FOUR STRATEGIES FOR THE ONLINE INVESTOR IN UNCERTAIN TIMES

AVOID EXTRAVAGANCES

People who have a poor saving record often do not realize how much money they simply let slip through their fingers. It is not always the large purchases that may be unwise in uncertain and difficult times but it is most important that a close watch be applied to all purchases in these days of turmoil and uncertainty on the world's financial markets.
A friend told me of his doctor who is still practising in his 80's. He drove a Porsche and enjoyed expensive wines which he consumed regularly. Fast cars and a taste for good wine has, over the years, cost him so much money that the good doctor was unable to retire at 65 because he had saved so little money. I should add that his wife had expensive tastes as well.
This is a somewhat extreme case but it shows how real money can be spent when one has a taste for the finer things in life. It is not unreasonable to expect that a medical practitioner could reasonably have spending habits that are above the average because of the higher earning capacity. Often, the spending pattern flows into other areas as well and before long these bad habits affect the whole pattern of spending and saving.
You do not have to waste your money on nice cars and fine wines to be extravagant in your spending.
I know a young man called Dave. He had a most extensive DVD collection. It is cheaper than going to the movies - which may be true - but the outlay he made was far in excess of what would be regarded as being prudent for a young man planning to marry.
Another friend had a wife who was extremely generous, and she was always buying things, not only for herself, but also for other friends as well. She always justified her purchases on the basis that she was able to buy so well and save so much on each purchase. Her husband told me one day that it is very possible to go broke saving money. I did not understand what he meant by that so I asked him to explain.
He remarked that it was possible to make large savings by buying bargains. But he said that to make a saving, money had to be spent. It is possible to save a huge sum of money by purchasing these bargains but unfortunately a huge outlay must be made in order to complete these purchases and it is very possible to run out of money even though you seemed to have saved so much in the process.
Extravagances can be as simple as buying a coffee and a couple of donuts every time you go shopping. It becomes a habit and this money is not spent because you are in desperate need of refreshment but purely because it becomes a part of the shopping routine. As we stated at the beginning of the article, these patterns often lead to a more disastrous problem of not controlling spending.

SAVE AS MUCH AS POSSIBLE - AND THEN SOME

Some people are naturally frugal and saving is no difficulty for these happy souls. However, for most of us, saving is a chore and it is most important to develop a saving habit very early in life. Often, a budget can be of great assistance in establishing a savings program. If a budget is used, it is very helpful to record all spending, whether it is for legitimate expenses or not. This then produces an accurate record of the outlays made over a specific period. These outlays can then be classified into essential spending, discretionary spending and wastefulness. When a record of this type is kept it can be very illuminating to see exactly how the weekly pay packet is spent. Essential spending usually cannot be modified or reduced. When waste is identified, it can be eliminated. Discretionary spending is the area where savings can be made. Careful examination of this type of spending can often reveal where savings can be made. Unless you itemize these things then it may be that these savings are not identified.

WORK AS HARD AS YOU CAN

This strategy has two parts to it. If a person is self employed, he or she usually works much harder than is readily apparent. In times of financial uncertainty, the self employed person must look closely at costs. If possible, these should be reduced. I knew a man some years ago who established his business in 1928 just a year before the Great Depression beginning in 1929. I asked him how he managed during this period. He remarked that he had done well. He had the advantage that he had a product that was in demand. He watched his costs very closely and even though his was a fledgling business, he survived this period better than most of his competitors. Another friend of that era started his business in 1930. He did not survive and changed direction after a couple of years. He told me later that he did not concentrate all his efforts in marketing and managing his business as he should, and with the benefit of hindsight, he realized that a greater effort on his part may have made the difference. For the employee, it is essential to demonstrate that you have more energy and greater skills than the next worker. Being the last one to arrive and the first one to leave at the end of the day may not impress an employer all that much when things get tough. Further study or the acquisition of additional skills may recession proof the job.

BE DISCIPLINED WITH YOUR SAVINGS AND ONLINE INVESTING

This is a failing that many of us have. Too often we start out on a project, or an online investment plan, full of enthusiasm and energy, only to find out further down the tack that we have largely given up. Greg is a young man who was shown a very simple savings plan. Under this scheme, he was going to save just three dollars a day, each and every day, bank the money in an online interest bearing account and let it accumulate until he needed it. I asked him how the savings plan was going. He said he was not very diligent and had got behind in his savings. If you do the math using compound interest, $3 per day amounts to about $1000 per year, add to this interest at say 7% and over three or four years this can amount to quite a sum. If you ask a young person to give you $3000 he probably could not, but if he had saved just three dollars per day, he could give you $3000 and still have some left over. This is what discipline can do. Whether it is relation to your savings or investing program, work or budgeting, discipline will pay off handsomely every time.