Hello all. I’ve got a favour to ask. I’m working on a follow-up to this personal finance piece (see below), published last month on Biznewz.com, and would greatly appreciate hearing your money management tips. I’m looking for fun, unusual and real life dos and don’ts we can all use. Please mail me yours, as soon as you can. Just a line or a quick pointer would be greatly appreciated.
Have a great weekend.
5 of the best money tips I’ve ever heard, some in strangest of places
The turning point in my personal financial management didn’t come as a result of an accounting course I took to brush up on my number-crunching skills. Or because of any detailed discussions with financial intermediaries or bank managers in my early years of work.
No, my first and most lasting personal finance lesson was delivered to me in an unmarked police car when I was a crime reporter. The tutor was a detective with a handgun strapped to each of his calves, another tucked into the back of his trousers and who knows where else.
It was about 2am in the morning. We were watching dozens of cops in bullet-proof vests quietly scouring a Hillbrow, Johannesburg street, some slipping into the stairwells of dilapidated apartment blocks, as an anti-drugs police operation kicked into gear.
It was a very exciting event, particularly later when residents accused of being drug dealers were forced out of their slumber, ordered to make themselves decent and frog-marched to armoured vans. The odd gunshot or two punctuated the air, but that’s what you’d expect on any night of the week in Hillbrow.
It was in the slow, quiet build up to the manoeuvre that this policeman shared his tips on how to grow a portfolio of assets out of a limited income. He told me how he managed his own saving and investing strategy.
I won’t go into the full details now, but the main take-aways were these: he had developed a portfolio of residential properties by maintaining a good credit rating, saving deposits and then borrowing money from a bank to fund the balance of his purchases. He had picked his properties with great care in order to secure reliable tenants.
He didn’t buy properties without secure parking, for example, because the most valuable possession a tenant is likely to own is a car, was his thinking. Go for relatively low-maintenance properties and make absolutely sure that the rentals in the area are in line with what you will need to fund the mortgage, was another point he made.
He didn’t sell properties, either. His main aim was develop a passive income stream net of costs.
By getting started as soon as possible after working, he had achieved just that by his early 30s. Just goes to show: you don’t need to be corrupt to build assets as a policeman.
Another person who has given me sound money advice has been my mother-in-law. A bit scatty (in the nicest possible way), and best known for her philosophical thoughts on religious matters, she once offered this pearl: if you possibly can, try to live off one salary before you have children.
This way you can save a lump sum to fund a decent investment later or cater for a period in your life when cash proves to be a bit tight. And, because you are used to living off half of what you earn, it won’t come as a shock when you really do need to be clever with a limited income.
Now, I must confess, although these are some of the best money tips I’ve ever heard, I’ve had some of the lessons reinforced the hard way. For example, I haven’t always bought property with secure parking – and that has generally not been to my advantage.
However, while I am not known for listening attentively to my mother-in-law at the best of times, I have paid heed to that little nugget. It really is amazing how much you can save in a relatively short period if you consistently hive off half your income.
Five great money tips
- Do whatever it takes to maintain your good reputation for repaying loans and accounts. With a good credit record, it is easier to borrow money from a bank for big asset purchases.
- Buy property as soon as you can. It is an asset class that can help ordinary salary earners grow their wealth. But it takes time, so you do need to start early.
- Don’t just buy any property. Research the area, particularly average rentals, so that you can increase your chances of your bond repayments being covered by a tenant.
- Never buy a property without secure parking. In South Africa, keeping your car safe is more important than a nice garden or a good view.
- Before you have children, try to live off one salary and save the other. This way you’ll build a nest egg that you can put to good use later – for example, to use as a cash deposit to fund a property purchase – and you can get used to managing your money on a tight budget.