Aside effect of investing a growing share of my disposable income in pursuit of the dream of financial independence is that I’ve come to rely ever more on a good holiday to refresh the soul.

My response to austerity, no pay rises, the threat of unemployment, and galloping inflation has been to save harder. I want to build my financial fortress faster.

I’ve never been a believer in all pain for some far-off gain, though, and that’s where holidays come in.

Holidays enable us to keep the wheels on our frugal wagon. The memories of getaways past and thoughts of escapes to come keep Mrs Accumulator and I going strong in the here and now.

Holidays and a frugal lifestyle can be dangerous bedfellows, though. Holidays are an escape – a few days of fantasy that break with the routine. Holidays are also a major expense, especially as I’m not about to prescribe living under a tarpaulin in the local woods, catching rabbits to eat for breakfast.

What living frugally is about is devising strategies that enable you to extract maximum satisfaction and value from expenditure, rather than mindlessly blowing a wad on pretty pictures out of a brochure, just because simply everybody is riding giant tortoises in the Galapagos this year.

I’ve therefore devoted a considerable amount of energy to devising a strategy that enables us to have more positive getaway experiences for less money.

Happy holidays

Some time ago, I heard a piece on the radio about research into the selectivity of memory.

It’s well known that human beings create positive or negative memories by screening out contradictory aspects of past experiences. But what are the key drivers of this process?

The conclusion was that two factors were liable to create more positive memories:

1. Change – a break from the everyday routine.
2. A happy ending – even a bad experience may be remembered more positively if it ended relatively well.

I decided to try and apply these findings to our holidays to increase their value to our lives. To see if there was a way we could get more holiday for less money, just by playing with our minds.

Creating more breaks in our routine obviously means going away more often. With no more money in the pot, that means more frequent, shorter holidays instead of one or two annual blowouts.

Instead of going away somewhere for a week, we now go away for three days (two nights) and do it twice as often.

A shorter break and the obvious bear trap of doubling your travel expenses has a number of implications that feed into the second component of our more positive holiday experience: making sure it ends well.

Happy endings

A good ending means not spending the last day of the holiday being endlessly shunted around airports, enduring delays, frustration, and the stress of not being somewhere at the right time with the right piece of paper just so you can join the next queue.

A good ending means being in control of your own schedule, so if you’re a little late along the way, it’s no drama.

It means keeping travel times relatively short, cheap and ideally part of the adventure (simultaneously dealing with the expense of going away more often).

Let’s face it, I’m talking about a staycation. A good ending is far more likely if you holiday in the UK.

Packing everything into the car for a staycation carries with it nourishing notions of the spirit of independence. “I’m master of my own destiny, I can drive to our destination in my own sweet time, and there’s no worry about passports, baggage allowances, missed flights or security checks”.

Then there’s the freedom of the road (peak hours and bank holidays excepted), which enables you to plan or meander as you see fit. You can even work in a pleasant stop-off on the way home, to break up the journey and increase the chances your memory banks will register a happy ending to the tale.

Most Accumulator holidays now take place within two to four hours drive of our home. We pick a point on the compass and find somewhere along that bearing that we’ve never been.

Staycations are a revelation:

• You discover much you never knew about your own country.

• You find new places where you might want to live one day.

• You stop writing off dear old Blighty as a miserable toilet in the typical British style.

Another way of ensuring a holiday ends well is to not make it the actual end of the holiday. The advantage of the three-day getaway model is that, during a week’s leave, you can time it so you’re back home for the weekend.

No more getting home in the wee hours of the last day, thinking “Oh my God, I’m back at work tomorrow.”

Instead, you’re back with days to spare, with time to sort out any overhanging chores, and time to buffer the shock of your return to everyday life. In the years ahead, you’ll forget the weekend and be left with the pink-hued memories of the time away.

Happy staycation

Obviously this strategy doesn’t work if your holiday absolutely has to involve baking yourself at 40ºC next to a pool, hand washing a Thai baby elephant, or mixing it with the playboys in Monte Carlo.

Chances are though, if that’s the kind of holiday you need, you’re doing it more for the bragging rights back at work.

Try the staycation alternative. Try something less ambitious and less costly but more frequent and full of soul food.

Take it steady,

The Accumulator

Further reading:

1. How group buying holidays can help you save big
2. Conjure up big savings without sacrificing your quality of life
3. 100 Secret Strategies for Successful Investing

I think going to university is now too expensive, time consuming, restrictive and potentially soul-destroying for people with talent to bother with anymore.

University has become a terrible deal, and most ambitious people shouldn’t go.

There, I said it.

I don’t know why it’s taken me so long to admit to myself that tuition fees, student loans, and the fact that any muppet who can write his or her own name now goes to university means it’s a waste of time to do so.

I suppose it’s because education is one of the central beliefs of being middle class in the Britain today.

Coming from a more working class background – with parents who strongly believed in education – it feels like pissing on the family photo album to make the case against going to university.

So be it.

I was among the first generation of my family to go to university. I benefited from a grant, and I didn’t have to pay fees. I invested my student loans.

My father, in contrast, got a scholarship to grammar school but when the time came to discuss whether he’d go to university – he said it wasn’t even raised. All his life he worked alongside people with degrees and Phds, wishing he had one.

That’s not an appeal to bring out the tiny violins.

It is to stress that I don’t lightly challenge the ubiquitous goal of going to university for youngsters with a bit of ambition.

And it’s to explain that I’m not some elitist snob for thinking it’s a positive sign that the craving for a university education may be fading at last.

Warning: This is a strident piece, aimed at provoking and inspiring those who want to do something different with their lives (whether it’s start a business, get rich, be financially free, or something unrelated to money). If you want to be normal, go to university and get into debt.

How I wasted my time from 18 to 21

It’s not as if I didn’t have a strong hint from my own university experience that it could potentially be a waste of time.

Having never enjoyed school, the first thing I did when I arrived at my top-flight university was to confirm I didn’t need to show up everyday in order to stay there.

No class register, no need to turn up!

I then proceeded to spend most of the next three years discovering women, music, poetry, and London. I read the NME over lecture notes, and created my own magazines and fanzines.

When I did go to lectures, I was spectacularly uninspired by all but about three of my tutors. Most were nice, smart people, but they spent a long time getting through a small part of the vast volumes of textbooks the university obliged me to acquire. There was also lots of diversionary tutorial-style stuff which wasn’t in the textbooks or on the syllabus – theoretically an advantage of a top-tier university education, but not great for passing exams.

“I was spectacularly uninspired by all but about three of my tutors.”

I didn’t waste my time with that. Instead I mainly crammed three or four weeks before the exams, and came out with a good degree.

I did a science / engineering degree, by the way – a terrible mistake for me, personally, which is another reason why you shouldn’t ask a 16-year old to decide where they want to waste three years of their life at great cost. Anyway, it wasn’t a less time-consuming arts degree, let alone something deeply spurious like a photography course or a diploma in fashion, so I had plenty of lectures to go to.

I just didn’t attend them, and it has never mattered since.

This isn’t a story about how I’m so smart that I didn’t need to be educated by lecturers. I was an idiot who sometimes didn’t know what exam I faced that day. I thought I knew more about life through literature than living it, and I made plenty of mistakes. But I was smart enough to realise it was more efficient to learn what I needed to know to pass my degree from books and friends than by sitting in lecture halls.

I’m also not ranting against a bad education. My alma mater is regularly named as among the best couple of dozen or so places in the world to go to university.

I ate caviar from the top table of the education system. I would have been better off skipping it for noodles from a Thai street vendor.

You don’t skip three years of life if you skip University

What about the wider university experience?

You know, quoting Oscar Wilde to bosom buddies under the clock tower at midnight, or meeting pioneering researchers, or simply learning not to be a teenage moron?

I think educated people mistake the progress they make growing up from 18 to 21 or 22 or 23 for the virtues of attending university.

You’d have made most of that progress anyway, as long as you weren’t stuck stacking shelves or masturbating between World of Warcraft sessions.

You can listen to inspiring people at the free lectures that happen in London and elsewhere every single day, or simply watch the TED lectures.

There’s an embarrassment of material out there that’s better than you’ll get in 95% of universities. And the Internet has made it easy to connect with like-minded individuals, too, whatever you want to learn more about. Why study alongside the third-rate when you can learn and even work with the best?

It’s true I met really interesting and stimulating people when I was in university.

However, they were also all idiots, just like any other 18-year olds and just like I was. Better to have met them in a job when they were older and wiser, or better yet in the field pursuing the same passion as me.

True, I did extracurricular activities in university that eventually helped me escape my dumb degree choice.

But were those opportunities a good reason to go in the first place? Why not cut out the middleman?

Too smart or too dumb to make education worth it

I’m not saying you don’t need to go to university because life is easy.

The truth is it hasn’t been so challenging for the young to collect and pay for the baubles of a supposedly respectable life – money, a house, a life partner, kids and a pension – since at least the 1940s.

What I am saying is that for most young people, university is no longer useful in helping you get there.

• Smart and tenacious people will waste three years when they could have been learning useful stuff in the real world (such as making contacts, and learning how to answer a phone in an office and be nice to workmates).

• Average people will be helped in the short term, but at the cost of £50,000 or so of student debts and spending most of their 20s and 30s paying it off, when instead they might have been discovering how not to be an average person.

• Intellectually mediocre people are probably better off chasing money from the start. There’s plenty of money out there in sales, various trades, or starting your own business and employing smart people who don’t know any better, or taking on average people with huge debts to service.

