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8 Expensive Things You Always Spend On Which Make You Less Rich

8 Expensive Things You Always Spend On Which Make You Less Rich

Our expenses are closely connected to our lifestyle, our habits, and generally our interests. It is also quite common how we tend to justify our expenses, but we can be very judgmental as we watch those around us spend their money. It is perhaps a defensive mechanism we’ve gradually developed, while living in the consumers’ culture.

However, you are not required to give up on buying things, all you need to do is re-evaluate your decisions and approaches. In other words, how to still get what you want, but at the same time preserve your budget. Prudence is a virtue, you should not hesitate to practice, for it will bring a certain dose of stability in your future life.

1. Bottled water

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    Yes, water is one of our essential needs, but we are not obliged to spend money on bottled water. Even though tap water usually contain harmful bacteria, it can be drinkable if you install a water filter. Truth be told, a filter is not that big of an investment, yet it can save a lot of money and it is far more convenient to pour water from the tap.

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    A liter of bottled water approximately costs 2$, and let us assume that the natural daily intake of water is around 2,5 or 3 liters. By switching to tap water, you save up to $5 dollars on a daily basis, or $150 per month.

    2. Printer ink cartridges

    Regardless whether you use your printer frequently or not, buying a new cartridge every time your old one is depleted, is an unnecessary expense. Cartridges are designed to be refilled, and you can either have someone else to do it, or you can get your hands dirty and fill them yourself. Either way, you will restore its functionality at only half the price. Moreover, it would be wise to buy a quality printer that uses cheaper ink, if you tend to use your printer regularly.

    A new cartridge can cost between $40 and $60, but it can be even higher. Refilling, on the other hand, is only between $10 and $12, so you save around $30 by opting for a refill.

    3. Cable TV and magazine subscriptions

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      Almost everything you want to read in your magazine is available online for free. As far as cable or satellite TV is concerned, you can stream an incredible number of shows or full length movies on Hulu.com, free of charge. Netflix offers a lot of quality material as well, charges only 9$ a month for these services, which is still cheaper than your cable subscriptions. In other words, any quality TV show you pay over $9, is basically a waste of money.

      4. Books

      It may sound outrageous, how can buying a book be considered as reckless spending. Well, it can. Buying books online, and reading it on an e-reader is a cheaper alternative, borrowing books is another budget friendly option, and a membership in the library is perhaps the best one. Buying a book that you want to read more than once is alright, but let’s face it, we love to show off. We decorate our bookshelves with our favourite chronicles and authors, to the point when it starts to feel shallow.

      The whole point of a book is to provide you with cautionary tales, help you forge some personal wisdom and moral values. If you start to treat it as a personal possession that you use to impress your friends, then you are buying it as a decoration. It is hard to say exactly how much you save by buying books for an e-reader, but you save around 40 to 50% for each book you purchase.

      5. Expensive Branded items

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        Let’s be honest, in the event you have developed a taste for buying globally renowned branded items, then your wallet is in a serious trouble. There is nothing wrong with having your own style, or trying to mimic modern fashion, but paying significantly more, simply because of a particular trade mark is madness. For example, buying an expensive item can sometimes cause more stress than satisfaction. You are more likely to get mugged, so you need to be vigilant all the time; it may not be compatible with all of your dressing combinations.

        A luxurious bag can cost $1000 or even more, but a military messenger bag f.e. will cost between $70-$100. The same applies for other branded items, if they drain your budget, condition yourself to look for cheaper alternatives. Learn to be more creative, don’t try to impress people with brand names – you are spending too much for something that is only a fleeting sensation.

        6. Video games     

        This is the same as with books – you do not need to own the game, you are only enlarging your connection to impress the Internet (the online community). It is alright to consider yourself a proud gamer, however, spending tons of cash just to let it the world know is absurd. Surely, you have friends who are also game enthusiasts – make an agreement with them, who will buy which upcoming game.

        There is no need to spend $40 every time a new game comes on the market. Furthermore, if you play games with monthly subscriptions ($10 – $15 a month), or even worse, freemium games, stop at once. Do not even try to justify the reason why you are playing them, just stop and find a new hobby. If you are able to play it for two or three months, see what it’s is all about and quit. If you can’t show this level of restraint, then you should aks yourself if you might be an addict.

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        7. Lottery tickets

        The number of people who play the lottery is ridiculously high. As John Oliver on “Last Week Tonight” said: Planning how you will spend your lottery winnings is an equivalent to planning what to say on your third date with Beyoncé. The only thing your lottery ticket does, is help the rich to get richer. Despite the fact that a single lottery ticket is approximately $3, the amount of money people spend to participate is large, since you usually buy more than one ticket. Instead of buying a ticket, put all that money in a piggy bank, and you are bound to be more satisfied after a couple of months, when you smash it.

