manage money is in our youth and our twenties, but if we don’t even know what we don’t know, then how will we know what we will need to learn? If that didn’t confuse you enough then keep reading!

I will outline strategies and money management skills that you’ll need with each of these levels. Ok, so you may be the exception to the rule, but it’s most likely that you are either in your twenties with:
(1) Bad debt (personal loans, credit cards etc) or
(2) No debt (some savings - see next article) or
(3) Good debt (mortgage, properties, geared/leveraged share investments-see next article).

(1)In your twenties with “Bad Debt”

What is a “Bad Debt?” Bad debts are any debts that are spent on consumables, items that are disposable, that depreciate, that lose value over time, that are just for fun, that don’t earn any income for you.

Don’t worry, this is a common scenario. You were either in school, college or university when you first discovered a world of credit. Unfortunately if you fall into this category, the debt monster is out of control. So it’s only $30/month, or $50/month or even $400/month for a car payment – you can afford it right?

What no one told you was that yes, you can afford it, but you shouldn’t have bought it because, for every $1 you borrow, you would have had to pay back a few dollars in return. That $25,000 car would end up costing you $35,000. That fridge you bought interest free 3 years ago for $800, once your monthly payments were finished, you ended up paying $1,500 for it. What a bargain, right? No one told you that the world was out to screw you when you were prime and ready to be taken advantage of.

So how to escape the crazy world of revolving credit and debtors chasing you for payment?

Budget by working out your income and your expenses. Budget- what an evil word. It’s dull and boring but it will shed light on your life. Plenty of budgets out there on the web for you to Google. Use pen and paper or spreadsheet, or a program – who cares how you do it, just do it.

All you really need to know is how much are you spending versus how much you are earning for each day, week, month, quarter and year. It's tedious but simple right? Start today, with a daily calendar and write down each time you actually spend on anything. Each time you pay a bill on credit card. Each time the bank automatically direct debit funds from your account. Day by day you will unwind the cause of the financial black hole that you’re in.

Write down all your income. Salary, wages, dividends, rental income, bonuses etc. You will need some basic maths skill in converting everthing to a daily, weekly, monthly, quarterly and annual basis so that you can compare expenses versus income.

If you spend more than you earn then you will have to cut back on your spending. Either that or earn more. Go read those books about living frugally and saving that little dollar, otherwise you will struggle your whole life, if you haven’t already.

You can easily cut back on any discretionary expenses. Any expenses that involves something you can control daily or weekly – eg eating out, groceries, entertainment, etc Cheaper mobile phone or internet plans are a few examples of descretionary expenses. This is not an article on how to cut back on expenses and live more cheaply. This article is how to manage your debt and bills in your twenties so if you want to pursue this option – read books on frugality and check other web blogs and articles.

Sort your expenses. Open up those bills. If you’re at this stage, you have a multitude of bills. Sort them out into categories. Utilities – phone, electricity, gas, water and mobile phone. Living – mortgage/rent, insurance, council fees/taxes and strata. Loans – mortgage/car/study/education/credit card loan/personal loan bills.

There is no point in investing until you have your debts and bills under control. Your most important bills are your mortgage and utilities. Lastly your credit card and personal loans- sort them out by interest rates OR by loan amount. You are going to focus on paying off one credit card/personal loan bill one by one until they are demolished. Pay the minimum on all of them except one bill.

That one bill can either be the one with the highest interest rate (smartest choice), or the one with the smallest balance (an emotional ‘feel good’ choice). Pick one.
Keep doing this and you will eventually be out of debt. It’s that simple.

Negotiate for better rates, for better deals and try to cut back on your expenses. You’ve organized all your paperwork, done the budget so what next? Start hunting around for low or interest free credit. Read the terms and conditions. If it’s beneficial, transfer or roll over your debt to this. Close off that old credit card/loan so that you don’t rack up new debts on it. This option is not recommended if you have poor financial skills. How can you recognize a better deal if you can’t calculate the pros and cons mathematically?

Can you stay at home with your parents? While others may scoff at this, you will be the one laughing when you sort out your financial life earlier than you could think was possible. It’s not smart to be paying rent to a landlord. Instead, if you have a great relationship with your parents, stay with them, help around the home, pay some of the household bills and start paying off your debt with the money that you save from not paying rent. Use this money to pay your debts and then save up a deposit to buy your own place.