• Lazy people will find £50,000 buys a lot more food and beer in the Far East.

Note that if instead of going to university you simply doss about town or take a minimum wage job and do nothing on the side, then it’s possible – though not guaranteed – that you’d have been better off getting a degree and a lot of debt.

The world is tough, and you need to compete in it.

I’m just saying a degree isn’t anything like a free pass to success anymore.

The people who SHOULD go to university

There are a few people who should go to university – even though everyone who tries a bit now goes, and even though it’ll cost most of them a small fortune they can’t afford and stifle them with debt.

People who should go to university include:

• Rich kids without any better ideas.

• The poorest kids who get much of the costs paid for them.

• Anyone with a scholarship that pays for university, provided they are passionate (talented classical musicians, for example).

• Someone who is ABSOLUTELY CERTAIN a particular career is for them, and that it needs a degree (would-be doctors, for instance).

• University lecturers who get paid to turn up and teach students.

• People who get paid to clean up after students and university lecturers.

• Pretty girls with sugar daddies, to avoid being dull.

• Anyone attending the conferences that universities host to make extra money.

• Foreign students who help bring down our deficit by spending money here.

Almost everyone else should do something else.

Over-burdened bright young things

What if you’re especially academically gifted? Surely you should go to university?

If this were the 1960s, 1970s or even the 1980s, then I’d wholeheartedly agree.

Back then society, recognising your brains and your potential, would pluck you from the conveyor belt that was taking the others from cradle to grave via a mundane job for life, and expose you to new ideas, people, and opportunities.

And you wouldn’t even have to pay for it!

That’s the cherished cultural ideal of universities that makes it so hard for older people to admit that you shouldn’t rack up 5-10 years of your likely disposable income to pay off the debts you’ll get for going there today.

It was great back then. But it’s not like that anymore.

Today’s smart kids are so thoroughly brainwashed by the myth of educational excellence, so terrified of doing anything other than collecting qualifications and certificates, and so secretly fearful that everyone around them is cleverer and working harder than them, that they’d make a slave in a Siberian labour camp blush with guilt.

“That’s the cherished cultural ideal of universities that makes it so hard for older people to admit that you shouldn’t rack up 5-10 years disposable in debt.”

I’ve met these clever kids at the end of their university careers. They’re a weird mix of bewildered and arrogant, insecure and self-entitled. Many are borderline unemployable for a bit, and are more or less humoured in their first workplaces.

Oh most still go on to get decent jobs and so on, eventually. I’m not saying university is deadly, just that it’s dangerous, delusional, pointless, and wasteful – getting a degree is in that sense a bit like recreational drugs.

I can’t help thinking many of them would have been better off – certainly happier – if they’d skipped the whole farce.

I’m not sure what society gets out of it all, either. The innovation keeping us ahead of the Chinese and the Indians is mostly achieved by creative mavericks and dropouts, not by well-educated drones.

Maybe the mavericks need well-educated drones as workers? Or maybe we’d do better to encourage more mavericks.

Anyway, who cares what society needs.

This is your life we’re talking about, or the life of someone you care about. Think hard before you plump for over-education.

The rich dropouts

On the subject of mavericks and outsiders, I used to think university dropouts like Bill Gates, Steve Jobs, Mark Zuckerberg, Richard Branson, and the many others who achieve enormous wealth despite not learning to pass exams were the exceptions that proved the rule.

But as I’ve got older I’ve met a lot of self-made millionaires. I even count a handful among my friends.

Off the top of my head I can think of three millionaire friends or close associates who either went straight into work at 18 or else dropped out of university.

In contrast, I have one millionaire friend who dutifully did the super-educational thing. But he became a millionaire by being a banker, which is about the only way university still pays really big time, in the short run anyway.

Of course I know other people who completed university and became rich. My last boss is one, although the tens of millions he’s worth has nothing to do with his first class education.

He started his business on the side, while still at university, and that’s what made him rich.

Most of the other millionaire graduates I’ve met trace their success to taking a risk and doing something different – going into business, mainly – rather than to a degree.

Nearly all of these entrepreneurs could have started the careers at 18 and got the initial experience and contacts they used that way. A few could have simply read some books, got networking on the Internet, and skipped a first job in an office altogether.

University challenged

There are so many objections to the notion that university is a bad idea that it would take a university lecturer three months to drone through them all.

Let’s consider some.

How can I get a job without qualifications?

The sad truth is getting any job worth having is hard, and mainly comes down to experience and contacts. The sooner you can get those the better.

Kids choose fun but futile degrees in media or photography or fashion to try to get interesting jobs, but employers will still demand you work for free for months – if you’re very lucky – anyway.

Ignore the glossy university brochures. I’ve met many people who did these degrees, at great cost, who now work in the accounts department or similar.

Start doing what you want to do at 18, and be brilliant, if you must have a 9-5 job. Personally, I’d try finding some other way to make money.

What about jobs that demand qualifications?

It’s true that many businesses now recruit ‘graduates only’.

Given nearly everyone who can write and pay for a pint of milk is a graduate these days, that’s not exactly an intimidating hurdle – unless you’ve followed the advice of this article and skipped getting a degree altogether, in which case you’ll be momentarily stumped.

Ideally, I say avoid these sorts of jobs.

I saw on the news yesterday that Nestle is building an ‘academy’ at its new factory. If a chocolate maker feels it needs to train its own staff rather than leave it to universities, you should seriously wonder about the usefulness of what you’ll actually learn at them, as well as the competency of any company demanding evidence of a degree from you.

But if you must get a degree to do what you really want to do (are you sure?), then do it cheap by living with your parents, and having a part-time job instead of going to lectures. Read textbooks instead.

Or perhaps buy a degree on the Internet.

I want to do something that REALLY needs qualifications!

Okay, certain professions require teaching: I don’t want to have my heart operated on by someone who bluffed through exams using Wikipedia.

If you really want to be a vet, a doctor, or an architect – and I mean REALLY want to be one – then university is worth the cost.

You don’t need to necessarily start at 18, though.

One of my best friends did something really inspiring the other day. He left his cushy job in engineering – and a salary – to pursue his dream of a career in medicine.

At the age of 40! I was blown away.

How much better though that he does this at 40, when he knows what he wants, rather than sleepwalking at 18 into becoming an embittered box-ticking NHS robot who wishes he’d chosen to do something other than sticking his finger up bottoms all day.

I’ve met these lordly consultants and registrars, and I suspect many would be better for having lived a bit before becoming doctors, or at least for taking a career break.

My friend was an idiot at 18. No matter, I was there, and I was an idiot, too.

If you’re not taking advantage of what being 18 means and being a bit of a moron, then you’re doing something wrong.

Much more wrong than choosing not to waste £50,000 going to university.

I want to meet interesting people!

I have nothing against this aspiration, and I should pursue it more myself.

But it’s not a good reason to go to university.

You’ll notice heavyweight magazines like Prospect or The Economist or The London Review of Books don’t stuff their pages full of interviews with 18-year olds. Charlie Rose does not interview undergraduates. The opinions of first-year students are not called upon at economic summits, or celebrated by the Nobel Prize committee.

That’s because 18-year olds who’ve done nothing but study all their lives are pretty boring. Rich in many ways, but dull.

Reality TV programmes like Big Brother feature young men and women sitting about dissecting their mundane sexual woes while drinking endless cups of tea all day.

If that’s your idea of interesting people, you’ll love university.

You earn more if you’ve got a degree

This one is hard to argue, in that it’s statistically true. However, it’s also statistically meaningless. Only someone with a university education could think it was important.

Given that most of the brightest, ambitious people – not to mention the most privileged – go to university, it’s hardly surprising that the same cohort goes on to earn more money.

But this tells us nothing about the bright and ambitious people who do something else. We can only look to anecdotal evidence, like all the self-made entrepreneurs who seem to do just fine without spending three years being lectured by people who can’t do but do teach.

Besides, the education pay gap is shrinking every year. At this rate people who avoid university will end up financially ahead, once you take into account the cost of a degree.

That’ll be pretty funny – I can’t wait to hear the excuses.

Much-quoted data from the pre-fee charging era suggests an income premium over a working life for degree holders of £100,000. But that data didn’t factor in debts or fees, even before the recent massive hike.

So the jury is out on whether degrees will pay in the future, especially if you’re a man:

If tuition fees rise to £7000, degrees in the arts, humanities and non-economics social sciences will be bad investments for men. The cost of getting them will exceed the uplift in future earnings.

What’s more, at a higher discount rate on future earnings, or in the bottom 25% of graduate earnings, even degrees in science, technology and engineering will have negative pay-offs for men.

Most degrees still result in higher salaries for women according to the same research, but there are clearly a host of other factors at play here.

If you are set on getting a degree for money, do law or economics or similar, and try very hard to get a First!

I am passionately into something weird

There’s been this big invention in recent years. It’s called the Internet.

You no longer need to go to university if you’re a bit different or want to learn more about something weird. So don’t bother.

Being weird is brilliant and marketable these days, but it can’t be taught.

I want to transcend my poor / limiting background

I feel for you, I really do. There is still a class divide in this country, and I believe social mobility is declining.

Young people who grow up in wealthy households in the South East or in the privileged enclaves dotted around the country really have no idea how lucky they are, or how the other 90% live. If they are privately educated it’s even worse.

If you’re in a ‘bog standard’ comprehensive school on the outskirts of Middling Town, UK, your family probably doesn’t know lawyers or company CEOs – let alone the investment bankers, media geniuses, and entrepreneurs who are really doing well these days.

