Mastering Money The S.M.A.R.T Way Without Working Any Harder Lesson #4

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Welcome To The Course, Mastering Money The S.M.A.R.T Way Without Working Any Harder!

 

Lesson #4

 

HOW TO ACCUMULATE WEALTH OVER TIME

 

In this module, we are going to cover saving, investing, and accumulating wealth.

 

If you cannot save money, the seeds of greatness are not in you.

W. Clement Stone

 

Get into the habit of saving until you get more satisfaction from rationally putting money aside than you do from irrationally spending it.

 

The events of the last year has exposed the fact that millions of people have no savings. After years of working in first-world prosperous countries they are broke, and dependent on benefits and foodbanks.

 

We all need savings to fall back on and to enable us to stop working or at least stop exchanging our time for money. If you have no form of passive income, you can never stop working.

 

In simple terms, savings can be categorised into three general areas:

 

1.      Short term

2.      Medium Term

3.      Long term

 

Short term savings can be for a contingency fund for emergencies, holidays or to buy something you need.

 

Medium term savings can be for larger items, like a deposit for a house, an investment into a business or a car.

 

Longer term saving is generally for retirement but can also include children’s college education.

 

Pay yourself first

 

A basic principle is to pay yourself first before you pay everyone else.

 

Think of saving as paying yourself rather than depriving yourself of candy when your pocket money was taken away from you by your parents.

 

Savers automatically transfer a percentage of their income into some form of savings vehicle as soon as they receive it and live on the rest.

 

Spenders spend and live on their salary and save whatever is left over, if any.

 

Who do you think saves the most money?

 

Money Master savers also maximise their tax-free allowances into things like tax-efficient pensions and schemes to make sure their money is working hard for them and they are paying less tax.

 

The poor work hard for their money, the rich make their money work hard for them.

Robert Kiyosaki

 

An easy way to save is to use the ‘jam jar’ method that your grandparents used when money was tight, everything was paid in cash and people didn’t use banks as they do today.

 

When the weekly wage came into the household it was divided up, usually by the women, and put into various empty jam jars to cover the rent, fuel, food and replacement items like children’s shoes. People also saved for birthdays and Christmas.

 

You can use this method by dividing your monthly salary into virtual ‘jam jar’ separate bank accounts rather than one account.

 

You can name the accounts whatever you like, but I would suggest something along the following lines:

 

·        Emergency or contingency fund

·        Medium term savings

·        Long term savings

·        Play account – fun things for yourself including trips, meals out and clothes

·        Giving account – for charity donations.

 

You could also add a training and development account to be invested in yourself in the form of books and courses.

 

The percentages will vary according to your means.

 

But the important point here is to get started, even if you can only save 10% of your income. Start this process online right now. Many of the newer “challenger” banks operate entirely online and can set up an account within minutes.

 

If you’re thinking that you cannot possibly save 10% of your income, look at your income and expenditure sheet. If you haven’t done one yet check your bank and credit card statements to see where your money goes.

 

If your budget is so tight and you have economised everywhere and still have absolutely nothing leftover, you may have to consider ways of increasing your income by getting another job or starting a home-based business in your spare time.

 

I have helped people transform their wealth through my book and coaching programme. 

 

Mark Victor Hansen, co-author of the Chicken Soup For The Soul book series which has sold 500 million copies all other the world, teaches a ‘10,10,10,70’ wealth formula in his book, The One Minute Millionaire.

 

The multi-millionaire entrepreneur advises that you divide your income in the following way:

 

·        10% Giving

·        10% Investing – for the long-term needs

·        10% Saving – for short to medium-term needs

·        70% to live on.

 

Pensions

 

Start saving for your pension as early as you can and save as much as you can.

 

As a rough guide, every 5 years of delaying a pension savings plan means your eventual fund will halve in value. In other words, every 5 years you wait, means you will need to pay in twice as much to get the same result. 

 

When we are young, we think we have all the time in the world. But you may not have as much time as you think.

 

For instance, if you are aged 30 now, you have roughly 30 years of working life ahead of you if you plan to retire at 60. Thirty years sounds like an awfully long time, however, if you break it down into pay or salary cheques, 30 years is just 360 salary payments - 12 per year times 30 years assuming full employment.

