How Much Should You Be Spending on Rent?

Okay, I’ll admit – rent is a pretty boring topic.

However, housing costs can make or break your finances. It is one of the largest costs we incur and therefore important to get on top of it. Here’s how much you should be spending.

How much should you be spending on rent?

The generally accepted rule is that 30% of your gross income should be spent on rent.

Why 30%?

The reason for this figure is that generally paying more than this can indicate rental stress. If you seem to be struggling with your finances, assess how much rent you pay as a percentage of your income – this rule is a good baseline to start with.

However, I think this rule should be used as an upper limit, especially if you have a larger income. I’d say a better rule is “as cheap as possible without compromising your values“. For example, my rent is 22% of my (very-average) income. Sure, if I followed this rule I could spend a bit more, however I’m happy with my current situation and would rather put the extra money into investments.

I’m spending more than 30%, is this a problem?


If you’re on top of your finances and putting a little aside each month, I wouldn’t stress about going “over” this rule. Especially if you’re young and live in an expensive city such as Sydney or New York. It can definitely work if you budget wisely and live frugally. However, if you’re living pay check to pay check and always short on money – you’re paying too much.

How can I cut back on rent?

Yes, you can get a roommate to cut down on rent and negotiate with your landlord but I’d say the best way is to sacrifice what you don’t prioritise. The best way to do this is to make a list on what you need and really want – and, stick to that. Don’t let anything else sway you!

I remember when I was choosing my place, I got comments that it wasn’t a “good” place because it was old, very used appliances and just generally a lower quality place. At first, I started to re-consider. I thought “I guess I could pay a bit more to have these nicer things. I guess it’s worth it. Thankfully, I quickly snapped out of it. I really had to ignore people’s opinions and focus on what I wanted. Did I really care about an old place? No. I was fine with it actually.

Sometimes we tell ourselves (I’m guilty of it, too!) “Oh, an extra $50 a week isn’t a big deal”. However, if you invested that money instead, you’d have $40,000 in 10 years* – not a small amount at all.

*Starting portfolio value of $100, 8% rate of return over 10 years

3 Habits That Helped Me Build a Six-Figure Net Worth (in my 20s)

Having a large income doesn’t always translate to wealth.

If you make $100,000 a year and spend $110,000 – you will never get on top of your finances and always be stuck living paycheck to paycheck. While your income is an important component, what is even more vital are your money habits. I’ve shared 3 key money habits that have helped me build a six-figure net worth in my 20s while earning a low/average income.

I’ve written an article on how I saved my first $50,000 at 20 where I discuss how I actually saved the money using budgeting and fixing spending issues. This article will delve more into lifetime habits that I’ve developed to keep creating wealth.

1. Being frugal (no matter how much my income increases)

I go the extra mile to save a dollar. When I made $7 an hour, I remember just how much money $5 or $10 was – and I remind myself this regularly, so I don’t forget it. When you start working full-time with a salary, it is so easy to get desensitised to spending money especially when you’re surrounded by older co-workers with much more expensive lifestyles. I have to actively remind myself that I shouldn’t be spending money the way people around me do, but rather what works for me.

That being said, it is about balance. The line between frugal and cheap is very fine and can be hard to perfect. Being overly cheap can cost you your health, personal relationships or even more money in the long-run so spend when you need to. I needed $5,000+ of dental work last year so I just sucked it up and paid because my teeth are more valuable than my investment portfolio. However, I don’t need $60 eyelash extensions a month when I can just use $2.80 ones from Daiso.

2. Avoiding debt like the plague

It’s hard to avoid debt these days – I personally needed to take out a sizeable HECS student loan debt to cover my degree. However, I have tried really, really hard to avoid it. The idea of taking out debt for an asset that does not increase in value causes me pain. For example, when buying my first car (which I needed urgently for work), my dad advised me to spend at least $10,000 to get a semi-decent car and not to bother with anything cheaper. However, this was more than my entire savings.