It’s very different for the lucky kids with high-flying aunts, uncles, and neighbours.

The rich are pulling away from the rest of society. The denigration of university education has taken away one of the few ways a clever, poorer young person could vault up the rungs.

From internships for the children of mates to crippling rents in London where the action is, opportunity is being closed down, not opened up, by these social trends.

I agree with all that. I just question whether a degree and a shedload of debt is going to help you. Especially if you do an arty degree and plan to work in media, fashion, music, design, or anything like that.

Your best bet escape route degree-wise is to do the most solid degree you can – preferably law, economics, science, or engineering-based – at one of the top universities in the country.

A degree in social science from somewhere nobody has heard of is going to land you back home on the shopfloor at Debenhams quicker than you can say: “Three years, £50,000 in debt, and all I’ve got is a chip on my shoulder”.

I want to be a grown up

The final recourse of the university defenders is it teaches kids how to be adults, and to live in the real world.

Such a laughable idea, I don’t know where to start.

Besides being grossly unfair to those poor dolts who skip university yet still somehow manage to drive cars and be polite to checkout assistants, it’s a pathetic justification for spending £50,000 moving from one town to another only to hang around with similar people learning lots of things you’ll never need to know again.

There are many more interesting ways to bridge the gap between self-obsessed 18-year old and a slightly less self-obsessed 21-year old than attending university.

There’s the now-ubiquitous gap year, for a start. I have come full circle on this – I thought it was a waste of time and money when I was a student, but 20 years on it seems like brilliant value.

People work all their lives so they can retire and take the trip of a lifetime. Why not take the trip when you’re 18, and learn to wash your own socks and make other people cups of tea along the way – just like in a hall of residence, but with better scenery?

Enjoy yourselves, then get a job, and count yourself £40,000 up on the deal.

University: A poor investment

I should have twigged the notion that everyone should go to university was a bad idea when it was championed by the last government.

Almost the definition of a good idea blown out of proportion is a modern socialist party’s manifesto – whether it’s state pensions, the NHS, worker’s rights, anti-discrimination, or the idea that everyone should be an A* student with a degree.

All brilliant ideas in theory – but absurd in extremis.

Cynics may say the Left’s championing of university is all part of some political game, but I’m prepared to give politicians the benefit of the doubt.

Most well-meaning people still think we need to send everyone possible to university. Practically everyone thought so 20 years ago, including me.

But times move on. The very popularity of the idea that everyone should get a degree has become its own downfall, by making degrees too expensive to teach and too trivial to count for much.

About the only thing that gives me pause in writing this piece is, as I said at the start, the thought of my parents, who glowed when I graduated and who spent some money on supporting me there, only for me to abstain from the whole debacle.

“The very popularity of the idea that everyone should leave school for university has become its own downfall.”

But we all make mistakes when we’re young.

It would be a bigger mistake to encourage more young people to waste their time and money getting a degree, out of some sense of guilt.

Remember: I didn’t even have to pay for my university education. Tuition was free, and a grant (and frugal habits) met most of my living expenses. Yet I still think it was a bad deal.

Imagine if I’d spent £50,000 on it!

Compound the £50,000 you’ll spend on university in a tracker fund for 50 years earning a little less than the average real return from UK shares of 5%, and you’ll have nearly £600,000!

Good luck beating that with your superior qualifications.

Unqualified opinion

Most young people won’t listen to me, which is fine – it leaves more room for those prepared to think different to seek the many other genuine opportunities out there.

Most of us are too old now to benefit from making a different choice anyway, whether you agree with me or not.

So it’s up to us to help the young at least think about their options.

Got children yourself, or plan to? According to research from the financial firm rplan, a child born this year will likely cost £123,000 to put through university.

My advice is to move somewhere vaguely affordable that has a decent university nearby, build your kids an annexe with its own entrance for when they’re 18, and encourage them to stay and study at home. You might just turn a liability into an asset.

Oh, and have one fewer child than you planned to. (You’ll be happier, anyway.)

If you agree with my argument that more young people shouldn’t go to university – not with all of it, but enough to give someone pause before starting adult life in hock to The Man – then please press the ‘Like’ button below, or Tweet it, or send it to some young person you know. You might just save a life!

Further reading:

1. Many graduate careers on hold, according to ONS statistics
2. Weekend reading: Get a model education courtesy of Stanford University (for free)
3. Are you richer than your kids, or poorer than your grandchildren?

Some people are preparing for the end of days. A fall or retreat of civilisation, linked to peak oil or the collapse of the global financial system or environmental disaster. Or whatever.

The solution is extreme diversification – up to and including buying your own remote and defensible farmstead, complete with independent water supply, power generation capabilities, and the ability to feed your nearest and dearest until the smoke clears.

Anyone with an imagination is surely visited by visions of the Apocalypse. But the disaster scenario that occupies my mind is purely personal.

What are the chances that life will turn out as I hope – contented, productive, and blessed with good financial and physical health – without the intervention of some catastrophic event that leaves the long-term plan in ruins?

Financial disaster strikes

Whatever the odds, I’ve known a number of people who’ve suffered irreparable loss of income due to a bad roll of the dice:

• One was forced out of a job they loved by workplace bullying. Their loss of confidence has meant they’ve never returned to the same level.

• Another rose to lofty heights before being sidelined by management politics. Redundancy followed, and equivalent positions are impossible to find in Austerity Britain.

The trajectory of many other lives has been permanently damaged by misfortune, for example:

• A rapid deterioration in health – either their own or somebody near and dear.

• Loss of funds due to fraud, scandal, or naive decision-making.

• Loss of reputation or freedom.

• Divorce, addiction, abuse, or the death of someone they depend upon.

The foretelling

Whatever the cause, I doubt many of the affected thought it would happen to them, or planned for it.

How can you plan for an ill wind?

I’m a relatively optimistic person (this post aside), but witnessing the casualties of life has caused me to assess my personal risk exposure to a reversal of fortune.

I don’t work in a job that exposes me to a high degree of accident or danger. My health should be okay, too, especially given my family history and my attitude to vegetables.

But the industry I work in is being rapidly transformed by the creative destruction of the digital age. It’s an opportunity for some, but the inevitable outcome is less people being employed doing what I do. There’s every chance that I could get caught up in the fallout – my skills deemed obsolete, or worth a lot less in the era of globalisation.

Given the increased volatility of the global economy, I could be a casualty of a dip-of-the-curve sometime in the next 10 years. And there’s no guarantee that I’ll be able to make good the loss.

Prepare for the worst, hope for the best

That’s a big part of the reason why I’m not relying on a 25-year plan to pay off the mortgage or a precisely calculated investment rate that will enable me to retire at 65, provided my life goes like clockwork in the meantime.

I can’t plan for a quantum universe in which I’m struck by a debilitating illness¹ aged 55 and 11-months, but I can give myself plenty of room for error.

I’m saving and investing more than I need to, by conventional lights. The way I see it, by spending less on caffeine I either reach my goals more quickly, or I am better insulated against my personal apocalypse, if and when it happens.

Take it steady,

The Accumulator

1. Of course there’s insurance but it’s hard to insure against every possible calamity that can afflict you and yours without paying well over the odds.

Further reading:

1. The hidden cost of not saving and investing because you’re in debt
2. Simple saving tips to help meet your investment goals
3. All our investing, saving and money making articles

The death of Steve Jobs saw huge media coverage and an outpouring of emotion across Facebook and Twitter.

For those of us who were geeks before most people had heard of the word – let alone before it became a bit cool – it was all rather surreal.

Don’t get me wrong – I was adding to the eulogies, too. Steve Jobs has inspired me since I first encountered the Apple story back in the early 1980s, when I was reading books like The Hacker’s Handbook and programming my dad’s clunky PC to simulate a Pentagon computer. It began a love/hate relationship with technology that continues to this day.

Steve Jobs was the inspiration behind my attempts at entrepreneurship, too. If it weren’t for Jobs, Branson, and a handful of others, I’d never have considered that business could be as revolutionary as art or rock and roll.

Most people saddened by the death of Jobs don’t think about business like that, of course. They simply buy the products and feel a kinship, in defiance of Douglas Coupland’s prescient warning that: “shopping is not creating”.

The genius of Jobs’ Apple was that he made consumption feel like creating.

Once only a small band of Apple aficionados felt this way when they used Apple products, but now half the world does.

Hence the adulation and grief people expressed at the passing of a fairly ruthless businessman whom they’ve never met, and maybe never even thought that much about.

The characteristics of entrepreneurs

One positive side to Steve Jobs’ death is that many more people will hear his inspirational messages. Perhaps a few will then go on to become entrepreneurs.

My favourite of his quotes comes from his now widely cited speech to graduating Stanford University students in 2005:

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything ­– all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important.

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Yet while many will be inspired to ‘go it alone’ by Jobs’ bold words and the driven way he lived his life, others may be less likely to try, because Jobs’ C.V. reinforces a narrow view of what an entrepreneur should be.

People who might be very credible in business could look at Jobs’ showmanship and his manic obsession with quality and secrecy and think: “Nah, that’s not for me”.

But that would be very wrong.

The reality is there is more than one way to skin a cat – and there’s more than one way to skin a hundred cats a week to turn a profit.

There’s no ‘one size fits all’ entrepreneur. Steve Jobs was no pile-them-high box shifter, Richard Branson is no mild millionaire next door, and Warren Buffett is definitely no gruff Duncan Bannatyne.

And that’s worth stressing because the popular media’s view that an entrepreneur must be a swash-buckling thrill-seeker or else a dedicated nerd puts off many people from considering starting a business.