 

At 40, you have just 240 salary payments left, and at 50, just 120, assuming you manage to stay in work and in good health.

 

Even a full working life of 40 years is only 480 pay cheques. If you save $100 per month for 40 years, it will give you a fund of $48,000 plus growth, less charges. You couldn’t live on that for the rest of your life today, let alone in 40 years’ time. Even $1000 per month would still only be $500,000 plus growth.

 

You can still combine pensions with other forms of investing, such as property, stock market and business, and even use your pension scheme to buy shares and commercial property, subject to the rules. This is a specialist subject, and you should take independent professional advice.

 

Before you jump into something like property, remember that buy-to-let investing does not suit everyone and is certainly not a passive form of investment. Buying property requires knowledge and expertise, as well as a diligent work. 

 

Take independent financial advice on this important area of your life. Don’t leave it to chance and risk living in poverty in your old age. If your employer provides a good pension scheme, that’s great, if not, or you are one of the millions of self-employed or casual workers, you’re on your own and will have to “row your own boat” to retirement.

 

Don’t rely on the government Pension ‘Ponzi’ scheme to look after you in retirement

 

Most government state retirement pension schemes have no actual fund.

 

Benefits are paid to retirees out of tax collected by working people. If I ran a pension scheme using the ‘Bernie Madoff method’ – keep collecting money and use that to pay investors – I’d be put in jail!

 

The UK Institute for Fiscal Studies (IFS) research found that in 2004, there were approximately 4 working age individuals (aged 20-64) for every 1 person aged 65 and over.

 

By 2056 this ratio is predicted to fall to about 2:1 or half the current level.

 

How can the government afford to fund state pensions at the same level if the income from working taxpayers drops by 50%?

 

The UK government has already started pushing back retirement ages for men and women and more cuts will be needed.  

 

People are also living far longer in retirement than they did to when the state pensions schemes were introduced after the Second World War. The numbers no longer add up, if they ever did!

 

These schemes are bust!

 

Summary Day 4

 

Saving is a habit. If you cannot save money you will struggle with money and debt for the rest of your life and will never be able to afford to retire comfortably.

 

Action Steps

 

·        Pay yourself first.

·        Set up an automatic transfer of a percentage of your income into ‘jam jar’ accounts the day your salary hits your account.

·        Save for retirement as soon as possible.

·        See an adviser or research pensions.

·        Always learn and do your own research before investing in any asset.

 

Congratulations on completing this module. In the next lesson, we will be looking at reviewing your finances to keep you on track.

 

If you would like to learn more about investing and managing your money, become a professional property investor, or would like to be financially free without working any harder, watch this free on demand training.

 

I will give a special free gift which can help you to immediately transform your finances when you attend the online training.

Click on this link to watch the free training now https://bit.ly/3wLWqx2

Mastering Money The S.M.A.R.T Way Lesson #3

Exclusive free training for my Money Tips Podcast followers!

 

Welcome To The Course, Mastering Money The S.M.A.R.T Way Without Working Any Harder! Lesson #3

 

MANAGE AND RESPECT YOUR MONEY

 

By the end of this module, you will learn how to manage and respect your money and make informed investment decisions to become a SMART MONEY MANAGER.

You can’t manage your finances without the right financial information.

Managing money, like managing your household, must be worked on throughout your life like exercise or washing. You cannot expect to stay in shape if you only exercise once a year!

What does managing your money mean?

Managing could be defined as control, influence or taking charge. An example of managing finances well is having enough put aside to be able to pay your bills despite a job loss.

 

Question

 

If you lost your job, for how long could you manage and pay your bills?

 

During a financial crisis or recession, millions of people lose their homes within months of being made redundant.

 

They have no savings. Instead, they have rent or mortgage payments, credit cards, car lease payments and loans. In short, most people live on a knife edge and are no more than three salary payments from bankruptcy.

 

Rainy-day money

 

You must have an emergency contingency fund so that you are not dependant on credit cards or instant payday loans when the car or washing machine breaks down.

 

Some well-known payday lenders charge as much as 91% APR (annualised percentage rate) for small unsecured loans, according to Payday UK’s website.

 

Borrowers do not realise they are paying an annualised 91% because they are paying off the loan in less than a year.

