Enter Jason Zweig, the most famous proponent of neuroeconomics with ‘Your Money, Your Brain’, and he’s got some great news. It’s not me. It’s my brain that’s letting everyone down. Here are some of the amazing things he suggests.

Out Of The Cave

Sadly, our brains didn’t evolve amongst the flashing lights of the stock exchange. We came from caves and our brains evolved to help us survive as long as possible and maintain the existence of our clan. In other words, we’re hardwired towards day-to-day survival as opposed to having a fantastic ability to plan for and envision our long-term financial security. We might struggle with our savings because our ability to envision decades ahead isn’t very well-developed. Brain Short Circuit: If all we can deal with is the day-to-day, make a couple of changes in yours that will save you money and invest it in your savings account. Or take yourself out of the equation and make it all automatic. Do not, ever, touch your emergency account unless it’s something you will still consider emergency level in 5 years time.

Swing At Every Pitch

Warren Buffett, surely a man who’s brain has evolved far beyond my own, loves to remind us that we don’t have to swing at every pitch. We don’t have to jump at every amazing investment that comes our way, every ‘sure-thing’ money making scheme. So why do we? Zweig says it’s because our brain is hardwired to action. Waiting for the right opportunity is a discipline that it might take a long time to develop. Brain Short Circuit: Understanding your own desire to make things happen now is a powerful tool. It’s like the millions of investors who change their investments every ten seconds. Put together a strategy you’re comfortable with and stick with it. Make the move when the right opportunity comes along, whatever your brain is telling you.

Seeing Red

Zweig suggests an amazing thing- amazing because it is so obvious, you can’t believe you hadn’t already thought of it. Back in the day before Internet, how often did people check their stocks? Probably around once a week, with the Saturday papers. These days, with iPhones, office jobs, emails, we could check 5 to ten times daily. And when we see red, our whole body goes into automatic defense mode. We probably don’t even recognise the stimulants coming from the brain, making us jumpy, constantly update our portfolios or panic and sell. Long-term investment has always been a key criteria for financial experts, and technology, Zweig suggests, has made it harder, not easier, to be a sound long-term investor. Brain Short Circuit: Recognise your body’s automatic panic button and stop checking the ups and downs of the stock market on an hourly basis. As Zweig says, technology is a tool, not an automatic path to great investing, and we should use it as such.

As someone who is aspiring to losing weight and getting fit, I struggle to cancel my membership as I know I really should be going. However, I have looked back at my calendar and realised that particular months are more busy for me than normal – meaning my ability to even remotely attend the gym are hindered. This is where I got my great idea!

Freezing your gym membership temporarily

I always knew you could pause your membership indefinitely for a small fee, though never looked into it. Why is it that I know I am frantically busy in April and May yet still keep paying fortnightly payments to Fitness First? Bit silly of me honestly.

Freeze your gym membership in Winter (pardon the pun)

I have opted to freeze my membership in the middle of Winter when I know I won’t be going. That’s a good 3 months of savings by been realistic with myself. Rough calculations show that I will save $210 by freezing my membership.

The only catch when freezing your membership

Often gyms will charge you a fee to pause your membership. I haven’t asked Fitness First yet what the cost of freezing is, though will be asking asap and hopefully updating this post. Either way, I am certain it won’t outweigh the savings of $210.

Oh by the way – these calculations are just for my memberships costs, this excludes the fact we also have another person in the family in the same boat, so it could actually be a saving of $420.

Here is a way that I recently got some cash back by ringing my insurance company (who provide me with car insurance and home and contents insurance) – it took a mere 5 minutes but resulted in nearly $700 in cash back into my pocket.

A quick intro to what excess means

Excess is the term given to the amount you will need to pay in order to initiate a claim with your insurance company. For example you might be insured for $10,000 of home and contents, though you will need to pay an excess of between $100 – $1500 in order to make a claim.

You can increase your excess

Something many people don’t often realise is that by having an increased excess amount, e.g. paying more in the event of a claim, you can reduce your yearly premium substantially and in turn the amount you have to pay in a lump sum to your insurance company.

It means that in the event of a claim, you will have a higher initial figure to pay in order to claim. This can work in both a positive and negative way.

You can change your excess, mid policy if you want

If you are like me and 6 months into a 12 month policy (on home and contents insurance + car insurance) you can ring your insurance company and request to change your excess. You can reduce your excess and owe them more money or you can increase your excess in exchange for a refund towards part of your policy – it really depends on your personal appetite for risk.

I increased my excess & here’s why

I didn’t really consider my excess when initially signing up, instead just hunting the best deal possible for full insurance that covered my requirements. Now that I need to save some more money, I have opted to increase my excess in order to receive a small refund.

