When it comes to finance, and let’s face it, it can be a boring subject, hearing one liners that encapsulate a strategy or a philosophy to succinctly support your own financial dreams and aspirations can be inspirational in itself especially at this time when we are about to get back to work and out of lockdown. John Lowe of Money Doctors takes a look at five of them:
- You need a budget and you need to budget.
You really should start with a budget plan. Do it before you leave lockdown so you hit the ground running. To know how much it costs you to run you and your family for a month.. every month. Any surplus goes to a saving plan to coincide with your goals and longer term plans. If you have no plan, then even to plan for the season ahead will be a start. Bundle all your current annual costs – email for a free budget planner spread sheet – and divide by 12. It should be less than your monthly income. You now know the amount of money you are going to spend every month – the surplus is the money you need for future plans.. home deposit, a wedding, children, a new car or that exotic holiday.
2. Never spend on impulse.
How often have I done this – you have an empty shopping trolley and you are wandering around aimlessly instead of sticking to a list.. of course you are going to be tempted that’s why you should never shop on impulse, either physically or online. If you have a list, you might be able to gauge what the total cost will be and just bring that amount of cash with you or do not exceed that amount on your debit or credit card..
3. Your financial life rests on the gap between your income and expenses.
Income is your number one asset and it has to cover everything both now and in the future. That gap between your expenses and what your earn is crucial especially if it is a surplus. It is with this surplus amount of money as I have said you plan. Planning for your holidays, that lump sum you want to repay the Personal Contract Plan (PCP) for your car, your child’s 3rd level ( total cost exceeds € 42,000 per child ) that attic conversion, that once in a lifetime dream holiday, not to mention that home deposit.. the list goes on but all those are paid from the gap between your income and your current living costs. So start saving. Regular saver accounts are available with all the banks where you can save between € 100 per month to €1,000 per month and you are only allowed one withdrawal per annum. The interest rate is not really relevant – best rate currently is 1.25% gross ( net 0.8375% – EBS )
4. Every euro should have a purpose
If you don’t have that purpose for your money, then it’s up for grabs and God knows where you will end up spending it ! Important therefore to check that list – not just your grocery list – and ensure your money is going to the right place.
5. Bet big when the odds are in your favour.
Well that’s what they say in betting circles. I am not a gambler but there are certain factors I do take on board when it comes to betting big especially on the stock market…
- The stock market is easily the best return of any asset class over any period of time.
- We were in the 26th Bull market (rising) now matched with the 26th Bear market (falling) so the next one is a Bull…
- The last Bull ending a few weeks ago – it has to drop 20% before being declared a Bear market – was the 2nd longest of all time and in its 9th year ( since March 2009 – the longest was 1987 to 2000… 13 years halted by the dotcom bubble burst..
- With interest rates so low and no immediate likelihood of a rise in the next couple of years, it could be assumed the stock market will continue to be a magnet for investor monies in expectation of the next Bull… if it ever comes…
- If you do want to preserve and grow your wealth, remember the world’s richest man Warren Buffet’s wise words – the stock market is a mechanism for transferring wealth from the impatient to the patient. He’s 90 this month and still living in the home he bought in Omaha Nebraska in 1937.
Stick to these 5 maxims and you’ll do alright…