During the lockdown, most of us have a bit of extra time on our hands. Even if all time you save is the time you would have spent on the road. You can either spend it getting rid of that wine collection you have built up over the last few years, improving your Counter Strike rating or take the time to improve your finances.
During the lockdown, our shares will take a knock and a lot of people will lose their income. However, there are a few positives that will come from having a lockdown. Eskom will have time to maintain their power stations, we will reduce air pollution significantly and we will get our finances under control. To get you started, here are a few things that you can do while in lockdown.
Review your spending
If you have ever wondered what the least amount of money is that you can spend in a month, you are about to find out. We can only buy essentials and the only thing that should increase is your spending on things like Netflix and internet subscriptions. I wrote an article on how to save money on monthly expenses that are worth a read if you really want to delve into this.
Start doing a budget
The main reason we start a budget is to determine what we are spending on each category and then to make sure this aligns with what is important to you. It allows you to place a cap on the amount you want to spend on each category.
The most important part of a budget is the budgeted savings. That is what all budgets are working towards, having as much as possible left at the end of the month. This allows you to sleep better at night while working towards financial independence. There is no better way to fall asleep than trying to do a budget, so it will even save you some money on sleeping pills.
Review your policies
Get competitive quotes for all your recurring expenses. Most people have life insurance, car insurance, home content insurance, medical insurance, etc. It is madness the amount of money we spend every month for when something goes wrong. If you can shave a little money off each payment, it quickly adds up. Some of the insurers that I have had positive experiences with are King Price, Outsurance, Discovery and PPS. So make sure you get a competitive quote from these institutions to make sure you get the best deal.
Look at starting a side hustle
Do you know what is better than earning a salary? Earning two salaries. There are two ways to save more money every month, by spending less and by earning more. There is a minimum amount that you can spend, but there is no cap on the amount you can earn.
The perfect side hustle does not require you to make money and is cheap to start. So always keep that in mind when you think of ideas for a new business. A good option is to start a website and with the wonder that is WordPress. Anyone can make a website that is professional and we will never run out of niche ideas that you can monetise. Think of website ideas where your users generate the content.
Another good option is something like Udemy, where you can make a course about something that you know a lot about. It will continue generating an income as long as the information stays relevant.
The end goal is is to start investing. Many people think that it is extremely difficult, especially if this involves shares. However, you can literally learn everything that you need to know about share investing from the post I wrote called a guide to index exchange-traded funds.
Something else that you can look at that I started investing in recently is government bonds. For April, the yield was increased from 8% to 11.5%. Government bonds are some of the safest investments that you can make. If the yields are close to what you can get by investing in shares, then it makes sense.
Just note that you will pay income tax on the yield from government bonds that will be more than the capital gains tax you would have paid on shares. Lastly, the money will be locked in for 5 years, so it should not be money that you might need in the near future. I will write a post about government bonds in the near future.
Learn about finances
There are so many excellent resources to teach you about finances and business. The best free resources that jump to mind are Skillshare and EdX. Although they do have paid courses, a lot of the courses are free and only charge you if you want a certificate to prove that you passed the course. But as an investor that does not want to do this as a profession, all that you want is the knowledge. EdX even has free courses by Harvard, MIT and New York Institute of Finance.
You can also check out Udemy for additional courses. You will almost certainly have to buy a course through them, but Udemy has specials for R20 on a lot of their courses. I did a course on search engine optimisation last year that had the best information I could find on the topic. If there are any terms that you do not understand, Investopedia is the place to search for it.
Lastly, I really enjoy reading. There is nothing better than pouring yourself a glass of wine and reading a good book. I honestly struggle reading fiction (I know I will get emails about this), so reading about investing was probably where it all started for me.
Some of my favourite books are listed below. I know it is lockdown, so you can’t order hard copies. Therefore, the links are to the ebook or Audible versions. My wife struggles to fall asleep, so I got her an Audible subscription that she listens to before bed. Every now and then, she has extra credit that I can spend on a finance book for when I’m driving to site. Give Audible a try and get your first book for free.
This is probably the first finance book I ever read. The core message is that the poor spend their whole lives working for money, trying to save themselves rich. The rich on the other hand buy assets that generate them money, replacing the need for a salary.
Freakanomics is an extremely interesting read. It teaches you the fundamentals of economics by giving you the best examples and outliers. It’s not going to teach you where to invest, but it will change your view on a lot of things we just assume every day.
This is an interesting book that looks at what the typical millionaire looks like. It shows that you do not have to be famous or own 10 companies to get there. The book has a look at where they invest and how they live. It is however focussed on readers above 40, so if you’re building wealth, this probably is not the book for you.
If you are looking to invest in individual companies rather than diversified ETFs then this is an excellent read. Benjamin Graham believes in value investing, which he did extremely successfully with Warren Buffet. I read Buffet’s book Snowball about the same topic, but the reviews say that The Intelligent Investor is an even better read.
A really good book that outlines the steps to improve your finances. This book has helped a lot of people sort out their finances. I’m not the biggest fan of his podcast/radio show, but his book is well worth the read.
In her book, Sam encourages you to pull your head out of the sand and start dealing with your finances. It looks at your attitude towards money and what we need to know about money. I like it because it deals with local issues that you will not find in other books.
In his book, Warren gives you all the information that you would pay a financial advisor thousands for. It is a step-by-step guide to investing while managing your risk and sleeping well at night. Well worth the money.
Take the time during lockdown to improve your finances and come out of this in a better position. If you have some extra time on your hands you can even teach yourself new skills. I will follow this post with the investment case for buying bonds now.
Related: Frugal Local’s top books to read