Serina Bird: Every single dollar counts
It’s easy sometimes to think that the best way to get ahead is by the big things: high-performing investments, a high-paying salary or clinching the best deal. But usually it’s the small things – the everyday habits – that get you ahead, such as packing your lunch most days or not turning the air con up to its maximum. This is how you will find the money to invest. And you’re more likely to scrutinise the details of investments, including fees, because you understand the value of each dollar.
Chris Brycki: Lessons come from losses
The best investment lessons I’ve learned have come from losing – and with 24 years of experience under my belt – I’ve had my fair share of investments gone ugly!
When it comes to investing, people love to gloat about their wins and returns – but few will talk about their losses and what they learned from them. This should always be your first question if you want someone to manage your money: When have you lost money investing? More importantly, what have you learned? From what I’ve seen, the experience gained from losses and missed opportunities is what separates good investors from the great.
Paul Clitheroe: Spend less than you earn and invest the surplus
Look, I know this seems bleedingly obvious, but most people just don’t get the fact that the single most critical money tip is just to spend less than you earn and invest the surplus in productive assets. Now, as long as you do your research, I don’t really care if you invest in shares, property or your own business. It is not so much what you invest in, it is that you invest on a regular basis.
Paul Clitheroe, AM, is one of Australia’s leading media commentators on financial issues.
Victoria Devine: Fake rich now equals real poor later
The number one money tip I drill into my clients is that living lavishly, without the income to fund that lifestyle, will leave future you in a whole world of trouble. In other words, fake rich now equals real poor later. I want people to understand the difference between being rich and being wealthy. While being rich may afford you those shiny things that look amazing on social media, sustainable wealth is what I want people to work towards by creating sensible money strategies. Don’t be swayed by what others are doing, know your values, establish your goals and work towards them every day.
Victoria Devine is founder and host of She’s on the Money, a personal finance podcast for millennial women. She is also the director and co-founder of Zella, a financial advice, accounting and finance broking practice in Melbourne.
Bianca Hartge-Hazelman: Do the inconvenient things yourself
The one money tip I am huge on in 2021 is: do the inconvenient yourself. In a COVID world making savings wherever you can is high on the priority list for many families – myself included. So I’m taking the approach of outsourcing things back to basics and doing whatever I can myself. For instance, this might be cleaning myself rather than paying a cleaner. Or when it comes to business, I’ve recently registered a new company and instead of paying $1,000 for help, I’ve done all the registrations myself and learnt a lot along the way about business, despite being in business now for many years. In addition we are embarking on a huge renovation, which I will be project managing and owner building myself, rather than paying a 10% to 20%-plus cost premium to a builder. I also recently completed a subdivision project myself with a lot of help from town planners both inside and outside of council. My advice is to do what you can do yourself in 2021 and think of any inconvenience as time spent learning.
Bianca Hartge-Hazelman is the editor and founder of the Financy Women’s Index and women’s money publication Financy.
Bryce Holdaway: Put a money management system in place
If you want to reach your financial goals it’s important to have a system in place. The best practice tools for personal money management are the same for everyone regardless of their income or occupation: one debit card, one credit card and a primary account.
The debit card is treated like cash and all discretionary spending happens here through a weekly allowance that only gets topped up once a week.
The credit card is for bills only. No discretionary spending whatsoever should be put on the credit card (ignore this at your peril)! The closing balance is ‘automatically’ swept from the primary account on the due date to avoid interest.
The primary account is typically an offset account (or a high-interest savings account if you have no mortgage) and is the central hub that houses all your money in one place. It optimises the surplus cash against your mortgage, whilst putting your budget on autopilot.
This simple structure utilises the wisdom of your grandparents’ flour jar system and adapts to a ‘tap and go’ world.
Bryce Holdaway is co-host of The Property Couch’ Podcast and co-author of Make Money Simple Again.
Craig James: Diversify, diversify, diversify
Many people kick themselves that they didn’t put all their money on that one hot investment. In reality, they should be applauding themselves that they didn’t invest in one that flopped. You may not end up topping the investment return leaderboard, but if you spread your money over a number of investments then you will sleep well. Ideally invest some funds in fixed interest, some in property, Australian shares and overseas shares. And the equity investments need to cover a range of individual companies and sectors – blue chips as well as one or two well-considered but more speculative investments.
