The Boodle Blog

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7 December

Things you wish your parents had taught you about money

There are many amazing things my parents taught me - how to value reading, my family, and to try and keep a sense of humour even when it feels like everything is crashing down around me. But there are also things they didn’t teach me that I had to learn on my own. A quick internet search of “Things I wish my parents taught me” confirms I’m not alone. From the guy who wishes he’d learnt how to cook, to the person who thinks they would have benefitted from knowing sometimes love isn’t enough. When it comes to money I feel like I was pushed into the deep end and expected to fend for myself (“What do you mean I have to be an adult now?!”)  And again there are lots of people who feel the same way. In fact there is a guy who has literally written a book about it, Rich Dad Poor Dad, by American businessman, author and investor Robert Kiyosaki. It's a book of advice on finances that rich dads give their kids. You know, so they can be rich too.

Active income versus asset-based income

The traditional way of thinking is that you get your income from your job. If your parents were like mine you would have heard the phrase “you should only leave a job for another job”, meaning that you should always be employed and earning a salary.

But rich people apparently make money from their investments, as opposed to their salary. Investors can be separated into those who invest in capital gains and those who invest in cash flow. The former will buy a house and make some repairs and then sell it for a profit. The latter will buy a house and collect the rent on it every month. There are pros and cons with both types of investing.

Have an accident fund

Life happens. Things like your geyser bursting or a branch falling and damaging your roof. These things can be unpleasant but if you have a fund which you keep for these eventualities you will be in a better position to recover easily. So, instead of having to max out your credit card again and paying the interest off forever, you could have something put away to help you get back on your feet in no time. 

Don’t be reckless with credit

While we are on the subject of credit, it’s a good idea to approach it with caution. Many people make the mistake of running up a lot of debt on credit cards and store cards. It is tempting to use credit to get the things you want and not have to wait until the cash becomes available. First make sure you have exhausted your other options like taking a loan from a family member or a friend. If you have decided to use credit, ensure that you use the best credit. When you use a credit card your debt revolves and you end up paying more on interest. But if you take a short-term loan you will have less interest from the outset and you will pay it off sooner so you will also not have to pay the added interest.

Find out more about the short-term loan offered by Boodle, and get more tips on making money and becoming the kind of investor that would make Rich Dad proud, subscribe to our newsletter.