Its Time To Get Financially Smart

[robaus]

>>â??Richest Man In Babylonâ? is all about budgeting.

 

â?¦ excellent book. Iâ??d say it was also about making your money work for you (the author calls them your â??little gold slavesâ?Â), after you have budgeted and lived frugally to save. The extravagance can come later when you have so many gold slaves working for you that a splurge is a mere pinprick in your net worth, whereas extravagance in your younger years can destroy your seed capital.

 

Cash is king at the moment, but if inflation gets out of hand itâ??s only dirty paper after all. Just ask a Zimbabwean.

Warren Buffet didnâ??t get mega-rich by working 9 till 5 and stuffing his mattress full of Benjamins. Youâ??ve got to invest your cash somewhere ultimately, if you want it to grow.

 

At various times over the last decade, property and shares have been king, and the man holding cash was the laggard.

 

A slowly slowly conservative approach could be a judicious mix of cash, shares, property and precious metals in 25% portions, and when the ratios get out of kilter restore the balance. Or if you are a more proactive shepherd of your assets, and see problems ahead adjust the percentages accordingly.

 

Some Rules:

 

Educate yourself re the investment worldâ?¦ books, magazines, forums. Paper trade and back test any theories.

 

If an investment return sounds too good to be true, it probably is. Thanks for that one Mr.Madoff.

 

By all means seek advice, but donâ??t let other people handle your investments - IMHO, but up2u.

 

Spread your risk. Donâ??t put all your eggs in one basket.

Or the opposite: put all your eggs in one basket and watch it like a hawk!

 

Is it â??Time inâ? the market or timing the market? Both are true. Depends what sort of investor you want to be.

 

Try to make your investments tax efficient. If you borrow money, use it for tax deductible investments only that generate tax free $$ for you.

 

Stick with investments you understand. A mate of mine knows fuck all about the stock market but is a handyman. Heâ??s always lived in his own tax free investment - his home. Always paid cash to buy the worst house in the best street in the best suburb he can afford. Throughout his life heâ??s refurbished his old house then moved upmarket to a new old house every few years. Sleeps well at night and is very comfortably off. Oz housing market hasnâ??t been as badly affected by the US sub prime fiasco. But heâ??d have made even more money if heâ??d borrowed to invest tooâ?¦ modestly, not borrowing to the hilt. CT, I read that Germany has not been affected as badly re house market because most Germans need at least 40% deposit to get a mortgage?

 

I havenâ??t got crystal ballsâ?¦ doesnâ??t feel like it anyway when my tilak gets to work! :hubba:

So I donâ??t know whatâ??s going to be king in 12 months or 2 years from now. Iâ??m a contrarian and believe that the world will recover from the present downturnâ?¦. Buy straw hats in winter. People still need houses to live in, food to eat, and fuel to get around. 2.5 billion Chinese and Indians still aspire to a car owning middle class lifestyle. Politicians want to avoid social unrest and to win the next election. Yes, politicians get it wrong, and then thereâ??s also Murphyâ??s Lawâ?¦ something comes out of left field such as Israel bombs Iran, Straits of Hormuz closed and who knowsâ?¦WMD WW III? The new broom Obama seems smart and I hope he heralds a few changes.

 

In Oz atm the top 4 banks are paying approx 5% interest on deposits, but you have to pay tax on that. Whereas owning shares in the same banks pays 9% dividends virtually tax free. Qantas is paying 13.6% tax paid! Sure, maybe they wonâ??t maintain their dividend pay out rate and I have faith that the Aussie govt wonâ??t let any of the top 4 banks fail. Up2u.

 

Google â??Dogs of the Dowâ? or the Oz equivalent â??Dogs Downunderâ? for a quick way of deciding what top 10 companies paying good dividends to invest in. or DIYâ?¦rank the top companies by their net worth, then re-rank them by their dividend yield. Ignore the 2 or 3 top ones which may be anomalies (donâ??t be greedy) and you have your dogs. â?¦ then do your own research to see if they are exposed to too much debt or risk. The monthly dogs have outperformed the Dow Jones index for the last 50 years or more.