I’m the first to stress the many reasons not to start a business. But thinking you’re missing out on some clichéd entrepreneur characteristics isn’t one of them!

Role your own mogul

We humans love to categorise, though, and we also like to have role models. It’s usually the same for those who start businesses.

True, a few entrepreneurs grow unthinkingly into the role from their everyday activities, while others become entrepreneurs because they just couldn’t work for someone else. They’re unemployable!

Yet even these ‘accidental tycoons’ usually cite success stories – if not outright role models – that they admire.

For this reason, I’d suggest that anyone thinking about starting a business gets reading. After digesting a few good biographies, you’ll appreciate there’s a wealth of different entrepreneur characteristics, and no billionaire can claim to have even half of them.

Here are ten good books – and ten very different entrepreneurs – to get you started:

• iCon Steve Jobs (Steve Jobs)
• Losing My Virginity (Richard Branson)
• Titan: The Life of John D. Rockefeller, Sr. (John D. Rockefeller)
• What You See Is What You Get (Alan Sugar)
• How to Get Rich (Felix Dennis)
• Anyone Can Do It (Duncan Bannatune) [My review]
• Business as Unusual (Anita Roddick)
• Enter the Dragon (Theo Paphitis) [My review]
• Andrew Carnegie (Andrew Carnagie)
• The Snowball (Warren Buffett) [My review]

Like anyone else, entrepreneurs have a huge variety of flaws too, but I think we’re all best concentrating on our strengths and finding people who can compensate for our weaknesses, rather than trying to do everything.

That said, you can flip most entrepreneur characteristics to reveal a potential failing – so risk-takers can be overconfident, numerical people too obsessed with detail or budgets, and so on.

Finally, I don’t think a ‘huge desire for money’ is the defining characteristic for most entrepreneurs.

Obviously it’ll be in the mix for many, but there are quicker and easier ways to make a bit of cash than starting a business if that’s your main goal.

Most people driven primarily by money will go into sales, property, or finance, depending on their aptitude, rather than risk having no money at all due to a failure in business.

And there’s no shame in that, as long as it’s true to their desires. As Jobs (and many before him) also said:

“Your time is limited, so don’t waste it living someone else’s life.”

Part Two will be a spotter’s guide to common types of entrepreneurs. Subscribe to make sure you read it!

Further reading:

1. Types of entrepreneurs
2. UK Entrepreneurs’ Tax Relief raised to £2 million
3. How to make money developing iPad apps

I am halfway to paying off my mortgage and suddenly progress feels incredibly hard – as if I’m carrying a backpack filled with rocks. My motivation is sagging in the no-man’s land of neither here nor there, and I suspect I’m not alone in feeling this way.

Paying off the mortgage is the Number One Financial Goal on my ‘to do’ list – the other big task being to accumulate a retirement fund that will keep Ms Accumulator and I supplied with tea and cake in our dotage.

Currently 50% of our savings go into cash, 50% into index trackers, and a big, fat 0% goes to the mortgage company. This way, all mortgage allocated funds remain in our control. Who knows, I could be binned off at work tomorrow so I want the flexibility. Come the happy day, when we hit the magic number, we can pay off the debt in one fell swoop as our mortgage deal allows unlimited overpayments.

But that day is a long way off and, according to classic psychological theories of motivation, goal-orientated performance can vary depending on how you measure progress. If you’re staring at the finish line then motivation increases during the sprint towards the end.

For example, if your financial goal is to save £1,000, then things get very exciting as you hit the £900 mark.

The opposite is true if you judge progress from your start-point. When you begin, you get an early rocket boost as you go from zero to – well, anything’s better than that.

Without even realising it, I based the progress of our top financial goal around the start-point. Having anything in the mortgage pot at all felt like a small wonder of the world because we’d spent many years avoiding even thinking about it.

I drew more motivation juice by calculating the lifestyle changes we could make, drawing up savings targets, and spreadsheets to track ‘em, and after that watching the monthly savings drip-drip into a creditable stumpy stalagmite of assets.

Endurance of the camel

But now… now the only thing to do is to keep going. It’s like plodding across the Sahara. I can see countless footsteps trailing behind me, and nothing but empty miles of sand ahead.

Everything that’s in my control feels like it has been done. There are few costs left to cut. Positive steps to up the ante would require drastic action like:

• Taking in a lodger
• Getting a second job
• Downsizing

All are a sacrifice too far at this stage.

Fear is playing its part. There’s no doubt that hitting the halfway point has flicked a psychological switch in my head. Previously I felt we had little to lose. Now with so much achieved, but so much more to do, I fear that something will go wrong with the finishing line still far out of reach.

I hope to pick up a second wind as we start the downward slope of the journey – that the excitement will build as we claw our way towards the endpoint. Still, it feels like we need to be well over the halfway hump for that momentum to kick in.

In the meantime, I’m taking solace from the fact that goal-setting theory is on our side because our top financial goal is:

• Accepted: We remain fully committed to the goal. I could imagine living in our current house for the rest of my days and the thought that no-one could take it away from us, regardless of rampant interest rates or a career cataclysm is a powerful spur to finish the job.

• Specific: There’s a number to hit. I know how much we have to save, every month, and for how long, in order to get there.

• Difficult: Goals that are too easy or too difficult wither our interest. Business leaders Gergen and Vanourek suggest that goals should be ”BHAGs – big, hairy, audacious goals – that really stretch us”.

• Susceptible to feedback: I could get extra support from Money Saving Expert’s Debt-Free Wannabe forum board, but for now a spreadsheet tracker and the occasional chat with Ms Accumulator about our mortgage-free dream is enough.

Pull yourself together man [slap!]

Despite the slump, I don’t fear falling off the wagon. Our financial goal is too important and too well-aligned with what we want for that to happen.

Bouts of despondency are only to be expected. If you’re in a similar funk then I can tell you that reappraising your motivation for achieving your goal help refresh your spirit (writing this post has been part of that process for me).

I bet it would also have helped if my former self had written a note to the future me about why we are doing it. I wouldn’t have wanted to let me down.

I’m going to try a couple of other things, too:

• Setting some clear short-term goals – paying off the mortgage is a long-term aim. Hitting some quick-fire targets in the meantime may well take my mind off how far there is to go.

• Finding some inspiration – I know a few people who’ve paid off their mortgage early through blood and toil. I’m going to find out how it made them feel once they’d done it. Hopefully that’ll act like some kind of dream caffeine, clarifying my vision and redoubling my energy.

I wonder how Monevator readers have coped when they’ve hit the wall in pursuit of their financial goals? Let us know below!

Take it steady,

The Accumulator

Further reading:

1. Four more ways to stop a financial crisis derailing your money goals
2. How to stick to your saving goals
3. The 10 eternally true steps to financial freedom

I have plenty of friends who are bad with money. Despite decent salaries and barely-there responsibilities, they’ve little to show for 20 years of work but memories and wrinkles.

Some have allowed hundreds of thousands of pounds to trickle through their fingers. Others have a property bought on the back of parental advice and funding that’s salvaged their net worth – but further retarded their financial education by enabling them to duck the big picture.

And if you’re thinking that knowing me has clearly made little impression on my friends’ finances – you’re right!

It’s not that I haven’t tried. But I’ve learned it’s a bad idea to bring up money with people who’ve been careless with it, especially if it’s one of your favourite topics. They get defensive, or alienated, or worse. And I’m sure I’ve been unbearably preachy at times, especially in my 20s.

Now in my late 30s, it’s a slightly different story. Friends who’ve noticed my obscure passion for investing will sometimes ask an off-hand question about ISAs, or pensions, or their daughter’s slush fund. And while I’m not the world’s most empathetic person, I’ve worked out this is their cue for ‘the chat’. They finally feel ready to ‘be sensible’ with their money, and they want to know what to do next.

What they should do is a big, big subject – it’s the subject of an entire blog about managing money! When it comes to investing, I usually suggest they start simple with a cash and tracker split across ISAs, although there are lots of variables, such as if they have a workplace pension or big obligations.

As for me, I get to hear them explain what took them so long:

• “I don’t have the time to win big on the stock market.”
• “There’s no money at the end of the month for saving.”
• “I’ll think about investing when I’m not in debt.”
• “When I’ve got more money, I’ll start to get serious about it.”

This is all terrible, terrible thinking, if terribly common, too.

Many people wonder why lottery winners often end up broke. Not me. Time and time again, I’ve heard people expressing the belief that thinking follows facts:

“When I’ve got out of debt and I have more money, then I’ll start taking all this seriously.”

In reality, the facts follow from the thinking:

“When I start taking all this seriously, then I’ll get out of debt and have more money.”

If you want to make money your tool and an asset, rather than a liability, start behaving NOW like the rich person you’re going to be:

• You don’t have debts, so get out of debt.
• You think positively about money, so think long-term.
• You’re already living the plan for how you’ll retire early.
• You save money and time by investing with index funds.
• Young? You’re already richer than I’ll ever be again. Compound your money instead of buying clothes you don’t need.

To conclude, here’s some advice I once heard (tweaked for privacy) on being the person you want to be.

It’s not about money – and it’s all the more powerful for that:

“I finally reached a decision a few years ago when I was deeply into an ‘I’m ugly and I always will be’ phase. I sat down and made a list of all the things I would do if I were ‘beautiful’. For example: I’d feel confident in a room full of beautiful people, I’d wear great, well-fitted clothes, I’d walk with my head up, wear make up and do my hair properly, buy and wear high heels, and so on.

