Podcast number 17: When you find out where you are wasting money; Stop!

I am a realist; and I know that it is not easy to always do the right thing when it comes to your money.

So today I’m just asking you to stop doing the stupid stuff!

You know what you are doing to waste money; especially if you took my advice in podcast# 16!

There are many things that people do that waste money; things like:

• bank overdraft fees
• Buying a lot of lottery tickets (it only takes one to win)
• Buying furniture and appliances at Rent-to-Own places
• Over paying for depreciating assets

Just to name a few.

So how do you stop doing money wasting stuff? We will talk about it after our financial definition of the week.

This week The letter “P” is for PE Ratio:

PE ratio - The price to earnings ratio is a way of gauging whether a company's share price is cheap or expensive compared to similar companies in the same sector. You get the PE by dividing the share price by the earnings per share (EPS) figure. For example, Company X with an EPS of 5p and a share price of 250p would have a PE of 50. Investors are prepared to pay more for shares whose earnings they think are going to rise strongly, so demand pushes the share price up. But if the EPS doesn't rise proportionately, the company's PE will rise. So if Company X's share price rose to 400p, but its EPS remained at 5p, the PE would rocket to 80. A high PE can indicate a high-growth company, but it can also indicate that the company's earnings have taken a sudden, maybe temporary hit. Generally the PE ratio is seen as a kind of barometer of confidence in a company's prospects.

Now that you are properly motivated to stop wasting money, so you can invest in low PE stocks; lets carry-on.

Ok, pull out those 30 day dairy of expenses we talked about in podcast# 16.

-highlight all the unnecessary spending.

-Then underline the wasteful spending; this will be things you spent money on that did not add value to your life in some real way.

-Ask yourself why you have these expenses, and what else you could have done with these funds.

-Do the math. Multiply this amount by 12 to determine how much money you could have saved in your debt reduction, cash reserves or investment account; if you would have but the money there instead of this wasteful and unnecessary spending.

It’s not rocket science. Like I say on page 56 of my book “A Fool and his money”

“Ignorance is bliss and costly as a mother stinker! Sooner or later people got to want to stop paying $5 for $1 worth of stuff!”

Well there you have it! The bottom line is nothing will change in your life or your finances, until you are ready to commit to the change.

The world you want to live in starts with you!

Until next time; keep building wealth!

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