Money Quotes From Twitter

A selection of quotes for investing, saving and just about anything else to do with money

Storified by humble savers · Thu, May 17 2012 20:07:44

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Five Ways to Save Money – Money Myth Busters. We have all heard the old money sayings that have become myths of their own, but which ones are true? We take a look at five popular money myths and give them our verdict. One myth that we believe to be true, is: ‘Where there’s muck, there’s money….Read more

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Financial Trivia

Greece as we know is suffering a financial crisis and the world is again getting worried. The Greek debt is estimated to be $500 Billion, US Dollars (CIA World Fact Book).

The stock markets have got nervous over the past couple of weeks, worried that Greece will not pay back the debts. During this period of time, the US stock market as measured by the S+P 500, has lost over $600 Billion in value! The total value lost around the world is estimated to be three times the debt of Greece. If you are having difficulty making sense of it all, you are not on your own!

Interestingly, Apple is now worth $510 Billion (May 16, 2012). The GDP of Greece is $308 Billion.

A Super Program

Regret Nothing is a great website for younger people who want to take control over their finances. They have an exciting campaign commencing very soon that will help everyone to better understand their superannuation. Superannuation is important, 9% of our wages gets directed to it and this will climb to 12%.

For most people superannuation will become their largest asset, even larger than the family home. However, we often take very little notice of our superannuation until it’s all too late.

By signing up for the free six week program, you’ll learn more about superannuation and have quite a bit of fun along the way (I’ve seen some of the videos!) Click here to find out more

Cheers

The humble savers team

What are money myths?

Which money myths are true?  We take a look at five popular money myths and deliver our verdict. 

1.    Where there’s muck there’s brass (money): Our verdict - TRUE

An old English saying believed to have originated out of Yorkshire. The presumption is that working in ‘muck’ (dirt to manure), can create brass (slang for money) as few people want to work with muck.

In Australia, the BRW 200 Rich List for 2011 shows that four of the top five wealthiest individuals all made their fortune through mining. They mine for coal, gold, copper and iron ore in the Australian red dirt.

The real working miners, the ones who actually do the hard work are also doing just fine. The miners are averaging over $2,172 as a weekly wage. This is far better than their ‘white collar’ friends from financial services who are earning $1,374 per week.  (Source: Suncorp Bank Wages Report 2012).

The evidence strongly suggests that this myth is true.

2.    Penny wise, pound foolish: Our verdict - TRUE (most of the time!)

The saying assumes that obsessing with small things (pennies) will hold back from making sensible decisions with bigger opportunities (pounds).

Consider this: If you are the sort of person that would drive all over town to try and save on every deal, the saying would be true. The reason is simple, the cost of driving equates to $0.74 per KM (Source – Australian Tax Office). This is the tax office estimate and takes into account fuel, wear and tear along with depreciation of your car. 

If you drive 50 KM to find the bargains, you’ll burn $37.00 in motoring costs. Add to that the time (and time is money!), shoe leather, food and drink while you are shopping, you’ll have to make some extraordinary savings to justify the expense. 

Rather than burning up your motoring costs, you would (probably) be better off putting that bargain shopping time to good use. For example, use your time to better your education and training for a higher paid job.

This myth, in our humble opinion is true (most of the time).

3.    As safe as houses: Our verdict - FALSE

This saying can have a few meanings. For example, houses are meant to be ‘safe’ because they are made of ‘bricks and mortar’ (Won’t blow down!).

The saying is often used by investors who like to ‘see and touch’ their investments and believe that no matter what happens, housing will always give a good investment return.

House prices right around the western world have taken a severe beating over the past few years. They can no longer be seen as a safe bet when it comes to your money.

If you are not convinced that house prices do fall in value take a look at this great chart from The Economist - Interactive Global House Price Chart. Have a play and see what has happened across the world to house prices. You can even select prices in ‘Real Terms’

All the information tells us that this myth is false. 

4.    Don’t put all your eggs in the one basket: Our verdict - TRUE

No guessing how this myth was developed. In money terms it is often used to highlight safety by diversifying (spreading) your money around as opposed to placing it all into the one investment; just in case that one investment fails.

A large number of the very rich have made all their money through one investment. For example the miners as mentioned in Myth 1 above, Bill Gates through Microsoft and so on. These examples would suggest that the myth is false.

Before declaring the myth as ‘false’, we need look at those who poured everything into the one investment and lost. Right across the world we are seeing everyday people apply for bankruptcy because of an inability to make mortgage repayments. They have lost everything through one investment.

As the myth is emphasising the need for safety, we declare the myth as true

5.   Investments will always come good because of the investment cycle: Our Verdict - FALSE

Investment advisers and economists often talk about investment cycles and quickly point to the ‘investment clock‘ to prove their point.