Although this means I will have to pay more should a claim arise, to date I have had zero claims since ever buying my first car or home insurance policy. This doesn’t mean I won’t require a claim into the future, though the upfront savings from a year or two of taking the risk are personally worth it for me. Especially if it means pocketing $700 a car for taking on the risk of having a $700 higher excess – the savings in the first year alone will cover it.

Not a bad way for me to take on a slightly higher risk in return for freeing up some extra cash. The extra money I intend to invest in ways that should make me more money – making money that was otherwise idle until a claim, start to work harder for my wealth creation desires.

Your thoughts

Drop us a comment below with your thoughts. This saving money idea is definitely not for everyone, though curious on what people think about reducing insurance to save more money.

The Borrower Is Slave To The Lender

The writers of the Book Of Proverbs, working over a thousand years ago, would have a lot to say about the current state of affairs. With personal debt at record levels, and debt crises between countries set to make 2012 a tense year, the slavery of borrowing is as fresh now as it was then. So, what’s the lesson? Get out of debt, or at least bad debt. Frugality isn’t so much old-fashioned as it sensible. It’s not about massive gains, but about protecting from massive losses. Conservative, yes. But also quite appealing with the current state of affairs.

Pay Yourself First

From history, we can probably only learn one thing for certain. Everything changes. Nothing stays the same. Kingdoms that looked certain to rise forever, just as quickly fall. The sun becomes the centre of the solar system, and the earth is no longer flat. So how can that one truth affect our finances? Some experts would suggest it’s a big argument in favour for allowing at least part of your investment strategy to include paying yourself fist. Setting aside ten percent of your income every paycheck, to be invested conservatively, might not sound all that inspiring but it will cushion you from the fluctuations that history tells us are bound to happen. Whether or not things get dicier in Europe, and what affect this has on Australia, a savings strategy of at least ten percent isn’t going to let you down.

Stay Flexible

If diversification is a crucial risk-protection, the flexibility is as important. Before we all pull out our yoga mats, consider how flexible your finances currently are. If you needed $5,000, would it be calamitous? Are you over-invested in one area, without an ability to withdraw should cash-flow become a problem? Emergency fund, a mix of long and short-term investment strategies and a manageable level of debt are all powerful tools for your finances.

Everything Turns

The flip-side of constant change is that no period, no matter how dark, can last forever. It would seem that it is anyone’s guess as to what might happen over the next couple of years. The Internet abounds with comparisons to the Great Depression and, in one article, an unexpected allusion to the Dark Ages. Economies inflate and deflate, often involving hardship on a personal level. But if what goes up must come down, we can take some comfort from the fact that the reverse is also true.

A Separate Account

The first thing to do is to get a separate savings account, one which has no debit card attached to it. If possible, even get it separated from your normal account so no late-night netbank transfers become tempting. Best to look for accounts without fees and ones that reward maintaining a certain balance without making withdrawals. Your local bank generally will offer a higher interest on your savings account with those conditions.

Tips

I work in hospitality, and it’s easy to spend the tips you get thoughtlessly on a chocolate bar or a coffee in-between shifts. But how about investing them in your next trip? If you work somewhere other than hospitality, save your loose change at the end of every day as suggested by Janet McCartney at Associated Content. Don’t just save the silver, put aside all your gold as well.

Direct Deposit

Get serious about your travel plans by putting money into your savings account as soon as your pay is deposited. Make an automatic deduction of whatever your budget can afford, and watch your travel savings grow. Another idea is to use the income from a second job or hobby, and get it automatically deposited into your travel account.

Cut Out One Luxury

Travel is a luxury, so something might have to give in the months preceding your grand take-off. My parents are heading overseas at the end of the year, so they’ve had to eliminate eating out at lunch time. That change will constitute a large part of their weekly savings to finance their time overseas.

Reduce The Needed Amount

If you have holidays owing, you’re in heaven as part of your trip is financed by the income you continue to earn while overseas. If you don’t have that option, why not talk to your boss about opportunities overseas, so you can work for part of your trip and mitigate some of the expense? Or consider working on an organic farm for a couple of weeks to lower the amount you need to save. It’s a different way of seeing the world, and might be the source of some of your best memories. You also want to aim to come home within budget, without having skimmed off some of your emergency fund or other savings.

The Savvy Budget

Often, when we first start earning decent paychecks, we can spend without having to think about it. Petrol in the car, a taxi ride home- none of it really adds up in our heads because we haven’t had to think about it before now. Once you’ve decided to start building up your savings, this becomes a different story. We need to know where the money is going. Without that information, our chances of making any difference to our savings is negligible. So what’s your monthly expenditure? And how much of it is essential? Answer those two questions and you’ll have a better idea of how much space you have to save.

