Homer Simpson shares his Foolish money-saving tips.
I miss, occasionally, just two things since I threw away my TV: sport and The Simpsons. Homer in particular impresses me with his wisdom and financial ken, so I thought I'd share some of his insights.
Fortunately for my editor, the words: 'Kill my boss? Do I dare live out the American dream?' are not amongst my tips! However, other wisdoms from Homer can help us Fools. Here are eight of them.
1. Homer the master negotiator
Headmaster: Our fee is 4,000 dollars.
Homer: I'll give you 100 bucks.
Headmaster: Our fee is non-negotiable.
Homer: 75!
Clearly Homer's negotiating skills are way beyond what we could hope to achieve, but I think that the average Brit could do more to haggle.
Haggling is par for the course (I hope!) with big items like cars. You might save yourself £1,000 quite easily. Put another way, if the car lasts five years, you've saved £200 a year. Why don't you try to double that with smaller items? I haggle a little bit these days and I intend to do it more whenever I feel I deserve a discount or when I think the mark-up is ludicrously high.
It's good economics too. Let's say you earn £25,000 a year, which means you probably earn about 3p after tax every ten working seconds. If you spend just ten seconds on a simple haggle and save yourself £2, you've effectively 'made' 67 times what you make when you're working. That's a 6700% pay-rise you've given yourself!
It's not high-pressure stuff. You can save money even if you keep it simple. My main thoughts on this are:
- Small items aren't worth a big haggle, but ten seconds is all it need take.
- There's no point haggling over small items in a major store, but you can do it in independent shops.
- How hard is it to say 'I've just got a tenner with me, but I'll buy a second bottle/CD/novelty mug if you knock off a couple of quid?'
- For expensive items, get a cheap online price, walk into a shop and tell them you'll buy through them if they knock off £10, £50 or whatever.
- Remember that you win some and lose some. It's no big deal if a shopkeeper refuses to budge when you are willing to buy it at full price anyway. Besides, win or lose, haggling is good for building confidence.
2. Homer vs. Scarface
'In America, first you get the sugar. Then you get the power. Then you get the women.'
I'm sure Homer's onto something genius here, but since I've heard nothing good about Tate & Lyle (LSE: TATE) shares recently, I'm going to stick with Tony Montana's 'money', not 'sugar'.
If you want to get 'the money' and you want to do it cheaply then index trackers are for you. Not only are they cheap, but over a very long period they have performed reliably well. You can read more about them in What Is An Index tracker? Suitable alternatives are Exchange Traded Funds.
Shelter your cheap funds from tax; get an index-tracking ISA.
3. Beware freebies
Woman: We're having a free get-acquainted session at our resort this weekend.
Homer: How much is this free resort weekend?
Man: It's free.
Homer: And when is this weekend?
Man: It's this weekend.
Homer: Uh-huh, and how much does it cost?
Man: Um, it's free.
Homer: I see, and when is it?
Man: It's this weekend.
Homer: And what are you charging for this free weekend?
Homer uses subtle, penetrating and persistent questioning techniques to attempt to establish the true cost of the 'free' weekend. His cynicism is well-placed, as in this instance the man and woman were cultists, trying to take him to be brainwashed.
Now, I'm not saying just yet that financial institutions practise brainwashing, but we can all learn from Homer's Foolish distrust of so-called freebies. Freebies inevitably accompany products with dreadful interest rates, higher fees, uncomfortable tie-in periods or some other small print that generally ends up costing you far more than the freebie is worth. Which is why they offer it to you, of course!
We at The Fool write articles regularly to compare products, and you can work out for yourselves how well the freebies compare by running searches on our product comparison tables.
4. Never trust anyone!
Until my brother, who holds whole conversations in TV quotes, corrected me, I misquoted Homer on this one. Still, my misquote stands true:
'I hope you've learned your lesson, Lisa: never trust anyone.' (It should be 'never help anyone', but now Homer joins various other misquoted thinkers, such as Virgil: 'Beware of Greeks bearing gifts', Sigmund Freud: 'Dreams are the royal road to consciousness' and, um, Michael Caine: 'And not a lot of people know that'.)
Unlawful bank charges, PPI mis-selling, the mortgage endowment scandal, the pensions crisis (caused by both government and industry), nasty credit cards, loan sharks, and all sorts of products that companies try to foist on you, such as the terrible guaranteed equity bonds or expensive multi-manager funds. It makes me cringe. You can't trust anyone with your money except yourself.
The good news is that you can do it yourself! Forget financial advisers, there is no reason whatsoever why you can't find out for yourself what to do with your money. Strip out the industry's jargon and the personal finance stuff becomes pretty easy.
The trick, as our discussion board users say, is to DYOR: Do Your Own Research. An annoying acronym (aren't they all?), but it's true. You can research using the guides and articles on this website or you can ask questions anonymously of the knowledgeable board users themselves. This will save you money on advisers' fees and it'll save you from putting your money or debts in places where they are ill-advised to go!
Take a look at our popular discussion boards.
5. Count Homer scrutinises products before buying
Sitting in a Bentley and incognito as 'Count Homer', complete with a monocle and a terrible British accent: 'What advantages does this motor car have over, say, a train, which I could also afford?'
Homer is wisely researching the differences between various products. Comparing products is easy online and it will save you a lot of pounds over the years. You can compare financial products using the tabs at the top of this page and you can compare all sorts of other products after a quick search on the Internet. (It's the DYOR again.)
6. Gambling doesn't pay, says Homer
'Son, if you really want something in life, you have to work for it. Now quiet! They're about to announce the lottery numbers.'
As I wrote earlier this year in the ironically named: A Betting System that Works! gambling doesn't pay. If you want to make money from money, you need to put a little effort into somewhat more boring things, such as savings accounts and investments.
Consider that your efforts are much more likely to be rewarded if you spend your time applying for a higher paid job or a vocational course than if you gamble, where the odds are against you. Save your money for yourself, not for the bookies.
7. £10,000 equals £1m!
'Bart, with $10,000 we'd be millionaires! We could buy all kinds of useful things like...love.'
OK, with £10,000, you probably won't become a millionaire and you won't be able to buy love (not for long anyway), but you could certainly buy a lot of things with the interest you earn; for example, in a savings account paying just 5%, you'd earn £500 per year.
Of course, the Foolish thing to do would be to keep the interest in the bank and earn more interest on your interest. Better yet, if you can afford to lock the money away for a long period you could invest it in the stock market. After thirty years of investing with returns of 7% you'd get £76,123. It's not a million, but it's a nice sum even after inflation.
Compare savings accounts through The Fool.
8. Shhh! Don't tell the boss
Finally, one of the most useful Homer quotes for me has been:
'I want to share something with you: the three little sentences that will get you through life. Number one: Cover for me. Number two: Oh, good idea boss! Number three: It was like that when I got here.'
...I may use number three when my editor looks over this article!