Instead of getting a loan, I ignored my Dad’s advice (sorry) and bought an 11-year-old car for $6,000 out of my savings with 170k kms on the clock. I had it checked out by a mechanic who advised me that the engine could run for another 10 years. Nearly four years later, my car is still faithfully by my side with no issues and no car loan. You can also have a read of my article of why I’ll never buy a new car.

3. Consistency

When I first started investing, I loved it. I was so into it, I was creating net worth spreadsheets that were projecting the next 30 years of portfolio gains – you get the picture. However, I’ve been on this journey for five years and it definitely isn’t as exciting after a while. I have definitely had periods where I’ve been unmotivated (being made redundant as the peak of a global pandemic, anyone?) and don’t feel like budgeting or managing my money.

While these periods are normal, the most important aspect is that I always found my feet and continued to work towards my goals – for years. This consistency is what helped keep up my financial habits and helped my portfolio grow. My advice is to never give up towards reaching your money goals!

And, that’s it! These are 3 key habits that I have implemented for years to build a six-figure net worth in my 20s. I acknowledge this isn’t possible for everyone and did require my substantial privilege such as living in a first-world country, being mentally and physically healthy as well as having no dependants. That being said, you don’t need to have inherited money, have a rich family/partner or make $70,000+ a year to build wealth – I can attest to that. Australia really is the lucky country and there are so many opportunities to create wealth from very little.

3 Money Habits That Are Keeping You Poor

Do you have a decent salary but wonder where your money goes every month? It’s likely your income isn’t the problem, but rather your money habits. Even if you make a large income, it’s very challenging to create wealth if you have poor money habits. Here are 3 key actions to avoid.

1. Paying yourself last

When pay day comes around, how do you manage your money? Do you pay your bills and save what is leftover? Try to do this the other way around. Think of yourself like a bill – the most important one. Transfer money into savings before you pay for your bills or expenses. This will ensure that you are making your financial goals a priority and you’ll likely spend less if there’s less in your checking account. If it’s a tough month financially, you can always transfer this money back out of your savings.

2. Being unprepared

Not being organised with your finances can cost you. From having to take out a high-interest loan to delaying your financial goals, it pays to be prepared. If you don’t have an emergency fund, start working on this. You can read more about the benefits of emergency funds by clicking here, Why You Need an Emergency Fund.

Know when your big expenses are coming up and put money aside in advance. For example, I know I need $800+ for my car registration in August every year so I make sure to put that money aside. It is a lot easier to save for large expenses when you allow yourself enough time. This prevents significant stress but also stops you from putting that big purchase on a credit card and incurring interest.

3. Putting off investing

When you’re young, it’s easy to put off investing until you’re older. Or putting it off because you don’t have a spare $5,000 to invest. While it’s important to wait until you’re ready, don’t put it off for too long. If you wait to invest, you’ll have to spend significantly more of your own money compared to someone who started investing before you. If this is confusing, I have lots of articles for beginner investors that you can check out below:

How Do I Actually Invest Money?

What Is The Minimum Amount To Start Investing?

How Much Should I Be Investing?

5 Reasons Why People Lose Money In The Stock Market

How A Stage 4 Lockdown Impacted My Budget

This will be the only time my life where I managed to save such a large percentage of my income.

Being honest, the Melbourne Stage 4 lockdown hasn’t been a particularly enjoyable experience. What has been great however, is the impact the lockdown has had on my budget.

Here’s what happened.

My previously high transport costs fell to $0. My entertainment and eating out costs were also negligible. As a young 20-something in a big city, I tend to spend a lot on this category. My dental appointments were cancelled. My gym membership cost was frozen. Other than face masks, I didn’t have to buy any non-grocery essentials. I didn’t need to buy clothes, shoes or any other similar discretionary purchases.

The Money Marketer Blog, The Money Marketer, Ruba Khan Blog, How To Save Money, Melbourne Finance Blog

As I was stuck at home, I could cook everything from scratch which lowered my grocery bill significantly. Working full-time in an office, I would previously purchase packaged snacks, bottled drinks and frozen dinners to help save time during a busy work week. Being at home, I am able to create my own snacks and drinks which is not only healthier but also so much cheaper.