Tight, But Not Terrible

The general idea is that your savings scheme should feel tight, but not terrible. If you’re watching your money reasonably carefully and know where it’s going, you’re probably in the right zone for saving. If you can’t go out any night of the week and stress for hours before meeting someone for a drink about your lack of spare cash, it’s time to relax the reins a bit. Saving at too high a level isn’t only an uncomfortable way to be living, it’s also not sustainable. You’ve got a better chance of saving real money once you’ve got it at a careful but not cruel ratio.

The Numbers

Generally, experts suggest you should be working towards saving 20% of your income. If you’re paying off debt, then your debt repayments can comprise part of that 20%. It’s also worth considering your super. While your employer might be making contributions, unless you’ve negotiated a better rate, it’s likely that’s at 9%. It’s worth trying to negotiate a higher rate, as well as contributing yourself, as some sources suggest a saving of 15% of your income for retirement. It’s a good idea to start at a lower level, say five to ten percent. Once you’ve become accustomed to that level of saving, gradually increase the amount until you hit twenty percent.

What Are We Saving For?

This of course varies from person to person, but once you start thinking about it, there is so much to be saving for. An emergency fund of 3-6 months wages. A house deposit, or some time overseas. Our retirement, obviously. It’s a good idea to write down your savings goals. You might want to have an emergency fund, plus a fund you can readily access for house maintenance, work opportunities, or replacing a burnt-out car. Any saving is great. But having an idea of where you want to put your money is essential to building your long-term financial stability.

On the flip-side, this week, I paid off my credit card. After four years and several botched attempts, I am free of consumer debt. It leads me to think about the place of debt in our lives- sometimes a war, sometimes an investment. Here are some thoughts about getting debt into a balance within the rest of our lives.

Bad Debt, Good Debt

As the experience of the past few years has shown me, debt can either bolster your life or drag it down. While my credit card debt was never massive, the accumulated cost of interest, attempts to pay it off and then rebuilding it, and never succeeding to pay off the balance by the end of the month doesn’t bear thinking about.

Compare that with the debt I carry from the cost of my education. They’re probably similar figures, all told, and while my education has promoted my employment opportunities, allowed me to find supplementary income sources (and been a very manageable debt, due to the help of the government) my credit card debt has done nothing but cost me money. I know none of this is news. But I’ve been clearly reminded about the importance of clearing bad debt, in order to accrue positive ones.

Manageable Debt

A large part of our lives, as adults, is living with debt. It’s amazing to think of the amount of money we will owe should we buy a house, hundreds of thousands of dollars. The key is balance, living with a manageable level of debt. I would argue that credit card debt is never manageable. If you’re not paying it off at the end of every month, it’s time to haul over your finances until you’re able to clear your balance on a monthly basis. Otherwise, lose the card.

Debt-to-income ratios become a catch-cry around the time you’re looking for a loan, but it’s worthwhile thinking about in everyday life. Experts suggest lenders like the look of a debt-to-income ratio of about 36%, with no more than 28% of that heading towards your mortgage. 37- 40% is considered the upper limits of a debt-to-income ratio. 41-50% is in the danger zone of debt. If you find yourself here, seek help in readjusting your financial picture and getting back into the right end of the spectrum.

Calculating your debt-to-income ratio is easy. Just total up all the money you spend every month servicing your debts- mortgages, car loans, credit card payments, even home insurance- and divide it by your income. Obviously, the end goal for a lot of people is to be heading as close to 0% as humanely possible. For some people, that’s their number one priority. That might mean downsizing to a house they can afford to buy outright or living without any form of plastic. For most people, debt is a necessary part of their lives. That doesn’t mean it has to be overwhelming. Work out your debt-to-income ratio and then start making the necessary changes in your life that can help improve the numbers.

In doing so, I stumbled across a website called Aussie Farmers Direct – offering some nice pre-packaged bundles of everyday staples for home delivery. I am yet to try them, though have read a few good things about them.

What do Aussie Farmers Direct sell?

From what I can see – they focus on the basics; such as milk, bread, eggs, bacon, juice, fruit and vegies and meat.

They offer all of these products bundled up into easy to understand packages for a set fee delivered to your door. The idea is to put an esky out the night before and awake with fresh produce delivered as frequently as you want.

What is the benefit of using Aussie Farmers Direct?