If you have no choice but to rent
– then you need to downgrade to a smaller and cheaper place. Also consider flat sharing arrangements. By minimizing your rental expenses, sure you sacrifice some freedom and privacy but this will help you pay off those debts sooner and save up for your own place. Either way – it’s not smart to live in a flashy apartment, drive a flashy car and have a flashy lifestyle when you’re up to the eyeballs in bills, debt and loans.

Focus on your career or business. This will provide you with increased income and help you pay off those bills and expenses faster. It will expedite your ability to save and thus, invest for a better future. Increasing your income, savings and investments will give you peace of mind because you can’t always live day to day, pay packet to pay packet. If that isn’t important to you yet, then at least it will provide you with a way to save for holidays, trips and all those toys you want to buy.

Learn good money habits. While you’re young, sexy, smart and beautiful, you also have time on your side. Time for you to fix mistakes, time for any investments faltering to recover, time for your portfolio to recover, time for you to take some financial experiments.

Compounding interest will work either for you (if you have investments and savings) or against you (if you have debts/personal loans). Einstein is quoted as believing that ‘compound interest’ is the eighth wonder of the world. He’s one smart dude. If you're young, you have the power of compound interest at your beck and call. Be it's master, and it will serve you diligently and reward you with passive income as you progress on your investing journey.

Wednesday, September 16, 2009

Your age and your wealth

The younger you are, the less wealth you will have. The older you are, the more wealth you should have. These statements are typical but by all means, do not reflect reality. Many have fallen under the typical/average achievements for their age group and many have vastly outperformed. Your age is not really a reliable indication for your achievements.

How many super rich kids have you seen in the news lately? Mark Zuckerberg of Facebook fame. Janene of Boost Juice fame. Anita Roddick of the Bodyshop fame (guess she's not young anymore but she was once, young, rich and famous), the Olsen twins by their MaryKateandAshley brand. Young and rich and totally talented. There's many more out there but not as prominent in the news and they don't necessarily flash their wealth around.

But for every super rich kid out there...there's also millions of dirt poor, overloaded with debt and struggling kid out there - not to mention the high income but big spender types who put themselves into the struggling category merely by ignorance or poor money habits. What applies to the young, also applies to the old. But, mind you, the overall differentiating factor that distinguishes between the young and old, is that the young have time on their side. Time to fix the errors of their way. Time to let the power of compounding work for them. Time is something the older population lacks.

But I'm digressing from the subject of this post. Your age and your wealth. Your age is an important determinant with regards to what you invest in, save for and spend on. This is due to the different financial demands that life throws to us as we age. As an illustration, someone in their 60's does not usually have the same financial issues and expenses as someone in their thirties - marriage costs, mortgages and children. Whereas those in their 60's are mainly concerned with retirement planning and investing in superannuation - subjects that bore the twenty something year olds to tears.

By mismatching your investment focus with your age group, you may be potentially leading yourself into a black hole or at least a stressed and worried state. It's a shame that a financial education is something that is really under rated. Even with a financial education, it leads you no where if you don't apply what you've learnt.

So here are the six categories I present to you:

1) Under Twenties.

2) Twenty Somethings.

3) Thirty Somethings.

4) Forty Somethings.

5) Fifty Somethings.

6) Sixty Somethings and beyond.

My next few posts will focus on each age category, outline what the major expenses are for each particular age groups and then what each age group will ideally need to start preparing and investing in.

Don't be a victim of a poor investment mismatch to your age. If you're young and haven't yet married or had kids but you will eventually (either single or with a partner) then you don't want to lock all your spare money up in superannuation where you can't access it until you're in your sixties and retired.

Similarly, if you're in your fifties, sixties and beyond...last thing you want is to be geared(borrowing) to the maximum and 100% invested in high risk asset classes (shares & real estate). Yes I know that you realise you won't have enough to retire and you're trying to play catch up. But by throwing all your savings for a last ditch effort before retiring reeks of desperation and makes you vulnerable. You only have to see the ravages of the Global Financial Crisis (GFC) to see what I meant by this comment.

Anyhow, the next few posts will outline the six categories I mentioned above.

Tuesday, September 15, 2009

How to master time and not be a slave to it.

Time Management in five simple steps - are you super organised? Meet all deadlines on time? Or do you feel as if you're suffering from information overload, a 'to do' list that keeps growing and never shrinks, tasks that are pending for what feels like an eternity and you just can't say 'no' to people properly when they want a slice of your time and you don't really have time for them?

