A maxim is a short pithy statement expressing a general truth or rule of conduct. When it comes to finance, and let’s face it, it can be a boring subject, hearing one liners or maxims that encapsulate a strategy or a philosophy to succinctly support your own financial dreams and aspirations can be inspirational in itself especially in these challenging times. John Lowe of MoneyDoctors.ie takes a look at five of them:
- You need a budget and you need to budget.
You really should start every year with a budget plan. To know how much it costs you to run your life ( 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. If your plan is shy of income, then you have three choices – cut costs, earn more or prioritise ( it’s why over 300,000 people stopped paying health insurance over the last 5 years ) Income is your number one asset and you need to safeguard it. Use a money diary to keep track of your daily spend – lattés mount up. You will be surprised how easy it is once you start! Email me for a free easy to use, simple budget planner spread sheet that has all the categories and even tots itself up.
2. Never spend on impulse.
How often have you done this – with an empty shopping trolley you are wandering around aimlessly instead of sticking to a shopping list.. of course you are going to be tempted that’s why you should never shop on impulse. 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.
As I said 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 you earn is important to know especially if it is a surplus. It is with this surplus amount of money you can 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 – it’s a must !
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. It can have a long term nature too – your children’s 3rd level costs, changing the car in 5 years’ time etc.
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…here are 5 of them….
- The stock market is easily the best return of any asset class over any period of time. As Warren Buffett once said the stock market is a mechanism for transferring wealth from the impatient to the patient..
- The 26th Bull market (rising) was matched by the 26th Bear market (falling) last March year when Coronavirus hit…however it has virtually all recovered and with the lockdown certainly half of the country who are in employment have been saving huge sums of money just itching to be spent as soon as we are allowed…
- With interest rates so low and no immediate likelihood of a rise in the next year or two, it could be assumed the stock market will continue to rise and at worst stay where it is…there are some savvy investment funds worth considering… unless…
- Gold, the barometer of volatility, reaches new highs in price. When the stock market falls or gets nervous, the price of gold rises…Last 7th August ( my birthday coincidentally ) it reached the highest ever price – $ 2,061 per troy ounce… today is c. € 1,890. The feeling is that it could go as high as $3,000 per troy ounce…They say that 10% of your wealth should be in a precious metal ( gold, silver, palladium – the main component of the catalytic converter hence the recent thefts ) but take advice.
- Cryptocurrencies – extremely volatile at the moment. My advice is if you can afford to lose whatever you invest in Bitcoin, Ethereum, Stellar, Litecoin, Ripple or such like, then go ahead. But be prepared for a very bumpy ride.
A good maxim is one that is adhered to….