Year 2009 review

Year 2009 review:

2009 has been a year of much turmoil in the financial world. Personally, I failed to win the National Lottery, and ended up cashing in all my Premium Bonds when I discovered I could get a better return in a bank account. I managed to increase my overall wealth by many thousands nonetheless, and came close to adding an investment property to my portfolio. Here's my take on the effectiveness of current financial investments, in terms of: business, stocks and shares, savings, property, a job, and other stuff.

Business:

It's been a challenging time for businesses, yet the British economy has not collapsed, and businesses are still making profits. There are still opportunities in business to make money.

Stocks and shares:

I have not invested in the stock market. I've heard too many stories from acquaintances who have been burned. My mentor Mr Piper does not believe in stocks and shares. I would only invest a tiny fraction of my money into index funds. Personally I think the best shares to invest in would be: supermarkets, banks, and travel because these are things people will always need, and will always pay for. I'll put some money into index funds this year, but it does not really excite me as I cannot control the investment closely enough.

Savings:

Simply saving money in high interest, instant access accounts is great way to store your money. If any investment opportunities crop up, you can access your money immediately to take advantage. Cash is king. Savings in the bank do not get a lot of interest, so get as much bank interest as you can, but also look to invest your money elsewhere, in your own investments, such as property (if you can afford it). Saving is something which must be done, it is the corner stone of wealth, and the building block of a great fortune. I saved up money for many years before I had the financial ability to make bigger investments.

The banks have gotten away with causing one of the biggest financial collapses ever, yet they are passing on tiny savings rates to savers, and the Office Of Fair Trading has allowed them to continue charging customers too much money for being overdrawn. The banks are not on your side when it comes to making money. The banks are not giving me a fair return on my money. I currently aiming to transfer a majority of my finances into property, this year. I will still keep lots of money in the bank for emergencies, but I will always know that I can do a better job with my own investments.

I am not putting down banks completely, and I still believe money must be built up in a bank, but for a purpose. Putting money in a bank is still better than doing nothing, and is better than putting your money under the bed.

Property:

I've had a good look at the recent property market, viewing properties in person, attending auctions, and calculating the strength of the investment. Its quite eye-opening to see how different the reality is from from TV shows such as Homes under the Hammer, and Property Ladder. No property that I have viewed is perfect, and compromises blatantly have to be accepted. Generally, all properties need a bit of redecoration. I do believe in doing DIY, and easy jobs such as painting, and I will always evaluate the cost, time, and likely outcome, before I decide to use skilled labourers.

I have learnt that in the majority of cases, it's best to just live with the physical layout of a particular property. Not all houses have an upstairs bathroom for example, and I was adamant that I would not buy a property without this feature, but after much searching, I see that downstairs bathrooms are perfectly acceptable and quite commonplace.

As for auctions, TV shows such as Homes under the Hammer, have displayed many buyers purchasing at auction without having a survey done first. I see that the reason for this, is that there is limited time to view the property anyway, and the possibility also exists that the property may be withdrawn before the auction, so why invest too much into the property beforehand. I think this means you can only really spend a lot of attention on one particular property (like doing a survey) before an auction, and then focus on investigating and buying only that one (within your budget), to limit your risk and keep your pre-auction costs down.

Are house prices rising? I think they are slightly, but this is probably the bottom of the market, as houses are selling. 2010 is the year for Moneyseeker3000 to invest further. I almost purchased an investment property one month ago and I actually made an offer, but the next day I woke up and my gut feeling was that in 2010, similar properties in slightly better rental locations would become available. The first property I see which meets my criteria (location, total purchase price, amount of rooms, likely rental), I will buy.

I will take out a 2 or 3 year fixed interest only mortgage, as the thought of 25 year mortgages scare me. I will make sure the monthly repayments are fixed, and as low as possible. Then I will save up the profits into a high interest rate account in case I need it, and at the end of the short mortgage term, I will use my savings to pay off a massive chunk of the mortgage. By doing this, I'm pretty confident of paying off the mortgage entirely in under 10 years, avoiding lots of interest charges that I would otherwise get on a 25 year mortgage. Yes, there will be mortgage arrangements fees, but over time it still works out to far less outlay than a 25 year mortgage.

Property is a bit of a hassle, and everyone worries about problem tenants and repairs, but I have never heard Mr Piper complain about such things. Property has made him a multi-millionaire. Is it worth an extra bit of hassle for more money? Of course it is. I know a few other property millionaires; one of them, Mr Popinski, recently (November 2009) had a 4 bedroom house unoccupied for 3 months as he was “waiting for the right tenant” who would pay more money than the local £1100 monthly rental. The mortgage was already paid off, but I thought he would still lose money by having the place unoccupied for so long. I would have followed Mr Pipers advice of renting out a property for the maximum you can get right now, rather than waiting for more. Mr Popinski managed to find a rich foreign tenant prepared to pay £1400 per month! That's almost £17k per year going into his bank account, and that's just one of his many properties! That's the kind of hassle I like!

Job:

I think a job is a good investment. It's a stepping stone onto greater things. You have the opportunity to observe your work colleagues, so it teaches you about other people and how they spend their money. You can see how their actions have created their lives, even though they usually cannot see it themselves. Having a job can teach you to save finance and you can learn to not waste money on expensive gadgets and outings as many of your colleagues will do. Having a job has allowed me to save up tens of thousands of pounds which I can plough into other investments, so how could I ever be against employment. When going for a job, always go for the highest paying job you can get right now, because you never know when you might be made redundant! I recognise that being controlled by an employer is not fun, it's like being a slave, and my goal will always be to leave work one day and survive on my own investments and ingenuity just like my millionaire mentor Mr Piper. These stages come step by step, and having an income from a job which you use for your own benefit is usually the first step.

Other ways of making money:

There's other ways of making money, but its important to stay alert. Don't simply trust advice from friends or from the bank. Do your own research. Most people do not know how to make money, they only know how to spend it. To be rich, you can't be like most other people, you have to be far more frugal, far more active, etc. American finance guru Dave Ramsey says “you must live like no one else now, so you can live like no one else later”.

Charity:

I continue to give money to charities. There have been times I've looked at my pay packet and thought that maybe I should just stop giving my precious money away, and invest it instead, but then I think of charitable people like Bill Gates and Sir John Templeton, and use them as my charity role models.

There are people out there who look at rich donors and say they are only giving away money because they are rich, but this is just an excuse for them to not give any money themselves. Anybody can give away some money, and it's usually the same people who complain about charitable acts who don't even give away one pence of their own money to help others in need. Their hearts are bitter towards humanity, and it is very sad indeed.

Conclusion

I have learned much this year, and I feel I should be doing much better considering all of the research I've done, people I know, and money I have made. The fact is, that I am just being impatient. I have done a great job on building up my finances, and my financial intelligence this year, especially considering how uninterested I used to be many years ago. On my mantelpiece I have a large porcelain tortoise (which I got from Poundland :-) ). Every time I look at it, it reminds me that wealth is a slow and steady journey. It is a journey which is unavoidable for a moneyseeker, and it is a journey gladly, and proudly undertaken, by Moneyseeker3000. Bring on the year 2010!