The topic of money has always interested Inga Bolukemini. Why does one person manage to live comfortably and save more with the same amount of money, while another barely survives from paycheck to paycheck? Inga is an investor with 10 plus years of experience and a personal finance mentor. She appreciates that there is such a wide source of information available in Latvian on various investment-related topics as Investoru Klubs, which she reads herself every day and recommends to her clients. Read more about Inga’s approach to financial planning below!
What is the main thing you want to teach your clients about finance?
It doesn’t matter if you have 10, 100 or 1000 free euros, you have to use them wisely. People often say that if they had 20% more income, they would do things differently. But look 10 years ahead! Your income has increased, but are you spending it differently? Mostly no.
It’s more important to get your financial basics in order, no matter how big your salary is. It is similar to building a house – even if you build a beautiful and exclusive house, but its foundations are unstable, nothing good will happen. And vice versa – on solid foundations, even a simple house will hold up well and be much more stable. Also, many people think that someone will come and arrange their finances for them – the employer, the state, the spouse… But in reality, each of us is the master of our own money. Only we can change ourselves.
So what is included in these financial foundations, how to arrange them?
According to the theory, there are 7 levels of prosperity. In the first 3, it doesn’t matter how big the income is, but the common feature is living from paycheck to paycheck, chaos in finances. People at these levels sometimes don’t even know how much they earn, where they spend it, nothing is left at the end of the month, there is no security cushion and goals, or they are chaotic, unstable. Even a large income doesn’t mean much if you don’t know how to use it. There must be a safety cushion, the knowledge that we can spend a certain part of the income – this forms the stable foundation.
Above the mentioned 3 levels, plans for where we will be financially in 1-2 years – investments, pension funds, etc. already begin. On the other hand, the highest level is when we can not work for money, we can develop, donate, help others, because money is not the main theme of life, after which we subordinate everything else.
Do you remember how you built your own financial foundations and how you did with it?
Yes, I was very lucky to have a good mentor – my grandmother. Back then there was no internet, stocks, foundations, but she taught a simple principle: it’s great to have someone pay you for something you own, if you’ve created something that brings money back. I also remember how she asked me if 1000 lats is a lot or a little. And explained that it depends on whether we are talking about earning or spending 1000 lats. It is very easy to spend such an amount (or any other larger amount these days), but to earn the same amount. Then you have to connect the mind. I am glad that I was given these basics as a child. I also know – the more money you have, the less you want to brag about it. At one point, it is no longer necessary to buy the most expensive car to prove something to someone, it is more important to feel for myself that I am buying something that makes my life or everyday life more beautiful, more comfortable, better, that it is enough, that it is not lacking. It’s a light feeling.
Assuming the basics are in place, what happens next once the airbag is in place?
Just as we used to pay into our security cushion, we can invest the same or more amount in our future well-being. 10-20-30% of income – according to possibilities. It’s true, I recommend not investing everything and leaving a part for your own pleasure, because art is also living here and now while thinking about the future.
Where to invest?
I have a virtual portfolio drawn in my imagination with 60% long-term and 40% short-term investments that I can play around with. The majority or about 70% of investments are in ETFs and about 30% in stocks of large companies. Separately, I have real estate and quite a few cryptocurrencies – just to be in this niche as well.
There is a saying that you should not think about how to spend less, you should rather think about how to earn more. But is this approach always correct?
If the basics are in order, earning more is good, because then you can save more and build your future well-being more aggressively, you can help others more, etc., on the other hand, if you don’t know how to handle money, even a 10,000 euro salary supplement won’t change anything. I have read articles about very wealthy actors and athletes in the world who have owned millions but later experienced bankruptcy. Millions can also be easily spent on the most expensive things – expensive trips, expensive hobbies, exclusive clothes, etc. If you earn more but don’t change your spending habits, it doesn’t make much sense.
Why is there a significant predominance of men among investors?
In general, according to statistics, women are better investors, because they take less risk, think more. Historically, men are hunters and risk-takers, but until recently 50-60 years ago, a woman’s place was not on Wall Street or in a bank, her place was in the kitchen and with children, and this also explains the more cautious approach with finances. Globally, female investors also suffer smaller losses on average than men. I think that every year the proportion of women among investors will only increase.
How not to stress when there is a lot of red in the portfolio?
At such a moment, the main thing is not to sell what is owned and what is in the red. If there is anxiety, you can not buy anything new, but it would be better to buy it as usual. I wonder about this paradox – when stores have sales, people go there and are ready to stand in long lines. When stock markets are low, they panic. It would be most appropriate to increase the amount of investment at that moment, if possible. But human money psychology is arranged differently.
How important is it to regularly monitor what is happening in the portfolio?
Investing in reality is not as intense as in the movies. If the plans are long-term, if the portfolio is diversified, then it is even better if we look at it less often. Those numbers don’t add up if we look at them more. I have even observed – the more we look, the more we want to sell something. It is different if there is a plan to make money in the short term, then you have to follow what is happening more intensively. When buying shares, it is generally important to know why we are doing it, what is the purpose of the purchase, how long I will keep these shares, where these shares are in my investment portfolio. It can’t be just a joke. Is it fashionable? Because everyone does? Because you want to earn? Any other reason?
What about obtaining information in general – how often should it be done? Is it important to keep track of economic processes?
Knowledge always helps to better understand situations and make decisions. I recommend reading as well Investors Club, because here is all the current information about investments, new IPOs (including expert comments about them), Latvian and foreign companies. The portal often helps to better understand in which directions you should be even more interested. Today, the disclaimer that we do not know something should no longer be an excuse. 10 years ago we had much less information, we could use that as an excuse, but now there are many sources, they are professional.
Why should others also read Investors Club?
When I talk about investments, I always mention that the Baltic news is particularly useful in the Investors Club – everything current about companies on the local stock exchange. You don’t have to search in different sources yourself, everything is already prepared and organized for reading. For a few euros a month, this option is available to everyone. So convenient! I am very positive that there is such a media in Latvia.
Maybe becoming financially educated would be a good New Year’s resolution?
Definitely! It is the best thing we can do for ourselves and our children, even and especially if our parents did not teach us this when we were children. Make it a goal in the new year to learn how to invest. And start with the Investors Club. Fix your relationship with money!
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2024-01-03 09:24:20
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