“Then I decided to do it anyway. I only have one life, and not enough money for the surgery required to meet my mental image of perfection. I’m damned if I’m going to let that stop me from having the life that I want.”

Amen to that. From now on, you’re good with money.

Further reading:

1. Who’s your Star Wars money hero?
2. How talking about money is like French kissing
3. The really obvious thing we all forget when borrowing money

A lot of people find it very hard to accept the randomness in economic cycles, the stock markets – or in life.

If a share goes down 5%, they have a reason for it. If a share rises 5%, they have a reason for it. Yet if there IS a reason for it, you can be sure they don’t all have the right answer. The sheer multiplicity of their explanations guarantees that.

The snap conclusions that we’re all inclined to make about share prices is a manifestation of The God Complex, a quirk of human psychology that basically says that no matter how complex the situation you’re looking at, you strongly believe your own solution is correct.

Worse, if you’re an expert then you’re even more convinced – when in reality, your superior knowledge should often encourage you to be more circumspect.

It’s well worth taking 18 minutes of your time to watch the following presentation from TED by Tim Harford, the author of The Undercover Economist, on the dangers of The God Complex:

No doubt the God complex equipped us well for life on the plains of Africa, when we had to move quickly and with confidence to avoid being a snack for a passing lion. But it doesn’t help us to evaluate a share for potential investment, or to solve other complex investing issues.

I can barely remember a time when those prepared to speak out about complex economic problems like the debt crisis in the US and Europe spoke in such simplistic, misleading and vehement terms, nor when in contrast those who feared that very complexity were so reluctant to make a move in the market.

For example, I seem to be alone in thinking that European politicians are doing exactly the right think with Greece. They are edging towards a solution via trial and error, seeing how much time a bit of fiddling at the fringes can buy – time for the infinitely more capable market to move towards a solution.

I’m more than happy to keep investing in the face of such fear. The opinion among most media and finance bloggers, in contrast, is that the system will explode unless there’s some ‘grand solution’ that will somehow solve all Europe’s problems for the next 20 years out at a stroke.

In response, I’ll quote a poet:

“The best lack all conviction, while the worst are full of passionate intensity.”
– William Butler Yeats, The Second Coming

Further reading

• You probably can’t pick stocks better than the market, so buy a tracker.
• Read Fooled by Randomness by The Black Swan author Nassim Taleb.
• Tim Harford’s new book Adapt is about how success begins with failure.

Further reading:

1. Video: John Maynard Keynes versus Friedrich von Hayek
2. Learn how to get rich from a video game
3. Video: BP spills a cup of coffee

One of the troubling trials the rich face is deciding when to dial back on wealth accumulation to focus on wealth preservation.

Icarus flew too close to the sun, and plenty who’ve made fortunes have lost them, too, when instead they could have lived out their days like Scrooge McDuck in a bathtub filled with dollar bills.

Much too young

On the other hand, given how quickly life expectancy is increasing (though not quickly enough for me!) and the ease with which a champagne (or even a cava) lifestyle can become an everyday habit, others adopt excessively conservative strategies too soon.

Perhaps the young-ish and rich-ish are not as greedy as they’re cracked up to be? I’ve known high-flying 30-something investment bankers to keep their money entirely in cash, bonds, and their West London property. Not a share in sight!

Sometimes they blame the onerous trading rules of their firms, but that’s hooey. The truth is once they’ve made their ‘nut’, they want to squirrel it away, as opposed to correlating their net worth even more with their market-related jobs.

You’ve got to lose to win

Protecting what’s yours may be sensible when you’re raking in six-figure bonuses each year. Didn’t Warren Buffett say the first rule was not to lose money?¹

True, but you and I aren’t made men at the last Wall Street bank standing, and you’re probably not Warren Buffett, either. Buffett can apply his loss-avoiding rule by spotting a final puff in an investing cigar butt. We mere mortals have to open cash ISAs to play safe, and that will hit our returns.

Most of the past decade was unusually kind to cash savers. But over the long run, history is clear — if you’re aiming to grow your way to wealth through modest savings and compound interest, then you need to forsake the short-term preservation of wealth for the potentially higher rewards (but greater volatility) of equities.

To give a simple example of how you could split a portfolio and expect very different results, according to Moneychimp’s standard deviation calculator:

• A 75% cash / 25% equity split predicts a return of 4.5%, with a volatility of 3.75%

• A 50% cash / 50% equity split predicts a return of 6% with a volatility of 7.5%

• A 25% cash / 75% equity split predicts a return of 7.5% with a volatility of 11.25%.

You pay a very high price for sleeping more soundly at night. The 7.5% return from the most volatile equity-dominated portfolio might not sound that much more lucrative than the 4.5% you’d get from the 75% cash-dominated one, but turning to our compound interest calculator we see:

• Low volatility, smaller returns: £10,000 a year sunk into the low return cash-dominated portfolio would be worth £638,000 after 30 years.

• High volatility, bigger gains: £10,000 a year invested into the high return equity–dominated portfolio could be worth £1,112,000 after 30 years.

The lesson: For most people, concentrating on reducing volatility to protect their net worth too early will greatly cap their returns.

Volatility is the price we pay for chance of a superior final outcome. But once you’ve made what you would consider enough money, this flips and you’d rather not lose it.

Target acquisition

To see just how hard it is to plan how much money you need, have a play with FireCalc’s returns simulator to see how long your money could last in retirement. It uses US data but the general principle applies in the UK.

Start with too small a nest egg, or experience a bad run of luck with a risky portfolio, and you can be left with nothing to explain to St Peter – but many years in poverty before you have to.

How much is enough? I don’t have an answer – however much I need, I’m not there yet!

True entrepreneurs like Branson or Bannatyne will certainly never be satisfied, but then they’re in it for the money like a scorecard. Nearly everyone else will find money after a certain point does not buy more happiness, and the law of diminishing returns kicks in.

A good aim for most of us mere mortals is to have enough to replace your salary with a diversified investment income – one with a decent proportion of real, inflation-sensitive assets like equities and commercial property in the mix, to keep you going long-term.

Complicating the timing of the shift to wealth preservation, if you can ride out the ongoing volatility there’s a good case for keeping some equity exposure even in your old age, perhaps via income investment trusts or a HYP, to further guard against inflation.

Income tends to be much less volatile than capital². If it’s too soon to worry about preserving the latter, then concentrating on the former while accepting the capital will fluctuate may be a practical compromise.

Happily wealthy every after

If you continue to work and save after you reach your income target – or if your investments do better than expected, sooner than expected – then you can look to reduce risk a little by allocating still more money to your income fund in total, but directing a greater proportion of it towards safer assets like government bonds.

Think you’re rich enough already? Then switch to preserving your wealth, and work too on simplifying a few of your tastes to have a margin of safety!

1. The second rule is, of course, not to forget rule one.
2. Interest on cash aside

Further reading:

1. A start-up that’s growing at 100% a month
2. Four more ways to stop a financial crisis derailing your money goals
3. How stop loss investing can save you money

I always make time to read Warren Buffett’s annual letter to his Berkshire Hathaway shareholders.

In contrast to the usual dry company reports, his letters read like a warm Buffett family Christmas newsletter, with a cast of familiar characters, recurring japes – and, okay, a fairly detailed description of how an insurance free float works.

And digesting the latest 2010 Berkshire letter with a nice glass of Australian Shiraz, I discovered a fabulous gem tucked amongst all the usual investing wisdom that surprised even a Buffett fanboy like me.

It was a modest letter within the main letter that Warren Buffett has republished, which was originally written by his grandfather, Ernest Buffett.

The Buffett family money gene

Anyone who has read The Snowball will know how Buffett’s early experiences and family life shaped his financial character.

But what this new Buffett letter reveals is that being careful with money – and feeling the urge to teach others how to shepherd it, too – runs deep in the Buffett family.

The letter was written in 1939 by Buffett’s grandfather Ernest, to his youngest son (and Buffett’s uncle) Fred, and his wife.

It reads (with idiosyncratic grammar) as follows:

Dear Fred & Catherine,

Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary to have at that time.

For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice.

For a number of years I have made it a point to keep a reserve, should some occasion come where I would need money quickly, without disturbing the money that I have in my business. There have been a couple of occasions when I found it very convenient to go to this fund.

Thus, I feel that everyone should have a reserve. I hope it never happens to you, but the chances are that some day you will need money, and need it badly, and with this thought in view, I started a fund by placing $200 in an envelope, with your name on it, when you were married. Each year I added something to it, until there is now $1000 in the fund.

Ten years have elapsed since you were married, and this fund is now completed.

It is my wish that you place this envelope in your safety deposit box, and keep it for the purpose that it was created for. Should the time come when you need part, I would suggest you use that you use as little as possible, and replace it as soon as possible.

You might feel that this should be invested and bring you an income. Forget it – the mental satisfaction of having $1000 laid away where you can put your hands on it it, is worth more than what interest it might bring, especially if you have the investment in something that you could not realize on quickly.

If in after years you feel this has been a good idea, you might repeat it with your own children.

For your information, I might mention that there has never been a Buffett who ever left a very large estate, but there has never been one that did not leave something. They never spent all they made, but always saved part of what they made, and it has all worked out pretty well.

This letter is being written at the expiration of ten years after you were married.

Ernest Buffett

“Dad”

Isn’t it great? I absolutely love this letter: I love the formality of it, the humility, I love the thought and the care of it.

Most of all I love the hard won wisdom in it.