Without proper time management, it'll always feel like information overload, pressure, stress, tiredness and that never ending feel of lack of accomplishment. Life is complex. It involves work, family, friends, studying, keeping up with qualifications, social functions, exercise, commitments and a million more things. Often it's difficult to juggle everything because we work longer and longer hours. There's less time in the day to finish our work, to perform our house chores, to manage our private life and also ensure we keep in touch with family and friends, keep healthy and look after ourselves.

Especially if you have children - it may be easy to feel overwhelmed, tired and stressed.

There's a few things that you can do to try and change your life for the better, to feel under control and to start achieving your goals and your objectives.

1. Dreams and Goals.
"If you don't have a vision for the future, then your future is threatened to be a repeat of the past." A.R. Bernard, clergyman.
Write down all your dreams and goals for the short (1 year), medium (1-3years) and long term (3-5, beyond). Next, determine what you will need to do to achieve these targeted goals. Writing this down will consolidate the big picture for you so that you will start having a good idea of where you want to head towards, what you want to be, and where you would like to see yourself. The younger you are when you do this, the clearer the journey will be. Now is a good time to start!

2. Prioritise your daily life.
"The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one" Mark Twain, author (1835-1910)

Once you have the big picture outlined above, you will need to sort out your day to day life. What are you doing now? Write down how you spend your entire day, week, month and year. Are you taking time to invest in yourself? By that I mean, are you learning anything new everyday? Are you looking after your health/wellbeing, your relationships and your finances? A good way to do this is to keep a diary with professional and work obligations and duties and keep a separate calendar of social activities and obligations.

Once you have a planner/diary/calendar of important events then you won't need to worry about forgetting anything. You will also beable to diagnose where your time is spent. Can you combine certain tasks together so you can streamline those duties? Can you identify where you're not effectively spending your time?

If you haven't already formed one, write down a 'to do' list for today and one for tomorrow. Anything that isn't completed today needs to be carried over to tomorrow's list and so forth.

If you find yourself constantly carrying over that same task again and again, force yourself to do that will be such a relief to finally complete it! Yes, I know... I know the reason why you haven't done it for so long is because you're not looking forward to it or it's messy, time consuming or complex or just plain difficult. Procrastination is the worst tyrant and makes us our own worst enemy. Simply pick a time of the day where you are feeling your brightest, best and perky...and drop everything else you're doing and just pick up that task that you've procrastinated on and do it!

If your to do list is too messy with stuff you've accomplished crossed out and it's hard to decipher, create a new one. These days, people manage themselves with Outlook calendars, I-Phone calender and note pads. If you can't manage yourself very well in electronic format, switch back to the old fashioned method of pen and diary.

Clump silimilar tasks together. If you can't find time to have separate lunches or dinners with a few friends, if they're from the same group, meet up with them as a group and free up that time for other things.

Don't sleep too much. By saying this I refer this to those who sleep beyond 8-12 hours a day. Lounging around in bed isn't going to achieve anything other than tiredness, feeling drained and lacklustre.

If you can delegate - then delegate! If you have staff, teach them and then use them. You're not a one person working machine.

Pay your bills on time. There's nothing that makes a person feel more helpless than late fees and penalties. Reducing your stress and anxiety will relieve your mind. So organise all bills to be paid in one file/folder/pile and write them into your planner/diary/calendar to pay so that you can see that it's due before it becomes overdue!

3. Review what you've done and what you've got to do next.
"Determine never to be idle. No person wll have occasion to complain of the want of time who never loses any. It is wonderful how much may be done if we are always doing." Thomas Jefferson, Third US Presiden (1743-1826)

Flick through your diary/calendar for the next few days, weeks and months to see what's planned and what is coming up so that you will always feel in control (mainly because you're not being ignorant and drifting along helplessly!).

4. The ability to focus.
Be focused on everything you do - if you're at work then you work! If you're socialising with friends, family or partners - have fun and enjoy yourself! Don't bring your personal problems into your work hours because it achieves nothing, only worry and stress on top of your workload. Similarly, if you're out socialising, mentally worrying about work issues is not going to solve anything either. If you're also studying, don't bring work or personal issues into your study sessions or else you are not studying effectively and you waste your time.

