Personal Finance

Here are some tips and tricks which I have picked up over the years. Most are just a matter of common sense.

Bear in mind that the Financial Services industry is in the business of making money. Since they are no longer allowed to print it they have to take it from their customers.

Rules

1. Never Borrow Money (except for a Mortgage).
   • Have as big a deposit for your mortgage as you can to get a better deal. Pay off the mortgage as rapidly as possible. Earned interest is taxed but mortgage interest payments avoided through early repayment are not.
2. Live within your means each month (except for one-off capital expenditure). To paraphrase Dickens:
   • Monthly Income < Expenditure = Misery
   • Monthly Income > Expenditure = Happiness
3. Never buy shares (no exceptions).
   • The stock market is a casino. As in all such establishments the odds are rigged to favour the house.
   • Also by avoiding the market you gain peace of mind.

Tips

• Keep at least one year's worth of salary in a savings bank account for emergencies.
• Pay bills using direct debits. This lowers the transaction cost & most providers will share the saving with you.
• Use a credit card for convenience but pay it off each month to avoid interest charges.
• Advertisers try to trick you into spending money. If you see something you want in a shop or on-line: don't buy it.
  • Instead wait 24 hours. If by then you cannot remember what it was then you didn't really need it and were about to fall victim to an advertisement ploy.
• Keep Accounts It is always a surprise to see where the money is going. When you start delaying expenditure until the next accounting period then you know you are taking it seriously.
• Pension Contributions Save half your age as a percentage of your income into a pension throughout your career to be able to afford to maintain the same lifestyle in retirement.
  • So when 20 years old you should put 10% of your income into a pension; By the time you reach 40 your contributions should have risen to 20%; And so on.
• When seeking professional financial advice the first question to ask the advisor is: "Are you on commission?" If the answer is anything other than a straightforward "No" then that should be the end of the conversation.

By following these rules, after 15 years working at a mid-level IT job in London, I was able to afford to buy a mountain in Ireland.