|by Mr Credit Card|
Yes, Mrs Credit Card and myself have just celebrated our 10th Wedding Anniversary last week. Looking back, I just want to share some financial lessons I have learnt during the last 10 years.
1. Save the bulk of your year end bonus
We have always saved the bulk of our year end bonuses we get from our jobs. This has allowed us to set aside a sizable chuck of savings. This has come in very handy many times during the last 10 years (when we needed to dip into some savings).
2. Buy things that last (not just cheap stuff)
When we just got married, we often had to watch what we spent. Afterall, we had just started our carriers. But there were several times that we probably spent more on goods that we should have, but those lasted a long time. For example, I spent a few hundred dollars on some nice shoes that lasted about 8 years. I bought a couple of designer suits that I still wear today! (and they still look very good). Mrs Credit Card still has business dresses that she bought 10 years ago. I believe they are still in this condition because they are of good quality and they do last (though they cost more).
3. Second Hand Cars really saves you a lot of money
We have had a few cars. All were second hand except one. And we wished we had not bought that new car (because of depreciation). All the second hand cars we bought never gave us any serious problems. We still own a second hand car today.
4. Never assume your kids would like what you bought
Mrs Credit Card toyed about ing a nice big doll house for our daughter. She assumed that she would fall in love with it and spend a lot of time with it. When we finally got it last Christmas, our daughter hardly looked at it! She spends more time drawing with her brothers, playing legos or Thomas the Tank Engine! Just goes to show you should never assume your kids would like what you bought for them.
5. Never assume your kid will like what you want them to do
Mrs Credit Card got my first son to learn to play the voilin when he was four. He was actually pretty good at it and we were all happy about it. Then, due to us moving, relocating, we stopped his voilin lessons and he has since refused to continue learning voilin. My son now likes soccer, baseball and playing chess. He says he does not like football or basketball. Come to think of it, we spent quite a bit of money on his voilin lessons (including ing the voilin and replacing the strings a couple of times). Not to mention the stress of asking him to practice daily! Don’t force something on your kids. They may not only be unhappy, but you end up wasting both time and money!
6. Teach your kids about Money
One thing I have learnt is that you have to teach your kids the value of money. Most people do not learn money management skills from their parents and hence, most are poor at that. I talked to many enterpreneurs and they all teach their kids about business and money and I have started that with our kids. I think we still have a great deal of room to improve, but at least we think about it.
7. Hire a financial advisor early
When you are young and educated, you think you know it all. I started investing myself in both stocks and mutual funds very early on. I really thought I knew it all. Most of you do (especially pf bloggers). But do you know your risk tolerance. Well, I thought I did until the daily volatility of my yahoo, amazon.com and ebay stocks was more than my annual salary!. I’ve made out ok over the years but when I looked back, I could have made much more by truly having a diversified portfolio.
But even here, most people do not understand what a truly diversified portfolio means. Do you know what percentage of the US equity markets consists of large cap, mid cap and small cap stocks? Do you know what percentage of US equities make up the World Equity Indices? What percentage of total Global Capital Markets is fixed income and what percentage is equities? How do you mix in index funds with with superior fund managers? Do you understand what Alpha and Sharpe Ratio is?
Truth is most people (including dare I say pf bloggers, investing bloggers, magazine writers, finance web site writers) do not know that answers to these question. And if you do not know the answers, how can you have a truly diversified portfolio and understand why it is constructed that way.
8. Take your time to your first home
Although most financial advisors and the mainstream press would have you believe that you should your first home as soon as you can afford a downpayment, I think you should think about this issue very carefully. Firstly, you should have a stable job. If you work in a very unstable industry, you probably have to save more to have a “cushion”. Buy only what you can afford. This sounds common sensical but with the real estate shooting through the roof in the last few years, you can get caught up easily and something that you really cannot afford (or one that leaves you no margin for error).
By the way, we bought our first house at a foreclosure auction. This probably saved us close to $50,000. (not bad at all).
9. Time is Money
Sometimes, in a bid to be more frugal, we tend to save money but waste a lot of time. When we were first married, Mrs Credit Card wanted to do the laundry herself (and save the money we would have spent at the laundromat). But this was taking up too much time on Saturdays! And she always accused me of not helping (well, I hate doing laundry). I finally convinced her to send the clothes to the laundry so we do not waste our precious Saturdays arguing over it. She finally agreed and was happy with the decision.
Remember, while you may want to save money, consider how much your time is worth as well.
10. Delayed Gratification
Delayed gratification is one of the most important trait to have for success. We all have our dreams, our dream car, dream house, dream BBQ grill etc. But financially successful people always put off spending on discretionary items until they can easily afford it. Both of us put off ing our house for years until we have really saved enough. We listened to music on my old Dell Laptop for years before ing a Hi-Fi system. We had a 19 inch TV for ages before ing a Home Theater. It is easy to fall into the 0% financing that is so common and is advertized to us everyday. But most people I know got into trouble because they stuff before they can afford it.
We are trying to teach our kids about this too. So far, we think we are on the right track. When we go to Toys R Us, our kids know that we will not be ing anything for them (unless it is their birthday or Christmas). They know that they are only there to ‘look at stuff’. We allow them to use their savings and pocket money to things. But when they realize that they will be using their own money, they stop thinking about ing stuff!
11. Use Reward or Cash Back Credit Cards to Earn Freebies
Both Mrs Credit Card and myself pay our credit bills in full (most of the time anyway). We use our cards to pay for everything, pay in full, and earn either reward points or cash rebates. Our two main cards are the American Express� Preferred Rewards Gold Card (although I have now upgraded to the Platinum Card) and the Blue Cash� from American Express . We have got lots of free airline tickets and cash rebates over the years.
12. Develop Money Trust Between One Another
Since we first dated, we have never had an argument over money. We never blew our money on stuff we cannot afford, nor have we really questioned each other’s expenses. If Mrs Credit Card saw a nice handbag and wants to it, I never question that decision. She has never abused that trust by being a shopperholic and ing a handbag every month! The same goes for me. This makes it so much easier. We had our fights in many other areas, but thankfully, money was never one of them. It’s tough enough to argue about relationships, kids, work etc. The last thing you really need is to argue about money with your partner.
So that’s it – my lessons from 10 years of marriage.