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Today’s post is courtesy of my friend Light Beam AKA “Mike’s friend from Canberra”.
Light Beam works and resides in our nation’s capital and is employed in the public sector.
But what makes Light Beam different to most public servants is that he works for the government body which sets and implements our economic policy.
That’s right – Light Beam pulls the strings for the Treasury department.
Suffice to say that Light Beam is a pretty switched on kinda guy and someone who knows a thing or two about finance.
Inevitably our conversations end up talking about a financial topic or two whenever I get the chance to see him.
He’s a long time reader of this blog as well (thank you sir) and recently asked me to post regarding the top 3 financial “mistakes” we all make and the immediate fixes we can all implement.
So… Light Beam, here’s for you:
Not caring about personal finances
“Wassat? Personal finance? Is that to do with my credit card or something?” (MrsFrugalSamurai, circa 2011)
You see, personal finance is not the most “fun” thing to discuss or do. After all, when was the last time you shared a romantic dinner with your beloved staring dreamingly into a spreadsheet…
In some cultures – money and the perception of wealth is frowned upon. In Oz, our tall poppy syndrome means we view success, riches and wealth as subjects for ridicule and mockery.
Which is also part of the reason why the majority of us put off our financial compass until much, much later in life.
But you know, personal finance doesn’t have to mean a huge paradigm shift from zero to hero overnight.
Just Do It
The easiest and simplest way forward if you don’t have a clue at all – is to set your own budget. On a piece of paper, write down all the monies coming in (income) against all the monies going out (expenses). What’s left over is your “savings”.
If you don’t believe there is enough “savings” left over then it is because either a) income is not enough or b) expenses are too much.
Seems like what you have to do then is pretty clear…
Listening to the experts
“The secret ingredient to my secret ingredient noodle soup is… nothing!” (Talking animated goose, June 2008)
Whether it is attention grabbing headlines, media soundbites or the most boisterous voice at the family BBQ, experts in each and every topic are everywhere.
In today’s day and age, when information is so readily available – it’s so easy to outsource our decision-making to individuals who are perceived to be “in the know”. They back themselves with research, statistics and multi-syllable scientific sentences.
After all, why do the hard yards yourself when someone has done it for you? Saves both time and effort right?
The thing is – more often than not, “experts” hide behind the veil of broad generalizations and blanket statements encompassing both sides of the coin.
But broad brushstrokes and sweeping commentary is not relevant and applicable to YOU.
This is because your circumstances are different, your time-frames are different, your risk profile is different and what you want to achieve out of life is different.
Just Do It
So does that mean we shouldn’t listen to any experts?
No not at all, if you do everything yourself – then you’ll only be learning from the school of hard knocks, a time-consuming and painful (but most memorable) education.
Instead, seek out the real experts – the ones with decades of experience and success in their fields.
Learn how they achieved their success – but even then recognize that the strategies and environment in which they operated in may have changed significantly from today.
What you’ll find though – is that the true “experts” very rarely are the loudest voice in the crowd.
“Debits and Credits may break my bones but Cash will never hurt me” (Ancient Accounting proverb, circa unknown)
Ah yes! The buy now, pay later mentality of instant gratification is one we should be wary of.
The proliferation of credit to the retail masses is one of the most significant and permanent shifts to the economic landscape in modern times.
And it’s not just credit cards we’re talking about.
Personal loans, lay-by schemes, even our weekly gym fees – all start with small upfront costs but have long interest tails.
Most of us have paid interest at some point in our lives.
Some of us have paid interest on that interest.
And a few of us have let that get out of hand.
However there are those of us who have used credit to create significant wealth.
This is because they understand the concept of leverage (that is, using other people’s money to make your own).
Although leverage magnifies gains (and losses), when understood and used correctly – it can put a rocket up your finances.
Just Do It
When it comes to personal finance, understand the difference between good credit (the type of lending which is tax deductible, can help with your financial goals and assist with acquiring income-producing assets) and bad credit (all the other shit).
Recognize that “leverage” and “loans” and “interest” aren’t necessarily evil words – you just need to know how to use them correctly.
Maybe you’ll think twice next time before pulling out that plastic!
Ahh Light Beam, gone are the days when we could just reminiscence over a beer or three over the latest footy scores eh? Now, seems like everything is “abyss this” and “luckbox that”. Times have surely changed as we grow older!
But the good news with these 3 common mistakes in that there are pretty easy and immediate fixes for each one, now it’s over to you to get them done!
So until next time, Mbyebye!
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