 

Payday UK quotes the following example:

 

“Representative Example: Borrow £500 for 6 months. Interest: £160.27 - Interest rate: 65% per annum (fixed). Representative APR: 91% - Total amount payable: £660.27. Rates between 9.3% APR and 1294% APR”.

 

Even high street banks are charging as much as 40% for a temporary overdraught – 400 times the base rate!

 

UK base interest rates are 0.1%, the lowest it has ever been in history.

 

If a lender is charging you 3% on your mortgage, that is 40 x the 0.1% the base lending rate on which they can borrow money from the markets and us depositors. I have never seen such a high margin.

 

Mortgages used to cost around 2% over base lending rates, so when the base rate was say 8%, you would typically pay 10% on a mortgage – or a margin of 1.25 over base lending rates.

 

Solution.

 

Make sure you have a contingency fund for emergencies, so you don’t have to rely on loan sharks.

 

If you do need credit, search for cheaper alternatives online or try credit unions.

 

You should have reserves equivalent to 6 to 12 months’ salary in the bank in case you lose your job or source of income. Large companies, government and local authorities hold millions of reserves. They also have a ‘disaster recovery’ plan in place.

 

You cannot possibly manage or control your finances without data, which means knowing exactly how much money is coming in and going out.

 

Managers cannot manage a company without accurate management information and your household is no different.

 

Think of yourself as a business or corporation even if you work for somebody.

 

You are the CEO of your own business.

 

Hold monthly, quarterly and annual board meetings with your family, even you’re the only director!

 

Set up a system to keep a track of your revenue and costs.

 

What does “respecting” money mean?

 

Respect money and it will respect you. The author and speaker Joe Vitale, who was featured in the movie The Secret, advises that “money has its own psychology” and “energy”, which you can either attract or block depending on your mindset.

 

Energy does not die; it moves around and changes form. Similarly, money circulates and helps multiple people and causes.

 

Think about it. Let's say you give $10 to a friend to pay his cleaner. His cleaner then uses the same $10 to pay for shoe repairs, the repair guy takes the same $10 to buy lunch and coffee at Starbucks.  Starbucks bank the cash. Your friend goes into the bank to draw cash out to repay you and gets the same $10 note and gives it back to you. How many things has that same $10 bought?

 

Right now there are trillions of dollars in circulation.

 

Author Brian Tracy gave me a simple idea at one of his seminars in America. The great speaker said: “You should respect money and even look after the cash in your wallet or purse by placing each dollar bill neatly and in order of value, with the President’s head facing the right way”. This might sound silly, but Brian went on to say that whenever he met someone who had money issues, their money would be stuffed into their pocket or purse like crumpled pieces of worthless paper. It was a metaphor for the way they treated money, and ultimately the way money treated them.

 

Respecting money is like respecting others, treating it well, nurturing it, looking after it and always taking care of it.

 

I had a school friend, Malcolm, from a well-off family who would casually throw away penny coins from his pocket saying they were “dirty” and “worthless”.

 

His lack of respect for money led to Malcolm being broke and living week-to-week for the rest of his life - even when he was earning well.

 

I had a habit of picking up “dirty” coins, which I retain to this day. The late Wayne Dyer also picked up coins and gave thanks for the blessing of money before putting them in a big jar.   

 

Look after your money and it will look after you.

 

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Education is key.

 

Lack of financial education can be extremely costly of your lifetime.

 

For instance, not understanding how high management charges on mutual funds or pension schemes can affect the value of your portfolio – which could cost you hundreds of thousands.  

 

Buying a house is probably the biggest financial transaction most people make in their lives, yet few people understand mortgages. They borrow hundreds of thousands and sign on the dotted line without reading the terms and conditions.

 

I have met extremely intelligent academics, scientists and directors running huge companies who did not know how to manage their personal finances and in some case made costly financial errors or retired broke.

 

Finance is not taught in schools, which is why we graduate from formal education financially ignorant. We rely on financial advisers to tell us what to do, but where do the advisers get their financial education? The answer is, from financial industry led courses. Anybody can take these financial adviser courses!

 

Take a financial adviser course.

 

You can take a basic financial adviser course without becoming an adviser. The knowledge I gained from the courses to become a regulated adviser have been invaluable to me throughout my life.

