Ten truths about money

Last updated 05:30 27/06/2013

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Over time I have gleaned a lot of information about personal finance from a number of sources: Martin Hawes, Money magazine, various bloggers, and of course my parents (not that I always listened, but they are actually quite clever). I have put it all together and added my own experience and perspective, and come up with my ten truths about money.

1. Time is money

Compound interest is the "fountain of youth" of the finance world. But it takes time to work, so you have start now and need to be patient. For most of us, being truly financially well off is a lifetime of effort, requiring care and attention. The sooner we realise and accept this, the better.

2. From little things, big things grow

I stole this from a super fund commercial, but it is a great piece of money-wisdom. I have a habit of "rounding down" – if I get paid $104.25, I flick that $4.25 into a savings account. Got a few dollars in your wallet? Put them in a jar, or a piggy bank. Without realising it you'll amass a small fortune in change.

3. Millionaires don’t 'act' like millionaires

Anyone could be a millionaire with some patience: it is rare for anyone under the age of 50 to have anything more than a million bucks without a windfall like an inheritance or having set up and sold a business or a heap of property, all of which takes a lot of money in the first place. Millionaires don't just happen overnight: they are highly organised and educated about their financial situation and goals; they are religious savers, and are not wasteful; and they take calculated risks. These are traits everyone should adopt.

4. Money can't buy happiness. But it can buy things or experiences that make you happy.

It is true that money can't buy happiness. Ask any woman who has bought the latest fashion item because she just 'had to have it', only to get it home and realise the unbearable truth that neon yellow really doesn't look that good on most ordinary people. However, money can accentuate your life if you use it needfully. By this I mean using money to enhance or add value to areas of your life that make you truly happy. If you’re a marathon runner, then nothing is more glorious than a brand new pair of runners or a two-hour leg rubdown after a race. You like pigeon racing – buy a new pigeon. Spending thoughtlessly brings guilt, stress and ultimately unhappiness. Spending mindfully can help you build a better quality of life.

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5. You can choose what you do, but you can't choose what you love to do.

Central to having money is of course earning it. I truly believe there are few people in the world who are lucky enough to have pursued a passion and turned it into their daily work. I’m not sure "eat chocolates and read novels" is on any job description I’ve ever seen! I have learnt the hard way not to stay in a job that makes me miserable. It is simply not worth it – you will end up limiting your own earning potential as you eventually stop striving for success. Try to be one of the lucky few. But if you can’t make a change at the moment, or in the foreseeable future, understand and accept that your job is a vehicle to allow you to do other things that do make you happy.

6. Assess everything on a '$1 per wear' basis

I have my mother to thank for this one. Everything I buy – clothes, shoes, household items – is assessed on the basis of "Will I wear/use this enough for to only cost me $1 per wear/use?" Now obviously things like wedding dresses, for example, don't fall into this. But next time you go to buy that neon yellow "must have", try thinking this thought first. You might just put it back.

7. Own only two types of things: those that are beautiful, and those that are useful. Anything else is just clutter.

This is a quote I saw years and years ago, and as hoarder (just a minor one, I haven’t graduated to the pros like some of those TV shows you see), it rang true for me. I wasted a fair bit of money on stuff that had no value (see 4 above. And 6.). Sometimes you can get something that is beautiful and useful, and this brings me a not unsubstantial bit of joy.

8. Pay yourself first

You'll see this in most "tips about money" columns – always, always pay yourself first. That is, put your savings away before everything else. If your company payroll can do a salary split, get your savings paid into a separate account. Then pay your bills, and then you get to spend whatever is left. This is called a budget, and it is not as scary, or boring, as some people would make it out to be.

9. Sometimes you have to spend to save.

Things like big appliances, a decent car, good-quality clothing items or shoes can often be expensive in the first instance, but save you money in the long term. Buying an inferior quality product may be cheaper now, but could cost you more in the long run as you replace parts, pay for maintenance, or end up wearing it out before you've got your $1 per wear/use out of it. This doesn't mean you have to have the new model of everything; quality does not always equal popularity. It does mean do your research on big or important purchases and spend wisely.

10. Being "wealthy" means having enough money to be protected, and comfortable; having the means to obtain what you need to survive and also what you want to enjoy your life.

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