        8. Buying new things

        Buying a new cell phone, a new car, a new console etc. the moment it appears on the market is yet another form of irresponsible spending, especially if you already have properly functioning utilities that are former models. Boasting with new items can be fun, but continually doing so is just sad. Why would you work so hard, every day, only to allow yourself to be manipulated by cheap advertising tricks?

        If you think of yourself as a collector or enthusiast, there is no need to buy these items the moment they hit the shelves. If your old iphone is still functioning, you do not need to spend $600 just to buy a new model. The same applies to your car – spending between $6000-$7000 for a new one is losing a fortune for no particular reason.

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        Djordje Todorovic

        Blogger, Gamer Extraordinaire

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        Published on November 3, 2020

        How to Start Investing Without Taking Major Risks

        How to Start Investing Without Taking Major Risks

        No one loves risk. This is the uncontested truth about us human beings. We love gaining but never losing. This is not abnormal in any way because human beings exist to increase. Any form of loss is strongly resisted by our brains. This article will teach you how to start investing as a risk-averse individual and get optimal results.

        All forms of investing are risky. The only thing we can do is minimize the risk, not eliminate it. This is why every investor needs to tolerate some level of risk. People who do not have any risk tolerance end up not investing at all.

        It is important to note that not investing is very risky. This is the greatest risk you can take on your financial future. Being a financial consultant and advisor for years, I have realized that successful people avoid losing possible returns while average people avoid losing investment capital.

        This means that successful people work hard to gain what they do not have while average people work hard not to lose what they have. As they say in sports, the best form of defense is offense. As successful people go for what they want, they find it easy to protect their investment.

        How to Start Investing Without Taking Much Risk

        As I have pointed out, you cannot eliminate the risk, you can only mitigate it. These 5 tips will help you secure the returns while taking minimal risks. It is possible.

        1. Get Investment Intelligence

        Investment intelligence refers to a set of information that helps you make prudent investment decisions. This is what the greatest investors like Warren Buffet and George Soros have. They can judge different opportunities from an information point of view. With that, they avoid making mistakes that could potentially cost them billions.

        As Robert Kiyosaki points out in his book, Rich Dad’s Cashflow Quadrant, investors can be placed in 5 levels:

        • The “zero financial intelligence” level
        • The “savers are losers” level
        • The “I am too busy” level
        • The “I am a professional” level
        • The capitalist level

        The first 3 levels, which consist of 90% of all investors, do not have sufficient information to make prudent investment decisions. Many would rather not invest, others will rather put their cash in a bank account, and the rest will choose to delegate the responsibility to someone else and entrust them to multiply their money.

        The last two levels of investors have some investment knowledge. They end up becoming the most successful people in the world. As I usually say, making money is not the problem, multiplying it is.

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        Therefore, knowing how to start investing without much risk starts with self-education. Read books and blog posts to learn how to reduce the risk involved while still getting acceptable returns. The more you learn, the more you earn. Getting more knowledge will help you look at the numbers and the facts as presented by the numbers.

        2. Start Small

        It is almost guaranteed that as a new investor, your first investment capital will be lost. This is because you do not have the right information and skills to make a return.

        Even though you may have some basics, it takes practical experience and skills to become a successful investor. Therefore, it is prudent to start small. As you make returns and learn, you can increase your investment capital over time.

        Do not borrow millions to make an initial investment. This is a grave error many people make. When the investment goes down, they are left heavily in bad debt. First, invest your savings and test your principles of investment. After you have gotten returns, you can now consider risking more and more capital.

        3. Diversify

        Diversification is usually the first answer given by all financial advisors when asked how to start investing by risk-averse people. This answer is correct. Diversification of your investment portfolio means investing in different asset classes to spread the risk.

        There are 2 types of diversification:

        • Inter-asset diversification: This is where you invest in assets from different industries. For example, you can invest in stocks and real estate. These are different asset classes.
        • Intra- asset diversification: This is where you invest in the same asset class. For example, investing in stocks of different companies falls in this category.

        Inter-asset diversification is more effective in mitigating risk because it cautions your finances from systemic risks that affect different individual industries. For example, some situations affect the real estate market only. Therefore, if all your assets are in this market, you will be highly affected. If you have diversified to stocks, businesses, precious metals, bonds, etc. you will not suffer major losses.

        Diversification aims to have some assets bringing returns even if others make losses. This is a key secret when it comes to how to start investing while minimizing risk.

        4. Do Your Due Diligence

        Due diligence is different from getting investment intelligence. Getting investment intelligence entails understanding the general principles of investment. Doing your due diligence, on the other hand, entails understanding the facts behind a certain investment opportunity.

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        When someone tells you of an investment opportunity somewhere, go after the facts. The facts will tell you whether it is a good opportunity or not. Never focus on people’s opinions when judging different investment options. The best thing is to do your research and justify the claims by the facts. Facts will never mislead.