 

The courses taught me about saving and investing, but more importantly, borrowing money and using the infinite benefits of leveraging 'other people's money'.  

 

This knowledge has literally been worth millions to me over the years.

 

A short home-study financial course could be worth more in money terms than a university degree.

 

Never stop learning.

 

The world of finance is constantly changing and evolving. Keep yourself up-to-date by reading the financial pages of quality newspapers and magazines online or use your local library. It only takes a few minutes each day to scan the financial news, or an hour at the weekend to read the money pages, but this small investment will pay exponential dividends and perpetual returns for the rest of your life.

 

Summary Day 3

 

Managing and respecting money, and learning about the world of finance, is a lifelong process like looking after your health.

 

Action Steps

 

·        Think about how you manage your money.

·        Start recording your monthly income and expenditure.

·        Calculate how long you can survive if your income dried up.

·        Start saving for emergencies and have a disaster recovery plan.

·        Start building up a fund to cover 6–12 months of essential expenditure.

·        Organise and respect your money.

·        Educate yourself in all aspects of personal finance.

·        Take a course or read books.

·        Read the financial news.

·        Never stop learning and updating your knowledge.

 

Thank you for listening and congratulations on completing this module. In the next module, we will be looking at how to accumulate money over time.

 

If you would like to learn how to invest and manage your money, become a professional property investor, and be financially free without working any harder and spending your life exchanging your time for money watch this free on demand training now to learn how to become financially free without working any harder.

 

As a thank you, I will give a special free gift which can help transform your finances when you attend the online training.

Click on this link to watch the free training now https://bit.ly/3wLWqx2

Mastering Money The S.M.A.R.T Way Lesson 2

Exclusive free training for my Money Tips Podcast followers!

 

Welcome To The Course, Mastering Money The S.M.A.R.T Way Without Working Any Harder!

 

Lesson #2

 

SPEND WISELY AND AVOID EXPENSIVE CONSUMER DEBT

 

In this module, we are going to learn how to spend wisely and avoid consumer debt.

 

Earn more than you spend.

 

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery”.

Charles Dickens, David Copperfield

 

Spending wisely means living within your budget, buying the things you really need and not indiscriminately shopping for things you want.

 

For instance, you need basic necessities such as food, utilities and a roof over your head, but do you really need Netflix?

 

Consumer debt

 

“Borrowing money at 18% to buy consumer goods is dumb”

Warren Buffett

 

The legendary investor Warren Buffett, whose Berkshire Hathaway company owns banks and credit card companies, actually warned investors against carrying a credit card balance!

 

Millions of Brits and Americans carry a permanent balance on their credit card – before the covid crisis, 110 million American had credit card debt paying a crippling average rate of 16%.

 

“You can’t go through life borrowing money at those rates and be better off,” Buffett added.

 

Buffett said that an old friend of his who came into some money and asked his advice on what to do with it. He asked if she had credit card debt. She said she did, and was paying an interest rate of about 18%.

 

“If I owed any money at 18%, the first thing I’d do with any money I had would be to pay it off,” Buffett advised her.

 

By paying off the balance, she would save more money on interest than any return she could earn by investing the money, whether in the stock market or in real estate or elsewhere, Buffett advised. He added, “I don’t know how to make 18%”.

 

If one of the greatest investors of all time admits that he cannot make more than the rate charged on a credit card, what makes you think you can?

 

You should still keep some money aside for a rainy day, but pay down expensive debt rather than keep cash in the bank earning less than 1% and don’t buy stuff which go down in value using credits cards.

 

How much are you paying each month on your credit card bill?

 

Chances are, you are paying the minimum amount required.

 

Paying the ‘minimum payment’ on your card balance will take between 10 and 20 years to clear the debt depending on the interest rate charged?

 

This practice is highly profitable for the card companies and extremely costly for consumers. UK card companies are now required to warn customers about the cost of paying off the minimum amount required.

 

Check your credit card statement now. If you are just paying the minimum ‘default’ figure, increase this immediately to a higher amount you can afford, or clear the entire balance.

 

Questions to consider

 

How much interest are you paying on your credit cards?

 

How do you use your credit cards?

 

How much do you pay off each month?

