I'm lucky to be a job where I can offer an opinion on investing in shares like Wesfarmers Ltd (ASX: WES) or Telstra Corporation Ltd (ASX: TLS).
Investing is the cushiest area of finance to work in because most of the time people are already financially comfortable when they come to you for advice.
They have a roof over their heads and clothes on their back.
Financially, things are often looking up for these people because they are not worried about paying the bills or making ends meet.
Here are three of the best money making rules which anyone can use, whether you are suffering from financial stress or not.
1. Save part of your wage no matter what.
Ideally, you are currently being paid super. That's around 10% of your wage. But chances are you cannot rely on super alone, plus you cannot access it until you are partly or fully retired.
If you can save an extra 10% of your wage it will go a long way to helping you reach your financial goals. If not, start with 1% then build each month. 2%. 3%… until you reach 10% (at least).
Why?
Saving part of your wage is the only way you will get ahead.
My wife laughed at me when I said, "the only way to save money is to earn more or spend less". She thought it was obvious. It is. But it is true.
2. Have a safety net.
If you don't have up to three months of living expenses tucked aside, it should be your first priority. Use your savings to put money away in a bank account that you cannot access easily. Put something between you and that money. For example, cut up the debit card you receive when you open an account with another bank. In a worst case scenario, you will have to go into a branch or wait a day to transfer the money into your transaction accounts.
Making it difficult to access this 'safety account' puts a healthy barrier between you and a new Samsung TV — which is an item no-one needs.
Insurance is important, too. Vital, in fact.
Did you know some insurances can held through super? That means premiums are paid by your super balance and not from your wallet. Don't be lazy. Do some research. Call them and read the PDS (product disclosure statement).
Income protection is one form of financial security that often goes unappreciated and unused.
3. Make your money work.
Rule number-two is your right to protect your family financially in the short to medium term. But if you want to protect them — and you — over a long period of time, you need to start investing.
Investing through super is great. But investing also outside of super is even better.
But when you have enough money to invest — be warned.
There are more people working in finance who want to take money from you than make money for you. Bitcoin, speculative stocks, negatively investment properties. These all sound wonderful, but if something is too good to be true it generally is. So do your research and know the risks.
Here's a quote from a story, The Richest Man in Babylon, that was written more than 80 years ago:
"Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment."
Rule number-three is about making the financial world work for you, so one day you don't have to. I suggest investing part of your money in stable blue chip ASX shares like Telstra and Wesfarmers when the time — and price — is right.
Foolish Takeaway
You might be thinking that there is one area not covered above: debt. If you have debt it needs to be manageable. That's obvious. Credit card debt is the worst, followed by personal/car loans.
Believe me or not but these debts fall under rule number-one, savings. If you can pay off a credit card charging 20% interest, immediately you have saved 20%.
Follow these three steps and you will be on your way to becoming financially free.
