Investing can be daunting, especially for those who are new to it. But as we kick off 2022 there is no better time to start putting your money to work for you.
Author of Bulletproof Investing: Gaining Financial Control in Uncertain Times, James Fitzgerald has listed his 22 top tips for getting on top of your portfolio in 2022.
Here are Fitzgeralds 22 top tips.
1. Build habits
Start the new year by building positive habits around your money – whether it is saving, spending or investing,” he said.
“Identify productive behaviour and take action to stick with it. Commit to 21 successive days of repeating a new habit and you are likely to retain it.”
Wellbeing comes from more than just being financially secure Fitzgerald said, which is why taking care of yourself is an important element.
“Healthy body, healthy mind. Make the first hour of the day just for you. Wake up early and get your heart going,” he said.
3. Find your motivation
“Think about what motivates you to save money and build wealth. What do you want? How will your wealth benefit others as well as you?,” Fitzgerald said.
“When you have worked that out, it will motivate you to achieve your goals – and when things become challenging it will help you focus again and keep going.”
4. Manage screen time
The average Australian spends 5.5 hours a day looking at their smartphone alone, Fitzgerald said.
“Having good habits around screen time is essential to avoiding burnout and attaining and sustaining success,” he said.
“Try to turn off your phone for two hours before bedtime and on at least one day of the weekend.”
5. Set goals and rewards
Set small goals and reward yourself when you meet them. Chart your progress to remind yourself how far you have come. Remember, no-one gets rich overnight,” Fitzgerald said.
6. Look at the land, not the home
As an avid real estate investor, Fitzgerald said it was important to pay attention to the land, not the house that sits on it.
“Land values will always increase more than the building, which generally decreases in value as it gets older,” he said.
“For that reason, land with a house on it is a better investment than an apartment.”
7. Find a mentor
“Ask someone who is financially successful and who has values and beliefs that fit with yours if they will mentor you. It could be a family member, friend, work colleague or neighbour,” Fitzgerald said.
“Catch up with them for coffee or a sandwich every now and then and ask them to help you better understand how to be successful with money.”
8. Cash can be useful
While most of our spending is done online these days, Fitzgerald said having physical cash can be the best tool to help you save.
“It’s not fashionable to use cash any more, but by withdrawing cash each week for your discretionary expenses (eating out, drinks, coffees, movies), you can curb your spending,” he said.
“Once it’s gone, that’s it. Keep track of how much you are spending and eliminate random spending.”
9. Streamline your bank accounts
There are so many options for bank accounts these days but it’s best to keep it simple, Fitzgerald said.
“Set up three accounts: an everyday account, a ‘future’ account and an emergency account,” he said.
“Get your salary deposited into the everyday account and pay your day-to-day expenses out of it. Set up the ‘future’ account with a different bank and set up an automatic transfer of 10 per cent of your pay into this from the everyday account.
“The emergency account should be similar to the ‘future’ account but used only for one-off expenses that pop up during the year, such as medical bills, insurance and holidays.”
10. Supercharge your savings
Fitzgerald said if your goal was to build up your savings, then it may be time to put in the extra work.
“Do some overtime, take a second job or ask for a pay rise. Then try to increase your savings allocation from 10 per cent to 15 or even 20 per cent. It will make a huge difference,” he said.
11. Consider a term deposit
While not always offering the best interest rates at the moment, term deposits are still a good option to make sure your money is safely locked away.
“If you have managed to save $10,000 or more, place it in a term deposit so it starts earning some interest,” Fitzgerald said.
12. Look after your mental health
“Lack of control over personal finances can cause enormous stress and worry. Seek professional help if you are suffering,” Fitzgerald said.
“A problem shared is a problem halved.”
13. Cash flow is important
Fitzgerald said cash flow could be like oxygen and it was important to keep your investments in check and to not overextend yourself.
“Invest in assets that pay for themselves. Don’t let the holding of your investment exceed 10 per cent of your take home pay,” he said.
14. Review your home loan
“Is it time to switch from variable to fixed rate? It’s a good idea to fix your home loan for your principal place of residence,” Fitzgerald said.
“Even saving half a per cent each year will add up to good savings and potentially take years off your mortgage.”
15. Put your ‘team’ in place
Fitzgerald said to be a successful investor, you needed a good accountant, mortgage broker or banker, property manager and mentor.
“These people will be crucial to your success,” he said.
16. Consider your options
Fitzgerald said it may be worth considering using other people’s money to begin investing, whether that be a small loan or asking for money to invest from friends and family.
Perhaps you could ask for money as your Christmas present to get that initial investment going.
17. Do your research
“Investigate any government grants or concessions you are eligible for, such as first home-buyers grants, concessions on stamp duty or other financial assistance packages,” Fitzgerald said.
18. Differentiate between ‘needs’ and ‘wants’
While that new outfit may look amazing, Fitzgerald said it was important to keep your eyes on your long-term goals.
“We need food and a roof over our heads. We don’t need an Xbox, concert tickets or an expensive new handbag,” he said.
“Make a conscious decision to be disciplined about what you spend money on.”
19. Detox from your subscription services
Even spending less than $10 a month on pay TV services can add up – especially if you have three or four.
Fitzgerald said a good way to get back on top of what you don’t need was to cancel your cards and order new ones to force a reset on all those commitments.
20. Be a reader
Learning through reading is a powerful habit. Expand your knowledge on things financial and otherwise.
There is plenty of information out there on investing, and while one book or opinion may not ring true for you, there are always other options.
21. Look at your influences
Fitzgerald said it could make a big difference to spend time with like-minded people who aspired to do well in life.
“The theory is that you will be as successful as the average of the 10 people with whom you spend the most time,” he said.
22. There is no time like the present
“If you’re fortunate enough to be in a position to invest in something today, do it,” Fitzgerald said.
“As the past two years have shown us so clearly, you never know what’s around the corner.”