9 January 2017

Cash-strapped? Try these nifty ideas to get ahead in 2017

| Suzanne Kiraly
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This is the time of year you might be considering improving your finances or saving for something really special, like maybe a holiday, a house or a new car. Maybe you had a shocker in 2016 and really want to improve your overall finances in 2017.

Well, you wouldn’t be alone. For most of us, we are not happy with our financial situation, and we feel the need to improve it one way or another.

It might surprise you to know that the more you learn about the psychology of money, the better you can implement that knowledge to get ahead financially. Kabir Segal, neuroeconomist (and yes, there is such a thing), and author of the book “Coined”, explains that the effect of money on our brains is akin to the effects of cocaine!

“Neuroeconomists [scientists who research how the brain is affected by money] have performed several brain scans on individuals who were about to make money, and the results were staggering,” Sehgal told Time magazine. “The studies show that these people had the same neurological response to making money in their “pleasure centers”, as someone who was high on cocaine.”

And, if psychology plays a large part in our financial behaviour, it only stands to reason that we should use psychology to improve our situation.

In this vein, I’ve been collecting some money ideas for a while now that play on our psychological attitude towards this concept of money and its accumulation. Here are some that I found to be really nifty suggestions, not too hard to do for most, and which could make a little cash go a long way towards achieving your financial goals or at least improving your financial destiny in 2017.

(1) One idea from a friend of mine is to put away $1 in week one of the new year and then increase the dollars with every week – so that you save $2 in week 2, $3 in week 3, and so on. Or a reversal of this is possible too – saving $52 in week 1 and $51 in week 2, and so on. You’d be surprised how much you will accumulate by the end of the year and this strategy plays on the idea that it’s a game or challenge, so it becomes none too painful.

(2) Another nifty idea that is sound psychologically (and which I am trying myself this year), looks like it works a treat – it is via an app called https://acornsau.com.au – where you get to invest the small change from your daily purchases and see how your money adds up. You can also nominate regular micro-payments to be added to your account and of course, in addition you can choose to invest lump sums if you wish. It’s really a very clever, simple little concept which plays on the notion that we don’t notice the small amounts that slip through our fingers. The founders of this app recently floated it on the stock market, I believe, with share offerings to the investors who use it. This one could go a long way in the future too, with our fast-growing, cashless society and our ever-growing financially savvy population post-GFC.

(3) This next idea is a psychological ploy, where you trick yourself into thinking there is no such thing as a certain denomination within our currency system – say the $10 note, by way of example. (Although you could easily choose the $5, $20, $50, or $100 notes instead.) The idea is that whenever you get one of the said chosen notes, you stash it away and then they accumulate over time. I have done this before with very pleasant results at the end of a year.

(4) This one is an ancient tried and true method used by the wealthy. It is the principle “to pay yourself first”. This concept originally came out of a 1926 book entitled “The Richest Man in Babylon” by George Samuel Clayson, and it has had a huge impact on thousands of investors – the wealthy and wise. It means that before you pay your bills or anything else, you pay a small amount to yourself (like 10% for example), and that way, you will make sure that the most important person (you) gets paid every single time. The trick is to not touch the money and let it accumulate, with interest.

These are four of the money ideas I like most that use the power of psychology in the way we view money and our strategy for financial gain.

I am sure there are many, more worthwhile ideas out there … please do share any you think may make a difference to our readers’ finances. We are all keen to get ahead – aren’t we.

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Suzanne Kiraly10:47 pm 17 Jan 17

Chris Mordd Richards said :

devils_advocate said :

A mentality of abundance would drive you to find a brand that you really like, that fits you well and makes you feel like the professional you want to be. And when they’re on sale, buy ten of them. Classics never go out of fashion and you will get the same number of wears out of an item of clothing or pair of shoes, whether they are your only pair or you rotate them through once a week. One of the worst mistakes I used to make was having only two pairs of “work” shoes (one black, one brown) and then having to pay full retail when they wore out. Now I stock up when I see a good sale, and have saved hundreds if not thousands.

I realise it’s not 100% applicable to women’s fashion but most women I know still have a few classic items (suits, heels, bras etc) that they wear from season to season.

I avoided clicking on this article all week thinking it was another list of super obvious “ideas” that is so popular around this time of year. I was very pleasantly surprised to discover four actually quite good and maybe not so well known ideas for saving instead, along with a game element to it which always helps I find! So kudos to Suzanne Kiraly for that.

As to devils_advocate comment, I really like that idea / approach actually. Unless you love thrift store clothes shopping as I do, that’s a really sensible way to go about it I think actually! I could do the same by combining low cost sale brand names pieces that really suit me with my thrift store stuff too, for an even more unique look. I’m going to suggest this to a few friends now actually.

As for not buying coffee, each to their own, but i’m sorry life isn’t worth living without good coffee!! 😛 LOL My aim this year is to cook at home more and buy less takeaway myself though! Good comments all round, thanks all!

Thanks so much for this and your generous comments – glad you did click on my article and yes, I can’t go without good coffee either!

