Money in the Vege Garden

I love fresh vegetables.  But I live 70km from the nearest town and it can sometimes be weeks between shopping trips, so I don't get to have fresh (store-bought) food in my fridge very often.  So I planted a vegetable garden to get some fresh veges more regularly, throughout the year.

Not having ever gardened before, it took me a long time to work out what can work and what can't.  For example, there are winter and summer vegetables and you don't get much success if you plant things at the wrong time.  It occurred to me about five minutes ago that the principles I operate when gardening are similar to the principles of money management and investing.  Here's a few key lessons.

Plant the right seeds for the right seasons.

Like plants, investments do actually have seasons.  At the moment Property and Shares (in Australia) are having a major low period.  If you can help it, now is really not the time to be selling a house and it hasn't been for about three years now.  But with low interest rates and low property prices, now might be a really good time to buy.  Plant the property seed.  It may take another couple of years for your investment to grow in capital, but eventually it will grow.  Shares should do the same thing.  But as with all investments, do your homework and make the right decisions for you.

Be Patient

It takes a while for plants to grow.  If you plant them from seeds as I do, you have to wait weeks to see if they will even come up at all.  Sometimes they don't.  If this is the case, then you need to cut your losses and plant again.  If you picked the wrong shares, or bought the wrong house, sometimes you need to do this with these as well.  Generally though, if you wait long enough, you will find that your investments (and your vegetables) will push through and give you some yield, even if it wasn't what you were expecting.

Plant lots of seeds, something will always come up.

Don't put all of your hopes into one thing.  Most people know that if you had all of your wealth in superannuation, in 2008 your net worth was halved.  If you put a little away in different investments, you should be able to handle losses in any one industry.  I have planted corn every year for 4 years and never got a crop out of it.  Yet, I have never starved because I still have lettuce and tomatos.

When you don't have time to tend your garden, plant things that take care of themselves.

I have two babies, born in the last two years.  Each time, I had to go away to Brisbane for more than a month to wait for them to be born.  I couldn't weed, water or plant my garden in that time.  Both times, I had pumpkin seedlings growing.  The first was from a seed that came up randomly in the front yard.  After I got back from baby delivery, the pumpkins had taken over the entire garden.  I didn't get any other plants for a while, but I haven't had to buy a pumpkin in 2 years.

I view investing the same way.  I don't have time or ability to trade shares, or to do development projects.  So I have a buy-and-hold strategy for both my properties and shares at the moment.  I'll probably get more active in the investment garden when my kids are older.

Do the weeding (check CC statements, budget)

You can't grow veges in the place where you have weeds.  Similarly, you don't have access to money you throw away.  Check your bank statements regularly and make yourself accountable for every dollar spent.  I often find things like fees that shouldn't have been charged on my credit card statement which can easily be rectified by a phone call to the bank.  Also, I can make a decision to hold off on impulse buying if my balance reaches a certain mental limit.

Harvest at the right time

I tend to leave my lettuce too long.  It goes to seed and tastes awful.  I think its because I get such pride in seeing my plants in my vege garden that all too often, I'll put off my harvest. It also comes from a bad habit I have of saving things for later, when I might really need it.

I've done this with shares too.  The market was doing well, share prices were increasing, I had my chance to take 10% and run, I didn't and then the market fell again.  I've also gotten out of a deal that went nowhere for three months. Literally one day later, that share took off and would have given me a 30% return the following week.  It's hard to tell sometimes.

Companion plant (reduce debt and save)

I'm a mathematical person.  I like geometric patterns and straight lines.  It's nice to see my lettuce all in neat rows, but it doesn't always make for good practice.  Some plants need a little shade and others need a little sun.  If you have a tall plant next to a short plant, the lower one gets some nice shade and the taller one doesn't have to put up with weeds growing under it.

Similarly, you don't have to focus only on debt reduction before you give yourself a chance to save.  It can be far more motivating to pay off your debts if you see your savings growing in the bank.  Also if you have some money saved up, you don't have to feel guilty when you buy something, because you don't have to undo all your hard work of reducing debt to pay for it.

Maintain your perennials (have buy and hold stocks and property)

There are a few plants in my garden that have been there forever.  Well not really forever but they are there year in- year out.  They didn't even die off when the pumpkins crawled all over them.  No matter what else happens in my vege garden, I know that I can depend on these plants.  They spruce up a salad nicely and also go in my stir-frys, quiches, fritters, pizzas or whatever.  They are my all-rounders.

I also have my all-rounders with my investments.  The shares I have continue to give me dividends, whether or not they go up and down in value.  My properties continue to provide me with income from rent regardless of market conditions.  I also have my allrounders in bank accounts and loan accounts.  I can pay down debt and save interest or build on savings or whatever I need.

I can't give you much more gardening advice but if you're looking for investment ideas, check out my book,  Do I HAVE To Get A Job? available now on Amazon.

Need some good Credit Card advice?  Have a look at How To Get A Credit Card - And Get The Bank To Pay Interest To YOU!

Three stages to wealth

I used to pride myself on paying my bills on time... and I was always broke. Now I can pay my bills on time and I'm rich.  The secret?  Learning how to NOT pay your bills on time.

