Money, money, money, must be funny…

I have recently been thinking about money given that I will start earning an honest penny come September. I am intent on having a really good think about how I want to distribute a salary when it starts coming into my account.

This is based on an idea espoused, I believe, by Robert Kiyosaki in his book Rich Dad, Poor Dad. The theory basically says “pay yourself first”. Instead of salary coming in, immediately paying all of your bills and then treating yourself to a night out or some new clothes and saving only what is left at the end of month (little), pay yourself first. Take a set amount directly from your account before paying anyone else. By doing so, all the bills will still be paid and I will still be able to afford some luxury but I won’t be wasting so much money on useless tat.

So, while I have a summer to relax, I wanted to devote some time concentrating on my finances. The goal is to split savings into three segments (not necessarily equally). These will go into a “safe” bucket and a “growth” bucket which is divided into a “buy and hold” bucket and a “momentum” bucket. These have separate aims:

• The safe bucket will have to be solid and reliable. Probably mostly an ISA with possibly Government bonds on top
• The growth bucket is looking at riskier, and hopefully more rewarding, options. These might mean investing in the stock market or corporate bonds. The options I take will be pound-cost-averaged. This means buying the same option every month with the same amount of pounds. The effect is that when prices are low I purchase more shares and when prices are high I buy less.
  • The buy and hold bucket will contain long term investments that I will not review. Over time the stock market always does well – as long as you ignore the, ahem, glitches that happen now and again. One strategy I am looking at is America’s Finest Companies. This is a list compiled annually of any publicly traded American company which has managed higher earnings per share, or higher dividends per share, for at least ten consecutive years. Dividends are reinvested and shares are only sold when a company falls out of the list. Of the 19,000ish companies traded, approximately 300 make the cut.
  • The momentum bucket is a group of investments which are actively traded over time. Although I doubt I will have time once I start working to trade daily, this bucket will include items that I will trade regularly. I am not entirely sure at the moment what kind of strategy I want to pursue with these investments and they are likely to be the most risky. I am interested in checking out foreign exchange given the greater volatility of the market (not certain if that is a good thing or a bad thing actually).

I have set up some over-elaborate spreadsheets so that I know exactly how much I will be pocketing after tax, the maximum I could borrow for a mortgage and what that would cost, as well as various other expenditures.

I may have to delay my whole investment strategy for a couple of months after I start work to catch up with my first month expenses before I get that first golden pay cheque, assuming that I will have had to have put down a deposit, etc. I would like to get involved with America’s Finest Companies as soon as possible, with the 2010 edition being released next month. I am fully intent on steaming on with the whole scheme by the new year, one way or another.

Here’s to making some money!

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