Serina Huang said :

Some really good ideas for making saving a ‘challenge’. I find it is all about the mindfulness of the little things. My habit is that every time I make a saving (e.g. decide not to buy a cupcake at my super yummy café at work), I immediately transfer that saving onto my mortgage. And that motivates me to make bigger savings as well, too. Over the course of a month I usually save at least $1,000 this way.

It will end up being a much bigger saving than that. $1000 a month over ten years at say, 5% home interest loan according to a Compound interest calculator ends up as a saving off your home loan of $155,282. The home loan will be paid off much quicker and then that money is freed up for other investments (or holidays etc). (But that’s a lot of cup cakes a month. Are you sure it’s $1,000 a month?)
I was told by some that small savings ideas are silly, but they do add up.
Even saving on $20 coffee a week, could be $13,458 off your mortgage over ten years. Then add other savings to that. Say, $50 on bought lunches a week. That could be another $33,644 off the mortgage over ten years. And the small savings keep adding up, as they are not small savings in the longer run.
The home mortgage is not generating income, so the sooner it is paid off, the sooner money can be put to investments that do pay money.

Serina Huang12:23 pm 17 Jan 17

Some really good ideas for making saving a ‘challenge’. I find it is all about the mindfulness of the little things. My habit is that every time I make a saving (e.g. decide not to buy a cupcake at my super yummy café at work), I immediately transfer that saving onto my mortgage. And that motivates me to make bigger savings as well, too. Over the course of a month I usually save at least $1,000 this way.

Chris Mordd Richards2:18 am 15 Jan 17

devils_advocate said :

A mentality of abundance would drive you to find a brand that you really like, that fits you well and makes you feel like the professional you want to be. And when they’re on sale, buy ten of them. Classics never go out of fashion and you will get the same number of wears out of an item of clothing or pair of shoes, whether they are your only pair or you rotate them through once a week. One of the worst mistakes I used to make was having only two pairs of “work” shoes (one black, one brown) and then having to pay full retail when they wore out. Now I stock up when I see a good sale, and have saved hundreds if not thousands.

I realise it’s not 100% applicable to women’s fashion but most women I know still have a few classic items (suits, heels, bras etc) that they wear from season to season.

I avoided clicking on this article all week thinking it was another list of super obvious “ideas” that is so popular around this time of year. I was very pleasantly surprised to discover four actually quite good and maybe not so well known ideas for saving instead, along with a game element to it which always helps I find! So kudos to Suzanne Kiraly for that.

As to devils_advocate comment, I really like that idea / approach actually. Unless you love thrift store clothes shopping as I do, that’s a really sensible way to go about it I think actually! I could do the same by combining low cost sale brand names pieces that really suit me with my thrift store stuff too, for an even more unique look. I’m going to suggest this to a few friends now actually.

As for not buying coffee, each to their own, but i’m sorry life isn’t worth living without good coffee!! 😛 LOL My aim this year is to cook at home more and buy less takeaway myself though! Good comments all round, thanks all!

dtc said :

Maya123 said :

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

Great, if you like your free activities then you like them – but you are definitely foregoing other activities that cost money. Movies, travel, food etc. And thats fine, but it doesnt make you a ‘better’ or more intelligent person because you scrimp and save. It just makes you a person with certain interests and if someone else has other interests (that involve spending money) then they are not wrong to have those interests.

There is a difference between someone (for example) deciding to go to a dinner and movie knowing it will cost money but being willing to accept that in return for having a good time, and someone not paying off their credit card because they keep forgetting, or buying a BMW on a finance lease (making bad financial decisions).

Dont get me wrong, I’m all for people being encourage to properly analyse their expenditure and figure out what they will miss and what they wont miss. But spending money on yourself isnt, by default, the wrong answer.

So there may be millionaires who dont spend much on themselves. I go back to my original point – having become millionaires, what is the outcome? They have financial security I guess. But maybe they would enjoy a nice house or a fast car or more travel. But probably they now have such a sense of guilt that they wont – and they will become the old age people desperately hanging onto every cent of their pension/tax benefits/health benefits so that they never have to spend their own money. Miserly unhappy old people with a guilt complex, but lots of money.

Trust me, I have never forgone travel, even in those few years until my house loan was paid off. I might not have travelled overseas during those few years, but I still had holidays in Australia. Holidays that were cheap. Long distance cycle rides for instance, which are some of my most memorial and best holidays I have taken. In my twenties and after my home loan was paid off I have travelled to many countries. It’s because my home loan was paid off that I could afford to. In fact, I will soon be taking off overseas for another couple of months, and then later this year I might go overseas again. In between I will do some local travel. I can do this, because for a few years I lived frugally and paid off my house loan quickly.

One thing, reading here, has revealed to me, that there are spenders and savers among us. Two different cultures.

devils_advocate4:40 pm 13 Jan 17

My advice is directed to the typical Canberra person. Who is that, you ask? Great question.
They are likely to be in their early 30’s, and drive a car as their main form of transport. They are more likely to be employed compared with other Australians, particularly if they are female. The typical Canberran earns more than other Australians on average, but also spends a lot on housing. Most importantly, the majority – and far more than other Australians – describe ourselves as either in management, professions or clerical/administration roles.

