Personal Wealth – Soccerwidow Football Betting Maths, Value Betting Strategies Sat, 16 Mar 2019 08:08:43 +0000 en-GB hourly 1 Are You the Architect of Your own Fortune, or Misfortune? Fri, 15 Mar 2019 15:34:36 +0000 Richard Wiseman of the University of Hertfordshire is a luck expert: In numerous surveys and experiments he has researched what luck actually is and he has published various books and publications in which he advocates that luck is merely an attitude. Those people, who classify themselves as blessed with no luck, get exactly what they expect: hard luck.

Opportunity Old Wooden Sign with Turbulent Background / Opportunity (Gelegenheit) Wegweiser mit turbulentem HintergrundImage: ross-edward cairney (Shutterstock)

The outcome of the research shows that people who describe themselves as lucky share one common characteristic: they are all exceptionally good at looking for and recognising opportunities. Wiseman’s luck strategies are actually banal: maximise random chances, listen to intuition, have confidence in your future, recognise luck in misfortune.

Opportunity Knocks

One explanation as to why some people are less lucky (less successful) than others can be found in an experiment carried out by Wiseman in 2003. His experiment follows that of Stanley Milgram Small World Experiment which suggests that each human (social member of society) is connected to every other human in the world by a surprisingly short chain of acquaintances.

Wiseman’s experiment began with Internet posts inviting the general public to participate and some 500 people applied. 100 were then randomly selected and handed a package with the task of forwarding it to ‘Katie’, a 27-year-old student of art and history at Manchester University, who once worked in public relations in London, and enjoys cycling.

All the initial volunteers and subsequent recipients were asked to send the parcel only to someone they knew on first-name terms. Ten per cent of the parcels eventually reached Katie and amazingly, there were just four people in total linking the initial volunteers with Katie.

The tiny number of people linking the volunteers to Katie supports the idea that humans may indeed all be linked to one another via a remarkably short human chain. ‘The Luck Factor’, published in 2004 by Richard Wiseman, reveals that lucky people frequently experience the ‘small-world’ phenomenon, and that such lucky meetings have a dramatic and positive effect on their lives. In contrast, unlucky people rarely report small-world experiences.

However, in his experiment approximately 20% of the volunteers did not forward their parcels at all, guaranteeing that their packages would never reach Katie. These volunteers had gone to considerable lengths to ensure that they participated in the study, but had then dropped out at the very first stage. Interestingly, the vast majority of these people had previously rated themselves as unlucky. These people hadn’t even tried to achieve success and had given up at the first opportunity (here is the complete description of the experiment).

The conclusion of this experiment is that luck and success depend on taking opportunities and that people who are not shy in creating and seizing opportunities seem to be more successful.

Belief in Luck

Have you ever heard the term “self-fulfilling prophecy”? Proof of this concept was recently attempted by Derren Brown in a UK Channel 4 TV show. He tried to show that if people begin to believe in luck, their attitude changes positively towards opportunities and as a result they become better off or more successful.

To conduct this experiment, a small northern English town was selected and a rumour begun about a statue in a local park which was bringing luck. The Channel 4 team helped a little by engineering a few lucky coincidences and within only three months the experiment took on a life of its own. The rumour spread, attracted the interest of the regional press and many people started to report lucky experiences and coincidences (without any further effort from Channel 4!).

The Channel 4 team also carried out a few experiments in the background and observed that the people who believed in the lucky statue became surprisingly more successful than others. These people were more open to new opportunities, concentrated on reaching success and thereby catapulted themselves into the newly formed group of lucky people.

Derren Brown succeeded to show that believing in the existence of a lucky charm has a positive effect on attitude and leads to more frequent opportunities. It was rather fascinating to watch the broadcast “Derren Brown: The Experiments, Series 1 Episode 4” and observe the development of the Todmorden experiment: Channel4

However, please be cautious! Believing only in luck and grabbing opportunities is not a warranty for success (although Derren Brown’s show seems to suggest this at the end, be reminded that it was only a show and he is a master of illusion!). On the other hand, surely a strong belief in hard luck and permanently omitting opportunities does not lead to constant failure?