This meant that I was able to save 75% of my income this month. This is an extraordinarily high figure, especially as I make a low income. With meticulous budgeting and constantly trying to be frugal – I average at around a 50/50 split between expenses and savings. My income has dropped drastically after being made redundant (as a result of the virus), yet I was able to save such a high percentage. Not bad!

Of course, I know that these figures are temporary – my expenses are will drastically increase next month. It was certainly interesting to analyse the impact an event like a lockdown can have on your budget.

What Is The Minimum Amount To Start Investing?

Technically, it’s $500.

That is the lowest amount that you can choose for a first trade on the ASX (Australian Securities Exchange). However, there are a few things to consider before you go ahead and make this first purchase.

Brokerage fees

Ever wondered why larger amounts like $5,000 or $10,000 are recommended to start investing rather than $500? This is due to brokerage fees.

When you buy or sell a stock, you pay a fee to do so. This fee can vary greatly (especially if you make a very large trade), however it is usually around $19.95. This means that:

  • If you buy $500 of shares, brokerage will represent just under 4% of your investment
  • If you buy $5,000 of shares, brokerage will represent only 0.4% of your investment

This means, the less you invest the more your shares would have to grow in value to cover brokerage costs. This doesn’t mean you need to save up $5,000 to start investing but rather, keep brokerage costs in mind when you are making a smaller trade.

How To Invest For Less Than $500

You can still invest even if you don’t have a spare $500 lying around.

Micro-investing is a way to invest small amounts like $5 or even your pocket change. With consistent contributions and time in the market, you can still accumulate a pretty sizeable investment portfolio. It is a great option for new investors who are perhaps uncomfortable with investing large amounts or find the stock market quite intimidating.

Raiz Invest and Spaceship Voyager are two popular ones, however I would highly recommend doing your own research and seeing what platform is right for you. Two key areas to look at are investment returns and fees. Make sure that the platform will actually make you money but also that they are not overcharging you. For example, if the investment return is 3% a year with high risk, that is very poor. You may as well put your money in a bank account instead which offers 3% interest and very little risk.

Do a lot of research to figure out what investment method is right for you. Saving up a large amount of money is hard in itself. Having to then invest it in the market for the first time can really scary! If you are more comfortable with making a smaller $500 trade, then go for it!

3 Online Shopping Hacks To Save You Money in 2020

Australian eCommerce grew more than 80% in the 8 weeks after the COVID-19 pandemic was declared by the WHO*. Whoa. We’re online shopping more than ever before so here are my 3 secrets to help you save some cash. We all know to search for coupon codes and sort from lowest to highest cost so here are some different ideas.

1. Use Honey to find all possible coupon code available publicly

It’s 2020, there’s no need to Google store coupons to get a deal. Instead, simply install the Honey Google Chrome extension (which is completely free!). This handy tool will automatically scan the internet for public coupon codes and try them for you at the checkout. It will then apply the one which saves you the most money.

This tool is great because it saves you time from having to do manual searches and testing them yourself if they have expired or not. It is also great if you are forgetful, as it reminds you to scan for coupons when you are checking out in an online store.

That’s not all. It also acts as a cashback service for lots of popular stores such as Kmart, iHerb, Pretty Little Thing, Clearly Contacts. This means by using the service to save money, you get a small % of your money back. I’ve received a $23 free amazon gift card this way.

Sign up for free here and get 500 gold: (it’s my referral link so I will also get 500 gold)

And, if you’re thinking “How do they make money? Are they selling my data?!” – click here to find out.

2. Use Cashback services

If you online shop regularly, you need to use as cashback services!

Similar to Honey, cashback services, give you a small % of cash back for your orders. I would highly suggest Googling different services available for your country. In Australia, my favourite one is Shopback, which is free. It has the largest range of online shops and includes stores such as Woolworths, Myer, Ebay, Dan Murphys, ASOS, Sephora.

Shopback has a handy extension for Chrome so I can activate the cash back with one click, it also reminds you of its existence as soon as you shop on a participating store. I’ve earned $29 in rewards for just clicking a button before I checkout, not bad!