This is a letter by a man who lived through the Wall Street Crash and the Great Depression. When Ernest Buffett says keep the money in cash in a deposit box where it’s easily accessible, he’s partly thinking about bank runs!

And when Grandpa Buffett says he knows people who have suffered from a lack of ready cash, he doesn’t mean that they couldn’t pop to IKEA to buy a sofa bed before the guests arrived. He means destitution in a world with no credit cards and few safety nets, save family.

In praise of cash

Buffett says that it’s this sort of Buffett family thinking that explains why Berkshire Hathaway customarily has at least $20 billion on hand.

That’s a lot of cash, and it’s held despite having the world’s greatest investor at the helm, who could be expected to make far higher returns on it than the measly percentage gains Berkshire will get on short-term deposit.

For you and I (who are still in the process of proving whether we’ll be the world’s latest greatest investors) there’s no debate – we should run hefty emergency funds and also keep a chunk of our portfolio in cash.

I love cash as an asset class. When people trash cash, warning me about inflation or telling me I should put more money into government bonds instead – or worst of all borrow to invest – my eyes genuinely glaze over.

Over the long-term the returns from gilts and cash aren’t so different, especially if you’re a private investor with a relatively modest nest egg who can chase the best savings deals. Yet the flexibility¹ of cash is impossible to compare with bonds, let alone equities, REITS, or whatever else might take your fancy.

Having cash on hand means you don’t have to go into debt if the boiler blows up. Having cash in reserve means you can swoop to buy cheap securities in bear markets. It means some portion of your portfolio is as unblinking as a hungry Buffett sat before an out-sized hamburger.

In fact, I think new investors could do a lot worse than simply split their investing between a main market tracker and cash, and then forget about the other asset classes for a few years. The security of the cash is very helpful while you learn to stomach the volatility of shares.

Don’t get me wrong – I’m over 90% invested in equities. Cash has its place, but it’s little use in fighting inflation, and that’s the bane of long term investment.

But whatever you do, don’t bung cash overboard in your quest for future riches or even just a nice retirement. Cash cannot be beaten for liquidity and versatility.

Investing doesn’t end with a cash savings account, but that’s certainly where it starts – whether you’re in the Buffett family or not.

And finally…

Oh yeah, and let’s not forget this bit in the letter from Ernest:

I might mention that there has never been a Buffett who ever left a very large estate, but there has never been one that did not leave something. They never spent all they made, but always saved part of what they made, and it has all worked out pretty well.

That made me smile, too. It’s a Buffett family joke we can all share!

1. Aka liquidity.

Further reading:

1. 5 ways to invest like Warren Buffett (from the man himself)
2. The Warren Buffett hedge fund that wasn’t
3. How did Warren Buffett get rich?

Aside from big picture stuff like extreme frugality, I’ve never focused much on ways to save money here on Monevator. Plenty of blogs have that niche covered.

But be under no illusions. Spending less than you earn is the key to getting rich, whether you earn 20K a year or two hundred. The Micawber Principle is the one rule of financial planning that rules them all.

So I was delighted when fellow money blogger David Hamilton agreed to fix the frugal tip deficit on my blog with a guest post offering more than 100 ideas for how to save money. David is the owner of Financial Planning Tips, and is well-versed in thinking of ways to ratchet down on your spending to save more.

None of these ways to save money are rocket science. But that’s the point – if they were, they’d be hard to implement. Instead, a quick skim through this list should spark a frugal push in your own household. A few quid saved here and there a day soon adds up to a lot more funds for investing.

Over to David!

1. Pay your credit card bills in full on time, every time: No more excuses for paying interest or late fees.

2. Buy cars used: Always buy used, never new – you aren’t gaining much by buying new except a nice smell, you lose a lot of value as soon as a new car rolls off the lot.

3. Learn to cook all your meals: Impress your friends and your wallet by cooking at home regularly.

4. Don’t fly or take vacation during peak travel season: This will always be more expensive. Instead, visit on the tail ends of each season – so you can still enjoy the weather along with better rates.

5. Buy your vegetables at the Farmer’s Market: Are you aware of the insane markup that happens because of the use of food distribution centers? Farmer’s markets are great because they cut out the middle man and that’s why the prices are lower. [Editor: This may depend on geography - in the UK, everyday markets or supermarkets will be cheaper, unless you're after roasted ox truffle oil]

6. Borrow or rent heavy duty tools from a site like Neighborgoods.net: If you have any special projects, there’s no need to buy or even rent special tools. You can find someone who probably has the tool you need.

7. Don’t go shopping just because there is a sale: Do you really need it? Start with the need first, then look for the sale.

8. Change your own car oil: Yes once you learn to change your oil, it’s easier than it seems, no more paying the markup an oil change as a service. Your auto parts store can tell you exactly what you need for your make and model of car.

9. Use a push mower: It’s less expensive, requires less maintenance overall, no gas or oil – and you get a nice round of exercise along by mowing your own lawn.

10. Make food in monthly batches: Preparing food in larger quantities saves money in the long run. You’ll have to spend a day or two cooking for the month, but you’ll save both money and time over the course of the month by having all your meal prepared and frozen.

11. Keep soap remnants: Save those little soap fragments and make them into a soap ball. Also make sure to take any soap in your hotel room home with you – that’s good free stuff!

12. Only wash shirts, jeans, pants when necessary: Unless there is a spill of massive proportions on your clothes, these items don’t need to be washed often. You’ll save by having smaller-size laundry loads. This DOES NOT apply to undergarments however.

13. Install solar lighting or low-voltage lighting: This is great for outdoor lighting like patio or driveway lighting. Installing this type of lighting will save you on electricity bills in the long run. You also can install this for indoor purposes, but outdoor is the more popular option.

14. Ride your bike to work, or take public transportation: You save on parking and gas.

15. Never drink and drive: Besides the obvious safety factors – if you do get caught you can pay thousands in fines.

16. Get rid of your cable subscription: In the age of the Information Highway you can watch movies on your computer, and get news from the Internet or from the radio if you’re concerned about receiving breaking news.  All for free.

17.  Eat before you go food shopping: An oldie but a goodie – help yourself stick to your shopping list by not going to the store hungry.

18. Don’t buy a smart phone, only a no frills cell phone: Do you really need that data plan? Leave that iPhone or Droid phone at the store. It’s most likely just a fun and convenient thing to have, but certainly not a necessity. [Editor: Oops. I bought an iPhone!]

19. Sharpen your multi-blade razor on the back of your arm: You really may never need to buy one again! For some reason this guy figured out that your arm works like leather.

20. Don’t go shopping at high end grocery stores: It’s overpriced and you can get everything you need at cheaper groceries stores. There’s a reason why they call stores like Whole Foods, ‘Whole Paycheck’.

21. Make your own coffee: If you drink coffee, make your own batch each morning and carry a thermos with you daily. No more Starbucks.

22. Carpool: A thing of the past? Nope, you can still do it. Bring it back in style with friends or co-workers to save on gas and car maintenance costs.

23. Get a hybrid car: If you have to buy a car, get a hybrid and save on gas.

24. Limit your dinners out to once a month: But make it a nice one and look forward to it.

25. Don’t drink alcohol: Empty calories and dollars down the drain! [Editor: I couldn't live without a drop of red. Your mileage may vary].

26. Cancel magazine subscriptions: Are you really reading all those magazines? I doubt it, so save the one or two you love. All others should be canceled.

27. Download your music legally from GoMusicNow: At 5 to 9 cents per song for cheap and great quality downloads you can’t go wrong. Don’t use Amazon or iTunes at $1 per song. [Editor: Not sure this works outside of the US? Here in the UK I use Spotify for free].

28. Use coupons: When buying food and other household items, always use coupons and buy what is on sale.  That’s not an excuse to buy what you don’t need, however. [Editor: I've never used a coupon, but some swear by them. Depends how much time you've got, perhaps].

29. If you’re a going bald, shave your head: Don’t buy all that hair restoration crap. Save on haircuts, shampoo and dignity from comb-overs. Besides the Buddhist look is in.

30. Sell Stuff on eBay: Go through your stuff that you absolutely don’t need and sell it.

31. Stop smoking cigarettes: So much money wasted; so much cancer-potential gained. [Editor: Hear hear!]

32. Don’t buy junk food ever again: That includes chips, sodas, cookies, cakes. Wasted money and calories.

33. Cancel your gym membership: No, this isn’t an excuse to not exercise. You can work out at home with isometrics, body weight exercises, go running in the park, or ride your bike.

34. Go generic: From food to drugs and more, going generic almost always saves you money.

35. Get a programmable thermostat: Let it be cooler at night in winter climates, or warmer in the day for summer climates.

36. Rent out an extra room in your house: Help pay down your mortgage by renting out that spare room to a relative or tenant. [Editor: Or a tourist].

37. Keep your blinds and curtains closed: Save energy by keeping the warmth in or the sun out.

38. Learn how to do basic home repairs and maintenance: Unless it’s a major project, you can fix many things around the house yourself. Home Depot offers free classes from the Home Improver Club.

39. Drive the speed limit: Never get a ticket, no paying for speeding.

40. Homebrew: If you must drink, learn to brew your own beer or wine.

41. Take vacations nearby: Forget long flights and big resorts in the Caribbean. Most likely, you don’t live very far from some nice places to visit.

42. Eat less meat and more beans for protein instead: Buy a pressure cooker and cook dry beans (not canned) to really save money. Meat is much more expensive. [Editor: There are big environmental benefits, too].