If you look at the Dow Jones stock market back to the 1900, you’ll see that it is very difficult to highlight a series of investment cycles with any predictability. Dow Jones 1900 – Present

Many will say ‘The stock market always goes back up’ and to be fair that appears true, at least for the Dow Jones.

Now, take a look at the Japanese stock market. Today it is only worth one quarter of what it was when it peaked in 1990. 22 years of suffering for every investor and still no signs of a quick recovery.

We declare this myth to be false as there is not enough consistency in the investment markets to justify the myth.

What are your thoughts? We would appreciate your comments along with any money myths that you believe in.

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Our goal with this article is to you help clear your mind and to set you on the track to investigate your investment opportunities. It should not be read as personal investment advice. You should always seek professional advice to suit your own circumstances.

1.    Create realistic investment goals

Investing without a goal is a a bit like setting off in a car with no destination in mind. Most people will find it easier to break their investment goals into time-frames. For example:

1. Short term goals – One to three year time frame and include such things as a new car, home renovations and holidays
2. Medium term goals – Three to seven years and could include a new home, the trip of a lifetime, and education fees
3. Long term goals – Greater than seven years. Retirement planning fits into this category. Younger people may focus upon buying their first home.

There are no right or wrong time frames. Your challenge is to be realistic as to what you can achieve in each time frame. 

By taking this first step of setting realistic investment goals, you’ll feel a sense of ‘taking control’ over your financial destination

2.    Know where you are at right now – Your current financial position

Before you set off on your financial journey you need to know where you are starting from. As a minimum you need to know the following:

• Current investments – Make a list of your current investments and break down into cash (money in the bank), fixed interest (bonds), stocks, property and retirement/superannuation funds 
• Debt – List your debts all of your debts as credit cards, personal loans and mortgages. Subtract your total debt from your current investments to get a ‘net’ wealth  position
• Complete a cash-flow exercise – List all sources of your income where is it being spent. You need to be cash flow positive!
• Review your spending habits – Seek to find some immediate savings. A penny saved is a penny earned.

After completing steps 1 and 2, you can start planning how you might reach your investment goals. Spend some time with online calculators to get a sense of your investment challenges. The Savings Goals and Retirement Income  calculators can be very useful for this exercise. 

3.    Make sure you understand investment risk

Investment risk can be very complex and even experts have tripped up by inadvertently taking on more risk than they initially calculated. Below is a very quick summary of the key investment risks:

• Fraud – Being ripped off is a very high risk. Basic rule applies – If it sounds too good to be true, it usually is
• Market risk – There are four key investment markets – cash (money in the bank), fixed interest (bonds), property and the stock market. All are very different markets and carry different levels of risk. Before investing in any market do your own research and get a good understanding of the risks
• Currency risk – All investment markets can be traded at home and abroad. However, investment values held in international markets will be affected, both up and down as a result of fluctuating currency exchange rates. As your home currency increases in value, the value of your international investments will fall and vice versa
• Diversification – While many a self made millionaire made their money through just one investment this is a risky approach to investing. Aim to consider a balance of investments that suits your end goals. You can expect a few winners and losers with your investments over a lifetime. Spreading your money around reduces the chances of you being wiped out
• Inflation risk – When I first started out in financial planning I was told that the riskiest long term investment was cash! Why can cash be so risky? Because cash pays a low rate of return and after deducting tax and inflation you often end up with a negative ‘real’ return (the net return is not keeping up with inflation) and thus unable to fund your retirement. 

 4.    You must understand debt

Debt has brought so many people, companies and now countries undone. Debt can be a friend and also a foe. The trouble with debt is that the lender, normally a bank, always wants their money back and with interest. Secondly, the lender has greater rights over the debt contract.

To put the debt into perspective, consider this example. You borrow $100,000 and add $100,000 of your own money to purchase an investment for $200,000. This investment drops in value by 50%, down to $100,000. The bank demands its money back – all of it. Therefore, after you hand back the $100,000 you are left with zero. You have just lost 100% on your investment even though it only went down in value by 50%.

5.    Get professional advice

Everyone’s circumstances are different and it is very complicated to plan and implement your investment strategies on your own. A good financial advisor will greatly assist with building a strategy to see you through the good and bad times. Additionally, professional advisers in Australia will need to accept responsibility for their investment advice and this can give you some protection if it all goes horribly wrong.

There has been plenty of negative media concerning financial advisers. There are some good ones out there, you just have to find them. Below is our guide for finding a good financial planner along with a guide for assessing a financial plan.

Financial Planner Checklist – 8 Questions You Must Ask

Financial Plan Checklist – What To Check In Your Financial Plan

Best of luck with your investing and one last tip – ‘Knowledge is power’

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