If you want to sign up to Shopback, use my referral link and earn $5 instantly –

3. Research the best value stores & stick to them!

Some online stores offer the basics – they never have coupon codes, products are priced slightly higher, never have free shipping. Others always have offers, gift with purchases and sales – stick to the latter! You may have to invest time to actually research which stores offer the best value. However, doing this will help you save money in the long run.

An example of this is Adore Beauty. This online beauty store offers free shipping on most orders, has products priced fairly, gives free samples and regularly offers free products with purchases. Often these free products are usually very useful and high-quality. So, instead of buying a product from another online store where I get no perks, I would rather buy it from Adore Beauty because I know I can get a free shipping, samples and a nice free gift – all while paying the exact same price.

I hope these tips and tricks will help you save money, earn cash back rewards and overall become a more savvy online shopper!

*Data from Australia Post report, “Inside Australian Online Shopping 2020 eCommerce Industry Report”,

3 Ways I Made Extra Money During Lock-down

What a crazy time this is. Us Melburnians can’t go out of a 5km radius of our homes and are only allowed one hour of exercise per day. How do I stay entertained? Blogging of course! All jokes aside, I hope everyone is safe, healthy and happy 🙂

Like many of us, I have been saving so much money being in this Melbourne Stage 4 lock-down. My transport and petrol costs have dropped from $200 – $300/month to basically nothing. I can’t socialise, go out to eat or watch a movie so no money spent in that area of the budget, either. However, I have also been finding ways to make extra money which I share with you below.

1. Cleared out my clutter and sold it online

Being stuck at home is the perfect time to clear out your wardrobe and decide what you no longer need. Photograph each piece, write a description of the condition and price it slightly higher than the amount you want. There are plenty of negotiators out there! I can often even make a slight profit on some of my items as I primarily buy second hand goods at a bargain price.

Not sure where to sell online? One of my favourite Melbourne-based bloggers, Emilia Rossi has written a post comparing Facebook Marketplace vs. Gumtree vs. eBay. Check it out by clicking here!

2. Freelance work in my industry

One of the best parts about being a digital marketer, is that there is always work available. Many companies need help with their marketing in the form of branding and social media, which is where I come in! If you are a professional with a set of skills, take advantage of this and do some extra work for a bit of cash.

Not sure how to get freelance opportunities? Okay, so I personally am not a fan of Fiverr or Upwork – any of those type of websites. I find that it is way too competitive and you’re fighting just to get gig. My advice? Use LinkedIn. Optimise your profile using SEO and advertise yourself on LinkedIn that you are open to freelance opportunities. If you’re stuck, I’d be happy to look over your profile for free – just send me the link on and I’ll give you some advice.

And, if you’re a company that needs marketing help but don’t want to pay overpriced agencies, contact me by clicking here.

3. Recycled my old phones for cash

Don’t throw away your old phones because you can recycle them for cash! A quick Google search will help you find different companies in the area that do this. Keep in mind that if you have a phone in reasonable working condition, I would try to sell it first on one of the platforms listed in the first point. However, if it is a really old model or you are having trouble finding a buyer – recycle it!

Tip: Make sure you look at 2 – 3 different websites to compare prices first to make sure you are getting the most amount of money for your phone.

And, that’s it! Here’s how I’ve been trying to get extra cash during these crazy times. If you have been making money in any cool and unique ways, let me know – I’d love to hear it!

5 Ways to Save Instantly On Your Next Grocery Shop

Note from The Money Marketer: This is a guest post kindly written by Frugal Beans. Sarne & Steph are a Sydney-based couple who have the best knowledge on how to be resourceful and frugal. Check out their website by clicking here – hope you enjoy the article!

Groceries are one of the largest expenses we have. Evaluating and adjusting your shopping habits is a sure-fire way to quickly save money. Food is a necessity but it does not mean you have to eat rice and beans for the rest of your life to save. The main reason people spend too much when shopping is because they are buying more than they need.

Here are 5 ways to save instantly on your next grocery shop!

1. Never go shopping hungry.

Always make sure you are shopping on a full stomach. This will stop you from putting things in your trolley you don’t need. Or impulse buying. When we shop hungry we tend to grab a lot more than we need. It’s a big no no.