43. Refinance your home: When rates are low take advantage of refinancing deals.

44. Don’t buy or rent books or DVDs: Get a Public Library card and borrow them – it’s free.

45. Don’t use toothpaste: Use baking soda instead. Toothpaste is a luxury, it’s the brushing that does almost all of the work actually. Baking soda will help whiten your teeth. [Editor: This is a frugal tip too far for me. I love my teeth!]

46. Never buy extended warranties: Ever noticed how these warranties usually last the life of the product anyways? You don’t really need it. If you need additional warranty, use the extended warranty feature for free on your credit card.

47. Bid for your travel needs: Yes, Priceline is still around and you can bid for flights, hotels and rental cars.

48. Create a budget: Fail to plan, plan to fail. Make a tight budget and stick to it.

49. Use open source software: Never pay again for software. Use OpenOffice for documents, Linux for your operating system, and other free software available for free on sites like SourceForge.Net.

50. Settle all of your credit card debt: Make a solid plan for settling credit card debt on your own and balance transfer to 0% APR cards. Just make sure to pay it all off before the 0% rate expires.

51. Always pickup your food, never get delivery: Don’t be lazy – get out of the house and go get it.  If you can walk or ride your bike to pick it up, even better.

52. Don’t buy bottled water: Either use a water filter at home or boil your own. Take water with you in reusable water bottles or a thermos.

53. Use gas at home: For heating and cooking, make sure it’s gas to save in the long run.

54. Telecommute: Get a job where you can work from home – at least some of the time. You’ll save money on commuting, lunches, and clothes. Plus you won’t have to see your boss every day.

55. Never finance anything: Never borrow to buy any purchase – except for your home. Always pay in full.  Though this doesn’t apply to using credit cards, because we’re paying off those balances every month, remember?  Think of your credit cards more like electronic cash (see tip #1).

56. No more fast food: Like junk food, a total waste of money for the nutrition you don’t get.

57. Drink water: Forget juice or soda. Most all drinks are filled with sugar or weird artificial sweeteners. Water is cheaper and far healthier.

58. Don’t buy cereal: For the nutritional value and amount you get, it’s too expensive. [Editor: Actually, I suggest you buy rolled porridge oats in bulk. Fearsomely good for you, and about 20p a serving with milk].

59. Buy frozen veggies over fresh: Frozen vegetables don’t spoil and they are always cheaper.

60. Plan your menu for the week: Planning ahead will prevent you from just saying ‘let’s eat out tonight’ when you aren’t prepared.

61. Use your shopping list: Do not deviate!

62. Buy Fair Trade coffee: For you coffee fiends, you’ll pay much less than most brands and get higher quality coffee.

63. Make your house airtight: Letting that precious heat and cool air escape will cost you. Make sure your windows and insulation are properly installed.

64. Stop using plastic bags for food storage: Use reusable containers for everything you can, instead of expendable Ziploc bags and the like.

65. Stop going to the mall: This place is designed to make you buy, buy, buy. Go directly to the store you need to buy something from, and then leave.

66. Get rid of newspaper subscriptions: Use the Internet for all of your news – it’s more up to date, anyway.

67. Wear more layers: In cool or cold seasons keep thermostat 68 or lower and wear more layers in the house to save on heating bills.

68. Sweat it out: Equally, don’t use the A/C if you don’t really need to. When it’s hot season sweat it out during the day. [Editor: We solve this problem in Europe by being too poor to have air conditioning].

69. Grow your own spice and vegetable garden: Got a green thumb? Grow your own and get fresh spices and veggies from your own backyard.

70. Wash your own car: No reason to buy a car wash, you can do it at home easily.

71. Buy clothes at thrift store: Save money on clothing, and get a cool vintage look by putting your outfits together the right way.

72. Move away: Live in a new town or even country where the cost of living is lower.

73. Get free prescription drugs: Stock up on samples from your doctor of your prescription of choice, and pay nothing more than your co-pay, which you have to pay anyways. Just ask your doctor and explain you have trouble affording them. [Editor: That's for my US readers. In the UK we've got the NHS, albeit a tax bill to match!]

74. Use an insurance broker: When buying your own personal health insurance, never get all your insurance from one company just because it is convenient. Insurance brokers need to get you the best deals to stay in business, because they know they are competing against other brokers. You’ll be able to find the cheapest homeowners insurance, car insurance and life insurance plans by using brokers.

75. Keep your windows closed: In the summer when it’s hot, keep the cool in, or in the winter, keep the heat in with closed windows.

76. When traveling, carry food: Make your food ahead of time or get from your cheap grocery store.  Especially when in airports, don’t buy anything there as it’s all overpriced.

77. Fly & return mid-week: Everyone wants to fly Fridays and weekend days, so mid-week has the best rates for departure and return.

78. Party at home: Invite your friends over, and rotate house parties. Make it B.Y.O.B. – share and share alike.  (Offer up some of that homebrew that you’ve made after reading tip #40).

79. Invest in no-load, no-fee mutual funds: Invest over the long term with these types of funds and never worry about paying management fees.

80. Only withdraw from free ATMs: Don’t use the gas station or non-network ATMs. Or get a Charles Schwab checking account where you get reimbursed for your ATM fees. [Editor: In the UK, this means avoiding withdrawing money from nightclub ATMs or dodgy cash machines in newsagents miles from anywhere].

81. Setup auto-payments: For your credit card or other bills and never pay a late fee again. [Editor: Direct debits in the UK].

82. Use EnergyStar products: Make sure your appliances are EnergyStar rated to save money on electricity. The higher the rating, the better the savings. [Editor: Details on UK energy ratings].

83. Turn off the lights: Whether you’re leaving a room or the house.

84. Use Skype or Google Talk: The best choice for long distance calls with family and friends. The quality is amazing, it’s like they’re in the next room. Get on board!

85. Never impulse buy anything: Wait two weeks after the impulse to see if you really need it. Bet you don’t!

86. Make your gifts: Get your craft on, and make your gifts for family and friends.

87. Negotiate prices: Wherever you can, from large corporations to small businesses. And always be willing to walk away.

88. Book in advance: As far ahead as you can when traveling to save money.

89. Stay with friends: When you go on vacation, plan to go where friends are. Most likely you’ve friends that live in a nice place.

90. Crash on a stranger’s couch when traveling: Find a couch to crash on with – it’s safe and been going on for years.

91. Beware tourist areas: Stay away from high tourist traffic areas where everything is more expensive when traveling.

92. Buy clothing out of season: You’ll find the best deals after a fashion season is over.

93. Buy in food in bulk: Set up shelves just for bulk food storage.

94. Get a large freezer: Put one in the garage for the storage of bulk meats, veggies and other bulk frozen foods.

95. Move in with family: If you’re renting save money, or if you own, rent out your home to others.

96. Make your own protein shakes: For snacks or meal replacements, shakes are more nutritious and cheaper.

97. Clean your own carpets: Just like your car, you can rent or borrow a cleaning machine and clean carpets yourself.

98. Don’t play the lottery:  Your chance of winning is extremely small. Save that money for an emergency fund or investing.

99. Buy a refurbished computer: Buying a used computer is a gamble, but refurbished one from a manufacturer can be a good deal, because it comes with a warranty.

100. Use timers for your lights: You’ll never forget about turning off your lights in the day or late at night again.

101. If you own a home, plant trees: Yes, trees do provide shade which can keep your house cooler in the summer. Think long term.

What other tips you do you have to share? Feel free to comment below, to add any tips you think would be useful.

David Hamilton is owner and author of Financial Planning Tips, which offers sensible information on personal finance. Besides being passionate about his finance blog and helping others keep their finances in check, David also enjoys playing music, staying healthy, spending time with family and friends, and traveling the world. You can also follow him Twitter.

Further reading:

1. My 10 rules to stay sexy and save money
2. How would you spend and save if you knew exactly when you were going to die?
3. Four more ways to stop a financial crisis derailing your money goals

There’s no doubt the war between the generations is hotting up as cash-strapped governments decide what services to cut and who to tax.

I used to get funny looks when I blamed baby boomer landlords for the high price of starter homes. Now that opinion is mainstream.

One MP has even written a book about it. The Pinch, by Tory minister David Willetts, is all about how the older generation have seized a disproportionate amount of wealth from their children.

And I’m inclined to agree. From job opportunities to peace to pensions to property, the post-War generation seems to have had it all.

Some argue though that the boomers didn’t get an easy ride. They tend to be boomers, funnily enough!

That said, I recently enjoyed a debate where a 30-something man took the opposite view, saying he pitied those in their 60s, and 70s. Our world was amazing, and getting more amazing by the day, he argued. Pining for the old days was pure nostalgia – the only people he felt envious of were his children.

So who is right, from a financial perspective as well as general quality of life?

I don’t have a definitive answer, but I do think there’s a couple of aspects to the debate that people are missing.

But let’s first recap the benefits enjoyed by the boomer generation, and also those of their offspring now in their 20s and 30s.

The boomers had it best…

Nobody is seriously arguing that the baby boomers born just after the war weren’t far luckier than their parents.

They didn’t suffer two World Wars. In Europe especially but also in the US, they also benefited from an expanded social safety net, more money in education, and infinitely superior and accessible health care.

But how do the boomers rank against their own offspring?

Pros of being a boomer:

• Stable work environment (at least until the ’80s)
• Affordable housing
• Final salary pension schemes
• Social mobility improved
• Grammar schools for the bright
• Relentlessly increasing standard of living
• Emptier roads, beaches, and beauty spots
• Lived through rock-and-roll and the 1960s

Boomer downsides:

• Rigid careers
• Hard to get loans or mortgages
• No shops open on a Sunday
• Sex not invented until 1963
• Lived in the shadow of the atom bomb
• Products (but not services) were worse and more expensive
• Restaurants in the UK were awful
• No computer games, plasma screens, mobiles or the Internet

Perhaps it was better to be born in the 1970s?