Seneca, a Roman philosopher and politician (5 BC-65 AD) is known for his saying: Luck is what happens when preparation meets opportunity.

Therefore, in our opinion the interpretation of Richard Wiseman’s and Derren Brown’s experiments should be as follows:

Sending a package to a stranger via acquaintances – a large circle of friends and an excellent social network requires a lot of effort to build and maintain and therefore it surely belongs to the set of “preparation”. If then an opportunity comes along, success (luck) strikes faster since there is simply a larger intersection between the two sets: preparation and opportunity [expressed in mathematical terminology].

Believing in a lucky charm – preparation (a lot of work) is not really much use if opportunities are hardly ever taken [the intersection of the two sets, luck, then remains empty or is much smaller than compared to other people].

The Gambler’s Fallacy

Despite belief in luck and many opportunities to gamble the gambler must never forget that luck (success) is a subset of preparation and opportunity. Gamblers, however, seem to have the tendency to focus on the many opportunities and in a firm belief in luck; somehow the ‘preparation’ falls behind. Unfortunately this is not a formula for success: If luck is defined as a subset of preparation and opportunity then one can omit neither of these elements.

When gambling it seems that there is exactly the opposite psychological rule compared to social behavior: If people in social environments are inclined to work hard (preparation) and are quite careful and sometimes even reluctant in seizing new opportunities, it seems to be the opposite when gambling. The majority of gamblers seem to be people who are rather inclined to seize opportunities but keep the preparation (work) at a minimum.

Business picture about analysis - gold coins with people on a sliding slopeImage: archerix (Shutterstock)

Be reminded of the fact that casinos and bookmakers earn their profits via statistics and probabilities (percentages) and there is a memorable saying by the statistician Chip Denman (Statistics Laboratory at the University of Maryland): Luck is only probability which one takes personally.

If a coin is thrown ten times and lands eight times as a ‘head’, it is tempting to believe that the next throw must be a tail. Unfortunately this is wrong thinking. The coin does not have a memory and the next throw has exactly the same chance as all the preceding ten throws: a 50% probability for ‘heads’ and 50% for ‘tails’.

Margaret Thatcher once commented upon praise she was given when receiving a school prize at the age of nine, “I wasn’t lucky, I deserved it!”.

Nevertheless gamblers often believe in ‘lucky streaks’ or ‘hot tables’ or even attach superstition to a particular number. There is simply no need to be fooled as the majority of gamblers tend to lose more than they will ever win.

Soccerwidow’s blog is about statistical analyses, probabilities, evaluation of historical data, strategies of sporting bets, gambling explanations, bookmaker mathematics, odds, et cetera. Perhaps you will take this opportunity and become a Guest Author for Soccerwidow. Who knows where this opportunity will lead you in life?

Further literature on this topic:

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How to Become Rich – 10 Powerful Books about Wealth and Money Fri, 29 Sep 2017 06:27:41 +0000 more »]]> Who doesn’t want to become rich? The answers are here. Embrace them. The rich know things that most people don’t. Learn from the wealthy.

One thing that successful people have in common is that they understand it’s not about how much they earn, but what they do with their money. They have learned how to handle finances and know how to grow their wealth.

Here are 10 powerful books to learn from the rich how to become rich…

1. The Science of Getting Rich by Wallace D. Wattles

First published in 1910, the book covers the “science of getting rich” – and, according to the author, it is an exact science, like algebra or maths.

There are laws that determine the process of acquiring wealth. If these laws are learned and followed, one will become rich with mathematical certainty.

Most people consider money as a finite resource for which they have to compete. This book disconnects from “obedient thinking” which holds you back from real wealth.

Wealth is as endless as the creative mind.

The aim of the book is to change your thinking about the concept of “money”.

