This is the most important book that I read in 2018. It is targeted towards Australians, but the basic ideas are applicable everywhere. Here is a summary of ideas from the book.
Ensuring your financial well being
- Choose banking institutions which have the lowest fees, ideally zero fees.
- Save at least 10% of your paycheck for retirement fund (RF).
- In Australia, this is your super.
- Invest your RF in a diversified portfolio.
- Also make sure fees charged by your financial products is as low as possible.
- Don’t hire wealth advisers who charge a percent fees.
- Automate your banking.
- Create an expense account.
- Deposit monthly expenditure money in this account.
- Create and maintain a monthly budget.
- Watch out for small but frequent expenses.
- Create a goal oriented savings account(splurge). For trips, splurges and so on.
- Create an emergency fund (EF) account, ideally this account is not easy to withdraw from.
- Keep mone to cover at least 3 months of expenses in EF.
- Create an expense account.
- Property
- Dont invest in property.
- Only buy the house you are going to live in.
- Always negotiate your mortgage down.
- Dont fall for mortgage traps, getting extras. Focus on keeping fees down.
- Credit and debt
- Use your splurge account to get rid off any debts.
- Get rid off your credit card.
- Unless you can automate credit card bill payment, having it is not worth it.
- Most miles etc are useless and not worth the risk of having a credit card.
- Earn more.
- Learn to negotiate your pay.
- Figure out a way to get extra income.
- Sell stuff you dont need.
- Acquire skills to start a side business.
- Give back
- Whatever little you can.
Most important lesson you can learn is - Power Of Compounding. A small pay rise every year, will compound to bring you lot of money in next 10-20-30 years. All small fees you save, will add up to become significant over a period of time. Think long term.