To you I say:
-Invest money building your professional network. Focus not on your colleagues but on the people in the position you would like to be in one day, and who genuinely like you and want to see you succeed. That might mean coffees, social club memberships, after-work drinks, or the occasional gift for a mentor when you reach key milestones, to show your appreciation for them and your recognition of the role they played in getting you there. These investments pay off more than you can initially imagine.
-Invest money in building your personal brand. Dressing to save money will earn you the corresponding reputation. You don’t want your wardrobe to attract attention for the wrong reason. Dressing for the job you want, rather than the one you have, sends a clear message, and has a psychological effect both on yourself and the interactions you have with other people. Splash out on a few, expensive signature items, for men I’d recommend a watch. People do notice.
-You are better off having no car than having your clapped out Hyundai leaking oil all over the executive parking spaces (yes this happened).

Maya123 said :

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

Great, if you like your free activities then you like them – but you are definitely foregoing other activities that cost money. Movies, travel, food etc. And thats fine, but it doesnt make you a ‘better’ or more intelligent person because you scrimp and save. It just makes you a person with certain interests and if someone else has other interests (that involve spending money) then they are not wrong to have those interests.

There is a difference between someone (for example) deciding to go to a dinner and movie knowing it will cost money but being willing to accept that in return for having a good time, and someone not paying off their credit card because they keep forgetting, or buying a BMW on a finance lease (making bad financial decisions).

Dont get me wrong, I’m all for people being encourage to properly analyse their expenditure and figure out what they will miss and what they wont miss. But spending money on yourself isnt, by default, the wrong answer.

So there may be millionaires who dont spend much on themselves. I go back to my original point – having become millionaires, what is the outcome? They have financial security I guess. But maybe they would enjoy a nice house or a fast car or more travel. But probably they now have such a sense of guilt that they wont – and they will become the old age people desperately hanging onto every cent of their pension/tax benefits/health benefits so that they never have to spend their own money. Miserly unhappy old people with a guilt complex, but lots of money.

devils_advocate said :

Maya123 said :

dtc said :

So now that you have foregone things that are enjoyable, scrimped and saved and lived on second hand and unexciting cars and paid off your house for 25 years and become a millionaire….what happens?

As in you either spend your money when you are too old to really enjoy it (sure you can enjoy some of it, but there will be limitations) or your give it to your kids. Great.

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

In my opinion, excessively (obsessively?) focusing on the expense side of the balance sheet is a losing strategy. I think it’s somewhat irresponsible to tell people that constantly chipping away at their outgoings is going to lead to financial security.

On reflection, I think that instead of cutting out genuinely wasteful expenses, it would be nice to see an article discussing how to cut out wasteful people. You know, the people who appear to be well-meaning but in reality waste your time, energy and positivity by their negativity, self-pity and at times straight out jealousy. And who resist your most well-thought-out, well-supported advice on how they could change things, and persist with complaining about the same problems year in, year out.

Oftentimes it can be tough to cut these people out of your lives, because you may have known them for years, decades even. OT I know, but I can’t recall having seen such a long shopping list of how to identify these people and reduce their impact on one’s own life, and it would probably better position people to succeed.

That was a very positive thought.

devils_advocate said :

Maya123 said :

I think you may have misunderstood the premise of the article. Yes, there are eccentric millionaires, and dotcom millionaires, and inherited wealth and so on. Some may display their wealth, some may choose not to. Precisely none of those people are going to be reading this article. So despite having read your comments, I fail to see their relevance.

My comments were not for the wealthy. It was to point out that flaunting wealth (while likely not having it) is wasteful and from what I have read, many of the self made rich don’t do it anyway; more likely the wannabes, who might never be more than wannabes if they continue to waste their money this way. However, if people want to spend their money now, rather then invest it, that is a personal choice, as long as they don’t complain when they retire and say they now can’t afford to travel etc, but not everyone wants to do that anyway. Some are very happy to stay home and potter and join in local community things.
My personal strategy was to pay off my home loan as quickly as possible to free up that money for other investments, and if that meant living very frugally for five years, so be it. I didn’t have a high income; I’m guessing lower than many here, but with no longer needing to pay off my house I was able to then invest my money elsewhere, which was my plan. That and I don’t like debt. Money paying off the home loan is a waste in a sense, because no matter how much your house value increases you still need somewhere to live, so I thought it prudent to get that out of the way so the money could be put elsewhere.
I also went against friends and acquaintances telling me not to buy the house where I did. So many negative comments. But as well as the house being cheap at the time, I could see positives to buying it, and I was right, as that house increased in value more than the houses others were suggesting I buy. It was also in cycling distance to work, so I saved a lot on petrol; plus the cost of a gym membership. I wanted to cycle anyway; the savings were a bonus.
This was my personal strategy. There are other ways, but at the time this worked best for me, and although I couldn’t be called rich, I have likely retired better off than many people who had my (very ordinary) income. I can afford to travel at least.

pink little birdie10:03 am 13 Jan 17

Maya123 said :

dtc said :

So now that you have foregone things that are enjoyable, scrimped and saved and lived on second hand and unexciting cars and paid off your house for 25 years and become a millionaire….what happens?