The ideas and concepts thematise the mental approach to money. It is a book that you can read in a day, but then it takes all your life to process the content and put it into action.

2. The Richest Man in Babylon by George Clason Samuel

A classic from 1926, reprinted numerous times, which delivers old wisdom in the form of entertaining parables carrying basic financial knowledge such as:

“Hold back more than you earn” or “Let savings work for you” or “Get out of debt” or “Pay yourself first” or “Protect your assets sustainably”…

It is claimed that the ancient Babylonians were the first people who discovered the universal laws of wealth.

This is a fascinating book showing that successful financial principles from 6000 years ago still apply today.

The first reality check is to make a fundamental decision to reduce personal debt. Protecting your assets and income helps increase your wealth, which is extended by investing responsibly and systematically.

This book will help anyone, at any income level, improve their current financial situation. You will earn an enormous return on your investment in this book. Read it and then begin growing wealth for the rest of your life.

3. Think and Grow Rich by Napoleon Hill

First published in 1937, this is the end product of two decades of research conducted by Napoleon Hill.

He interviewed more than 500 of the wealthiest men and women of his time and uncovered the secret of their great fortunes.

The result is a book teaching how rich people think. Only then can we adopt their behaviours and become rich as a result.

This book has a chapter dedicated to some of today’s most important issues – Specialized Knowledge, Decision Making, Imagination and Organized Planning. It also has principles for Teamwork, Creative Vision, Health, etc.

This is a classic, and the examples are as relevant today as they were in the early twentieth century.

There are thousands of self-help books on the market and hundreds of self proclaimed “gurus” who make a living by copying the wisdom in Hill’s books. However, there is not much in any of them that Hill hadn’t already touched upon.

4. The Magic of Thinking Big by David J. Schwartz

Millions of people around the world have improved their lives since 1959 by reading The Magic of Thinking Big.

Dr. David J. Schwartz helps the reader to organize themselves as optimally as possible in order to earn more money and, most important of all, to become more at peace with themselves.

The book demonstrates useful methods, without getting lost in empty promises. The author shows that intellect or innate talent are not necessarily connected with success and satisfaction but, personal habits, thinking and behaviour are.

The theories presented are supported by a variety of case studies.

This books helps you overcome the disturbing habit of making excuses; it teaches you to dream again, to rethink what you truly are, to get on terms with your attitudes, and your action habits.

Of course, the book is not the Holy Grail for financial problems, but it is a useful tool. It helps explain why we behave the way we do and suggests improvements.

By reading the book you will learn how your own behaviour affects life choices and future success, positively or negatively.

5. The Wealthy Barber by David Chilton

This entertaining book is one of Amazon’s best-selling books on personal finances.

David Chilton simplifies the complex matter of personal finance and money management by packaging it in the form of a novel.

First published in 1989, the book provides very useful money management principles.

The story revolves around a group of friends who visit a barber shop once a month, and there they receive powerful advice on managing their money from their “wealthy” hairdresser.

With the help of his fictional figure, Roy, and a large dose of humour, Chilton teaches how to take control of finances and take them into your own hands – slowly, steadily, and with sure success.

It is by no means a Get-Rich-Quick story, but the narrative demonstrates that you don’t even need an average income to achieve financial independence.

6. The Millionaire Next Door by Thomas J. Stanley Ph.D.

This book, first published in 1996, has become an incredible bestseller in America.

What do millionaires have in common? How do you recognize the millionaire next door? Where do they go shopping? What kind of car do they drive? How did they become rich?

In this book, the authors interviewed millionaires to reveal similarities among them.

Contrary to expectation, real accumulators of wealth don’t do any of the things that popular perception would have us believe. They don’t have expensive tastes, live in posh houses, drive sport cars or wear the trappings of success.

Instead, they budget very carefully and live well within their means, setting aside a sizeable portion of their income for investment. Most millionaires are apparently penny-pinching, well-disciplined in handling their finances and frankly, downright dull! Not the sort of people that warrant a second glance.

