One thing that’s amazed me since starting this blog was the breadth of knowledge of the money blogging community, so, rather than keep all these new insights to myself, I thought I’d ask them to share their top financial tip with you.
A key feature of many posts is about financial education and what people wish they knew earlier. Many want to stop others making the same mistakes they did and pass on the knowledge they have learnt to others. Lots of these tips are really straight forward and easy to follow, but could significantly improve your financial affairs.
I have asked fellow bloggers to share the top financial tip they wish they knew earlier in the hopes you can benefit from their wisdom.
Last month I published the first post in the series, which proved very popular. I hope this post will be equally informative and interesting for you and will give you some new insights.
Here are this month’s top insights:
Beware of consumer culture
Just like most people, I got caught up in a consumer mindset when I was in my teens and early twenties. TV shows and movies made me crave branded clothes, expensive accessories and luxurious nights out. Luckily, I never went into credit card debt or bought more than I could afford, but I wasted a lot of money on things I didn’t need.
When I found the Financial Independence community, my biggest revelation was how misleading our consumer culture is. I learned about hedonistic adaptation and how quickly the novelty of a new purchase wears off, leaving us craving the next high.
As my self-employed income continued to grow, I found myself spending less and less and investing the rest, setting myself up for a lifetime of financial freedom. Once I’d internalised the lesson that ‘more’ is not necessarily ‘better’, I became much more content with the life I already had. My happiness levels have soared with this new knowledge – and, as a bonus, I am spending around £700 less per month!
Invest as soon as possible
My top financial tip I wish I knew earlier was to invest as soon as I could.
There is a whole industry out there designed to make investing on your own seem complicated and confusing. This is how I felt for years. And it paralyzed me from taking action. So I saved my money in a traditional savings account earning barely anything for interest.
In reality, investing in the stock market can be as simple or as complex as you make it out to be.
You can invest in simple broad-based index funds or ETF’s. Or you can learn the complex world of shorts and puts. It’s really up to you.
The earlier you invest, the more time your money has to grow. This is the number one reason why I wish I would have started investing earlier.
The more time your money has to grow, the less of your own money you need to invest in order to reach your financial goals.
Have multiple income streams
A financial tip I wish I knew earlier would be to have multiple sources of income. The coronavirus has taught me that no matter how secure you think something is, it can come and go within days. That applies to jobs more than anything. I was left unemployed and having to make my own money.
Having multiple sources of income means that even without a pandemic, you’ll have a bit of extra cash coming in each month. It gives you a little more freedom, and you can earn it doing something you love.
Whether you’re selling bits and bobs on eBay, doing online surveys or making thousands on eBook and Etsy, having another source of income is so important. You don’t need to be making a full-time income off of it, but knowing you can make money elsewhere is crucial and something everyone should do”
Invest in appreciating assets in order to fund your depreciating assets
When I was growing up, I wanted to have nice things. I was taught from childhood that working hard in school would get me a good paying job, which would provide the means to obtain those nice things. Having a good worth ethic was instilled in me.
However, I learned that the luxury items that I purchased with hard-earned money were depreciating assets (things that lose monetary value over time).
While there is nothing wrong with buying these items if they bring you joy, they will most likely not help you to achieve financial goals like appreciating assets (things that gain monetary value over time such as stocks, bonds, and real estate, etc.) will. After purchasing the items, I was back to square one.
When I joined the financial independence community, I learned something that I wish I had known many years earlier. Using your earned income to purchase appreciating and cash-producing assets will allow you to fund purchases of things that you value in the future, without sacrificing your finances.
This simple change in mindset has helped me to speed up but also enjoy my journey to financial independence that much more!
Learn as much as you can
One of the best things about being alive today is the absolute abundance of free information available. With just a few clicks on a keyboard you can take a course at an Ivy league school, get a recipe from a Michelin star chef, or Invest your savings into a seemingly endless array of choices. The question though is which one?
Back in the 1980’s when I started my investing journey, there were just a handful of resources available to learn about money. Money magazine, Kiplingers and the Wall street journal were about all I could get my hands on. And yet, even with fewer choices it still felt like an overwhelming task to choose a good investment.
For many years I unsuccessfully put money into individual stocks and mutual funds. It wasn’t until the 2000’s that I found the advice I had been looking for. I wanted a simple, low cost investment that would provide solid returns. The answer was Index Funds.
Since focusing on Index funds I’ve seen steady growth, but the biggest benefits have been non-financial. I have confidence in my plan and my future. I don’t spend any time stressing out over it, and I can now focus on more important things.
Stuff doesn’t make you happy
The financial tip I wish I knew earlier is you can live with less and be happy.
We spend our lives chasing the next thing that will make us happy. A bigger house. A nicer car. More clothes, shoes or whatever your obsession is. When we get it, we just want more.
Over the years, I wasted money on things I didn’t need: clothes, shoes, makeup, household gadgets. These days I’m decluttering and wishing I had never bought some of those things. The truth is – accumulating stuff is not the path to happiness.
For the last couple of years, I have been on a waste-reduction journey. An important part of reducing waste is buying less. Taking a more mindful approach to spending, I ask myself a few questions before buying anything:
• Do I really need this?
• What will I use it for?
• How often will I use it?
• Do I already have something that will do this job?
If I can’t give the right answer to these questions, I don’t buy it.
I’m spending less and saving more. Who knows? If I had started this years ago, I might be retired by now!
If you found this post interesting, please like it and share across social media or send it to your friends. I’d also love to hear your thoughts and experiences, so please leave a comment! What’s the top financial tip you wish you knew earlier? Also, please get in touch if you’d like to be included in a future post. I’d love to hear from as many different points of view as possible!