Eat before you leave the house and you will have yourself prepared to resist the temptation of grabbing that extra packet of chips.

2. Always shop with a list and stick to it.

Before you shop, write a list. Go through your fridge and pantry to see what you need and write it down. It’s surprising how often people shop without a list. It can cause your grocery shop to inflate by over 50%. You don’t know what you need so you end up grabbing way more. You get home to find you already had cheese and now you’re stuck with eating 2 blocks. Having a list to stick to will help you only buy what you need.

3. Meal plan

Recently we have added meal planning to our savings habits. Every Sunday night we sit down and write out what meals we will cook at home for the week. One of us writes the list while the other checks the pantry and cupboards for the ingredients to use.

One strategy we use when meal planning is to cook oldest to newest. When we check what to eat we see which ingredients have been sitting there the longest. Which items need to be eaten before they go to waste. We’ve found it the best way to minimise food waste.

Having a meal plan allows us to better plan our weekly grocery shop. It also helps us to minimize the amount of food we need to buy.

4. Shop Around

Never do all your grocery shop at the one supermarket. Not all supermarkets are created equal. In Sydney, we are fortunate enough to have competing supermarkets always pop up right next to each other in many locations. Use this to your advantage. Before you shop, check pricing. Check which supermarket sells the items you intend to buy the cheapest.

Check these prices online as most supermarkets advertise their prices on their website. At first this might be a bit of a pain. But, after a few times you will instinctively know which supermarket offers which products the cheapest.

5. Buy in season fruit and veg

Ever notice how one day strawberries cost next to nothing then the next week they are over $5 a punnet. Seasons. Always buy fruit and veggies when in season. Unless you have a craving that can only be satisfied by buying those blueberries, try to avoid them. When fruits are not in season you will pay a higher premium for them. Fruit and veg is always cheaper when the markets have a surplus of them when they are in season.

Depending on where you are located in the world will depend on what is in season where you are. You can also tell by what is on special at your fruit and veg market usually.

And, that’s 5 habits to change in your grocery shop to help you save! After a while, you won’t even know you’re doing it. We have been shopping this way for over 8 years now since we moved out of home. We’ve found these the best way to keep costs low and minimise the amount we waste.

Buying more than is needed is the main reason people spend excessively. Gaining control over your spending habits and employing a few strategies when shopping will surely help you lower your grocery bill costs.

If you have a shopping habit that can help us all save please let us know!

Frugal Beans

3 Things Not To Do When Managing Finances as a Couple

Note from The Money Marketer: This is a guest post kindly written by WealthFitzYou. Knowing how to navigate finances with your partner is so important and I’d love to help you out with that. However, I personally don’t have any experience with this as a single woman with independent finances. This is where WealthFitzYou comes in to share their tips and tricks – hope you enjoy!

Let’s start off with a disclaimer, we’re writing this as a young, fairly newly wed couple. We’re speaking from our experience of being coached by our own Wealth Manager and as Finance Coaches. What we write is solely our opinion, and we hope you get value out of it, if you do any of the three points, please don’t take any offence! We’d love to hear your opinions on them.

1. Don’t have secret credit cards

Don’t have any secrets. Period. You know the saying “Secrets don’t make friends,” well it definitely doesn’t make a strong relationship too. If there’s a secret to be kept, we’ve learned that there’s a deeper reason why we have to “hide things” from one another.

Instead of secrets, COMMUNICATE. This is something that isn’t normally taught or modelled to us, i.e: for us our parent’s were the ones that hid bank accounts from one another. However, making sure you’re on the same page builds a strong foundation for your financial future. Communicate your dreams, goals, aspirations, everything that brought you together as a couple to begin with (more on this in point 5).

At the root of all 3 points is Communication, and quite frankly it’s the root of any relationship.

2. Don’t be a Dictator

No one likes a dictator. And don’t assume your needs are the same as your partner’s – most likely they aren’t.

It may have sounded cliche to “Communicate,” but an often overlooked part in Communication is actually creating a safe, healthy environment where you can both voice your wants and needs.