This book is a must-read. You may fault some aspects of it, but the message is one that everyone should consider, even if you find reasons to ignore its conclusions.

7. Rich Dad, Poor Dad by Robert Kiyosaki

Rich Dad, Poor Dad: What the Rich Teach their Kids about Money is an absolute bestseller since its launch in 2000, a highly acclaimed book.

When Robert grew up, his “Poor Dad” taught him that the road to success is “get a good education, get a good job and save your money”.

This is certainly not a bad piece of advice but, over time, Robert Kiyosaki realised that this advice did not lead him to prosperity.

“Rich Dads” on the contrary give their children a completely different advice. They teach “start a business, make passive income and invest effectively”.

This is an easy to understand book which teaches a different way of thinking about money and wealth.

Do yourself a massive favour and buy this book! Take some time out to read it from cover to cover, then read it again and follow the advice. This book will honestly change your financial life!

8. Secrets Of The Millionaire Mind by T. Harv Eker

The author is not only a good writer, but above all, has the ability to guide the reader step-by-step through his thought process.

Secrets Of The Millionaire Mind powerfully exhibits the relationship between thinking patterns and financial success.

Eker presents simple but very powerful concepts. It may be often a surprise to the reader to find situations in their own daily lives described in the book and how wrong their own behaviour looks retrospectively.

As you read this book, you will discover many interesting insights into how to become wealthy. It is very illuminating to see the connection between how you think and what you do. Attitudes about money determine our life, and thus financial success or failure.

The particular strength of this 2007 publication is the solutions to questions such as which strategies create wealth, and what really rich people do that others don’t.

Unsuccessful people see obstacles and risks in most things whilst successful people see potential growth and opportunities. It all starts in your mind!

9. It’s Called Work for a Reason! by Larry Winget

Larry Winget grew up poor and has experienced first-hand bankruptcy, but he managed to work his way back and is now a multi-millionaire.

This book was self-published in 2008 and is not your “average self–help book”. It comes from a contemporary author who is considered one of the icons of the present day personal development movement.

Larry Winget has his very own biting and no–nonsense signature. His writing style earned him the titles “Pitbull of Personal Development®” and “World′s Only Irritational Speaker®”.

Winget′s “get off your butt and go to work” approach to self–improvement boils success down to a simple formula:

Everything in your life gets better when you get better.

Stop making excuses, stop blaming others and take responsibility for your life and your results.

Larry is clearly a vehement opponent of the duplicity of other financial and business books that stroke the egos of their readers and communicate what people want to hear.

The book argues that poor results in the workplace are caused by your own poor performance, and nothing else.

10. You Were Born Rich by Bob Proctor

In this 2014 publication, Bob Proctor takes the reader on the journey to a surprising discovery:

Success is not grasping for something you don’t have, but success is based on effort and rearrangement of all fragments that are already there.

The title may be misleading. You Were Born Rich has nothing to do with being born with a silver spoon in your mouth. It’s about personal potential which everyone is born with. The title of the translated edition in Germany is: Know the Wealth Within You.

The underlying message is:

Look into yourself and change the negatives concepts we all have had programmed into our ‘heads’. So much damage is done to our self esteem, confidence, sense of well being and ability in our early childhood.

Although many of us are aware of this, it’s applying the required changes that is the hard part, but this book helps you get to the root of the matter.

Bob says, “You go in life either forwards or in reverse… you grow or you die … you create or disintegrate”.

With this selection of books about wealth, personal finance and money management, you will quickly find that making money and managing it is not as complicated as may often be the impression. Many of these books follow the same concepts and strategies. Why? Simply, because they work.

Money management is not rocket science. However, even if effective financial management may seem intimidating at first glance, once you develop the correct attitudes and habits, it should be easy and inevitable to change your financial future.