5. A messy desk, a messy mind.
Tidy up those papers, dirty coffee cups, used plates, dusty surfaces and general rubbish on your desk. Searching through piles of paper does not look professional. Having a huge pile of documents on your desk does not look like you're in control and just have a lot to do. You don't want to be handling the same paper twice or sorting through the same senseless pile again and again. File it away. Bin it if it's uselss (or recycle!).

Have a meaningful file so that you know where to look things up. Filing really is underrated. File your bills, file your work, create folders in your email program and file those emails away.

Anyway, those 5 steps has a lot of little steps in them ;) Before you know it, if you put those steps into practice you will find time to relax, breathe and feel happy. It's too easy to find ourselves caught on a little hampster wheel, running around and around yet going nowhere. When this happens we feel stressed or unhappy. So take control and life becomes much more enjoyable.

Sunday, September 13, 2009

Ways to Save Money

Due to the woeful state of our world's economy, more and more articles are appearing everyday about budgeting and how to live life more cheaply. I may as well write some of the ideas up (and add a few of my own) seeing as it's always good to have a snapshot review of whether you can make a difference to your life. Even if you follow just one or two of these points, you will notice a positive difference over time.

Rather than living day to day, you want to beable to have the freedom to do what you want, whenever and wherever you want to. Here's the budget checklist (the first 11 points are from the Sun Herald investor liftout section 6th Sept 2009), the rest are my ideas:

* Take your lunch to work (saving an average $8x5x52 = $2,080 pa)
* Buy in bulk
* Make your own coffee (saving an average $3x5x52= $780 pa)
* Grow your own fruit, vegetables( and herbs)
* Watch DVDs instead of going to the cinemas
* Pay yourself first
* Mend clothes rather than buy new
* Shop with a list (reducing impulse buys)
* Cook meals rather than get take away
* Pay off your credit card in full each month
* Go on self catering holidays
* Negotiate cheaper and better deals for car/house/health insurance, phone, mobiles, internet and basically anything requiring subscription (if your contract has expired) at least annually
* Use public transport if this is an option for you. This saves on the car's wear/tear on the engine/tires/kms and repairs and maintenance. A car can actually cost up to $300/week to run - I'll write a blog about this sometime because it's really a hidden cost that we don't often realise.
* Use Skype for phone calls - totally free
* Eat fruit and vegetables that are in season (a LOT cheaper than buying stuff that aren't in season)
* Watch out for the specials and stock up (maximum one year!! it's not a warzone so there's no need to stock up as if there'll be embargoes) if it's non perishables (eg toilet paper ^_^ , toothpaste, canned goods, cleaning products)
* Cut out or cut back the baddies - cigarettes, alcohol, junk food, lollies, soft drinks, processed foods, takeaway, deep fried cholesterol laden food, vending machines snacks
* Swap gym memberships for some free or cheaper exercises - jogging, taking walks in the parks and around the neighbourhood, rollerblading, biking, hiking, playing sports where you can split the cost of court hire
* Swap buying fresh flowers for a potted plant - a potted plant in bloom from the nursery will be super cheap (eg $8 or $15) and it will last for weeks, whereas buying blooms from the florist will last at most a few days to a week before wilting. If you've got green fingers, it's better to grow your own, bulbs last forever and seeds are at the most, $2-$4/packet, soil is $4-$15 for a 10kg bag and this will give you months of varied blooms.
* Swap dinner nights out for dinner at friend's places where you each bring a dish. Instead of $20-$50 per person (depending on the amount of liquor you drink too), you have a great time and the cost of each dish that you cook is about $10-$20 instead.
* Eat less meat and eat more vegetables and fruit instead. Not only does this save more animal lives, this will save you money, improve your health and wellbeing and help keep your weight stable (and if your metabolism is fast like will also lose weight).
* Cook from scratch... nutritious meals can be as cheap as $2.50 per servings
* Research the prices of what you want to buy if it's a major expenditure- don't buy impulsively. Negotiate and don't negotiate when there are other people around or they won't be inclined to negotiate with you "Can you tell me what your best price is? Ask your manager if you have to." and once you get some discount (95% of the time you will) then ask again "If I pay cash for this, what price can you sell it to me for?" (60% of the time you get a further discount :) )
* Don't buy it if it's just going to create landfill, sit on a surface uselessly and gather dust or is cheap and will breakdown shortly after acquisition - this will save yourself and save the world simultaneously
* Borrow books from public libraries for free instead of buying so many books from Borders, Angus & Robertson or Amazon etc... unless you enjoy re-reading books, alternatively swap books with friends
* ...more to come...have a few things to do before writing more

How to identify the level you're at as an investor.