        The best approach is to study the past and project the future. This is called forecasting. Similarly, you can follow what is called scenario planning. This is where you try to understand the future and make appropriate decisions today.

        For example, you might foresee that electric cars are going to take over in the future. This way, you will decide to invest long term in car companies that are focused on that area. This is due diligence.

        5. Avoid Making Emotional Investment Decisions

        Emotional decisions lack logic and rationale. They are not supported by the facts. Emotional decisions are therefore risky. When it comes to making investment decisions, always use logic. This is using your brain rather than your heart.

        For example, a friend you love and respect may tell you of an investment idea and ask you to invest. The natural tendency is to comply with their demand. When you bring your emotions here, it will be impossible to resist even though the deal does not favor your financial future.

        However, it is better to do what is emotionally incorrect to safeguard your financial interests. Demystify the options and make an informed logical decision.

        Low-Risk Financial Instruments

        Knowing how to start investing without taking much risk requires looking at different low-risk investment options.

        Here are some financial instruments that a risk-averse individual may consider investing in.

        1. Treasury Securities

        Government financial instruments are less risky. This is because the government can print money to repay its investors. Therefore, the possibility of default is considerably low.

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        It is, however, important to understand that these securities yield below-average returns. If you are in your prime age, only invest in them as a diversification tool and not as the main income-generating instruments. Therefore, consider your financial position and make an informed decision.

        2. Dividend-Paying Stocks

        Dividend-paying stocks are less risky compared to those that do not. Even if the stocks decrease in value, the dividends you get over the years will caution you against actual financial loss.

        Therefore, analyze the company in whose stocks you want to invest in carefully. If they do not have a dividend policy that suits your financial needs, move on. Fortunately, many companies pay dividends to their shareholders year in year out. You just need to do your due diligence.

        3. Preferred Stocks

        Preferred stocks are given priority over ordinary stocks. They are paid after bondholders are sorted. Therefore, in case the company is pushed out of business, preferred stockholders will be paid before ordinary shareholders upon liquidation of the company’s assets.

        4. Fixed Annuities

        A fixed annuity is an insurance contract that pays the holder a guaranteed interest rate on their contribution. The opposite is called variable annuities.

        The great thing about fixed annuities is that they are simple and predictable. There’s no need for you to learn about the stock market changes since you know what to expect based on your agreement.[1] Fixed annuities are guaranteed. They are paid as long as the company is in a position to do so.

        5. Money Market Accounts

        These are interest-bearing accounts provided by financial institutions. They pay a higher interest rate than the normal savings accounts. These accounts have insurance protection and are therefore less risky.

        6. Corporate Bonds

        This is a financial debt security that is issued by a firm and sold to investors. Bondholders receive a fixed or variable interest on their investment and receive their investment capital upon maturity. These are low-risk instruments especially if the issuer is an established firm in the market.

        7. Certificates of Deposits (CDs)

        This is a type of product offered by many deposit-taking institutions. They offer premium interest rates on deposits as long as the customer agrees to leave the money untouched for a certain period.

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        8. Value Funds

        Value funds follow the value investing strategy used by famous investors like Warren Buffet and Benjamin Graham. It involves identifying shares that are undervalued and putting money in them.

        Value funds are low risk because they are sold at a discount. They later bring returns when the market undergoes an auto-correction. However, it takes skilled managers to identify undervalued stocks.

        Word of Caution

        So far, we have looked at how to start investing without taking major risks and the instruments to invest in. It is also important to give a word of caution on the same.

        1. Let the ROI Outdo the Inflation Rate

        Inflation is a persistent increase in the prices of commodities. It serves as a measure of the changes in the prices of commodities and services over a period of time. Inflation impacts the cost of living and eats into the purchasing power of money.[2] If your return on investment (ROI) is less than the inflation rate, you have lost economic value.

        2. Consider Opportunity Cost

        Opportunity cost is the value of the foregone alternative. If you have different investment options, calculate the ROI, and invest in the option with the least opportunity cost.

        3. Consider Your Financial Position

        Where you are in terms of finance should determine the kind of investment option you choose. People who are just starting should seek both returns and security. If your investment is wiped out, you will have little left to lean on.

        People who are established financially can afford to take major risks. After all, when they lose the investment capital, they have enough to fall back on.

        4. Consider Your Financial Goals

        People have different financial goals. Some want to be very wealthy, while others just want to live a comfortable life. Choose your investment options carefully based on your goals. People who want to be super successful should seek to maximize ROI.

        Final Thoughts

        As we have seen, it is impossible to eliminate risks. The best you can do is to mitigate them. Therefore, tolerate a certain amount of risk to guarantee better returns. By following the tips in this article, you will learn how to start investing while significantly reducing the risks involves as you focus on the reward.

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        Featured photo credit: Chris Liverani via unsplash.com

        Reference

        [1] Annuity.org: Fixed Annuity
        [2] Financial Express: What is Inflation?

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