A last personal note: I was very fortunate to grow up with parents who gave me the mind set of the rich on my way. My preferred saying on the topic of money, which many of my friends have written down to remember is:

It is easier to make money than living a life of saving money.

Which money management books have you read? Are there any books that you would recommend in addition to our list? Please help others and leave a comment below. Thank you.

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Top 10 Tips: How to Save Money without Living Cheaply Sat, 30 May 2015 14:43:18 +0000 more »]]> You don’t need to be a millionaire to live an enjoyable life.

Here are the top 10 tips on how to save money and at the same time live a good life, and I mean a really good life. Live your dreams without tightening your budget to a point which feels uncomfortable.

Man weighs money on a scaleImage: alphaspirit (Shutterstock)

There is absolutely no need to live cheaply just because you are not a high earner.

Of course, for any existence in today’s modern world some money is required. However, you don’t need big money, and it doesn’t matter where you live.

The tips below work for everybody. Read them, understand them and use them. Enjoy life without being ruled by lack of money!

Top 10 Tips: How to Save Money Straight Away

  1. Go shopping with a shopping list and stick to it, and never shop on an empty stomach!

    This is actually quite basic advice and should be obvious to everybody. However, there are many people who simply never use a “to do” list or a shopping list. I have heard excuses such as, “I don’t need a list. I have a good memory…”, or, “I don’t need a shopping list – I’m not intending to buy much.”

    The usual scenario is that even if you only need bread, peanut butter and milk, if you go shopping without a list it is very likely that eventually you’ll find yourself at the till with additional items in your basket such as chocolate, crisps, or beer. There may have been some cheese on offer which you also threw in.

    If you add up the items you have bought and don’t actually need it may only be a small amount each time such as £5. But if you act in the same manner during every shopping excursion then the cumulative effect could be in the region of £100 a month, or even more.

    Save the £100 for necessities – don’t spend it on comfort or luxury purchases!

  2. Add-up the bill as you go along. This will help you to stick to a budget.

    Another very simple piece of advice. Set a budget for what you want to spend on this trip and then challenge yourself to beat the budget. Be competitive and try not to spend more than your budget allows (i.e. what you intended to spend), but actually less.

    If you succeed every time you go shopping to save £5, then you will have totted up perhaps as much as £100 for other things by the end of the month.

  3. Always pay cash. Develop the habit of never using your card for shopping. This rule allows you to withdraw only your budget for a week (e.g. £100), to focus on it and then stick to it.

    You have your shopping list and your estimate of the total cost. Don’t take any surplus money with you. Believe me, this truly helps.

  4. Try substitute brands. Don’t stick to “named brands” just because you’ve seen the TV advert.

    Usually, the cheaper brands contain exactly the same ingredients. You are only paying for the name of better advertised products (i.e. their advertising costs).

    In Germany, I remember some time back there was a big consumer test, matching no-name products which were produced for cheap shops such as Lidl against high profile branded products. Every single no-name product scored better than its branded competitor.

    Keep this in mind when shopping. It will save you loads of money and see you receiving at least the same quality.

  5. Don’t be tempted by discounts (buy three, pay for two, etc.), as you certainly don’t need to stockpile large quantities of any products. Stretch out your money and only buy what you need.

    Why should you be tempted by bulk savings to buy a discounted shampoo brand which costs £4.50 a bottle, paying “only” £9 for 3 bottles, when you could get the gel you normally use for £2.50 a bottle?

    Big money saver here! Think before you buy! Do I truly need it?

  6. Never buy everything under one roof. Identify the cheapest places to shop for certain items.

    Although this may sound a bit stressful or time-consuming to have to run from one shop to another to get the whole shopping done, you will soon realise what a huge money saver strategic shopping really is.

    A nice side effect of doing so is that you give yourself a little more exercise!

  7. Don’t buy cheap.

    There is a saying “buy cheap, pay twice”. Ponder a little over this phrase. It makes a lot of sense.

