Financial Tips that are Great for everyone

It is sad, but no one will ever get rich by working for a living. One would think that someone on a huge salary would be incredibly rich, however if one earns a lot then one spends a lot. The difference is that someone on a small wage leads a far different lifestyle to one on a huge salary. Someone on a small wage may only be able to afford a single two hundred dollar suit. Someone on a huge salary may have several thousand dollar suits. Most people live a lifestyle as to what they earn so it cannot be assumed that a person on a huge salary is able to manage money better than a person on a small wage.

Trouble for many starts when someone on a small wage spends like someone on a huge salary. Credit cards and the ability to obtain a credit card fairly easily dooms a lot of people to existence from one pay packet to the next. They are then on a treadmill for the rest of their lives, just one step away from bankruptcy.

Tip number one is to live within your means. Every article on money management stresses that everyone should work on a budget. There is no point in earning a thousand dollars a week if one thousand two hundred dollars is spent a week. Sit down and add up all annual expenses, divide that by fifty two, and bank that weekly amount to a separate account. That way as bills come in there will always be money there to meet them. The next account to open is an investment account. Bank to that account as much as possible. For example, fifty dollars a week will add to over two thousand five hundred dollars a year. Fifty dollars may not sound a lot but two thousand five hundred is not to be sneezed at. The rest of earnings may be used for day to day expenses, entertainment etc.

Tip number two is to control spending on a credit card. Get a card that offers an interest free period and completely pay the amount owing each month. Credit card companies charge very high interest rates on balances that cannot be cleared each month and roll over to the next month. Sometimes it may be necessary to make a large purchase on credit in which case the entire amount  cannot be be cleared when the credit card bill arrives. If that is the case  examine the budget and clear the debt as quickly as possible. Budget to spend only what can be paid in full each month except in emergencies. Limit yourself to only one credit card.

Tip number three is to make your investment money account work for you. Assuming a budget has been worked out to meet all bills such as rent or rates, electricity, Internet fees, phone bills, insurance etc and an investment account has been established, various ways of wealth creation can be examined. It must be stressed that one must do homework if one is to look at all the investment opportunities once a reasonable savings amount has been reached.

Buying an investment property may sound good but buy the wrong property and a lot of  your hard earned dollars may be wasted. For instance if a house is unusually cheap there is usually a very good reason for it.  Perhaps a freeway has been zoned to be constructed  within meters of the property. The thing is don’t go buying property until everything about property investment has been learned.

Buying shares is a way of obtaining gains in a very short time which can be readily be accessed unlike property which is generally considered to be a long term investment.  Unfortunately with shares it is a way of losing money in a very short time as well. Stay away from the share market until everything about a company has been investigated. 

Investment in all its forms needs very careful consideration. There are several seemingly incredible investments that appear too good to be true. In many cases these investments really are too good to be true. Many people have lost huge sums of money in  unsound investment schemes.  Professional people who one would assume have grounds to profess intelligence, have been caught up in unsound investments and unfortunately have used their position to encourage other people to invest their money as well.  When one is told that a company is returning fifty percent annual profit on capital investment surely alarm bells would ring. Incredible as it may seem many people rush to invest without even looking at a prospectus or a balance sheet.  Not exactly money management is it?

Most people have superannuation and are encouraged to contribute extra money into the fund. Superannuation is very much long term and subject to the ravages of inflation. Two hundred thousand dollars today may sound a lot but fifty years from now it may not  be such a  big deal.  It is important to manage superannuation each year and not let it be ignored. Check to see how the fund is performing.  Many funds have an element of share investment which may result in negative returns. Such is the workings of superannuation funds that your superannuation fund can be raided any month that the fund posts negative returns. It is quite possible that your superannuation fund could be worth less at the end of the financial year than at the start.

Tip number four is to have a bit of a gamble if your convictions allow. Lotteries offer huge wins for a small outlay. Gambling however can quickly turn into a disease whereby thousands of dollars can be wasted. The urge to win can be a strong magnet to the weak willed and desperate.  If you can set a limit to what is reasonable to lose then lady luck may shine upon you. Consider however that the chances of getting rich by gambling are incredibly slim.

Tip number five is to never let up on ways to create wealth. Many people invent something that makes them rich. If you can sell that something to a million people and make a dollar profit on each item then you have become a millionaire.  The trick is to find that something that a million people want. Be prepared for a lot of hard work and disappointment. The world is full of gadgets that people have invented hoping to sell them to a million people for a dollar profit each item. Good money management is not a consideration for them and most have lost their entire life savings in pursuit  of marketing a gadget that nobody wants. Good money management however, would see a gadget’s viability tested before any major capital outlay.

Basically good money management requires discipline. Most people are too lazy to budget, too lazy to find ways of cutting expenses, too lazy to find ways of creating wealth and go through life dreaming of the big win. Money management to them is like rocket science. In this world there are lots of people willing to take your money as easily as you are willing to part with it.

Remember the saying, “A fool and his money are soon parted.” Perhaps that saying can be directed to people who have no idea of money management.