What distinguishes successful investors from normal investors? This question is complex. First and foremost, however, there are a number of actions and simple rules that you can implement immediately. We present four tips for more financial freedom.
Learn what successful investors do
Financial freedom is an issue that more and more people are proactively addressing. There are many reasons for this. The two biggest causes are likely to be worries about pensions and the persistent phase of low or negative interest rates for overnight money accounts and savings books.
It is therefore essential to take care of your own retirement provision yourself. The most important instrument is of course your money. But money alone won’t help you. Using your money properly is crucial for your economic success.
4 tips for more financial freedom in old age
Successful investors can serve as role models. We don’t want to look at the stocks in which they invest their money, but rather analyze their behavior. Because we can (almost) all easily implement the tips that successful investors follow.
For years the business journalist Suzanne Woolley busy with the little tricks and actions of successful investors. We want to bring you closer to what she has learned.
1. Save on time and automatically
One of the biggest problems many people have is that they are spending the money that is available to them. First of all, this is not reprehensible and, depending on your character and inclination, even human.
For this reason, you should avoid spending all of your money. How it works? Very easily! Set up one or more standing orders on your paycheck that go out on the 1st of the month or even a few days before.
With these standing orders, you push a certain proportion of your money to one or more accounts that you cannot access with a credit or debit card. Two examples of this would be a standing order for a pension account and a deposit with shares.
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2. Build up a financial reserve for emergencies
Count on the unpredictable! This much-quoted saying is particularly important for your retirement provision and your management of money. Translated, this means something like this: Put enough money aside for an emergency so that you don’t have to take out loans in case of doubt.
Even if you don’t expect it, it can always happen that your car breaks down tomorrow, that your house is (partially) destroyed due to a natural disaster or that you lose your job due to bankruptcy. You should be prepared for all of these cases.
This is exactly why you can set up another account, into which you pay an amount every month in case of an emergency. That could be 100 euros, for example. If nothing happens to you for five years, you have already saved 6,000 euros on a new used car or something similar in this way.
3. Get an overview of your expenses and exploit potential savings
The penultimate tip to getting more out of your existing money in the long run is to know all of your income and expenses. In particular, the expenses play a decisive role. List them all on your computer or on a piece of paper.
How much money do you pay monthly or annually for streaming services, pay TV, fitness memberships, insurance and the like? Almost everyone pays money for at least one activity or subscription that he or she does not use.
A simple rule of thumb is your usage. If you haven’t seen a single movie on Disney Plus in the last three or six months, you don’t need the subscription.
If you don’t want to part with it right away, write down the start date and write a reminder in three or six months. If you still haven’t watched a series, you can cancel your subscription.
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Those amounts add up. A streaming service can save you ten euros. If you then cancel your gym membership, the amount increases to 25 euros per month. That’s already 300 euros a year.
There is also a lot of potential for savings in the financial area. Let your bank break down how much money the account management or your credit card costs you per year. If this results in immense costs, you can look around for other financial institutions. There are enough alternatives.
4. Never spend more money than you have available
The last tip you should learn from successful investors is probably the simplest one: Never spend more money than you currently have.
That means: watch your consumption. If you don’t have 1,000 euros for a new bike and your old one is still working, you shouldn’t buy a new one. Instead, save a few more months until you can afford it on your own (see 1.).
If you instead give in to your short-term inclinations and take out loans from banks or even friends, you build a network of dependencies, which means that at some point the entire income flows into the repayment of liabilities.