 

Would you still buy that gadget or item of clothing if you had to pay for it in cash or straight out of your bank account?

 

Albert Einstein said ‘compound interest is one of the most powerful forces on earth’.

 

Using compound interest to your advantage in saving and investing, will make you rich. Used against you by borrowing, it will make you poor and someone else rich.

 

At an annual interest rate of 18%, how long would it take for the investment or debt to double?

 

The Rule of 72.

 

The Rule of 72 is a simple way to determine approximately how long an investment will take to double given a fixed annual rate of interest. By simply dividing 72 by the annual rate of return, you can obtain a rough estimate of how many years it will take for the initial investment to double.

 

72/18 = 4

 

In other words, a sum of money invested at 18% pa will double approximately every four years.

 

Similarly, a debt with interest rolled up will double in four years.

 

You can see how powerful compound interest is when applied to debt. The average UK mortgage holder will pay over half a million pounds in interest over their lifetime.

 

Summary Lesson 2

 

The first step to becoming a SMART MONEY MANAGER is to spend wisely and avoid expensive consumer debt. By taking this step alone you will see a dramatic improvement in your financial and emotional wellbeing.

 

It’s not about how much you earn, but how you manage your money that counts.

 

You could earn more money by getting a pay rise, but unless you change your money habits, you’ll soon be back where you started.

 

Action Steps

 

Think about how you spend your money.

 

Start making a list of all your income and expenditure using your bank and credit card statements including all the standing orders and direct debits. You can use a notebook, spreadsheet or a smartphone app to keep your record.

 

Your list of expenditure will fall into two categories – Fixed and Variable.

 

Fixed costs, which can include:

 

·        Rent or mortgage

·        Food shopping

·        Utilities and energy

·        Regular bills

·        Club membership and subscription payments

 

Variable expenditure, which can include:

 

·        Clothing, coffees, drinks and treats

·        Meals out and takeaways

·        Repairs

·        Any other stuff you indiscriminately buy on a whim or because it’s ‘on sale’.

 

Simple money saving tips you can use right now.

 

If you are running short every month, think about where you can make savings.

 

There are so many ways of making savings from switching utility providers to finding a better loan or mortgage deal. Switching mortgage deals has saved me tens of thousands of pounds.

 

Here are a few simple money saving tips:

 

Cook your meals and cut back on eating out at restaurants and buying takeaways. Prepare proper meals using fresh ingredients instead of buying more expensive, and less healthy, ready microwavable meals?

 

Drink less alcohol. How often do you go to the pub of bars and how much do you spend on a night out?

 

Buy less coffees and make your own. How many visits to Starbucks do you make each week? You can make fresh coffee for a fraction of the price of Starbucks.

 

Save a fortune on credit card interest. You can save by switching to a lower rate or interest free deal which can help you increase your payment towards reducing the balance. Just Google ‘best credit card deals’ and you’ll find hundreds of offers which can save you money.

 

Use cards only when necessary and try to clear the balance in full each month to avoid interest charges.

 

Review insurance every year. Insurance companies make it easy to auto-renew your household and motor insurance every. Making the effort to shop around could save you hundreds of pounds.

 

Review your mobile phone contract and utility providers. Reviewing your phone contract or plan is a great way of saving cash and you don’t have to change providers. Call your provider today.

 

Your expenditure list will immediately help you identify any obvious targets for cutting back, like that subscription you no longer need or the recurring payment you’d completely forgotten about – we’ve all been there.

 

I cover many more money saving ideas in my free Money Tips Podcast.

 

I’m not saying you should give up having fun and live a reclusive life living like a miser. You can enjoy life more if you live debt free within your budget, save for the things you really want and increase your income when you want more.

 

You don’t have to follow the “I want it now” crowd!

 

Thank you for listening and congratulations on completing this module. In the next module, we will cover further steps on managing and respecting your money.

 

Would you like to learn how to become financially free without working any harder and spending your life exchanging your time for money watch this free on demand training now to learn how to become financially free without working any harder.

As a thank you, I will give a special free gift which can help transform your finances when you attend the online training.

If you enjoyed this and found it helpful, please like and share with your friends and follow me on social media to give more people free value. 

Click on this link to watch the free training now https://bit.ly/3wLWqx2