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Monday, November 12, 2012

Money in the Vege Garden

I love fresh vegetables.  But I live 70km from the nearest town and it can sometimes be weeks between shopping trips, so I don't get to have fresh (store-bought) food in my fridge very often.  So I planted a vegetable garden to get some fresh veges more regularly, throughout the year.

Not having ever gardened before, it took me a long time to work out what can work and what can't.  For example, there are winter and summer vegetables and you don't get much success if you plant things at the wrong time.  It occurred to me about five minutes ago that the principles I operate when gardening are similar to the principles of money management and investing.  Here's a few key lessons.

Plant the right seeds for the right seasons.

Like plants, investments do actually have seasons.  At the moment Property and Shares (in Australia) are having a major low period.  If you can help it, now is really not the time to be selling a house and it hasn't been for about three years now.  But with low interest rates and low property prices, now might be a really good time to buy.  Plant the property seed.  It may take another couple of years for your investment to grow in capital, but eventually it will grow.  Shares should do the same thing.  But as with all investments, do your homework and make the right decisions for you.

Be Patient

It takes a while for plants to grow.  If you plant them from seeds as I do, you have to wait weeks to see if they will even come up at all.  Sometimes they don't.  If this is the case, then you need to cut your losses and plant again.  If you picked the wrong shares, or bought the wrong house, sometimes you need to do this with these as well.  Generally though, if you wait long enough, you will find that your investments (and your vegetables) will push through and give you some yield, even if it wasn't what you were expecting.

Plant lots of seeds, something will always come up.

Don't put all of your hopes into one thing.  Most people know that if you had all of your wealth in superannuation, in 2008 your net worth was halved.  If you put a little away in different investments, you should be able to handle losses in any one industry.  I have planted corn every year for 4 years and never got a crop out of it.  Yet, I have never starved because I still have lettuce and tomatos.

When you don't have time to tend your garden, plant things that take care of themselves.

I have two babies, born in the last two years.  Each time, I had to go away to Brisbane for more than a month to wait for them to be born.  I couldn't weed, water or plant my garden in that time.  Both times, I had pumpkin seedlings growing.  The first was from a seed that came up randomly in the front yard.  After I got back from baby delivery, the pumpkins had taken over the entire garden.  I didn't get any other plants for a while, but I haven't had to buy a pumpkin in 2 years.

I view investing the same way.  I don't have time or ability to trade shares, or to do development projects.  So I have a buy-and-hold strategy for both my properties and shares at the moment.  I'll probably get more active in the investment garden when my kids are older.

Do the weeding (check CC statements, budget)

You can't grow veges in the place where you have weeds.  Similarly, you don't have access to money you throw away.  Check your bank statements regularly and make yourself accountable for every dollar spent.  I often find things like fees that shouldn't have been charged on my credit card statement which can easily be rectified by a phone call to the bank.  Also, I can make a decision to hold off on impulse buying if my balance reaches a certain mental limit.

Harvest at the right time

I tend to leave my lettuce too long.  It goes to seed and tastes awful.  I think its because I get such pride in seeing my plants in my vege garden that all too often, I'll put off my harvest. It also comes from a bad habit I have of saving things for later, when I might really need it.

I've done this with shares too.  The market was doing well, share prices were increasing, I had my chance to take 10% and run, I didn't and then the market fell again.  I've also gotten out of a deal that went nowhere for three months. Literally one day later, that share took off and would have given me a 30% return the following week.  It's hard to tell sometimes.

Companion plant (reduce debt and save)

I'm a mathematical person.  I like geometric patterns and straight lines.  It's nice to see my lettuce all in neat rows, but it doesn't always make for good practice.  Some plants need a little shade and others need a little sun.  If you have a tall plant next to a short plant, the lower one gets some nice shade and the taller one doesn't have to put up with weeds growing under it.

Similarly, you don't have to focus only on debt reduction before you give yourself a chance to save.  It can be far more motivating to pay off your debts if you see your savings growing in the bank.  Also if you have some money saved up, you don't have to feel guilty when you buy something, because you don't have to undo all your hard work of reducing debt to pay for it.

Maintain your perennials (have buy and hold stocks and property)

There are a few plants in my garden that have been there forever.  Well not really forever but they are there year in- year out.  They didn't even die off when the pumpkins crawled all over them.  No matter what else happens in my vege garden, I know that I can depend on these plants.  They spruce up a salad nicely and also go in my stir-frys, quiches, fritters, pizzas or whatever.  They are my all-rounders.

I also have my all-rounders with my investments.  The shares I have continue to give me dividends, whether or not they go up and down in value.  My properties continue to provide me with income from rent regardless of market conditions.  I also have my allrounders in bank accounts and loan accounts.  I can pay down debt and save interest or build on savings or whatever I need.

I can't give you much more gardening advice but if you're looking for investment ideas, check out my book,  Do I HAVE To Get A Job? available now on Amazon.

Need some good Credit Card advice?  Have a look at How To Get A Credit Card - And Get The Bank To Pay Interest To YOU!

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