We’ve noticed some couples do everything together, except finances. This shouldn’t be the case. Instead of dictating, BE A TEAM. If you’re reading this, we’re assuming you’re in a relationship, and you should be just that – hopefully no one is in an actual relationship with a dictator.

3. Don’t make it boring

We know a monthly “money date” doesn’t sound the most fun, but it doesn’t have to be boring.

To most, money is boring or a stressful topic (especially during the trying times we’re in), but when you establish a safe environment for communication as mentioned, it can take the pressure off. Money should be something that brings us together, not apart.

Let’s close off with the controversial (drum eye roll please)… Budget.

A budget doesn’t have to be restrictive, instead MAKE IT FUN. Literally, we have a FUN “No Judgement” Budget for each of us. It can be exciting planning dates or fun things to do together, within a budget. Giving yourself some lee-way can replace those feelings of dread with experiences to look forward to.

The word “budget” strikes a negative tone with many, but a budget isn’t telling you what you can’t do… You make your own Budget, and you’re completely in charge of it! A “real” budget gives you the freedom to do the things you truly enjoy.

In summary,

  1. Don’t have Secret Credit Cards, Instead Communicate.
  2. Don’t be a Dictator, Instead Be a Team; and
  3. Don’t make it boring, Instead Make it Fun!

We hope you’re able to apply these 3 points in your relationships. If you’re ever looking for more information or to follow our own personal finance journey, feel free to follow us @WealthFitzYou on Instagram. We’d love for you to join our Wealth Success Community, where we motivate, educate, and Share Couple’s and Single’s Success Stories – we’d love to hear your story.

Thank you so much to The Money Marketer for letting us write this guest blog post, and sharing your personal Success Story with us!

How Bubbles Affect The Stock Market

Note from The Money Marketer: This is a guest post by Financial Freedom 101 – be sure to check out their blog by clicking here. They provide lots of educational content on the stock market, perfect for the Gen-Z investor!

Stock market bubbles are common, and I think we are in one today. Bubbles form in economies, stock markets, and business sectors like the tech bubble that lasted from 1995-2001. Many people believe that we are going through another tech bubble right now, because of all the stock buy-backs and federal stimulus pumps that are making the assets in the market very high. Investors are valuing companies like uber at a multiple of 100 times its sales. To put that into perspective, Zipcar, the hot sharing-economy startup of its day, commanded around a 6x multiple at its peak. Microsoft fetched a similar one when it went public in 1986, achieving a market cap of $778 million on its first day out. Enterprise software firm, Slack is valued more than 90x its sales. There is a bubble going on right now, but the fed can’t stop printing money, and these big American corporations got a surreal amount of money with companies like Apple, who have 207 billion dollars on hand. 

How are bubbles formed

 Bubbles are formed by GREED. Economists define bubbles as a rapid escalation of stock prices followed by a contraction of greedy people who keep buying stocks blindly, not caring about the cost or risk presented, followed by a rapid market decline. 

 Often the first stage of a bubble is when a new product or technology is made public on the market and gets a lot of the public attention. Hence, then people dump an absurd amount of money into these companies blindly taking risk into account. As more and more investors enter the market, thinking that they too can profit from the run-up, inventory becomes scarce. As a result, prices rise at an extreme level, then fall to the floor. 

Causes Of An Asset Bubble

Three main things contribute to asset inflation.

  • Low-interest rates

The current economy in America has 0 interest rates, which SCREAMS that we are currently in a bubble. Low-interest rates make it easy to borrow money cheaply, which boosts investment spending. Historical evidence suggests that low-interest rates lead to asset bubbles and that investors take excessive risks to achieve desired investment returns, exposing their portfolios to a higher overall risk. Stock prices are already inflated, and the rise of the private credit market spells of trouble ahead.

  • Global Imbalances

Back when the tech bubble popped, many other countries like japan were investing in US assets. People believe that the inflow of currency from abroad was one of the leading reasons for the tech bubble. The US ran a trade deficit and attracted hot money inflows, leading to higher demand for US securities. The global imbalances are one of the causes of the 2008 financial and economic crisis. The financial flows associated to these imbalances in the international financial markets, which are incapable of absorbing efficiently these huge capital inflows.

