The Big Money Quiz: what should I do with my cash?
1. You get an unexpected bonus at work. What do you do with the money?
A Splurge it on something I normally wouldn’t buy
B Leave it in my current account to come back to later
C Transfer it to my savings account
D Add it to my investment portfolio
E Use it to place a high yielding investment I normally wouldn’t
2. When you go to the grocery store, how do you normally pay for your purchases?
A Half-and-half mix of left-over cash and credit
B Dedicated grocery debit card
C Cash I’ve drawn out to last me the week
D Credit/debit card
E Store-specific card
3. When the stock market report pops up on the news, you normally…
A Tune out. I’ll never have cash to throw away on it
B Turn it off
C Pay attention to housing market trends
D Listen to the long term-trends and cycles
E Already know what they’re going to say…
4. How do you approach your taxes?
A The people I work for take care of that nonsense
B I read how much I’ve paid, shrug it off and move on
C My tax accountant handles all of that for me
D I don’t pay very much tax, thanks to my off-shore investment portfolio
E I always look for loopholes to reduce how much I need to pay
5. When it comes to the festive season, what is your approach to Christmas shopping?
A It happens on the 24th of December, depending on how skint I am
B I’ll buy the odd thing some time in December for the people I live with
C Shopping starts in November, when sales are at their hottest
D I’ll do the shopping the first week work shuts down for the holidays
E The perfect gifts will present themselves within three days of Christmas
Mostly As: The big spender
As fast as you get it, you spend it. You probably have nothing saved, and that’s something you can’t see changing. You’re in company: one in four Britons have no savings, but there’s plenty you can do to alter your situation.
“The key issue is access,” explains Adam Pratt, lead financial consultant at Easily Started (easilystarted.com). “If you have open access to your savings, you’ll wipe them out in small chunks. Look for an account that aids your discipline of saving an affordable amount of your pay. Don’t ignore the new Lifetime ISA either, which has a tax-free wrapper and gets topped up by up to 25% per year to contribute towards buying your first house or your pension.”
Mostly Bs: The minimalist
You don’t place much importance on money, because it makes you another cog in a financial system that keeps everyone indentured for life. You’re not far off: a paper at the University of Buffalo found staking your self worth on the pursuit of money has negative psychological consequences.
“Money is engineered to seem complex, and some of the language around it is impenetrable,” explains Adam. “At its heart, it’s a universal quantifier allowing you to convert efforts into anything you choose. If you are not fussed about cash now, just make sure you have the basics covered for your future self. If there is any to spare, look at investing in things you are interested in, from ethical businesses to crowd funding. That way, your money works for you.”
Mostly Cs: The squirrel
You’re a ruthless saver and have set up all sorts of investment strategies that are risk averse, yet constant in their yield. The future is something that worries you, so you’re playing the long game by having just about every eventuality covered with multiple insurance policies.
A paper at Hiroshima University found having a good understanding of money reduces worries about old age. “Your investment strategy may seem risk averse, but you still need to be smart,” explains Adam. “If you are dealing in cash investments, the Financial Services Compensation Scheme only guarantees £50,000 per institution (£85,000 for ISAs), so place your savings wisely. There are also treasury and other bonds as alternatives.”
Mostly Ds: The amasser
You are officially ‘post- economic.’ That’s the term where you no longer have to work as you are so wealthy, everyday economics have no bearing on your finances or life satisfaction. It’s all about maintaining your wonderfully high standard of living at this stage, so there’s no need to get risky.
Even if you feel insulated from the world’s problems, you do not own your own planet and are affected by how everyone else acts. “You can clearly afford excellent advice, but may not feel like you’re getting it,” says Adam. “I will add my penny’s worth: beware the self-professed expert, because they have nothing to learn. Instead, look to specialists in tax and managing portfolio risk; be receptive to advice, but heed only your own mind. Any tax advice you are given now may be retrospectively invalidated by HMRC, and you should always take full responsibility for your investment choices.”
Mostly Es: The risky business
You’re in love with the sheer exhilaration a high-risk, high-reward investment can yield and there’s a certain thrill of the chase that keeps you entertained and motivated to be creative with your funds. This ensures you’re always seeking new and inventive viewpoints for earning cash the easy way, which can include dipping your toes into the stock market. Sometimes you win, sometimes you lose, which often sees the balance coming slightly in your favour.
Quick fixes and ‘sure things’ don’t always pay off the way you imagine they will, especially if you listen to people making guarantees. A paper at Bocconi University in Milan found if you want to make money with stocks, you shouldn’t listen to fortune-tellers. During the last 35 years, investing in the 10% of US stocks analysts were most optimistic about yielded on average 3% a year. Investing in the 10% of stocks analysts were most pessimistic about would have yielded a
staggering annual increase of 15%…