Advice For My Sister Part 2

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Tuesday Deep Dive: Advice For My Sister Part 2

Changing Your Attitude Towards Money

Last month, I shared some tips with my sister on managing her personal finances (shopping addiction). While I detailed most of the specifics in the previous article, our conversation also turned into an interesting and open discussion about money. I love these sorts of chats, learning and sharing ideas (as many of my mates would know), so I thought I would share my key ideas with you too!

Over the past five years (since I started taking my finances seriously), I have had a fair few shifts in my attitude. Some of these changes came from hard lessons (please don’t bring up crypto 2021), while others stemmed from shifts in my financial goals and values (e.g. placing a higher priority on travel). And as I mention in my article, Being Wrong, I’m almost certain my ideas will continue to change and mature over time.

Remember, I’m no financial advisor or guru, just someone with a bit more experience than my sister. So, take these ideas as you will:

1. Easy Wins

When it comes to managing your finances, easy wins can make a big impact. Here are some simple examples of strategies to boost your savings without major lifestyle changes:

• Phone/Internet Plan: do some research into better options! You could easily save $10 to $30 a month, which adds up to $120 to $360 a year!  

• Pack Your Lunch: this one is huge! Buying lunch everyday can quickly add up to $50 - $100 a week, which adds up to $2600 - $5200 a year   

• More Drinks In, Less Drinks Out: host pre-drinks. Having your first few drinks at home can easily save $50 every night out!   

• Transport: Do you live in the city and have a bike? Ride it! If you are in Brisbane, public transport is 50 cents right now - use it! Fuel adds up!

• Cancel Unused Subscriptions: Do you really need Netflix, Disney, Stan and Prime!? Or two gym memberships? Even cutting one service could save you $20 a month, or $240 a year.

• Buy Generic Brands: When grocery shopping, avoid name brands. Home brand is usually 20% or so cheaper!

But remember, no need to take it to the extreme… still enjoy some drinks out, but just be conscious of the easy wins.

2. Do You Really Need It?

When purchasing anything, asking yourself the simple question, do you really need it? If you do, great, buy it. But if you don’t, sleep on it. Try to never buy things impulsively. Let me remind you (Bella), that you DO NOT NEED any more clothes (probably for years) - so, sleep on it!

If you are unsure if you need it or not (you probably don’t 🤣), try to think like a minimalist. Could you put that $$$ to better use? Or could you find something just as good second hand?

Another strategy: I like to think of something I really value/enjoy and compare the cost. For example, a new surfboard costs say $600. So, when I see the super cool brand-new iPhone for $1800 (that I don’t really need), I like to think: is it really worth three surfboards??? Nope.

3. Money SYSTEMS

No Stress: I never worry about money. I am not saying I have a lot of it, because I certainly don’t, but I have faith in my system. If your system is sound, and you stick to it, there should be no worries. Even if you are in debt, so long as your trajectory is upwards, you won’t be there for long. Discipline is the only factor you need to be concerned with.

Purpose: On systems, I loved a piece of wisdom from American financial guru Dave Ramsey: every $ needs a purpose otherwise you’ll spend it thoughtlessly. This is why it is so important to have your buckets established and give every $ a home.

Simplicity: It needs to be simple to be remembered. Like I have mentioned before, complex excel sheets are not the go (unless you’re a weird Actuary)!

4. You need a WHY

Arguably the most important aspect, is your ‘why’. If you don’t know why you are saving money, you never will.

So, the first step is to establish your financial values, review your personal mission statement and set some financial goals!

Once, you have some long-term goals (e.g. buying a house, retiring or financial freedom), you should start to see the importance of the savings / fire extinguisher account (see previous finance article).

Similarly, you need to have some long-term goals for your ‘play money’ (e.g. a new car, a new toy or a plane ticket), to see the importance of your smile account.

Everyone’s goals and buckets can be different. The only wrong answer is if your system doesn’t match your goals!

5. Investing

Understand the importance:

• You invest to ensure a future income. Every person gets old. Make sure your income will continue without work.

• “If you don't find a way to make money while you sleep, you will work until you die.” - Warren Buffet

• “Gold labours diligently and multiplies for the person who finds it profitable employment.”

Know your risk profile:

Like I discussed in the previous article, I think it is super important to know your risk profile before investing. One of the reasons is to ensure you never fall victim to a fad. Think: Dogecoin, NFT’s and Meme Stocks. If you decide you want to invest in these areas, recognise the extreme risk and only invest a small percentage of your portfolio.

What not to do: throw in 10% of your portfolio, make great profit, decide to throw in 80%, then nearly lose it all 🤥.

• KNOW THE RISK.

• GUARD THY TREASURES.

• BETTER A LITTLE CAUTION THAN A GREAT REGRET.

Keep a record:

In your fearless folder, keep a record of your investments. This is seemingly obvious, but frequently forgotten. This is not only for you (when you need to make adjustments) but for your family (if tragedy were to strike).

Further, I would suggest recording the reasoning behind your investment decisions. Months or even years can go by without a proper review, and when the time comes to assess your investments, having that context will make things much easier. You'll appreciate knowing why you chose those specific shares and what your thought process was at the time (if only I knew why I bought so much BTC 😢)!

6. Seek Knowledge/Wisdom

Start financial discussions with the people around you, research and read - but be selective. Remember the third law of gold? Only take advice from those who are wise in handling money - never from those who aren't.

So, thanks Grandma, for always telling me to save for a rainy day!

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