  • High Trading Volume and High Volatility

During a bubble an asset buyer is willing to pay a price above fundamentals because, the buyer is afraid of missing out on the gains of a bubble so they buy an asset blindly at a overvalued price due to investor overconfidence. E*TRADE, Fidelity, Schwab, Robinhood, and Interactive Brokers all reported either increased activity, new account signups, or both, as individual investors adjusted their portfolios or bought equities and options at a rapid pace since March of 2020. Trading activity has soared to all time highs at many online brokers. Charles Schwab’s first-quarter financial reports showed that the top 30 volume days in the company’s history, 27 of them were set in February and March 2020. Logins by Fidelity clients increased by 56% from march 2019 to march 2020.

Five Stages Of A Financial Bubble

We can identify financial bubbles is the suspension of disbelief by most investors when the speculative price surge is occurring: It’s only in retrospect, after the bubble has burst, that they’re recognized. We can only ever Identify bubbles in hindsight and to make the right decisions to prepare.

  • Displacement

A displacement occurs when investors get infatuated by a new industry paradigm, such as new technology or interest rates that are historically low. A perfect example of displacement is back in 2000-2003when federal interest rates went from 6.5% to 1%. Over these three years the interest rate on 30-year fixed-rate mortgages fell by 2.5 percentage points to a historic lows of 5.21%, which was just the beginning phase for the housing bubble.

  • Boom

Prices rise slowly at first, following a displacement, but then gain significant momentum as more and more participants enter the market having FOMO. During this phase, the asset in attracts wide spread media coverage, like Electric Cars right now. FOMO is what could be an once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of participants into the fold, which then get burned when the bubble pops.

  • Euphoria

During this phase investors are pouring in large amounts of money into the market which causes prices to skyrocket. Valuations reach all time highs. Right now a lot of investors are coming into the market thinking its easy, anything bought within the last two months has gone up an absurd amount. Airlines,Cruise companies and even rental car companies are on the brink of collapse and people are still buying there stocks days after bankruptcy. this is the kind of stuff that happens during this phase of euphoria. Skill, strategy and money management don’t exist. It’s just about everything going up, all the time. And it’s not going to end well. The saying “Stonks only go up” has came out of this time of euphoria. Euphoria is usually the stage of a “False Bull Market” or a “Dead Cat Bounce” Personally, i think we are in this stage right now and its only a matter of time for the market to pop.

  • Profit Taking

In this phase, the smart money takes profit which is a huge warning sign that the market is going to burst. This is the best time to start selling positions and taking profit. Estimating the time a bubble collapse is hard but if your happy with the profits you have made take profit hold cash. Cash is a position and an opportunity will come, the market isn’t going to go up forever. It only takes a minor event to pop and bubble like covid-19. If we see another resurface of cases killing thousands of people the market will likely fall again because the Federal Mandate cant keep printing and putting money into the market.

  • Burst

In the Burst stage reality sets in, investors panic sell and prices drop at rapid rates. Prices ultimately fall faster then increase from previous weeks. Investors and speculators, faced plunging values of their holdings, now want to liquidate them at any price. As supply overwhelms demand, asset prices slide sharply and prices fall. An example of a burst is when Lehman Brothers declared bankruptcy and Fannie Mae, Freddie Mac and AIG almost collapsed. The S&P 500 plunged almost 17% that month, its ninth-worst monthly performance. In that single month, global equity markets lost a staggering $9.3 trillion of 22% of their combined market capitalization. At this stage of the bubble people knew they were doomed and an economic recovery was far to come until the giant 10 year bull market we are experiencing right now.

Bubbles affect the stock market in many ways. Some can make millions off a stock market bubble and some could lose there whole life savings, its the matter of how you play the bubble. Speculative bubbles in some asset or the other are inevitable in a free-market economy. However, becoming familiar with the steps involved in bubble formation may help you to spot the next one and taking profit early. Remember, cash is a position and don’t be afraid to use it to your benefit, BUY LOW SELL HIGH.