Needs vs wants

With all the negative headlines and the doom and gloom forecasts each day (Wall Street leading the Dow Jones down etc etc) each week I see the value of my portfolio declining – and yes that is depressing.

But I am not going to sell. So what is my survival strategy?

Actually it’s the same strategy I have had since my real time financial crisis – at the end of my 11-year marriage – no house, no car, in fact a big black financial hole after years of hard work. All because I had allowed someone else (in my case, my ex husband) to take responsibility for my financial welfare.

Today is a different story. My portfolio has declined because of the overall economic environment, and over the years I have learnt through my mistakes a few rules around money, so I don’t need to sell but I do need to continue to follow the hard-learnt financial lessons of my past.

Take total responsibility for what you earn, spend and invest; no-one will ever care about your hard earned money as much as you do.

  • Work harder and smarter.
  • Spend less than you earn.
  • Understand the distinction between needs and wants.
  • Borrow only for assets or cashflow.
  • Just as you would for your business, prepare an honest monthly personal balance sheet.
  • Never borrow for luxuries.
  • Only borrow to the level that you can sleep well. Understand your personal risk profile.
  • Keep investing in those things that will add financial value.

These simple rules seem so obvious, but the level of consumer debt in Australia would indicate that many Australians do not live by them and consequently many may be facing serious financial crises.

The smart money rules can be applied both personally and to your business. The new paintings for the office and the new plasma screen or iPhone may have to go on hold if you need to boost your marketing budget, for example.

Needs vs wants! In the end, contrary to what we may think, it’s better to have financial security than expensive possessions, particularly as they so often fail to bring the satisfaction we think they will give us.

I have always found the challenge and excitement is more in the getting than the having, so my reasoning right now is that it is just another time in history to become more conscious again of smart financial survival skills.

Source: Marcia Griffin (Smart Company e-Newsletter Wednesday, 16 July 2008)

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