    If you buy cheap (e.g. the cheapest thermos flask you can find) then it’s likely to be cheaply made, or sub-standard, and/or a product with a very short lifespan. This means it will need replacing sooner rather than later.

    Okay. So, you buy a flask for £10. Then in five months’ time another for £10. And in a year a third flask for £10. Spending £30 right away would probably have bought you a flask with a lifespan of five years or more.

    We are not rich enough to continue buying cheap. Keep this in mind and look for quality when shopping for durable items.

  8. You are your own boss. Don’t keep up with the Jones’s. Don’t be led into purchases just to compete or emulate your neighbours.

    There is no need to pay any attention to the habits of other people. Your neighbours probably don’t spend as much time as you imagine thinking about you. How much time do YOU actually spend thinking about your neighbours? Do you care what brands they wear? Do you really care what make of washing machine they have?

    The only thing you may find bothering you about your neighbours is some inner belief that they are better off than you. But do you actually know what is going on internally? Do you know how many sleepless nights they may have because they can’t manage their money as a result of the new car sitting on their drive?

  9. Think twice, three times, or more before buying anything such as clothes, or other long-term items.

    Do you really need them? Abide by the One Year Rule for Possessions. This means that everything that hasn’t been used in the last 12 months, isn’t really needed.

    Go through your wardrobe, go through your tool boxes. Take out everything you haven’t used for one year and sell it. I promise you will be hugely surprised at the number of benefits!

  10. Implement the “Value per Wear” or “Value per Use” rule. This means dividing the cost by the likely number of uses per year. This will help you to decide what to buy.

    So, you are considering buying a used car. The one you have in mind is going to cost £1,500. You need the car to get you to work daily. This means, say, 48 weeks x 5 = 240 days.

    £1,500 divided by 240 = £6.25 per day. Of course, there will be insurance, fuel, repairs, MOT, etc. to add on to this. Do the same sum with these items. Think twice – Is it really worth buying a car which will cost perhaps £20 a day to drive? Can’t you get to work cheaper than that? Has it ever crossed your mind that you may save a bucket load of money by getting a lift to work, even if you have to pay for each ride?

There is really no need to live poorly or in a financial mess purely because you are not a “high earner”. The secret of good money management is to rid yourself of false beliefs and, of course, a little lateral thinking and budgeting also helps.

Good luck!

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Always in the Red? Control your Banking Behaviour! Thu, 28 May 2015 23:01:05 +0000 more »]]> Recently, an old friend came along and asked me to have a look at his finances. Despite the fact his monthly net pay was in the region of £2,500, his overdraft was constantly rising. He often found it quite difficult, especially at the end of a month, to pay the bills.

Young woman agonizing over financial calculations in her kitchenShutterstock Artist: Andy Dean Photography

However, most readers will probably agree with me that £2,500 per month is an agreeable amount of money for one person.

In 2014 the UK average salary was around £26,500 (£2,200 gross per month), less taxes, leaving a net pay of £1,750.

My friend, earning more than 40% above the average salary, somehow managed to get into difficulties.

I cannot deep-dive into the complexity of his problem here, but one thing came very quickly to light: He was juggling far too many bank accounts, credit cards, monthly standing orders, direct debits, and so on…

In short, he had simply lost control of his own money.

Control Your Spending

The simplest way of taking control of your money is to have only one bank account, for all purposes. The need to pay attention to multiple accounts will immediately disappear.

Another, very simple cash control mechanism is never to shop using bank account debit or credit cards.

Even if it sounds old-fashioned, most people find it considerably easier to control their finances using cash rather than bank statements.

Developing the habit of paying as many things as possible in cash reduces the opportunities for over-spending.

Those who pull out a card for every purchase without calculating the real immediate and future cost without maintaining a budget will quickly find themselves in a similar situation to my friend.

One Loan to Rule them All

This solution is called “Debt Consolidation” in professional jargon.