We all know that young people are automatically rich. But the boomers were young once, too, so their kids aren’t any luckier in that respect.

Here are some better points of comparison:

Benefits of being 20 to 30-something today

• Everyone but total numpties can go to university
• Foreign travel cheap and easy
• Flexible ‘portfolio’ careers
• Opportunity to work anywhere via the Internet
• Far better if you’re black, gay, and possibly female, too
• Boomer riches should trickle down eventually
• More accessible investing: ETFs, trackers, Monevator
• Endless cheap goods from China
• Internet, computer games, 3D cinema, and Lady Gaga
• Pornography on demand – how exciting!

Downsides for Generation X, Y, Z

• Little opportunity to drift, try out different jobs
• Graduate debts of £25,000 or more
• Premium for being a graduate eroding
• No job security
• Housing 5-10x average starting salary
• Endless competition from China
• Must fund own retirement from income
• Must also fund boomer retirement, national debt etc
• Pornography on demand – how boring!

Isn’t it all about expectations?

As my lists of benefits and downsides shows, it’s no easy thing to compare the generations. And what makes it even thornier is the issue of expectations.

If you were a clever working class boy who passed his 11+ exams and got into grammar school in the 1950s – and from there a good university – the chances are high you’d enjoy a far better standard of living than your parents could have imagined.

Whether an engineer, doctor, architect or journalist, you’d join the educational and professional elite. You could easily own a big home by the time you were 35, plus golf club membership, a pony for the kids, and a wider family grudgingly admitting for the rest of your life that you’d done well.

Compare that to a graduate today. Raised on the expectations of her parents and the 24-hour have-it-all culture, she thinks that her degree in medieval poetry should afford her the lifestyle that her father enjoyed.

But she forgets that:

• Fully half her peers also go to university now
• She’s not in that top 5% like her dad – she’s just another A-student
• Housing has been bid up by boomers and dual-income families
• Life on the average wage isn’t like Friends or Sex in the City

To make things worse, she may also expect a career AND kids. Whatever floats your boat, but she can’t compare her life to her stay-at-home mum’s who was happy with baked beans and granny’s cast-offs through the ’60s.

It’s all down to expectations.

If you travel to rural Africa or India, you’ll find people likely happier than you living in shacks. It’s not patronizing to say it’s because they don’t expect much, so the arrival of the Internet or a new health service brings them joy.

They didn’t expect it, and it does.

What about the time value of life experience?

Expectations are about our hopes for the future. But what about the experiences we’ve banked?

The 30-something child of a boomer who says he feels better-off than his parents because life is improving every year is assuming progress is going to continue.

Remember the time value of money? This states, effectively, that a bird in the hand is worth two in the bush – that £1 today is worth much more than £1 in ten year’s time.

What is the time value of a year of our life? What if the future is much darker than the recent past?

We haven’t abolished war or disease, last time I looked. Then there’s global warming, extra competition from overseas, the end of oil, and goodness knows what else to worry about.

I’m pretty optimistic about the future, but I don’t deny those are all real threats.

In contrast, boomers have the advantage of knowing they’ve lived through most of their lives in relative peace and prosperity, and with their life expectancy increasing year-on-year.

I’m sure most boomers would swallow a pill to be 25 again and to take their chances, but that’s not an option for any of us. The comfort for a boomer is that while their children strive to be hopeful about the future, the boomers can look back fondly on a pleasant life lived.

My verdict: It depends who you are

I don’t think it’s possible to make a clear cut decision as to whether it was better to be born in the 1950s or the 1980s, even from a financial perspective.

Mix sex, drugs, and daytime TV into the equation and you’ve got a novel, not a blog article.

However I do have some hunches:

• Generally, if you like stuff you’d rather be young now. If you prefer experiences I’d say the boomers had the better bargain.

• If you were a bright lower middle-class or working class boy, you’d have done best to be born a boomer. With hard work, the grammar schools would have pulled you up in life, and society became more meritocratic with you. A great house, a stable family, and a secure pension was yours for the taking.

• If you were born to rich parents, it probably doesn’t matter, but I think you’d have enjoyed the 1960s more. Chelsea, Greenwich Village, and Marrakesh was your oyster.

• If you’re very clever and driven by money, the world is your oyster today. You can easily be on six-figures in The City before you’re 30. That would have taken decades a few generations ago.

• If you’re a bright teenager from a less well-off background, I think you’ve still got opportunities today but you’ll have to strive more than the equivalent boomer. You’ll have to take on debt to get your degree, you’ll be competing with trust fund kids for unpaid internships, and if you want a creative career you may never own a house.

• If you’re willfully ignorant, lazy, pregnant at 16, and/or irresponsible, thank your lucky stars if you’re under 40. Rather than judge you or ask you to improve yourself, our benefit system will shower you with riches – at the expense of those temporarily down on their luck or seriously disadvantaged (the job seekers, disabled, old, and so on).

Harsh but true.

Disagree? Let us know your own verdict in the comments below.

Further reading:

1. How a boring broker will make you richer

You and I are advised to put our money into simple portfolios and to invest in shares for the long-term for our retirement.

But once the preservation of wealth becomes more important than growing it, other strategies come into play.

The preservation of wealth for the super-rich usually entails:

• Wide diversification at the expense of higher returns
• Reduced volatility
• A focus on real assets such as property and gold
• Investment in illiquid and unlisted securities and companies
• Paranoia over taxes

In fact, I doubt there’s a rich person in the world getting by with an index tracker, a savings account, and a wodge of Government bonds.

Risky businessmen

Firstly, let’s define the sort of millionaires we’re talking about.

I’m thinking riches well beyond the standard Millionaire Next Door variety. Rather, I’m discussing the sort of people who populate the lower reaches of the Sunday Times Rich List.

Let’s say a net worth greater than £10 million/ $15 million.

Now, not all these very rich people practice the preservation of wealth through diversification.

Many self-made entrepreneurs retain a huge slug of the businesses they founded, for example. This makes their net worth very dependent on the day-to-day value of those businesses.

Take Bill Gates. The world’s sometime richest man has diversified into everything from biotech firms to Warren Buffett’s Berkshire Hathaway to Corbis, his digital picture library. Yet despite selling millions of Microsoft shares every quarter, he is still the company’s biggest single shareholder. His 8% holding is worth $17 billion. If Microsoft goes bust, Gates will plunge down the rich list.

The insanely rich like Gates, Warren Buffett and Carlos Slim – the Mexican tycoon who’s currently the world’s richest man – can afford to take their chances. While in percentage terms the wealth tied up in their businesses is huge, the lesser share of money held outside is still enough to ensure a very prosperous lifestyle, whatever happens to their core company.

Such entrepreneurs got rich by being risk-takers. It’s not surprising they are comfortable continuing to take risks afterward.

But it’s also worth noting that lots of very rich people are simply badly advised or ignorant about money, especially the recently rich.

Many famous sports professionals go from millionaire status to bankruptcy in just a few years. They typically manage this by putting their cash into do-or-die business ventures they’ve no ability to evaluate, as well as by leaking money to friends, family, and advisers as quickly in retirement as when they were still earning millions.

Avoid their example if you want to stay rich!

How an old money dynasty stays wealthy

What we’re really interested in are the moneyed upper classes who remain rich from year-to-year and across the generations.

A great insight into their investing comes via the reports of RIT Capital Partners – the Rothschild family’s investment trust.

Listed on the London stock market, anyone can buy shares in the Rothschild’s trust. As a result it’s obligated to report on its activities, like any other company.

And what is very clear if you read its annual reports is that Lord Rothschild does not believe a stock market tracker, some gilts and a wodge of cash is sufficient to guarantee his heirs a chunk of the Rothschild fortune. Far from it!

Here’s how RIT Capital Partners’ assets were allocated as of March 2010:

Now that’s what I call diversification! The unquoted investments alone include all sorts of weird and wonderful stuff, from Brazilian farmland to a newly established Norwegian oil explorer to a 50% stake in The Economist.

Another notable aspect to Rothschild’s strategy is currency diversification:

As you can see, the trust shifts its exposure to different currencies a great deal from year to year. This isn’t so much about trying to make money from currency swings as it is about the preservation of wealth.

Diversification is everything

As Rothschild’s trust demonstrates, the key to wealth preservation is massive diversification, to guard against all conceivable forms of investment failure:

• Massive vertical diversification – Investments across the waterfront of asset classes, from property, bonds, private equity and stocks to more exotic fare like unlisted businesses, land, art, antique furniture and intellectual property such as publishing rights.

• Massive horizontal diversification – Holdings in the different asset classes are spread widely among baskets of stocks, different fund managers, various countries’ bonds, and indeed into different currencies.

• Political and legal diversification – Super-rich people are much more interested in taxes, the legality of their holdings, and political risk than you and me. They may have good reason to be more paranoid in many cases. For this reason they tend to hold some of their assets offshore, including real assets like property or gold.

Coming soon – practical tips from the super rich on the preservation of wealth. If you want to ensure your heirs can blow their inheritance on strippers and sports cars, subscribe for free to make sure you read it.

(Image by: Hamed)

Further reading:

1. Learn how to get rich from a video game
2. When should you stop growing and start protecting your money?
3. The Rules of Wealth