In comparison to other countries, New Zealanders aren’t very good at saving. Consumer debt is a massive problem in our society. It’s been made normal to have consumer debts: personal overdraft, credit card debt, personal loans, car loans.28
The education system, too, is flawed. Heard the saying “university is the new high school?”. Getting a degree is considered an investment, but is fast becoming a universal commodity that is priced as a luxury. Banks offering tertiary accounts come with unscrupulously large overdrafts of around $500, which normalises spending more than you can pay for, fostering the inability to save money properly. It’s teaching our kids that it’s okay to keep spending when they have no money left in the bank. That it’s okay to be unable to budget, to manage yourself, to live off others. We are in a society where it is okay to borrow to go for a holiday, it is okay to have the hire purchase to have something you can’t even afford.
Tertiary accounts are teaching our kids that it’s okay to keep spending when you have no money left in the bank.
There’s been a lot of talk lately of the gap between the rich and the poor. It’s big. It’s growing. The core difference between them is their mindsets of how they use their money. The rich focus on “invest” while the other group thinks more about “spend”. The rich would be focusing on invest not only their money, but also their time (learning, developing). The rich know how to manage their money while the other group can’t. Don’t forget that you are the person that chooses which group you want to be a part of.
Focus on investing rather than spending.
When you receive your wages, a money-smart person prioritises their use of money. First, invest a solid amount of your wages. Starting from $1000 pay, invest $500. Next is your commitments: food, mortgage, broadband, which could take around $450. The last $50 is for spending. There is a strong control over where every dollar goes, and with half of the income being invested, that $500 will growlater down the line. Someone who isn’t money-smart will pay off their commitments and then use the rest as spending money, leaving nothing to be invested and thus have nothing extra to grow. We often hear people say that you have to enjoy our lives, but keep in mind that the more work you put in early on, the better the rewards you can reap later. It’s your choice whether in early adulthood in spring you prance in the meadows and live paycheck to paycheck in later life in autumn, or work diligently on the fields and have a comfortable life come the autumn harvest 20 years later. Don’t forget that “investing” can be fun.
We know that everyone is different physically: tall, short, thin, wide and everything else. You can change some of these aspects easily through physical training, diet, and style choices. But we often forget about our mental training: your habits, your mannerisms, your attitude to life. These are changeable as well. People can stop smoking, stop drinking, eat better food, and learn a better outlook on life. We can all change our mindsets, too, to be smarter with money.
Like your body, you can train your mind.
When was the first time you heard about and properly understood ‘investing’? Chances are that it was later in life. I was in a seminar (hey, don’t judge me) last Saturday where the speaker recounted taking his children to the bank when they were two, and getting them to put 50% of their pocket money into the bank. He taught them that’s a form of “investing”. So at a young age, his children learned that money is for investing not just buying toys. We can do the same and raise wiser children who are better equipped for life.
In the next article, we will talk about the many types of investments you can make.