The Lemon Fool

What’s the best financial decision you’ve made that helped boost your net worth? Also, what tool do you use to keep track of your net worth?

katie wrote:What’s the best financial decision you’ve made that helped boost your net worth? Also, what tool do you use to keep track of your net worth?

I guess my best decision was buying Scottish Mortgage Investment Trust. Also buying the most expensive house I could find in my locale.

I use the now very old fashioned Money program from MS.

Dod

Best decision was years ago to make an as large as I could afford monthly contribution to my pension, boring I know, but the tax relief makes is a percentage gain winner, having done that for over 30 years it is now decent sum.
I use Excel to record my pension and share holdings as well as Google Finance for my portfolio

There are many over the decades.

I suppose that THE most important was to decide to actually pay attention to capital, investing and spending.

Decades ago I decided that I didn't want to work all my life. That lead automatically to a FIRE mentality, though it was before it had a name.

Sure, I could argue that pension investing has made a significant difference, or that returns of 29% or 35% on the likes of Scottish Mortgage and Pacific Horizons are what count. However without that initial change of attitude they simply wouldn't have happened.

Tools, I use a few.
HYPUSS running under LibreOffice, and Google sheets are my main tools. Though in terms of investment, the internet is a great enabler to research investments, magazeans like the Investors Chronicle and Shares and podcasts provide food for thought.

getting a highly paid job in the canadian arctic for three years .

then buying a property here without a mortgage .

investing my salary in company shares since then .

When younger, not diversifying and letting the winners run and run. Ten baggers easily outweigh the odd disaster but if you sell out when they've merely doubled you lose most of the gains.

Buying shares in companies the market had written off which I thought would get through and prosper.

When older, diversifying into Scottish Mortgage

scrumpyjack wrote:When younger, not diversifying and letting the winners run and run. Ten baggers easily outweigh the odd disaster but if you sell out when they've merely doubled you lose most of the gains.

I've always thought this too. There seems to be a widespread view that diversification when investing is necessary to reduce risk, but to my mind this simply biases one's portfolio performance towards the average.

But to answer the OP's question, mine was to bet the farm on BTL back in the mid to late 90s, just as global interest rates were trending down and consequently mortgage rates too, which resulted in house prices rocketing. Not something I was aware of happening at the time, it was just luck the way falling interest rates put a rocket booster under property prices.

My concern now is global pressures are building now for the reverse to happen.

Mike4 wrote:

scrumpyjack wrote:When younger, not diversifying and letting the winners run and run. Ten baggers easily outweigh the odd disaster but if you sell out when they've merely doubled you lose most of the gains.

I've always thought this too. There seems to be a widespread view that diversification when investing is necessary to reduce risk, but to my mind this simply biases one's portfolio performance towards the average.

But to answer the OP's question, mine was to bet the farm on BTL back in the mid to late 90s, just as global interest rates were trending down and consequently mortgage rates too, which resulted in house prices rocketing. Not something I was aware of happening at the time, it was just luck the way falling interest rates put a rocket booster under property prices.

My concern now is global pressures are building now for the reverse to happen.

Yes it's fine to make the conscious decision not to diversify when you are young, own your own house and earn a good income. In that case if the investments go down the pan, it's not the end of the world. It is different when you retire and will earn no more. Hence diversifying into ITs later on.
I was also lucky in that I bought a house in Notting Hill in 1971. It was a very dodgy cheap area then and one got tax relief on mortgage interest

Spend less.

Save more.

Invest more.

Don't underestimate the difference not buying all that [expletive deleted] you don't really need can make.

Aminatidi wrote:Spend less.

Save more.

Invest more.

Don't underestimate the difference not buying all that Manure you don't really need can make.

Ah now that reminds me of the other thing I decided I needed to do to substantially increase my net worth - use gearing. Without gearing, even doubling my (small) net worth at the time would have only gained me £small x 2. Still small.

I had to use that cliché, "other people's money".

The obvious arena where this is encouraged rather than frowned upon, was property, and still is AFAIK.

1) Education and a professional career. Necessary but not sufficient.
2) Buy property early and often. BTL landlording used to be a great game, but not so much now
3) Shares, obviously. Unlike others I don't think you have to shoot the lights out (i.e. be lucky). The markets give you 8% a year on average and that is a doubling every 9 years if reinvested. Slow and steady wins the long-term game.
4) Marry well (or don't marry at all). Divorce is a wealth killer.

Unlike others here I never emphasised pensions, preferring to max out PEPs and ISAs since their inception in 1987. I only took out pensions where I had no choice or where the employer contributed to it. Even so those three pensions will give me 45K a year when I start drawing them, but taxable of course hence the preference for ISAs.

I don't use any tools. No need for them.

Certainly gearing, as in buying a house on a mortgage when inflation was double digits and the interest was tax deductible at '70s rates of tax, was a complete no brainer. Added to which the absurdity of unlimited PRR made maxing out on a house a very low risk route to increasing net worth.

Also the best 'tool' is clear thinking common sense.

Lootman wrote:Even so those three pensions will give me 45K a year when I start drawing them, but taxable of course hence the preference for ISAs.

Thre will be some (probably more than few) Fools who will benefit (greatly) from the higher rate tax relief on the way into their pension and pay only basic rate on the way out

pje16 wrote:

Lootman wrote:Even so those three pensions will give me 45K a year when I start drawing them, but taxable of course hence the preference for ISAs.

Thre will be some (probably more than few) Fools who will benefit (greatly) from the higher rate tax relief on the way into their pension and pay only basic rate on the way out

The richer, and more successful ones, will pay more than the basic rate though.

I have made plenty of mistakes but the things that have helped me increase my net worth to the extent of permitting early retirement were:

Despite leaving school at 16 with few qualifications getting a good and very well paid job
Maxing out on the employee share scheme, where investments were matched
Maxing out on pension contributions and ISAs
Buying cheap houses and renovating them
Taking pretty large punts on Scottish Mortgage and Amazon

All the best

MM

Good education
Good marriage
Save

Invest in property and yourself, the former is also looking after ones self but it could be further education or courses. I'd add fitness and health to that too.

These are overall generalisations rather than invest in "X" that all people can do. Then time will do its magic rather than relying on picking the right set of numbers in the euro lottery.

It depends on how accurate you need to record net worth, to avoid IHT maybe.

Fag packet, spreadsheet, Quicken.

katie wrote:What’s the best financial decision you’ve made that helped boost your net worth? Also, what tool do you use to keep track of your net worth?

Stop spending

AiY

katie wrote:What’s the best financial decision you’ve made that helped boost your net worth?

Educattion.

Negative for cashflow at inception but a positive NPV financial decision for sure.

dealtn wrote:

pje16 wrote:

Lootman wrote:Even so those three pensions will give me 45K a year when I start drawing them, but taxable of course hence the preference for ISAs.

Thre will be some (probably more than few) Fools who will benefit (greatly) from the higher rate tax relief on the way into their pension and pay only basic rate on the way out

The richer, and more successful ones, will pay more than the basic rate though.

Yes, my pensions alone would be almost enough to push me into higher-rate tax. There is also the risk that income tax rates will be higher in the future. Of course there is also the risk that the tax benefits of iSAs will be diminished.

Agreed, the future can go anyway
oh for a crystal ball