If you want to be a winner in the financial game, then these fourteen tips will help!
According to a recent survey for "How to" website VideoJug, the skill that Britons would most like to acquire is how to make money.
As someone who spent the first three decades of his life throwing money away hand over fist, this news comes as no surprise to me. It's only in the last seven years or so that I've actually made a concerted effort to increase my wealth and, so far, it seems to be working. Here are some of the lessons that I've learnt along the way (in alphabetical order):
Aim high
"Make no small plans for they have no power to stir the soul." (Niccolo Machiavelli)
When you set yourself targets, be sure to make them as demanding as possible, because you need to stretch yourself if you want to grab a decent prize. For example, my target is to invest half of my take-home pay each year, while living on the other half. To be honest, I fail to meet this target most months, yet it still pushes me to salt away as much of my disposable income as I can, which is my underlying goal.
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Beware of experts
"An expert is a man who has made all the mistakes which can be made in a very narrow field." (Niels Bohr)
Whenever I'm interviewed on radio or television, producers are keen to refer to me as a "personal finance expert". As I hate that word and am embarrassed to be referred to in this way, I always insist that they call me what I am: a personal finance writer.
Although I may be an authority on certain specialist subjects (for example, the dreaded payment protection insurance), I'm by no means an expert in every field of money management. For example, I've called house prices wrongly over the past two years, because I expected the housing market to cool as prices reached record highs. So, don't automatically place your faith in "experts" ("ex" as in has-been, and "spurt" as in a drip under pressure!), because the only person you can truly rely on is yourself!
Don't fear change
"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." (Charles Darwin)
If your finances are going to survive and thrive, you have to be prepared to adapt to meet the ever-changing challenges of life. For example, your financial needs at sixty will be very different to those at age twenty, so you need to be flexible enough to face the future with confidence. Then again, although the world is constantly evolving, some things never change. For example, spending less than you earn is always a good idea, as is stashing money away in a rainy-day fund.
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Have a little knowledge
"An average person with average talents and ambition and average education, can outstrip the most brilliant genius in our society, if that person has clear, focused goals." (Mary Kay Ash)
You don't need to have an IQ of 150 or a pile of academic qualifications to be a financial success. As our American cousins say: "If you're so smart, why aren't you rich?"
I know umpteen graduates who have made a mess of their personal finances; equally, I've met many people of modest means who are fantastic at managing their money. Good money-management isn't rocket science, but mastering it does require a little know-how. In Your Guide To Easy Money, I set out the basic principles which I use to manage and grow my wealth.
Learn from your mistakes
"A person who never made a mistake never tried anything new." (Albert Einstein)
No matter how well thought-out your plans are, something is sure to come along and upset them at some point. Even worse, if you don't have a plan, you don't have a hope of succeeding. In my dafter days, I made more financial foul-ups than most, as I explained in My Biggest Financial Disasters. These days, I hope that I've learnt from my previous mistakes -- but I still exercise caution, because I can always lose money in new and different ways!
Plan ahead
"If you aim at nothing, you'll hit it every time." (Anon)
If you fail to plan, then you plan to fail. Hence, it's a good idea to sit down and actually figure out what you want your money to do for you. My first financial plan, way back in 1998, was simple: to rid myself of the £50,000 debt that I'd run up over the previous decade. Once I'd succeeded, I created another plan to build up a decent sum in savings, then yet another plan, and so on.
Naturally, your needs and personal circumstances will change over time, so don't be afraid to chop and change your plan to suit your situation. But remember: no plan = no hope!
Practise self-denial
"Man is rich in proportion to the number of things he can afford to do without." (Henry David Thoreau)
One of the best ways to boost your bank balance is not to earn more (because you'll pay even more tax, National Insurance and so on), but to spend less. The core competency for money management is a decent grasp of budgeting, which is the foundation of good financial planning. In How I Lived On 10p A Day, I explained how 'extreme budgeting' helps me to keep my finances on the straight and narrow; these ten tips will also help.
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Prepare for the unexpected
"I'm a great believer in luck, and I find the harder I work, the more I have of it." (Thomas Jefferson)
When the brown stuff hits the fan, as it inevitably does, you need something to fall back on, whether it's a cash cushion or some form of insurance. In How To Master Disaster, I set out ten ways to protect yourself, your family and your assets against the twists and turns of fortune. Without a few of these everyday shields to protect you, your finances are naked and exposed!
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Read and learn
"You live and learn. At any rate, you live." (Douglas Adams)
If you want to be 'good with money', it's worth taking some time to read up on the subject. At the very least, you'll learn some new tricks which should help you to hang onto more of your dough. Two of my favourite financial books are The Money Diet by Martin Lewis, which is the best money-saving book ever written, and Smarter Investing by Tim Hale, which is the most thought-provoking and Foolish book that I've had the pleasure of reading.
Set aside some time
"Always bear in mind that your own resolution to succeed is more important than any other one thing." (Abraham Lincoln)
Many of us spend just a couple of minutes a month studying our finances, if any time at all. Frankly, that's not enough time to deal with such an important aspect of modern life. Time spent managing your finances is rarely wasted -- and often proves very rewarding. For example, spending twenty minutes finding a cheaper mortgage could save you £1,000 a year, which is a serious fat-cat wage!
Start small
"If you wish to reach the highest, begin at the lowest." (Publilius Syrus)
As with most people's ambitions, mine started small and then grew as my wealth grew. When I dug myself out of debt back in the late Nineties, my financial ambition was very limited. My first goal was fairly modest by most people's standards: to save up £3,000 in a tax-free savings account known as a cash mini-ISA. Having reached this rung on the ladder, I then set myself another goal, then another, etc. So, start small, but have lofty goals!
Tame your impatience
"The key to everything is patience. You get the chicken by hatching the egg, not by smashing it." (Arnold H Glasgow)
The investor's greatest weapons are patience and time -- I often remark that "The stock market saves its greatest rewards for its most patient investors". Indeed, given enough time, anyone can become well off, as I explained in Make Yourself A Millionaire. However, if you have all the necessary money-management skills yet fail to invest, then you've missed the biggest trick of all.
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Understand the power of self-control
"Self-control is true power" (Marco Pierre White)
To have more money tomorrow, you need to spend less money today. Given that we Brits have become addicted to debt in recent years, this is no mean feat. However, resisting the temptation to spend (or to tinker unnecessarily with your finances) -- although difficult -- is ultimately very rewarding. Building a brighter future means curbing some of your worst instincts and adopting some good habits today.
Write down your ambitions and desires
"If you can't measure it, you can't manage it." (Business saying)
Lastly, I'd urge you to put down your plans, hopes and dreams on paper, where you can see them and they can act as a constant reminder of your life goals. Some life coaches swear by these 'affirmations' and ascribe mystical powers to them, claiming that you can bend the universe to your will simply by repeating these affirmations regularly. I'm highly sceptical of such claims, but the fact remains that writing down your goals provides you with a great map towards your objectives.
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