5 Tips to Make Money and Invest Sooner
One of the biggest hang ups of any new investor I speak to is money. Lets be honest. There is a reason we are all looking to invest and that is to create significant wealth in the future. But often there is a catalyst as to why we are looking to create this. It may be that we are struggling living pay day to pay day (been there done that) or it may be that we are in significant debt from buying overpriced items that are now basically worthless (been there done that too!). My story as to why I started my investment journey is best left for another day but I do think it is important to explore some of the ways we personally created enough surplus cash to begin investing and increasing our net worth.
Domino Your Debts
This is one of the most important, if not the most important steps we took to creating spare cash. Take a look at your debt position. Afterpay, car loans, credit cards, store cards, family lends, etc. Write them down! Everything down to the hundred bucks you owe Jim down the road. Start with the smallest balance first. This technique worked well for us. I understand that you should technically tackle the most expensive first however by paying the smallest balance first gave us the continuous wins we needed to continue. A winning mentality so to speak. We would pay the minimum on all other amounts apart from the first debt on the list which would get all our spare dosh. Once paid off it was on to the next one. Transferring the whole amount we were paying on the debt recently paid off and combining with the minimum amount already being paid. This would create a domino effect effectively snowballing these debts towards zero. Trust me, it becomes addictive. Automate these processes as much as you can. Zero % balance transfer cards are an excellent tool if you remain disciplined and understand their fees. When you start to create the surplus cash as a result of paying these debts off, don't fall into the trap of spending this on other items. Remember - You were living without it anyway!
Trim Your Bills
Your bills need to go on a diet. Think phone, internet, electricity. They have been fat for far too long! Take your phone bill for example. Do you review this on a yearly basis? Has your contract expired? Is there a better deal? Do you reallllyyy need four thousand gigabytes? A $10 or $20 reduction in these kinds of contracts really ads up across the household budget. Personally we looked at BYO phone plans, cutting down foxtel, low cost internet providers. I stopped upgrading my iPhone every year or two and extended this to 3 and 4 years. I barely noticed the upgrades yearly anyway and upgrading after 3 years was much more satisfying. BYO phone plans were around the $40 a month. I went with lower cost internet providers. Sure some of the tech savvy readers may disagree but they filled our needs. Foxtel was first trimmed down just to sport and entertainment. I later ditched this for Kayo. I learnt to read my energy bills and critiqued their charge rates. Doing this exercise created hundreds if not thousands of dollars in spare cash-flow per year across the family budget.
Sell Your Expensive Car
We've all done it. Oh what a feelin'. Keeping up with the Joneses. There is a perceived "status" that comes with owning a nice car. Unfortunately these are also expensive, cost a bomb to run and depreciate in value very quickly. This is a tough one. As a mechanically minded person I can understand there is a sweet spot when discussing cost and value. Older cars can lead to increased maintenance costs. But a new car that has been looked after poorly can be a huge drain on finances. Personally we ditched the idea of a $100k SUV and went cheap and reliable. No car loans for us. These just amplify the holding costs. It does help to have a rough understanding of vehicles and recognise what will need more/less maintenance. As an example I currently run a 2001 Ford Laser purchased for $2500. Honestly the best car I ever owned. Purely from the mental aspect. I know this vehicle effectively owes me nothing. It costs a whopping $50 to fill to the brim and lives outside everyday. I also purchased a project car from the 70s to show our daughters that brand new and expensive is not needed to create fond memories. Some of the best times we've had as a family has been driving this car. The costs of these two vehicles combined are far less than the current average car most families run. Most people will question buying another property using a $50k cash deposit but won't think twice taking out a $50k loan at 8% to buy a new car that depreciates immediately after driving off the lot. Doesn't make sense to me.
Get a Side Hustle
A great way of reducing the time taken to pay down debts or saving a deposit is to explore the idea of a side hustle. Feel free to go out and take on a second job. Might be packing shelves or doing nightshift somewhere however this may not be viable for everyone. Especially those with young families. So look to hobbies or tasks you may already be doing or enjoy and work to monetize these. When my wife went on maternity leave I started to wreck motorbikes and started dealing spare parts. It was an awesome money spinner and learning experience. I discovered bikes I'd never heard of, learnt the ins and outs of a bike, found new places all over the state to deliver/pick-up from and dealt with some "interesting" characters. I had memorable trips with my father (who is a bike nut) going to pick up another project. It was so enjoyable and kept us on our financial path during a pretty testing time. Most people go backwards during this time whilst we managed to still move forwards albeit at a slower pace.
Refinance Your Mortgage
Seems pretty obvious but if you're a home owner then you should definitely look at the possibility of refinancing. Home ownership and the mortgage associated with it is often our biggest expense. So some significant gains can be had here. Presently there are some excellent interest rates out there, fixed and variable. Lenders are offering cash-back options where they will rebate up to $4k. Fixed rates are in the low 2%. Forget loyalty when it comes to home loans. Your banks have none so remaining unemotional is the best thing you can do. I've seen people forego thousands in lost savings by staying with the same lender. Keep in mind loan structuring is really important when it comes to investing in property so be careful not to go for the cheapest rate. Talk to a good broker experienced in this department and who is in tune with your goals and ambitions. For us refinancing in the past has not only been for accessing equity but the added benefit of reducing our monthly repayments and increasing our cash-flow has done wonders for our progression.
"The best time to plant a tree was 20 years ago. The second best time is now."
Ancient Chinese Proverb
Remember - This is NOT easy. It isn't a case of exploring these ideas and you're ready to go the next day. We implemented these over years and years. Many times we lost our way but we had a plan and stuck as close as possible to it. I always look at our journey like a yacht travelling into headwinds. It is no straight line. We change tack along the way. Adjust and remain flexible. It always takes longer to get there but in the end we do. Don't listen to those who say this is easy. I am not here to tell you it is. But the rewards are there for those willing to put in the work.
- The Tattooed Investor