One of the great things about starting the journey of property investing is that you don’t necessarily need to be on an enormous pay packet to do it. Many people assume that to invest in property you need to have a lot of money to start off with. I’m sure that many of us know of people who are making big bucks in their jobs but are still struggling come the end of the month to pay the bills and are sometimes heard saying ‘If only I had more money/got a pay rise/won the lotto’ etc… One of the key things to realise when considering investing is that it’s not how much money you have it’s how you manage the money that you do have that matters. Look at the examples that we hear about of people that do win the lotto. There are numerous unfortunate stories of people winning millions of dollars but just a few short years later they have gone through the lot and have nothing to show for it. Just simply having money doesn’t equal knowing what to do with it. Learning how to manage money (and not just in relation to property investing) is one of the key skills that I’d suggest is essential before embarking on any property investments.
For a lot of people talking about money is simply not something that is done. It could be for many reasons be it cultural, historical or just something ‘not done in our household’. For some people discussing money might be seen as rude or obnoxious (and I’m sure in some cases it is) but think about the reasons why it’s worth discussing. I’ve read comments by several authors on personal finance regarding the lack of money management that is taught in schools. Maths, science and english are staples in many a school curriculum but what about finances, budgeting and investment? For many adults we need to either choose to learn about these things or (as unfortunately many people do) cross our fingers and hope that the lotto win comes though. Whilst I still get the occasional lotto ticket I’m not relying on the one in several million odds to get me to where I want to be. The choice to learn about managing your own money should be a simple one (and I hope for you it is) but unfortunately for a lot of people it still falls into the too-hard basket. If you’re still reading, let’s assume that it is something that you are keen to learn more about. Remember, there is a big difference between someone talking (and learning) about how to manage money in order to do it well versus someone simply talking about how much money they have!
Whilst the title of this post is about becoming ‘intimate’ with money, what I mean by that is that it’s important to know as much as you can about your own finances and to learn to manage them rather than sit back and hope for the best. This isn’t about learning how to become a millionaire, it’s about knowing what you have, what you are doing with it and how you can start to make it work for you…hopefully the millionaire part comes later! For many people this step can be challenging, particularly if money is not something that you are used to discussing or learning about. For some, simply getting over the mental hurdle of ‘but I don’t earn enough to have to worry about it’ is the first step. My thought is that whether you’re a 10 year old putting pocket money in a piggy bank or an executive on a 6 figure salary you can always learn something new when it comes to managing your money. It’s also an ongoing process that you need to commit to as the way you manage your finances changes as you go through life. One thing that I’ve found (and I can feel eyebrows being raised in skepticism now) is that as you get better at it you will start to see the benefits of managing your money and it can change from what may have felt like a chore into something that can be enjoyable…you’ll have to trust me on that.
I have learnt a lot about managing money over many years but I’m the first to say that I still have plenty to learn. Let me finish this post with a few of the most important financial management lessons that I learnt that have really stood out to me.
- Start learning to save. This seems like a simple lesson to learn but it’s one of the hardest to start putting into practice. Whatever pay packet you receive there is always scope to start saving but in a world where we all want the newest things yesterday holding onto that money can be difficult. This link to the Moneysmart website will provide some useful tips as well as a nifty savings goal calculator.
- The difference between good and bad debt. This is an important lesson when it comes to investing in property as debt is a key part of it. The difference between the two is significant though. Basically, one is debt for an asset that goes up in value and one is dept for an asset that loses value. Think a house vs. a new car. See what Oprah has to say about it here, although I don’t think she needs to worry too much about money…
- Beware of credit cards. We all have one (or several) and they are a part of life but its amazing how credit card debt can have a huge influence on an individua’ls personal finance. Learning to live and manage credit cards is crucial for everyone with some plastic in their wallet. Check out this credit card calculator and see how long it takes to pay it off. The example below could apply to a lot of peole.
There are innumerable financial lessons to learn when it comes to managing your own money. If you’ve got some that you found beneficial share them below!