 

Someone please remember to resurrect this post in 6 months and 12 months time on 31st July and December. It will be interesting see where we go from here and with 20:20 hindsight say â??I shudda, cudda, wudda, â?¦gonna be a billionaireâ?¦ next time!â? Write down your own prediction now. Might keep our investment prowess focused.

 

As of 30/12/08

 

Dow Jones Index 8,668

 

FTSE 4,392

 

Australian All Ordinaries 3591

 

Commonwealth Bank of Australia Term Deposit A$100k 6 mth 4.5% 12 mth 4.25%

 

Australian median house price in A$ A$447,659

 

Gold price US$ 873

 

Maybe someone can find similar stats for their own countries

 

Good luck, mates

 

 

 

[waerth]

I'm not really into those get rich type books' date=' but I guess some of them do offer sound advice such as financial planning etc which really should be part of everyone's education especially today.[/quote']

 

the "how to get rich" books make only the guys who write them rich and not those who read them! :smirk:

 

There you have it!! So the way to get rich is to write an "how to get rich, quick and easy" book yourself!

[WorldFun]

robous, very good advice - I'll try to be back with some EUR stats a bit later

 

weird, yes being author & able to sell in high numbers seem to be reasonable biz - many other 'obvious' biz like those ready to be taken by the 'right' folks

 

happy new years 2552!!!

[USVirgin]

I heard on the local news in SoCal that fortune teller is a recession proof business. Doing well right now.

[Steve]

Drug dealers also see an increase in business in bad times. That's a recession proof business as well.

 

I would assume bankruptcy attorneys as well. Don't know but would make sense.

 

 

[RayRay]

Great. My goal in 2009 is to become debt free. Well, at least get rid of my credit card balance.

 

I went through this 4 - 5 years ago after my divorce. In said divorce I "inherited" a huge credit card debt from that stupid f#cking b!tch.

 

Even though I was making a good salary and the company was paying my housing / car bills I lived like a pauper. Initially I set a plan to payoff the credit card debt and student loan in 3 years. After about three months I said f#ck it and started throwing every spare penny I had at the debts.

 

When the company was so kind as to give a bonus, it all went to the debt. If I got a pay raise, 100% of the raise went to the debt. Instead of three years I had that shit paid off in one. That was one of the happiest days of my life when I sent that very last payment.

 

You will be amazed at how quick the bank balance starts to increase when you are keeping it all for yourself instead of sending it out to Visa / AMEX and the other bastards. Seriously, getting debt-free was better than any pay raise I ever received.

 

Also, because I went a year with no frills I find even now that I have money I don't really spend as much as I would have thought. Oh I don't go without anything now, but I'm not going on big splurges either. Every couple of years I might get a new set of golf clubs, but that's about it.

 

[rookie]

.....My new year's resolution is to simply get a job and start playing golf again. Sounds like an oxymoron, but it's difficult to play golf when you have no income.

 

Amen to that!

Two year ago I was playing 2-3 times a week; last year I played played only twice! Plus, I want to do more motorcycling and exploring throughout SEA.

But, I've gotta figure out how to do it without getting a job/work. I surely don't want to open a clinic as I'd be locked into office hours 4-5 days a week. Such isn't compatible with my wants! Ugh! Maybe it's gonna be push-up _padded bras_? :smirk:

 

[Steve]

Thanks RayRay stories like that keeps me motivated.

[kamui]

I would really recommend to buy this book Link.

 

It preaches what RayRay did.

[gobbledonk]

Yeah - we all talk a mean fight, but I find that it all turns to shit as soon as the wheels touch the tarmac in LOS. Granted, that is 'holiday money', and I accept that I need to show a little more fiscal restraint back here in Cape Boring, but I enjoy the toys that I recently purchased with my credit card. For those outside Oz, many families and pensioners were recently given a thousand dollars (and up, for those with kids) to stimulate consumer spending - I didnt get one brass cent - and we have all done what we can to keep Fortress Oz solvent. The message is clear at the moment - spend, spend, spend !