As in you either spend your money when you are too old to really enjoy it (sure you can enjoy some of it, but there will be limitations) or your give it to your kids. Great.

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

While it’s great that you have chosen to do this, there is an issue around accessibility of the housing market for most people not affordability once in which is not a particularly large issue for people in Canberra. You value your house much more than anything and that’s ok but what works for you isn’t going to work for everybody.

It’s nice to save and cut down on expenses but really you need to work what out what you value. Like I really value my café coffee much more than I value the $45 a week it costs me so it’s in my budget. Is me being miserable without the coffee really worth the savings to me no – but I already save more than 20% of my pay.

But then I’m more than happy to compromise on other less important things.

devils_advocate9:07 am 13 Jan 17

Maya123 said :

dtc said :

So now that you have foregone things that are enjoyable, scrimped and saved and lived on second hand and unexciting cars and paid off your house for 25 years and become a millionaire….what happens?

As in you either spend your money when you are too old to really enjoy it (sure you can enjoy some of it, but there will be limitations) or your give it to your kids. Great.

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

In my opinion, excessively (obsessively?) focusing on the expense side of the balance sheet is a losing strategy. I think it’s somewhat irresponsible to tell people that constantly chipping away at their outgoings is going to lead to financial security.

On reflection, I think that instead of cutting out genuinely wasteful expenses, it would be nice to see an article discussing how to cut out wasteful people. You know, the people who appear to be well-meaning but in reality waste your time, energy and positivity by their negativity, self-pity and at times straight out jealousy. And who resist your most well-thought-out, well-supported advice on how they could change things, and persist with complaining about the same problems year in, year out.

Oftentimes it can be tough to cut these people out of your lives, because you may have known them for years, decades even. OT I know, but I can’t recall having seen such a long shopping list of how to identify these people and reduce their impact on one’s own life, and it would probably better position people to succeed.

dtc said :

So now that you have foregone things that are enjoyable, scrimped and saved and lived on second hand and unexciting cars and paid off your house for 25 years and become a millionaire….what happens?

As in you either spend your money when you are too old to really enjoy it (sure you can enjoy some of it, but there will be limitations) or your give it to your kids. Great.

Oh come on, there are lots of activities to enjoy that don’t cost lots of money. You have a very limited outlook if you think things have to cost money to be enjoyable. Show some creativity. By the way, it didn’t take me 25 years to pay off my home loan. I did it in five, on a very ordinary income. How? First I bought the cheapest house for sale at the time, then I rented out the other bedrooms, I bought almost no new clothes in that time, only some cheap underwear as needed. Took cheap holidays, which I thoroughly enjoyed. Grew my own vegetables and based my eating around this as much as possible. Rode my bike much more than I drove my car to save on petrol. I also went on long distance bike rides for some of my holidays, which were wonderful holidays. I socialised, but not in restaurants. I rarely had takeaway, doing my own cooking…as did my tenants too, in case you think this is rare. I also rarely bought fizzy drinks or alcohol, as this is a big expense, and I didn’t yearn for them. Then I was debt free. A wonderful feeling, and that brought ‘freedom’.

So now that you have foregone things that are enjoyable, scrimped and saved and lived on second hand and unexciting cars and paid off your house for 25 years and become a millionaire….what happens?

As in you either spend your money when you are too old to really enjoy it (sure you can enjoy some of it, but there will be limitations) or your give it to your kids. Great.

devils_advocate5:03 pm 12 Jan 17

Maya123 said :

Seems as though you didn’t read what I wrote, that the usual millionaire (as a millionaire isn’t what it was once, switch that to very wealthy person). Several articles I read on this said that the average ‘very wealthy person’ (that’s first generation self made ‘very wealthy person’, not inherited) was not likely to drive a fancy car, and it might also be second hand, and they are likely to live in an ordinary house, not what ‘poor’ people tend to expect.

I think you may have misunderstood the premise of the article. Yes, there are eccentric millionaires, and dotcom millionaires, and inherited wealth and so on. Some may display their wealth, some may choose not to. Precisely none of those people are going to be reading this article. So despite having read your comments, I fail to see their relevance.

The vast majority of us – myself included – inherited nothing from our parents but a strong work ethic. We live in a town where the costs of living are rising so much that people (individuals, but to a certain extent couples with kids) on six-figure salaries are just getting by. And who really wants to be “just getting by”? Not me.

I agree with the majority of the tips posted above, because they relate to reducing wasteful expenditure. Emphasis on the wasteful. And I don’t feel any particular need to get into a p’ing contest about who has the best financial management skills, and/or who managed to accumulate the most wealth. Everyone has opportunities to learn, including me. Just this year I started up a business which is probably going to make me more in 6 months than my PAYG salary for the whole year. Lastly, I was not suggesting that in order to be real, wealth must be displayed.