Ben Kingsley: It is not your money…. you have to pay it back
In the modern age of digital money, we are constantly prompted to access credit. From our banks offering us credit cards to retailers offering us store cards or buy now pay later services such as Afterpay.
Clever marketing tactics mean that many people see this money as theirs, when it’s not. Just because you have access to it, does not make it ‘your’ money.
Making a purchasing decision using a credit, store, charge card or a buy now, pay later service, is generating debt. A debt that, depending on how quickly you repay it, is going to incur an interest or service cost to you.
Using credit or borrowings can be beneficial in some limited circumstances, but can be a dangerous money management habit for everyday living or discretionary spending.
Alan Kohler: Fees matter
What you pay someone to look after your money is not only the one thing you can have some control over, it’s also the only thing that can be known. Future performance is, well, in the future, and therefore cannot be known. Past performance can be known, of course, but as they all say: past performance is not a guide to future performance. What’s more investment management is possibly the only service where the more you pay, the service isn’t necessarily better. That’s because the price detracts from the outcome, so as the price rises that tends to result in a worse outcome. Not always, but that’s the tendency.
Alan Kohler is editor-in-chief of InvestSMART and one of Australia’s most experienced business commentators.
Peter Koulizos: Old is generally better than new when it comes to property
When it comes to making money in real estate, generally the best type of property to buy is an old house – the older the better. Even though new homes usually look much better and have brand new appliances, fixtures and fittings, they depreciate very quickly, just like new cars. For example, a new car is worth a lot less in 20 years’ time but a car that is 100 years old can be worth a lot more in 20 years’ time.
Don’t be sucked in by clever marketing and buy a brand-new home – my tip is to look for an older home that has character.
Margaret Lomas: Affordable property will be an increasing trend
When buying property, affordability will be a key driver in 2021. One thing that a pandemic does, that not many people seem to think about, is make people cautious. Life can turn on a dime as we saw countless times during 2020. From one day to the next, we can’t know if we will be in lockdown or out, in a job or out of one, healthy or otherwise. The big risk of an expensive property and a large mortgage is one that many don’t want to take on. Buying more affordable property, in areas where lifestyle needs are well catered, is an increasing trend. In the coming two to three years we will see far greater levels of growth in non-capital cities and affordable suburbs than we have ever seen before.
Margaret Lomas is a qualified financial and investment property adviser, and the founder and director of Destiny Financial Solutions. She is also the author of nine books.
Steve Mickenbecker: A budget can help you reach your goals
Clearing debt and saving for a goal have one thing in common – the need to cut spending, set a budget and then to stick to it. Firstly, work out where your money is going, where you can cut back, and what you are left with. Put the draft budget away overnight and then trim spending again. This becomes your budget and tells you how much you should transfer to your savings every pay day. Then set up an auto transfer to your savings account for pay days. Finally don’t touch it – it’s not your money, it is your goal’s!
Steve Mickenbecker is the Group Executive of Financial Services at Canstar, bringing more than 30 years of experience in the Australian financial services industry.
Roger Montgomery: Pay yourself first
The biggest and simplest mistake made by most people is that they believe their entire salary belongs to them. Unless they pay themselves first, it never does. As soon as your salary is earned, Telstra, Netflix, Spotify, Sydney Water, AGL and AAMI all take their slice. After that Woolies and Coles, BP and Shell all take their slice. And after that there’s restaurants, holidays and school fees. The little, if any, that is left over is the only part that is yours to keep. What you have effectively done is paid everyone else first and yourself last. You need to reverse this. As soon as you have been paid, pay yourself first and then invest it immediately so that it starts working for you.
Shane Oliver: Turn down the noise
The digital world we live in is seeing an explosion in information and opinions about investments. But much of this is of poor quality and emphasises the negative. This has gone into hyperdrive through the coronavirus pandemic. Paying too much attention to it risks increasing your uncertainty and throwing you off a well thought out long-term investment strategy.
The key is to turn down the volume on all this noise. To help do this: try and put the current worries in context; recognise that it’s normal for markets to swing between extremes; focus on only a few reliable news services; and don’t check your investments so much – the longer you stretch it out between looking at your investments the more likely you will get positive news.
Dr Shane Oliver is head of investment strategy and economics and chief economist at AMP Capital.
