Numbers game: 47 rules about money

As a personal finance writer I dwell upon how we use and save money more often than most people. Through my own experiences and those of readers I have learned an awful lot about money in my 47 years on this planet.

So I thought I would write the 47 best money rules I have learned in my life. Some have been gleaned from my own successes and mistakes, others through reading and educating myself and still more by listening to others.

General:

1 Track your spending. You can't budget if you don't know what you're spending.

2 Needs and wants are often confused. This is perhaps the biggest financial mistake that people make.

3 Talk money with those linked to you financially. Whether it's parents, partners, children, employers, or business associates, get financial discussions out in theopen.

4 People are too quick to judge others' financial decisions, me included. But that needs to be balanced against my next rule, number 5.

5 People will justify their bad financial decisions to the end of the earth. "I did all the right research," one finance company investor told me as my eyebrows went through my hairline.

6 Monkey see monkey do. Children learn about finances by watching their parents, not listening to hypocritical lectures.

7 You can earn a good salary and still be poor. Budget advice services sometimes see people with six-figure salaries who still can't make ends meet.

8 People can and do lose all their money. A couple of times a generation a collapse such as Black Monday arrives with disastrous effects for thousands of people. Others fall for tricksters such as the off-the-plan apartment salespeople or Ponzi scheme promoters.

9 Entrepreneurship is good. Grounded but entrepreneurial people do well financially. They may not succeed in making their fortune first time around, but often do if they persevere.

10 You can be a capitalist and still have a social conscience. I admire philanthropists.

11 You don't have to have a high-paying job to get wealthy. I once interviewed a successful property investor who worked by day on the shop floor at Noel Leeming and made his real money after 5pm.

12 Don't blame your parents, your children, your partner or your education. Responsibility is good when it comes to finances.

13 Even beneficiaries can save. Some people live within their means no matter how little they earn. Saving money is a choice.

14 Some people want to be poor. They think they're poor and that they'll always be poor and sabotage their financial future.

15 Pay your taxes on time. The IRD has a big stick.

Spending:16 I regret frittering money on coffees and unnecessary eating out. It would be better to direct that money towards savings.

17 Spending money on experiences is good spending. I am eternally grateful that I sold all but one of my shares at age 22 (by coincidence in August 1987) and went backpacking through Latin America. It's good spending if the experience enriches life.

18 Braking wastes fuel. This was one of those wonderful chestnuts that it takes a few seconds to get your head around. If you drive too fast and brake regularly, you're using petrol on wasted momentum. Driving well can save 10 per cent of your fuel bill.

19 It's moronic to incur fines. Like the maniac driver in a big red American-style pickup truck who overtook me on State Highway 2 on December 17, just to be pulled over and fined.

20 You can get rich one dollar at a time. Every dollar is precious. Think before you spend it.

Debt:

21 Save before you buy. A bit of a radical concept in 2011, but it can change people's financial future.

22 Interest-free hire purchase deals are for suckers. You still pay ad establishment fee and the majority of people fail to clear the debt on time and pay interest anyway.

23 Credit cards make you look rich. Anyone can live well for a few years, but the debt catches up.

24 The only "good debt" is mortgage debt. Provided you don't over-leverage yourself.

25 Interest payments on personal loans, credit cards and HP are "idiot tax". Why throw money away unnecessarily?

26 Having a credit card debt need not be the norm. A credit card limit is a safety net, not personal money to spend.

Investments and financial products:

27 Beware of investments discussed at barbecues. When the whole world is piling into an investment such as property, gold, tech shares and so on, you've almost certainly missed the boat.

28 Buy property young, preferably in your 20s. Move heaven and earth to get the deposit. Rent is wasted money.

29 Any offer that comes over the telephone isn't worth having. Just ask the people who were cold called by Blue Chip, timeshare schemes, or horse betting scams.

30 Having life insurance is a good idea. Paying that monthly premium feels like dead money (excuse the pun). The payout when you die can give your beneficiaries choices at a difficult time in life.

31 An entire class of investment can crash and burn. Who remembers: Equiticorp, Chase Corporation, Renouf Corp, Judge Corp and more that collapsed like a pack of cards after the 1987 crash? Then there were tech stocks, mortgage-backed securities and finance company debentures.

32 Shares can be "safer" in the long term than bank deposits. The argument, which I first read on the Motley Fool website, is that over 10 or 20 years good share investments will keep pace with inflation, while bank deposits will be eroded.

33 KiwiSaver is good. This is a red rag to many readers. Government-led retirement programmes get people saving for their future.

34 Insurance policies are full of gotchas. For goodness sake READ EVERY WORD of your policy.

35 Property investment isn't always as safe as bricks and mortar. It can turn to custard. Mortgagee sales happen all the time - especially with investment properties.

36 Markets overshoot and undershoot. If a market's fundamentals (such as the yield on investment property) are out of historic kilter the market is probably brewing a bubble.

37 The best time to buy is just after a crash. Buy fundamentally good investments when everyone else is bailing out of the market.

38 Beware of investing just to save tax. Is the investment actually any good or is someone desperate to sell it to you?

Financial advice and salespeople:

39 Take your advice from people who have been through several cycles. Johnny-come-latelies going through their first financial cycle underestimate the risks.

40 Your money is your responsibility. Yes, employ a financial adviser, mortgage broker, accountant and other professionals, but make sure you understand what they tell you and double-check that your money is adequately spread.

41 Seminar presenters aren't always financial experts. They probably make their money from seminars, not from the actual investment they're preaching about.

42 Credit rating agencies don't always get it right. Some companies deceive the agencies, others are part of an industry that may not be well understood by the ratings agencies.

43 Don't believe the get-rich-quick conmen. You should aim to get richer slowly, but steadily.

44 Government subsidies are a magnet for spruikers. Sharks swarm around government money. Just look at the people selling insulation, heating, and ventilation or those who have been caught selling KiwiSaver door-to-door.

Others:

45 Passive cash-flow rules. Finding ways to make money that don't need your hourly input makes sense.

46 Telling the truth infuriates some readers. Suggesting that people can change their financial ways brings in a flurry of outraged emails.

47 You can learn more about money. The easiest and cheapest way to improve your knowledge is to get a book out of the library.