This will be the last of the three posts on the principles that I live my life by and these are the long-term ones, the overarching life long principles. As with the other principles I’ve already outlined this is a living list and I’m sure it will be added to and subtracted from in the future…..
- Be debt free – I went through much of my twenties in debt on credit cards and a car loan. Then I started to get financially educated and realised how stupid it is to live beyond my means. I sorted myself out, spent a couple of years agressively paying the debt off and it’s stood me in good stead because I’m now debt free. I have a lot less stress in my life. All my stuff is properly mine. I have more disposable income and my money makes me more money (interest and investments) rather than lining the pockets of a loan shark (ooops I meant credit card company – I find it tough to tell the difference). I don’t have the latest Audi, iphone, furniture etc but I also don’t worry about my stuff being repossessed if I was made redundant or how I’m going to meet my bills this month – Why you must get out of debt and stay out of debt
- Have a safety net – Following on from the above once I was out of debt I kept setting aside the money I used to pay off on debts to save myself up a “safety net”. Not a huge amount but enough to cover an unexpected house or car bill etc so that I’m not plunged into a financial pit by those type of problems.
- Pay yourself forward – One of the first books I read on financial education was Rich Dad, Poor Dad by Robert Kiyosaki which was recommended by one of my friends who has the richest Dad I know so I took notice. And it explained a lot. Although not everything in it is wonderful, it certainly opened my eyes to the mistakes that most people make with money and fairly simple ways of helping yourself. One important point is to always pay yourself forward. So every time I get paid some of it is automatically siphoned straight off into my investments – I don’t even have a choice in it. It’s like I never had the money in the first place so it just quietly does it’s thing building up in the background.
- Be frugal and minimalist- So much of our modern western lifestyle is wastage. We’re taught by advertising to want and use more, more and more all the time. I don’t agree. Why use more than we need to. When I say frugal I don’t mean cheap, on the contrary I believe in buying the best version of things that I genuinely need, but not wasting money on things that I don’t really need and actually using things until they are worn out, not just replacing them because there is a new model out. I try to use, buy and keep only what actually improves my life. For example I like using the internet but do I need the latest smartphone, a mac book and an internet enabled TV to do so? No. I just have an old but still perfectly useable good laptop that does the job fine. So why waste money and resources that I don’t need to just so I can keep up with the Joneses? I don’t believe in having clutter in my life. This description of the difference between things and stuff sums this up brilliantly – The difference between stuff and things
- Learn continuously – I love learning new stuff and I try to always be as open as possible to new ideas. I believe there is always room for improvement and it’s worth grasping every opportunity to learn possible.
- Buy second hand – We’re so conditioned by advertising that shiny and new is better but I disagree. In the case of “things” (as opposed to stuff – see above) second hand is often equally good as or even better than shiny and new. Shiny and new has destroyed yet more of the earths resources. Shiny and new has often cost the first owner more than they really needed to pay. Shiny and new hasn’t been tested so that the problems have been ironed out. Let’s take a car as an example. What will £10,000 buy me? Well I could buy a brand new hatchback. It’ll be shiny and new for a few months. It’ll also be a brand that most likely doesn’t have great build quality. It will be a pretty bog standard model with few extras. It will be worth sod all in a few years time as it won’t be very desirable. Or I could buy a nicer car that’s a few years old. It’ll likely be a better brand, with a few more extras, some more comfort and more likely to hold it’s value compared to the hatchback. Or I could buy a 7 – 15 year old car that’s on the way to being a classic. It will be the nicest car that money could buy when it came out, built with quality and lots of extras. It will have done pretty much all its depreciating and if I choose something rare and very highly rated it may well may even go up in value in the long run. When put in this context it amazes me how many rubbish new cars get sold. And this principle applies to so many things. I like to make sure I’ve weighed up how much use and quality I’ll get and how long a second hand item will last and therefore give me value before I go anywhere near buying something new. It’s the second hand Beemer vs brand new Dacia principle.