I’m simply pointing out that money in and of itself has no inherent value, save for the real investments you make, including in yourself. By cutting some of the expenditures listed in this article, people may end up costing themselves more than they save. I felt the urge to comment on it because I made that same mistake myself and since correcting my mental approach I’ve seen nothing but gains.

Suzanne Kiraly4:30 pm 12 Jan 17

Wow! Thanks guys for such a robust discussion.

I agree with some of what you are saying and especially find the coffee argument interesting. I think that the mindset thing is spot on! It’s how you view money that counts, After all, money is just a concept and we are the ones who attribute a value to it. Along with the notion around “money not buying you happiness”, I always recall a comedian who once said that: “I’m not the one who wants or cares about money too much, but everywhere I go, they ask me for it!”. Another comedian said: “I’ve been rich and I’ve been poor. Believe me, rich is better!”

I think that mindset is everything – and if you are focused on growth strategies, rather than only on reducing spending, you can get ahead quite quickly.

Suzanne Kiraly2:29 pm 12 Jan 17

Grail said :

Step 1: cancel subscription services like FoxTel.

Step 2: allocate a fixed amount of money per pay that you are allowed to spend. Use a soreadsheet ir an app like Pennies to help you track your spending.

Step 3: each month, reduce your spending budget. Review previous months’ spending and pick one more expense to reduce or eliminate (do not buy coffee from the cafe, that will save at least a thousand dollars a year)

Step 4: expand your spend tracking and review to other budget areas.

Also: get a piggy bank. When you get home each day just put all your coins in the piggy bank. Bank the coins at the end of your year (financial year, birthday, Christmas, wedding anniversary, whatever)

You will probably save another $400/year this way.

Thanks so much for your helpful suggestions. Love the “piggy bank idea and banking the coins. And although I am in favour of cutting back on expenses, I also think that there has to be some quality of life too.

devils_advocate11:48 am 12 Jan 17

dungfungus said :

devils_advocate said :

Grail said :

For the lucky ones there is also Step 0: get a better paying job (or get your partner a better job, or get a partner with a better job).

Money can’t buy you happiness but what it does get you is a whole lot of comfort!

There’s a quote often attributed to David Lee Roth: “Money can’t buy you happiness, but it can buy you a big enough yacht to sail right up alongside it!”

Similarly, “the one thing money can’t buy is poverty”.

“There’s nothing more costly than a cheap suit.”

devils_advocate said :

So, just the one house then? And what about the v12 or (insert exotic car of choice) to park in the driveway, where does that come into play? In addition to the non-deductable primary residence I always pay cash for cars as well because they’re a depreciating asset.

Seems as though you didn’t read what I wrote, that the usual millionaire (as a millionaire isn’t what it was once, switch that to very wealthy person). Several articles I read on this said that the average ‘very wealthy person’ (that’s first generation self made ‘very wealthy person’, not inherited) was not likely to drive a fancy car, and it might also be second hand, and they are likely to live in an ordinary house, not what ‘poor’ people tend to expect.
As for your comment, “So, just the one house then?” although they might live in an ordinary house, I would imagine many might have investment properties.
I know someone who has property worth millions, but they live in a very ordinary house themselves, and I do mean ‘very’ ordinary here. (Their investment houses are worth more than their house). They drive a second hand car, and I don’t think they have ever had a new car. They basically told me it was a waste of money buying new. Until the last couple of better second hand cars, the cars were an embarrassment to be seen in; old, paint peeling, that sort of thing.
I know someone else who has half a dozen houses. I would be very surprised if he drives anything fancy (but I haven’t seen their car). The “v12 or (insert exotic car of choice) to park in the driveway” tends to be those attempting to keep up with the mythical Jones , who are likely to be up to the eyeballs in debt. Big car, big house, children in private education, horses for the kids…, but a huge loan they will take years to pay off. Looking rich, doesn’t mean they are rich. I was going to say, they are to be pitied, but that’s unfair, for if they are happy living that way and don’t mind debt, that’s their life.
Of course there are the people who move beyond ‘very wealthy person’ and by that stage I’m sure they have a fancy car and a huge house. There are also those who inherit wealth and not having needed to get there themselves and then likely to spend it.

Maya123 said :

In further response to devils_advocate’s comment about buying coffee, that it’s only $2000 (I took that to be for a year), I went to a compound interest calculator and put in $2,000 a year for 40 years at 3% interest. After 40 years that’s $150,803 extra you could retire on if you had only forgone buying coffee. True, that amount of money in 40 years won’t be worth as much as it is now, but coffee will also increase in price over this time and I didn’t allow for that.