All produce is 100% Australian and fresh from the farms of working Australians. This means it is trying to make the grocery game a bit fairer for the farmers themselves while providing high quality, farm fresh products to nearly all corners of Australia (including the cities!).

The bundles are likely a clever way to help bring the cost into a more fairer realm. E.g. they may have more profit on one of the items in the bundle, so in turn can subsidise some of the other items. A great way to not lead on price, but focus on quality and quantity.

Will Aussie Farmers Direct save you money?

Although the milk prices are a little more than in a major supermarket, the value does appear to be there. For instance, I was pretty blown away at the $35 deal called the ‘Family Time Saver’.

The ‘Family Time Saver’ has the following items:

• 12 free range eggs
• 1 chicken breast
• 1 packet of sliced tasty cheese
• 1 box of fruit and veg
• 1 beef mice (1kg)
• 1 whole milke
• 1 bacon packet
• 1 loaf of bread
• 1 esky bag

All of this for $35 with free delivery. Not bad at all.

What I hope to see from Aussie Farmers Direct

I am about to sign up, so they could already have it – though I would be really keen to get a little more picky with my bundles. E.g. I would want light milk, light mince, the ability to swap the bacon for something else etc.

If that is doable – I will be a very happy saver indeed!

More details on Aussie Farmers Direct

Aussie Farmers Direct’s website is www.aussiefarmers.com.au – check them out and see some of the popular bundles people are getting delivered.

After you know how much of your pay is accounted for in fixed expenses, you are left with a leftover sum of money that is called a variable expense threshold. This is the money you need to use for feeding yourself, getting yourself to work, buying lunch, buying clothes and all that jazz – or as we call it ‘living’,

Why is the variable expense threshold important?

The reason your variable expense threshold is important, is it gives you an indication of the money you have left over for everyday living. Often we don’t realise why we are getting into debt until we see this amount. The left over money is often very little to say the least.

It also helps you with one other thing – see below.

Calculate your daily spending limit

Now that you have your left over variable expense threshold – divide it by the amount of days in the fortnight or month, this will give you a daily spending limit.

This means you now know the actual figure you cannot go over on a given day. It’s often quite shocking to realise how little we have each day.

How it helps me save money

The way it helps me save money is by making me conscious of spending again. Often I don’t think twice about spending $50 on lunch, a magazine, a few drinks at work etc. Though now that I am aware I technically only have $45 a day to do not only that but buy groceries and fill up with petrol – I start to question whether I should be spending my money on that particular thing.

Great to help you become aware of your actual budget again. Give it a go!

As a result, I have decided to economise my spending a little – I am now going to instead opt to ignore the big brands and their fancy marketing and focus on making my own cleaning products for certain daily tasks that are costing me an arm and a leg.

Here is how you too can start to save money on cleaning chemicals.

List down your daily cleaning requirements

Firstly you need to list out what it is you clean on a regular basis. For me, I use a surface spray (Spray N Wipe) to clean the kitchen from top to bottom as well as the living room where we generally eat. On top of that, I tend to mop the back laundry room daily to help get rid of the dog smell (two dogs will quickly transform a room into a very smelly little place).

Now that I know where it is I am spending my money on cleaning agents, I can look to economise with substitutes.

I also use the same products to clean bathrooms, showers and sinks.

Look up the cost of your cleaning products

Then you need to look up the cost of your cleaning products. For me it’s around $10 for Spray N Wipe and $15 for a large contain of disinfectant that I buy to put in the mop bucket.

Now you know your base cost for cleaning, which for me is $25 a week roughly in the above.

Look at the active ingredients in your cleaning chemicals

There are a lot of fancy named chemicals in these bottles but the one thing you can’t go past is the amount of bleach in both. This shows that bleach is the active ingredient and once Google’d shows just how amazing this cleaning agent is in killing germs and cleaning.

What you need to purchase to get started

So to get started, you will need the following:

• 2 spray bottles from ALDI
• 1 oversized bottle of bleach, the bigger and cheaper the better

Recipe for a good all purpose cleaner

Pour one cup of bleach into the bottle carefully, then put 2-3 cups of water or until spray bottle is completely full. If you wish to give the spray a slightly better more homely smell – drip a drop or two of eucalyptus oil or similar into the bottle.

Leave the lid off and gently mix solution in a slow circular motion.

You now have a cleaning agent that will kill germs

You have now made a cleaning agent that is perfect for spraying on benches in the kitchen to kill germs.

HOWEVER you can’t use this on wood or metal as it isn’t as soft on those surfaces.

I am also using bleach in hot water to mop my back floors, a huge saving. Doing all of the above means I am cleaning my house for under $5 a week instead of $25 – not a bad little saving!