How to Turn Discretionary Income into Long-Term Wealth

Discretionary Income 

Written by R. A. Stewart

If you have taken a good look at your bank statements you will notice payments such as rates,  power, and groceries. These are fixed expenses and are necessary. Then there will be payments for such things as entertainment, hobbies, and the like. These are things which you can do without.

Discretionary spending money is what you have available to spend beyond your necessary expenses. Expenses that you need to pay every month. If these are not paid there will be consequences such as a financial penalty. In the case of rates this is usually an extra 10% if the account is not paid by the due date.

Discretionary spending is what you have control over. Food is a necessary expense but going out for a meal in a restaurant is classed as discretionary spending.

If your income drops your discretionary spending is affected. You have less money to spend on whatever it is you love to spend your money on.

Do you have more discretionary spending money if your income rises? That all depends if your costs go up. During the current cost of living crisis as the economy is often called, an increase of income does not always keep pace with rising costs which means there is less discretionary spending money available. 

It is the costs of fuel, power, insurance, and rates which ordinary people cannot control which are biting. Food and groceries are necessities but at least people have some measure of control on what to spend their money on in the supermarket.

Investing your Discretionary spending money

It is not always the amount you receive in your pay packet but what you do with it after you receive it which determines your financial outcome. What separates a good money manager from a bad one is that a good money manager will save and invest some of their discretionary spending money with their future in mind while a bad money money will spend everything without any thought for the future.

It takes vision to make provision for the future. Making plans for the future is a responsible and mature thing to do. There are consequences for spending everything. One is that when an unexpected bill arrives there is no money in the kitty to pay for it.

If you do not have an emergency fund then using part of your discretionary spending money to start one is a good idea. 

There are plenty of investing apps about. These can be used as a way to invest on a shoe string. Getting involved in the share market helps to build your financial literacy.

If you have more discretionary spending money available and want to be a bit more adventurous then investing in crypto-currency may be your cup of tea if you are aware of the risks and don’t mind taking risks. After all, if you spent your discretionary money on a restaurant meal it will be gone in one night. You might lose it on Bitcoin so what is the difference?

When investing your money ask the question, “How will this affect my lifestyle if I lost this money?”

If you were saving for a new car and invested the money you set aside for a new car in the crypto-currency and lost it all, the result will be that you will be unable to purchase your new car. The same thing applies to whatever you are saving for, an overseas trip, education, or  house deposit. Investing requires common sense and diligence.

About this article

This article is of the experience of the writer and is not financial advice. It may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your blog/website or ebook.

Read my other articles on www.robertastewart.com

 

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Photo: Lake Mapouriki near Franz Josef Glacier, West Coast, New Zealand

Safety First: How to Protect Your Money from Debit Card Fraud

Debit card dangers

Written by R. A. Stewart

How to make the most of your bank’s debit card.

Having a debit card is a handy banking aid to have at your disposal. If you like buying stuff off the internet then you need some form of visa payment system to allow you to do this. Certainly not owning a debit or credit card in this day and age is a bit like not knowing how to use the internet and I have met a few of those people.

There are some rules which need to be followed if you are to make the most of your debit card.

You may not agree with some of what I am saying here but then again there may be something in this article which may be helpful.

Don’t do these things with your debit card:

  1. Don’t have your pay direct debited into your debit card.

If you do this then you are asking for trouble especially if you are buying and selling online because these sites will have your card details and all it would take is for one of these sites to be hacked leaving your card details to be exposed to fraudsters. I use my debit card for online purchases only. I deposit money into my debit card from my personal savings account. 

  1. Don’t use your debit card as a way to save money for your holiday, car, or anything else.

The most obvious reason for this is that your money is not earning any interest. There are better options available for investing your savings such as a personal savings account if the money may be needed within twelve months or an online share market platform such as sharesies or robinhood if you are investing for a longer term.

  1. Don’t leave your debit card lying around where anyone can pick it up.

This is the same as leaving your household keys lying about. If you are just using your debit card to make online purchases only then there is no reason to carry it around with you. Leave it in a safe place at home.

Contact your bank if you notice any deductions on your statement which you never made.

They will then cancel your card and order a new one for you. Take some form of ID with you when you do this.

I knew a lad who had $3,000 missing from his savings account so he contacted his bank. This lad had his debit card linked to his ordinary savings account on one of those overseas websites where you buy stuff. (It was not ebay). What they discovered was that the website was hacked which meant that his account details was exposed. 

In the end, the bank refunded his money. 

I told him that he was better off depositing a lump sum into an account which is not linked to internet banking.

Here are other ways of getting the most out of  your debit card

  1. When using your debit card at the checkout at a retail store choose “cashback” instead of visiting an ATM machine to avoid fees.
  2. Utilize app features to lock your card if it is stolen or lost to temporarily block certain transactions from taking place.
  3. For overseas travel use the wise debit card to minimize high foreign exchange fees which would have otherwise be charged on your bank’s debit card.

About this article

The article is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. 

You may use this article as content for your  blog/website or ebook.

Read my other articles on www.robertastewart.com

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