The Investor Pyramid would work to classify individuals into a category to enable them to see the areas they need to improve and focus upon. At the bottom, the base of the pyramid, it would be the beginners and on the tip of the pyramid, the advanced investors. The bulk of the population falls onto the bottom category of the pyramid. Only a small minority of the population would fall into the pointy end category.

1. Beginners & novices
(Majority of the population falls into this category)

*How to identify if you belong in this category:
Debts, loans and borrowings on consumer products (TV, cars, watches, furniture, holidays etc), credit card debt balances that never gets paid off, no savings, no emergency funds, no idea about what you spend or what you earn, constantly late on bills (rent/mortgage/phone/electricity/gas/insurance etc), incur overdue fees and penalties either occasionally or frequently, incur bank charges for insufficient funds, cheques bouncing, living day to day on a financial treadmill and if you were to lose your job, everything would collapse.
*Topics for you to learn and identify with:
Budgeting, saving money, cutting costs, spending less, simplifying your expenses, frugality, recycling, reusing, snowballing your debt repayments and the basics of money management.

2. Intermediates and just fumbling along

*How to identify if you belong in this category:
Your bills are paid on time, you have some savings (you're not too sure how but somehow you managed to spend less than you earn), you know you've got to find a financial advisor or else invest in something but you've got no idea where to start, you don't really know anything, you have a mortgage that you're paying off but it's taking forever to pay off and you feel trapped financially.
* Topics for you to learn and identify with:
Budgeting, saving more money faster, the basics of
investing in shares and property, the financial/economic terminologies, escalating your mortgage repayments, the tips and tricks of debts, learning about income statements, balance sheets.

3. Above average Investors

* How to identify if you belong in this category:
Your bills are paid on time, you know how much you save and spend either daily/weekly/monthly/annually (ie: your budget is in top shape), your mortgage is on its way to being paid off early, you've got some shares and/or some managed funds and/or investment properties, you have a balance sheet of all assets and liabilities.
* Topics for you to learn:
How to invest in shares and property, how to analyse and compare returns, how to negotiate and organise your finances, how to find the best deals for investing and for financing, diversifying your investments, insuring yourself for income protection, disability, disablement, retirement planning, superannuation, Self Managed Super Funds and wills.

4. Advanced Investors (Minority of the population falls into this category)

* How to identify if you belong in this category:
Your budget is meticulous and you already have a good idea of what your income and expenses are. You've got investment properties and/or extensive share portfolio (direct/indirect), investments, funds and savings, your will is set up, you know what your balance sheet would be - infact you've applied for a lot of investment loans so you clearly know what you're assets and liabilities balances are.
* Topics for you to learn:
How to analyse yields, returns, investments, assets, tax, insurance protection (if you haven't insured yourself), gearing, using leverage. If you fall into this category then you pretty much won't be perusing the internet for blogs like mine (because you already know it all) and you'd be spending more time on stock exchange sites and time with your investments to monitor them, retirement planning, superannuation and Self Managed Super Funds.

Well folks, that's pretty much my reverse pyramid of investor categories by ability and actual assets/experience. There are more extensive breakdowns of these categories, but an important point to note is that it's useless for a person from category 1 (the beginner) to jump straight into category 4 (the experienced investor) jumping categories like are opening yourself up to financial problems, liquidity problems, debt problems, banks and loan sharks taking advantage of you and also you can fall prey to the swindlers.

An Introduction

There are so many money management sites out there so why would this one be any different?

This would hopefully be a site for myself to reference websites and materials and possibly any other lost soul out there looking for answers about their financial problems or how to create a financially secure future.

I don't claim to know everything...far from it. This is a journey for myself as I travel through life and experiences and for anybody else interested in the type of topics that I write about. How can anybody claim to be an expert on the topic? I can applaud them if they wrote about the 'Global Financial Crisis' before it happened. No one can predict with certainty how the masses will react and the after effects of their behaviour. It's these simple dynamics that create our society and our economy and as a result, the impact our lives.

Whether you are a maestro already in the game of money and finance, or starting off on those little baby steps to learn more about how to save or create a future for yourself, I hope you learn something from this blog.

Without much ado, this concludes the introduction to this blog.