“Money
is not the most important thing in the world. Love is. Fortunately, I love
money.”
– Jackie Mason
So, you've reduced your
re-occurring expenses to the bare minimum. You want to do more. What else can you do?
Join up to the rewards
programs at the super markets.
They are free to join and yes they take years to
get decent rewards, but scanning the card takes an extra second or two. They
will often also send you coupons and other incentives to visit the store.
My personal favourite is
the flybuys rewards program from the Coles/Westfarmers group of companies.
You can do an online
survey every month, to get 1000 points. With 2000 points you can redeem $10
flybuy dollars that you can pay for your goods at Coles, Kmart, etc.
https://www.tellcoles.com.au
It takes 5 minutes to do
the survey, so extrapolating that, you are actually making $60/hour once a
month from doing these surveys. $10 free every 2 months in my pocket certainly
beats using my own $10. Make sure you do it every month, put it as a monthly
calendar event or do it when you get paid (assuming paid monthly)
Everytime you buy
something, think to yourself if the short term satisfaction is worth the money.
I like going out to eat with friends as much as the next guy and I'm happy to
spend on occasions. What I don't do is make it a habit to go out 3+ times a
week and eat out. I'm also less likely to eat out if it is just myself. Yes,
the momentary satisfaction you get when you bite into that delicious burger and
chips is so gratifying, but that only lasts the 10 minutes that it takes to
down the food. After that, the remorse that is felt is as stuffing as the food
in your belly. The remorse from eating junk food, but also the remorse from
spending money un-necessarily when you have food at home and the potential to
save money.
The money that you save
gives you long term enjoyment because of the compounding effect money has. This
$10 you didn't spend generates 10% return this year, then 10% next year, and so
forth.
Get a credit card, but
never spend a cent in interest.
A lot of people are
scared to get credit cards. They think they have no self control and will just
go crazy spending on anything and everything. Well let me just tell you this.
Everything in life requires self control and dedication. We would all go over
the speed limit on a clear road if we could, but we have to use our self
control for the safety of ourselves and others. We need to rein in our impulses
with credit cards so as to also stay safe - financially.
I have 3 credit cards -
all with a different purpose for a total combined limit of over $20k. My
spending habits are the same irrespective of how much my limit is. I spend like
a guy with a limit of $200, not $20,000. Since having a credit card at the age
of 18, I have paid total interest of $0 on my cards.
There are many free ones
out there - why pay an annual fee when you don't have to?
My personal favourite is the 28 degrees credit card by GE Money. No annual fee, up to 55 days interest fee, and the biggest draw card: no international purchase fees. Normally, your usual bank will charge 3% of the purchase price if you buy from overseas. With 28 degrees, no fee AND also very favourite exchange rate.
So you must be
thinking, why bother with a credit card if I can just use cash - and it is easier
to budget? Well. It all goes back to self control again.
- It is actually easier
to keep track of your expenses if it is all itemised and dated on your
statements, so you can look back and see where the money has been going. This
is easier to do than keep daily expense tallies on your phone
- Up to 55 days interest
free. Every company seems to offer this these days. TAKE ADVANTAGE OF IT. The money on your credit
can be sitting in your savings account, first home saver account, your offset
account during the interest free period. Once your period is up and statement
is due, pay just before the due date. RINSE AND REPEAT. This is perfect for
expenses that you would have had to incur anyway. eg Quarterly train ticket,
rego, insurance. Seriously, sometimes my bills come to $2k in a single month. I
know I would much prefer to hang onto $2k in my offset account, than having my
balance immediately be deducted $2k. Interest is calculated daily but
compounded monthly. Remember that!
- Many cards offer many
complimentary insurances when you purchase it with your credit card. I recently
signed up to Citibank Platinum credit card, usually a $199 annual fee, but
signed up to a promo that gives free annual fees for life. It offers free
travel insurance, free purchase price insurance, free extended warranty.
- Fraudulent / Incorrect
deductions are infinitely easier to dispute with credit cards compared to debit
cards. Handy when you have the monthly direct debit coming out of the credit
card. Think about it, when its the credit card company's own money, they will
move mountains to fix up the issue. When its money from your own personal
account, what incentive do the banks and finance institutions have to fix it up
straight away?
Do note though, that
when applying for credit, lending institutions will take into account your
credit limit, not how much you owe, to calculate your serviceability to the
loan. You can however close your accounts prior to applying for more credit and
problem solved.
Examine where your money
is going each month
Some people I know go to
the movies at least once a week. In a month, that is at least $40 (assuming you
use coupons) and more because you need drinks, snacks, dinner afterwards for
the day/night out. Not only is the movie experience dulled because you go so
often, but there's just not that many movies worth forking money on. There is a
thing called the internet where you can entertain yourself for free. Instead,
borrow some blu-rays from friends, go visit some people once a while.
Alcohol and Smokes - may
as well pour money down your throat, because that is what effectively happens.
The single biggest money trap for Australians. $10, one glass of Asahi in the
city pub. Yep.
I'm not against going
out having a good time, but don't make it a weekly thing where you go all out and lose track of how much you've spent. It is better
for your liver and your wallet if you do it occasionally.
Smoking - there is
absolutely nothing you can say to convince me that it is a good idea. Bad for
your health. Bad for your breath. Bad for your wallet. Is there any surprise the
the government taxes the hell out of it? It is after all an inelastic demand
product. No matter how much the prices go up, people will still buy it and pay
through the nose for it.
"How long have you
been smoking for?" the colleague asks.
"Thirty
years," says the smoker.
"Thirty
years!" marvels the co-worker. "That costs so much money. At three
packs a week, you're spending $3120 a year. Had you instead invested that money
at a 9 per cent return for the last 30 years, you'd have $460,000 in the bank
today. That's enough to buy a Ferrari."
The smoker looked
puzzled. "Do you smoke?" he asked his co-worker.
"No."
"So where is your
Ferrari?"
Don't be fooled by "sales"
Read up on a thing called the anchoring effect. Basically,
something you want catches your eye. Be it a nice dress, new jacket, new
electronic gadget. The price tag shows $500, but then you hear there is a sale
and it is now $320. Wow. Must buy it. Nowwwww.
Check out this interesting article on the subject
Don't be afraid to chase
the highest interest rate or sign on bonuses
Banks and financial
institutions are not unlike other businesses that offer promotions to get
customers in the door. When there is more competition, that means more interest
from them in getting your attention.
Don't get complacent -
always be on the lookout for new deals and promotions from the banks.
The big 4 banks offer
ridiculously low interest rates, check around the on-line only institutions to see what rates they are offering. I have had accounts with
- Virgin Money
- St George
- ING Direct
- Rabo Direct
- Suncorp
- Bankwest
- UBank
just to name a few
When the 4 month
introductory high rate expires, look for a new high rate. Banks will often
offer sign on bonuses, so when you create an account and deposit a certain
amount they will credit your account money after a certain time. If they are
fee free accounts, what do you have to lose from joining up and having it open?
1 hour of your time is certainly worth $50.
In this regard ING
Direct have been the most generous. When I signed up, they were offering $120
in bonuses for creating the account and doing some transactions, then $250 for
referring 5 friends to the bank. This is real actual money, not fake money!
Always be on the lookout and ask around, ask your friends what they recommend,
ask your work colleagues - you'll be surprised.