I think you’re spot on with the coffee idea. Feeling time poor in the mornings, I used to drop the kids at childcare, and then drive through McDonald’s to get a coffee to drink on the drive to work. I realised how much it was costing me, and just started drinking the instant coffee at work (it’s no worse than a McCafe coffee, anyway). Making the coffee at work also meant I had a couple of minutes to switch into my work mindset, rather than being rush, rush, rush all day. I don’t go out for a coffee during the day, either – my colleagues are in the tea room, and they’re the ones I’m networking with to help my job prospects, not the bloke that runs the cafe over the road. If I need a break, I switch tasks or go for a walk at lunch.

devils_advocate said :

Grail said :

For the lucky ones there is also Step 0: get a better paying job (or get your partner a better job, or get a partner with a better job).

Money can’t buy you happiness but what it does get you is a whole lot of comfort!

There’s a quote often attributed to David Lee Roth: “Money can’t buy you happiness, but it can buy you a big enough yacht to sail right up alongside it!”

Similarly, “the one thing money can’t buy is poverty”.

devils_advocate8:45 am 12 Jan 17

Grail said :

For the lucky ones there is also Step 0: get a better paying job (or get your partner a better job, or get a partner with a better job).

Money can’t buy you happiness but what it does get you is a whole lot of comfort!

There’s a quote often attributed to David Lee Roth: “Money can’t buy you happiness, but it can buy you a big enough yacht to sail right up alongside it!”

devils_advocate8:38 am 12 Jan 17

Maya123 said :

On the contrary, this “mentality” lets some people pay off their house in a few years…

So, just the one house then? And what about the v12 or (insert exotic car of choice) to park in the driveway, where does that come into play? In addition to the non-deductable primary residence I always pay cash for cars as well because they’re a depreciating asset.

Maya123 said :

In further response to devils advocate’s comment about buying coffee, that it’s only $2000 (I took that to be for a year), I went to a compound interest calculator and put in $2,000 a year for 40 years at 3% interest. After 40 years that’s $150,803 extra you could retire on if you had only forgone buying coffee. True, that amount of money in 40 years won’t be worth as much as it is now, but coffee will also increase in price over this time and I didn’t allow for that.

I have a lot of sympathy for this view because I used to be in the same mindset. Whether it was coffee, after-work-drinks or professional clothes, I viewed them as an expense rather than an investment. What did it get me? I was in my early 30’s, bouncing from one EL2/senior associate job to the next, all the while wondering why my technical ability was no longer enough to get me to the next level.

Luckily I met someone who was prepared to tell me how things really work and I was able to switch my mind set. Maybe the merit principle is a complete joke, or maybe merit is a broader concept than simply technical ability and experience. Regardless, you don’t have to have a PDS attached for something to be a sound investment.

In further response to devils_advocate’s comment about buying coffee, that it’s only $2000 (I took that to be for a year), I went to a compound interest calculator and put in $2,000 a year for 40 years at 3% interest. After 40 years that’s $150,803 extra you could retire on if you had only forgone buying coffee. True, that amount of money in 40 years won’t be worth as much as it is now, but coffee will also increase in price over this time and I didn’t allow for that.

devils_advocate said :

Maya123 said :

An extension of this, is only to buy new clothes when they are actually needed. IE, your other clothes are worn out and beyond mending. And really, if you have half a dozen good shirts, do you really need another!

This is unfortunately an all-too-common poor person’s mentality. A mentality of abundance would drive you to find a brand that you really like, that fits you well and makes you feel like the professional you want to be. And when they’re on sale, buy ten of them. Classics never go out of fashion and you will get the same number of wears out of an item of clothing or pair of shoes, whether they are your only pair or you rotate them through once a week. One of the worst mistakes I used to make was having only two pairs of “work” shoes (one black, one brown) and then having to pay full retail when they wore out. Now I stock up when I see a good sale, and have saved hundreds if not thousands.

I realise it’s not 100% applicable to women’s fashion but most women I know still have a few classic items (suits, heels, bras etc) that they wear from season to season.

devils_advocate wrote, “This is unfortunately an all-too-common poor person’s mentality. “

On the contrary, this “mentality” lets some people pay off their house in a few years, while others on the same income or better, still have a mortgage and are complaining about lack of money.
I remember being told many years ago that the typical millionaire (this was when a millionaire was worth something) was not like people who aren’t millionaires would think they looked. The typical one I was told would likely own a good business in a country town, drive an old car and not look showy. In fact, someone working in a country bank told me he wouldn’t cache a cheque for someone because he didn’t think the person presenting the cheque looked like he had that much money. It turned out he was the richest person in town. They don’t get rich by wasting money.
This excerpt from a book is interesting, ” The Millionaire Next Door: The Surprising Secrets of American’s Wealthy
By THOMAS J. STANLEY, Ph.D and WILLIAM D. DANKO, Ph.D
Longstreet Press
CHAPTER ONE
Meet the Millionaire Next Door
These people cannot be millionaires! They don’t look like millionaires, they don’t dress like millionaires, they don’t eat like millionaires, they don’t act like millionaires–they don’t even have millionaire names. Where are the millionaires who look like millionaires?
The person who said this was a vice president of a trust department. He made these comments following a focus group interview and dinner that we hosted for ten first-generation millionaires. His view of millionaires is shared by most people who are not wealthy. They think millionaires own expensive clothes, watches, and other status artefacts. We have found this is not the case. “

