Estimated reading time: 6 mins
It’s only recently that schools in many countries have begun to teach modern life skills such as online safety, cyber-security and personal finances. Which means there are billions of people worldwide ‘of a certain age’ that have not been brought up with the skills and know-how to manage their personal finances.
Some people learn from their parents. Some learn carefully and deliberately. But most, like myself, learn about personal finances through personal experience – trial and error if you want to call it that – and it’s the ‘error’ where most people get the lessons of greatest value, right? After experiences such as:
- Spending up, resulting in being strapped for cash
- Spending more than you have or earn, leading to debt
- Surprise bills or expenditure
- Long, long, long periods of borrowing
- Not having a rainy-day fund and you need a holiday
You get the picture. Perhaps these ten tips might enlighten us about our personal finances?
Tip #10 – Search for the best credit card deals
There is no end of resources that will help us find the best credit card deal that suits our needs. Note: the card with the lowest rate isn’t necessarily the best deal. Of course, low rates, or even introductory rates of 0% for a period, are attractive and often a great choice, but look out for deals with much longer periods of a low-rate. Try MoneySupermarket or NerdWallet.
Tip #9 – Learn how to hunt down deals
Deal hunting requires learning and the development of a skill – so the sooner you start and gain some experience, the better you will become at it! It’s also about amassing a list of resources where deals can be found. Websites like Groupon are the obvious ones to add, and a plethora of coupon sites, but there is also sites like eBay where great discounts can be found when compared to full-price branded sites.
Also consider physical locations such as T J Maxx who carry end-of-line clothes and household goods – that’s if you can wait that long (see tip #1).
Thing is, hunting down deals takes longer but the rewards can be well worth the effort!
Tip #8 – Contribute to a pension
Start paying early into a pension and the dividends will pay off. Paying a little amount from an early age is actually better and more fruitful than paying lots of money into a pension in later life. The compounding effect of interest makes that so. In simple terms, if you started paying $20 every month into a pension at the age of 18, you will have more money at retirement than if you starting paying into your pension $1,000 a month for the last year before retirement.
Tip #7 – Don’t buy now if you don’t need to
A mistake many people make is to buy now when they don’t need to and increase credit balances on credit cards. This is crazy as you begin to amass interest on those purchases before you receive benefit. Even if you pay with cash, the Time Value of Money (TVM) means that you’re actually paying more now rather than later – that for a benefit you won’t be realising just now. If you’ve never heard of TVM then I strongly recommend you read about it and understand it as it’s a core lesson in personal finances in my opinion. It wasn’t something I learned about until I did my MBA!
Tip #6 – Be organised with bills
Paying household bills early (before the due date) is not wise (think of Time Value of Money in tip #7 above) – that is unless you’re incentivised (I’ve seen some energy companies add credit to an account if they receive payment early). But paying late, where a penalty arises, is bad practice. Get organised with bills and make sure they’re paid on time. I add a calendar entry on my iPhone to remind me to pay bills so I don’t miss their due date.
Roseland Associates Tip #5 – Challenge all line items on bills and invoices that you don’t recognise
I see this time and again – items added ‘for my convenience’ onto bills and invoices where I haven’t asked for them. Challenge these things! Don’t be fooled into paying for something you will never use. What’s the worse that can happen? You find out that you made a mistake and you need it after all – big deal. It’s better to be sure, than sorry later.
Tip #4 – Don’t fall for scams – have a critical mind
There a lots of people out there after your money. They will try anything – nothing is sacred. Their schemes and devices to convince you something is genuine are getting more sophisticated and clever. I have almost been fooled a number of times, if it wasn’t for my critical mind. Email is easily the most prevalent mechanism for scams – assume every email you receive is dodgy until you’ve checked it thoroughly. (Have you received an email from your own email address telling you that you have been hacked, a video of you conducting a ‘personal act’ recorded, and now you have to pay a bazillion bitcoins? Ignore it – its’ a scam. They haven’t hacked your email – but used a clever trick to appear as if they have.)
Tip #3 – Buy ingredients rather than packaged food items
We all have to eat, so most of us do a lot of shopping for groceries. We spend roughly $2,600 per person per year on groceries. You’d be amazed how much you can save by gathering the ingredients and cooking yourself rather than buying pre-prepared packaged meals – by my reckoning you’ll save 80%. Besides, it’s more fun and healthier as a choice.
Tip #2 – Do you really need all that insurance?
It is possible to be overinsured. More than that – it’s probably very likely that you are. This is costing you money for no benefit! I strongly urge you to review all your insurance and check that you’re not paying for insurance that you don’t need and that you know what you’ve actually purchased.
Roseland Associates #1 Personal Finance Tip – Save a little, regularly
Saving means that we have cash in the bank if we need it for an emergency, such as a hole in the roof, or something we really, really want but don’t necessarily need right away.
Saving can mean we don’t increase our debts and give our hard-earned cash, as interest, to a credit card company. Instead, purchases are actually cheaper because we earn interest on our savings.
Some people have never saved in their lives. Credit is very easy to acquire so why bother? The reason to bother is that saving is a great habit to get into and requires a lot of self-discipline. Moreover, it means that we have to undergo delayed gratification – something that a lot of people struggle with because, quite frankly, they haven’t had to before (it’s easier to bung it on the credit card…)