Scott Phillips: Don’t make investment decisions based on paying less tax
This one is obvious when you think about it, but it’s remarkably uncommon. I’d guess 19 out of every 20 people ask their accountant “How can I pay less tax?”. It’s a reasonable question.
But do you know the better question? It’s “How can I improve my after-tax returns?”
You can pay less tax by, for example, borrowing a heap of money to buy a terrible asset. You’ll pay more tax – but also be left with a lot more money – if, instead, you buy a better asset, even if you don’t borrow to do it.
By all means, don’t pay more tax than you have to. But don’t make it an end in itself.
Adrian Raftery: Make reducing debt a priority
When you analyse the law of compounding interest (check out the Rule of 72) there is an obvious benefit to making extra repayments (including fortnightly rather than monthly) to reduce debt as soon as possible. After all, all debt is bad debt. But if you are forced to have debt, make sure it is tax-deductible and let the taxman help. Pay off your non-deductible debt ASAP (such as personal loans, home loan and credit card) with extra repayments and keep your loans for investment properties as interest-only. Once you have paid off all non-deductible debt then start looking at extinguishing the tax-deductible debt.
Dr Adrian Raftery, also known as Mr Taxman, is the best-selling author of 101 Ways to Save Money on Your Tax – Legally! and is widely sought by the media for his views on tax, superannuation and financial issues.
Jane Slack-Smith: Regularly look for better deals
As boring as it may seem, potentially the best money tip I can share is to go back through your credit card, PayPal and Apple/Google Accounts and check out your regular expenses – and go back a few years.
I did this recently for my mum and we found phone app subscriptions that were free for a month and then in fine print $79 per year. She had a number of these that she had just forgotten about and with no description on the credit card bill she had no idea what they were for.
I also completed the exercise for my business and saved more than $2,000. And when my car insurance was about to renew for another year in December, I decided to see what else was available. Guess what? The premium went from $1,700 a year to $700. All I did was confirm all drivers were over 50 and that we drove limited distances each year. So, if you have some downtime, check out the subscriptions you have signed up for and forgotten about or the regular annual expenses you have and see if there is a better deal.
Phil Slade: Count your blessings
The best money tip I have ever received came from a song we sang at Sunday School which went “Count your blessings, count them one by one”. Mindfully acknowledging what we have, rather than what we don’t have, mitigates against a host of cognitive biases that nudge us toward poor financial decisions. When shares crash, look at what you have left rather than ruminating over the value you have lost, to make the best investment decision. When buying property, look at the available budget rather than spending hours researching what more money could buy. Count your blessings.
Michael Yardney: Develop ‘rich habits’
Becoming rich boils down to two things. The first thing you need to do to become rich is to accumulate wealth. This isn’t easy and takes time. It requires learning the skill of delayed gratification. In other words, spend less than you earn so you can put your money to work for you.
You can’t become wealthy by saving alone, however investing, reinvesting and growing your financial intelligence are habits that make you rich.
Then you need to keep the wealth you have accumulated by developing a wealthy mindset – what I call ‘rich habits’.
Since wealth is the cumulative result of many little things added together and compounded over a lifetime, your daily habits can make or break your financial success.
Unfortunately, sometimes life can conspire to distract you from achieving your financial goals, but practicing the rich habits of taking action, being disciplined and showing resilience can help you grow and maintain your wealth.
Effie Zahos: FOJI can be just as bad as FOMO
I’m not a risk taker which is why I sometimes suffer FOJI – fear of jumping in. FOJI can be just as bad as fear of missing out (FOMO). FOJI can prevent you from moving your cash from a safe bank account to, say, the sharemarket. Now, don’t get me wrong, cash plays a very important role in any portfolio, but cash in the bank won’t make you rich and in the long term shares or property could, but because of FOJI you stay put. I’ve overcome FOJI by flipping my thinking around. Think about it this way: if you don’t start investing there is a risk you won’t reach your money goals. Another way to curb your FOJI is to understand that small change can make big gains. By drip feeding your money into your investment you may be somewhat protected thanks to dollar cost averaging. This allows you to buy more when prices are low and buy less when prices are high. The end result? A better average price. And only ever invest in something that you understand – there’s merit in keeping things simple!
Effie Zahos is Canstar’s editor-at-large and has more than two decades of experience helping Aussies make the most of their money.
Cover image source: ChristianChan (Shutterstock)