Please write down all your loans, mortgage payments, leasing contracts, etc. For many people this will not be an easy task. But please do it. Believe me, it is essential to get an overview of what you own and what you owe.

My friend came up with at least eight different, regular monthly debts including a loan for his Smartphone, another instalment payment for a fridge, an overdraft in one bank account, some money owing on a credit card, a personal loan with another bank, and also some money borrowed from his parents.

I then asked him how much he owed in total. He found it difficult to give a straight answer, as it was difficult to take in the scope of his various accounts and balances.

It took him a while and a lot of effort to compile a complete list of his various debts.

Of course, my next question was how much interest was he paying for the privilege of being in debt? Again, no immediate or straightforward answer was forthcoming.

After a few calculations he totted up his various loans. The outstanding total was over £20,000, more than 65% of his annual salary! Alone, the interest in a year amounted to £1,480 – equivalent to almost 5% of his annual income. The shock of coming to terms with this position was followed by some sleepless nights.

It is said that a normal, healthy debt, as long as you can meet its payment obligations, is fine. But what is “normal and healthy”?

I write about this subject in some detail in my article Healthy Debt & Debt Consolidation, but for gaining and recovering control over your finances, the first step is simply to become aware that you have to take control.

Therefore, the first advice I gave my friend was to consolidate all of his debts into one loan only.

The Simplest Way of Taking Control of Your Own Finances

  • Manage only one bank account
  • Pay all purchases in cash from a predetermined budget (for example, £100 per week)
  • Instead of dozens of monthly loan instalments for different things, consolidate them into one loan

What also helps is to maintain your awareness and always bring purchase receipts back home, file them, and scroll through them once in a while. I recommend doing this at least once a month.

In tandem with this, make a habit of looking at your (one!) bank account to check if there are any recurrent payments you can get rid of, or any other payments for things you don’t badly need or want.

In short, do something about it and don’t bury your head in the sand, as financial problems seldom disappear. In fact they have a nasty habit of becoming much worse, very quickly.

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What You Should Know About Value for Money & Personal Finances Thu, 07 May 2015 19:34:30 +0000 more »]]> The crucial importance of truly understanding the concept of ‘Value for Money‘ first dawned on me when I was appointed by a school in England to sort out their finances in 2003.

Despite being a well-funded state school their budget was everything but healthy with substantial arrears outstanding. They were hamstrung by limited funds and could not afford to maintain their premises or facilities, let alone employ quality staff.

Cartoon: Businessmen look on as old timer uses divining rodThis guy knows where to find the best value for money.

Image: Cartoonresource (Shutterstock)

The senior management and the local council backing the school continued to believe that they were working with a philosophy of ‘best value for money’. This phrase was used on a daily basis, everywhere, but I found it hard to see any evidence of anyone actually grasping the true concept of ‘value for money’.

It came across to me as just a fashionable expression reserved for moments of mutual agreement on financial subjects that no-one seemed fully to understand.

It took me a whole budget cycle to teach the management what ‘value for money’ really means, plus another year to implement the amended budget. The end result was a healthy, positive budget facilitating a comprehensive refurbishment of the school grounds, an upgrade of all the classrooms, the employment of better teachers, and many more things besides.

But enough of my background… Value for Money is not only good practice for businesses; it is also equally as useful in a domestic setting. Paying heed to a value for money strategy certainly helps manage personal finances and squeezes more out of the limited resources most people have available.

Examples of Value for Money

Value for Money is not getting the maximum amount of things from a limited budget but Getting What You Need

Say, as an example, you have £500 and think of spending it on clothes. Value for money doesn’t mean that you should get as many clothes as possible for £500.

Actually the very first question you need to ask yourself is: Do I actually need any more clothes?

If the answer is yes, then the next question is: What clothes do I really need?

You may come up with the following list: a shirt; five items of underwear; jogging bottoms; a winter coat

The next step is to write down the prices for these items. Here we are looking at prices for good quality items not just the cheapest bargains which will need replacement sooner than later.