I found several articles that said similar. I imagine this is now dated, as millionaire isn’t was it was once, but the basis of this still applies, so what you are expressing is actually the “poor person’s viewpoint”.

devils_advocate said :

Reducing consumption reduces utility. There is no gain to made here. If you thought it was worth buying before, then by not buying it you’re (by definition) giving up something of equal or greater value than the amount of money you save.
Giving up coffees at the café is particularly terrible advice.
For the sake of a couple of thousand dollars, you have just given up one of the most ubiquitous networking opportunities that exist in the modern workplace (now that smoking is basically banned); given up the productivity benefits that exist from taking a cognitive break and getting out of the office (and the caffeine!) and perhaps worst of all, identified yourself as the office tightwad/social recluse.
People have been meeting to talk over a beverage for centuries. The only other significant opportunity I can see to achieve the same outcome is after-work drinks, but that has its own health and financial costs which in my view far outweigh that of the mid-morning café one-on-one.

Um, we used to sit around and drink coffee and tea we made ourselves at work. You can still network and save money by making your own coffee and tea. None of us had a problem with this. You say it’s a “couple of thousand dollars” a year. Well, that’s a couple of thousand off the house mortgage, plus saved interest, adding up to greater amounts over years.
Your comments bring it home why some people have difficulties budgeting. It’s attitude.

For the lucky ones there is also Step 0: get a better paying job (or get your partner a better job, or get a partner with a better job).

Money can’t buy you happiness but what it does get you is a whole lot of comfort!

devils_advocate1:23 pm 11 Jan 17

Maya123 said :

An extension of this, is only to buy new clothes when they are actually needed. IE, your other clothes are worn out and beyond mending. And really, if you have half a dozen good shirts, do you really need another!

This is unfortunately an all-too-common poor person’s mentality. A mentality of abundance would drive you to find a brand that you really like, that fits you well and makes you feel like the professional you want to be. And when they’re on sale, buy ten of them. Classics never go out of fashion and you will get the same number of wears out of an item of clothing or pair of shoes, whether they are your only pair or you rotate them through once a week. One of the worst mistakes I used to make was having only two pairs of “work” shoes (one black, one brown) and then having to pay full retail when they wore out. Now I stock up when I see a good sale, and have saved hundreds if not thousands.

I realise it’s not 100% applicable to women’s fashion but most women I know still have a few classic items (suits, heels, bras etc) that they wear from season to season.

devils_advocate1:17 pm 11 Jan 17

Reducing consumption reduces utility. There is no gain to made here. If you thought it was worth buying before, then by not buying it you’re (by definition) giving up something of equal or greater value than the amount of money you save.
Giving up coffees at the café is particularly terrible advice.
For the sake of a couple of thousand dollars, you have just given up one of the most ubiquitous networking opportunities that exist in the modern workplace (now that smoking is basically banned); given up the productivity benefits that exist from taking a cognitive break and getting out of the office (and the caffeine!) and perhaps worst of all, identified yourself as the office tightwad/social recluse.
People have been meeting to talk over a beverage for centuries. The only other significant opportunity I can see to achieve the same outcome is after-work drinks, but that has its own health and financial costs which in my view far outweigh that of the mid-morning café one-on-one.

Maya123 said :

Grail said :

Step 1: cancel subscription services like FoxTel.

Step 2: allocate a fixed amount of money per pay that you are allowed to spend. Use a soreadsheet ir an app like Pennies to help you track your spending.

Step 3: each month, reduce your spending budget. Review previous months’ spending and pick one more expense to reduce or eliminate (do not buy coffee from the cafe, that will save at least a thousand dollars a year)

Step 4: expand your spend tracking and review to other budget areas.

Also: get a piggy bank. When you get home each day just put all your coins in the piggy bank. Bank the coins at the end of your year (financial year, birthday, Christmas, wedding anniversary, whatever)

You will probably save another $400/year this way.

+1

Allow me to add a few more suggestions.

Step 5: Pack lunch for work; rather than buy lunch, and as Grail suggested, don’t buy a coffee. Have a kettle at work and boil that and make your own coffee/tea.

Step 6: Don’t go near shops (such as malls) without a need, as this will assist eliminating unneeded purchases. Then, buy what you need and leave. Don’t hang around. An extension of this, is only to buy new clothes when they are actually needed. IE, your other clothes are worn out and beyond mending. And really, if you have half a dozen good shirts, do you really need another!

Step 7: Don’t eat out or buy takeaways. Cook you own food; it’s usually healthier and it’s cheaper. This is, if you don’t waste the food and throw it out, as do a high percentage of people. Learn and get in the habit of using all the food. Drink (tap) water with your meal, rather than juice, wine, etc. Grow some of your own food, to reduce the food bill further.

Step 8: In winter, close doors of rooms you are not using and don’t heat them. Turn off heaters when you go to bed and are not at home. In summer, use an electric fan rather than air-conditioning.

