This week we meet Maria Nedeva, a business school professor and the creator of The Money Principle, where she teaches people in financial trouble how to build sustainable wealth. You can follow Maria’s work on Facebook and Twitter.
Conversations with money bloggers
What is your earliest memory of having and spending money?
I was probably four or five years old. Growing up on my grand-parents farm meant I didn’t have much awareness of what money was or how it worked outside of fairy tales. When living back with my parents, I remember having a stash of small coins. This was my treasure. I discovered chewing gum and bought some…I couldn’t believe that all my treasure was gone. This is my first experience of ‘paying pains’.
Have you ever felt out of control with your money?
Oh yes. I was not in control of my money until approximately nine years ago. And it wasn’t only a feeling either – I really had no control. This means that I didn’t know how much I earned, how much I spent and how much things cost. I had no savings and no investments, at least not substantial enough to mention. I just wasn’t interested. Having wealth in property and pensions was accidental rather than a thought through strategy.
Nine years ago, we reached a crisis point – we were £100,000 in consumer debt. This is when I decided that things will change, and I would become a ‘money master’. We paid off all consumer debt in three years and continued to increase our wealth by investing.
What was your worst money decision?
In the mid-1990’s, John and I decided to invest some money (approximately £6,000) in the stock market. We had to do the old-fashioned thing: select shares to buy and make sound decisions about the (small) portfolio later.
Instead of reading up on some companies and learning about value stock investing, I put some of the money in a company because I liked its name. Okay, I wasn’t that shallow – it was also in biotech and I suspected biotech would be big. Yep, you guessed it – within several months I lost 95% of my investment.
Since that time, I’ve made money and I’ve lost money; but I’ve never bought shares without doing my homework.
What was your best money decision?
My best money decision was to learn about, and experiment with, investing in businesses. Businesses not only yield unrivalled returns; they also make money by contributing value to people and society rather than speculation.
What is your best tip for saving money at home?
When I analysed our spending for the first time (nine years ago) I found that up to 80% of overspending on our budget was from:
- Wasting food;
- Overpaying for insurance; and
I would also emphasise that saving around the home, or any saving, for me is about reducing waste. Hence, my tips would be:
- Make a weekly menu a buy for what you are going to cook;
- Batch cook and freeze meals;
- Snap out of the ‘I don’t like left overs’ mentality. What is left from dinner is your lunch, not rubbish.
- Check your insurance payments regularly; use comparison sites to do this. Even our life insurance is a fraction of what we used to pay (and we are decades older).
- ‘Entertainment’ is only what makes your life more enjoyable. How much of this is free?
What is your best tip for saving money out and about?
At first, I thought to say that I don’t do this. But I do, I just do it differently. I focus on two things: buying quality and training myself to want less.
What would be your advice to the 18 year old you regarding finance?
People will tell you that mastery of money comes from learning how to save and invest it. Don’t believe them! Money mastery comes from learning how to spend money mindfully.
What was your biggest ever bargain?
Our house, I suppose. Its value has increased five-fold in 25 years.
What was your most recent purchase?
A pair of shoes. I was in Capri and my shoes were killing my feet (at least this was my excuse for buying a lovely, and comfortable, pair of Italian shoes).
Do you stick to a monthly budget?
This is difficult for me to answer. If you ask me whether we have a monthly budget, and stick to it, the answer will have to be no. Still, I know exactly what we spend every month and the ‘God knows what’ budgeting line when I do our budgeting is very small (no more than several pounds).
There are two things behind this apparent conundrum. First, we minimise our spending by controlling our wants. And second, we have built a positive monthly cash flow that affords us spending flexibility.
Do you have any long–term financial goals you would like to share?
I used to dream about a time when no employer would control my life. This is no longer a ‘long-term’ financial goal – I’m already in a position where continuing in my university professorship role is a matter of choice.
My long-term desire is to build enough wealth to start a foundation to deal with some of the most acute problems of humanity. One of these is inequality in all its manifestations.
If you won a million on the lottery, what is the first thing you would do?
First thing I would do is let it rest for several months – this way most of my emotions would have settled. After that, I’d start researching businesses to buy/invest in. (I know, this sound far too boring, but my foundation is not going to build itself.)