So our list is now priced as follows:
1 x shirt – £85
5 x items of underwear – £50
1 x jogging bottoms – £75
1 x winter coat – £250

In total, £460. We even have a saving of £40 from the original budget of £500.

You get what you need and even keep some money for other uses because having a budget doesn’t mean that you have to spend it all. A budget means that you must not spend more than you have available to spend. If something is left over simply allocate it to some other use, for later.

In Summary: First budget your expenses, decide what you really need, estimate the prices, spend the money only on the essential things you need, and (important!) do not exhaust your budget for unnecessary things purely because you haven’t used all of the available money.

Value for Money is getting High Quality

Another common wrong and deceptive belief is that if money is limited you have to buy cheap.

Here are a few proverbs which may help you to think in the right direction:

Cheap things are not good, good things are not cheap.
Chines Proverb
What is cheap is the most costly.
Spanish Proverb
If you buy cheaply, you pay dearly.
English Proverb

Please take a few minutes to ponder over these three sayings. There is a good reason why different cultures have developed very similar aphorisms over the centuries.

Another saying is “I am too poor to buy cheap.”. Make a habit of this simple phrase when you make decisions what you buy.

Back to our previous example…

You have £500 and you think it is a good idea to spend the money on clothes. Now, without thinking in advance on how to spend it, you might go shopping with your money and start bargain hunting.

I am sure you will agree that it is likely that you will return home with some household items you probably found price-reduced in one shop or another; perhaps you added a few t-shirts to the clothes inventory or whatever else you saw cheap and you may even have bought a winter coat at the bargain price of £50.

Play a little with this line of thinking… you probably bought lots of items with your money but, actually, you only needed the winter coat.

The winter coat is very likely not the quality you would have preferred but you didn’t have £250 for the one you really wanted. You had already run short of money as you finally saw the cheap coat. In addition, after a few wears the quality of the coat may deteriorate meaning you’ll have to start looking for a new one next year.

What happened here is that you spent your budget of £500 for things you didn’t need, many of which, are unlikely to survive a longer period.

If you are entirely honest with yourself, in reality, you have purchased a winter coat for £500 (plus lots of things you didn’t need which have been thrown in for “free”), which you will only use for one year.

If you thought at the beginning that you were getting “value for money” then this was definitely wrong.

In Summary: Go out with a shopping list and only buy what you need. Look for quality not quantity!

Value for Money in some more Academic Terminology

‘Value for money’ (VFM) is a term used to assess whether or not an organisation has obtained the maximum benefit from the goods and services it both acquires and provides, within the resources available to it. Some elements may be subjective, difficult to measure, intangible and misunderstood. Judgement is therefore required when considering whether VFM has been satisfactorily achieved or not. It not only measures the cost of goods and services, but also takes account of the mix of quality, cost, resource use, fitness for purpose, timeliness, and convenience to judge whether or not, together, they constitute good value.
Source: University of Cambridge

Achieving VFM is also often described in terms of the Three E’s – economy, efficiency and effectiveness:

  • Economy – careful use of resources to save expense, time or effort.
  • Efficiency – same level of service for less cost, time or effort.
  • Effectiveness – getting a better return for the same amount of expense, time or effort.

Value for Money for Managing Personal Finances

Please don’t get scared off using the concept of ‘value for money’ purely because it is widely used in connection with businesses and organisations. This doesn’t mean that getting ‘value for money’ is not applicable for personal life.

In the end, every individual and every family are strictly speaking also “businesses”, albeit small businesses not large corporations.

Therefore, if Value for Money is a good practice for businesses it is certainly also good practice for the home. It will undoubtedly help you manage your finances better and get more out of the limited resources you probably have.

Therefore, try to understand what ‘value for money’ means and employ the concepts.

It’s as simple as this… Value for Money is about economy (thoughtful management of your money), efficiency (best use of your time, effort, and money) and effectiveness (optimised use of your money).

Good luck! 🙂

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