Step 9: Don’t buy fizzy drink, fruit juice and the like. Definitely don’t buy bottled water. Drink our good tap water. Include fruit as part of your diet. At present, free fruit can be picked in the wild.

Step 10: Consider other ways to get to work, besides driving. When purchasing a car (if you find it difficult to be without) get the most fuel efficient one you can. Smile sympathetically, as your neighbours, the Jones, drive up in a new large fuel consuming 4X4, that they will likely never take off road.

Step 11: Consider if you really need to renew subscriptions to magazines and the like.

Step 12: This is a ‘given’ of course. If you are one of the few who still smoke (less than 14% in the ACT, I believe). Give it up. It only makes you look like a loser anyway.

Just one more suggestion…Home Brew !

Maryann Mussared1:07 pm 10 Jan 17

This is an excellent article for the beginning of the year. Even if we choose not to make resolutions that are so easily broken, it is interesting to focus on managing our finances. I always say not having a credit card until I was in my mid 20s taught me some good habits – i.e. they didn’t exist other than Amex and Diners Club. Who remembers ‘hire purchase” or HP which is what you did to buy, by instalment, something you really wanted? Default and it was repossessed. I have Foxtel and it means we don’t go to the cinema very often. A night out at the cinema for two with drinks and perhaps a meal crashes through the $100 barrier every time. My great investment for 2016 was a Soda Stream. I did a ‘make-over’ on my kitchen (i.e. I did not strip out and start from scratch, but got new drawers, cupboards, benchtop and taps for 1/3 the cost of all new) and had a filter tap installed. Then I started looking at the amount of bottled water I was purchasing and did my sums – and started to feel guilty about the effect on the environment. Now I save hundreds of dollars each year by ‘fizzing’ my own water and I prefer it. I even took my Soda Stream on holidays recently!

Acorn require access to your bank account, which is off-putting. When they started up I asked them whether they were concerned at all with ethical investment and the answer was “no”, and with no plans to look at ethical investment in the future. So, via Acorn, you could be investing in asbestos products, smoking-related products, and fossil-fuel anything, unfortunately.

Grail said :

Step 1: cancel subscription services like FoxTel.

Step 2: allocate a fixed amount of money per pay that you are allowed to spend. Use a soreadsheet ir an app like Pennies to help you track your spending.

Step 3: each month, reduce your spending budget. Review previous months’ spending and pick one more expense to reduce or eliminate (do not buy coffee from the cafe, that will save at least a thousand dollars a year)

Step 4: expand your spend tracking and review to other budget areas.

Also: get a piggy bank. When you get home each day just put all your coins in the piggy bank. Bank the coins at the end of your year (financial year, birthday, Christmas, wedding anniversary, whatever)

You will probably save another $400/year this way.

+1

Allow me to add a few more suggestions.

Step 5: Pack lunch for work; rather than buy lunch, and as Grail suggested, don’t buy a coffee. Have a kettle at work and boil that and make your own coffee/tea.

Step 6: Don’t go near shops (such as malls) without a need, as this will assist eliminating unneeded purchases. Then, buy what you need and leave. Don’t hang around. An extension of this, is only to buy new clothes when they are actually needed. IE, your other clothes are worn out and beyond mending. And really, if you have half a dozen good shirts, do you really need another!

Step 7: Don’t eat out or buy takeaways. Cook you own food; it’s usually healthier and it’s cheaper. This is, if you don’t waste the food and throw it out, as do a high percentage of people. Learn and get in the habit of using all the food. Drink (tap) water with your meal, rather than juice, wine, etc. Grow some of your own food, to reduce the food bill further.

Step 8: In winter, close doors of rooms you are not using and don’t heat them. Turn off heaters when you go to bed and are not at home. In summer, use an electric fan rather than air-conditioning.

Step 9: Don’t buy fizzy drink, fruit juice and the like. Definitely don’t buy bottled water. Drink our good tap water. Include fruit as part of your diet. At present, free fruit can be picked in the wild.

Step 10: Consider other ways to get to work, besides driving. When purchasing a car (if you find it difficult to be without) get the most fuel efficient one you can. Smile sympathetically, as your neighbours, the Jones, drive up in a new large fuel consuming 4X4, that they will likely never take off road.

Step 11: Consider if you really need to renew subscriptions to magazines and the like.

Step 12: This is a ‘given’ of course. If you are one of the few who still smoke (less than 14% in the ACT, I believe). Give it up. It only makes you look like a loser anyway.

Step 1: cancel subscription services like FoxTel.

Step 2: allocate a fixed amount of money per pay that you are allowed to spend. Use a soreadsheet ir an app like Pennies to help you track your spending.

Step 3: each month, reduce your spending budget. Review previous months’ spending and pick one more expense to reduce or eliminate (do not buy coffee from the cafe, that will save at least a thousand dollars a year)

Step 4: expand your spend tracking and review to other budget areas.

Also: get a piggy bank. When you get home each day just put all your coins in the piggy bank. Bank the coins at the end of your year (financial year, birthday, Christmas, wedding anniversary, whatever)

You will probably save another $400/year this way.

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