Let me explain.  Back when I was broke, I tried to save money. Every pay I would look at my bank balance and see the amount grow and grow.  Then a bill would arrive and I'd pay it.  Then another would come, and another, and another.  Eventually I'd be back at square one with no savings.  Does this sound familiar?  What was I doing wrong?  I tried to save.  I was being stingy with my spending but still my money just seemed to disappear.

Lets look at my situation now.  I save money.  Each time money comes in, I look at my bank account and see the amount grow and grow and grow.  Then a bill arrives and I pay it... on time.  And another arrives and another and another.  But I never get back to square one.... ever.  My balance always gets bigger and bigger and bigger.  Am I earning more money?... actually no.  I'm earning less now than when I was broke.  Have my expenses decreased?  No, I have two small children now.  My expenses have increased significantly.

Am I lying to you? No again.

So what is the difference between then and now?  The very significant attitude change that facilitated the change from broke to rich.

And now the secret.  Not paying the bills on time.  You see, I put my savings as a higher priority than paying the bills.  I didn't even know how to budget and this began to work.  After I learned to budget, it worked better, but the key to success was the attitude shift.

STAGE 2

I'd get paid, save some money and then a bill would arrive.  Instead of paying the bill with my "savings", I would wait until more money came in.  This was pretty easy because I had a job and was getting paid regularly.  So then, I'd get paid, save some more money, and pay the outstanding bill.  I'd watch my savings go up and up and the bills still got paid.  Not immediately and sometimes not even on time. But they always got paid AND I still managed to save.

Lets recap on the THREE STAGES TO WEALTH

Stage 1
Pay your bills on time and stay broke.

Stage 2
Save first, pay your bills when you get money in later.

Stage 3
Learn to budget, save first, pay your bills out of money allocated for that purpose.

The only difficult part is changing your attitude to one that is more relaxed about paying your bills on time.  But if you are prepared to go through stage 2 then eventually you can get to stage 3 and you can be rich and still pride yourself on paying the bills on time.  Have faith that this stage will come and you may find it easier to change your priorities.  After all, who is more important? You? Or the Internet company/ Telephone company/Electricity company/Somebody other than you?  I think you'll find the answer is quite obvious.

Teaching children a positive attitude regarding money

We all want the best for our children.  We try to make sure they are safe, are going to a good school and are getting enough love and attention at home.  But how often do we stop to think about what they are learning with regards to money in their daily lives.  After all, they will have to handle money eventually.  Should their financial education begin when they get their first job or earlier when they are at school, or should we be conscious of their financial education from an even younger age?

I'm here to argue that regardless of when we begin a formal education strategy about money, our children will form their own opinions at a very young age.  By the time our children are school age, they usually know what a book is and have some idea about letters, words, numbers, shapes and colours.  It makes sense that they also know what money is and have an opinion about how to use it.  They have seen us shop innumerable times in their lives.

Our children have also heard us discussing money.   We probably haven't even been aware of the messages they have been receiving.  But if we want to give our children an advantage in the world financially, perhaps we should be thinking about what we say.  Is the subject of money in your house associated with arguments and negativity or does it bring about a positive feeling?  Is it a taboo subject to which each member of the family acknowledges the unspoken rule not to speak of it?

Have a think about what type of feeling you get when you think about money.  Chances are, your children feel the same way.  What beliefs do you have?  That money is scarce, evil, abundant, fluid, powerful, useful, easy to get, difficult to keep, never enough, not important? If you haven't really thought about it here's a quick exercise.  Have a think about the phrases you use in respect to money.  Or when your child asks for something what do you say?

"Money doesn't grow on trees"
"Money is the root of all evil"
"I don't get paid enough for that"

or is it something like

"Money provides opportunities"
"Money is easy to come by"
"You can have anything you like, with careful planning and budgeting"
"If you can save up half for that, I'll put in the other half"

To give our children a head start in their financial education, it is important that they can speak freely with you about money.  It is also important that they develop a positive attitude towards money.  But here's the trick:  If you have negative beliefs about money it will be difficult for you to teach your kids a positive attitude.  So here's an exercise that you can do.

Get the whole family together.  Turn off the TV, phones and computers and sit around the dinner table with some paper and coloured pencils.  Get everyone to write down some beliefs that they have about money.  Decide as a group whether these are positive or negative. Discuss how these beliefs affect how you handle money.  If your catchcry is something to the effect of, "We can't afford it" then you probably don't allow yourself to want anything because there is no possibility of ever being able to get it.  For your children's sake and your own, entertain the idea of turning this around at least to "How can we afford it?" if not to, "We can have this if we really want it" and do some brainstorming about how you as a whole family can earn more money for your purchase or at least save up for it from existing income.

Now write a new list together which contains only positive comments about money. These should be new beliefs that you'd like to have.  You don't have to believe them straight away.  Once you have a list of between five and ten new beliefs, put them up on the fridge for everyone to see and read daily.  Get used to saying these words instead of the negative ones.  Your children, creative beings that they are, should develop a positive outlook with regards to money and be on their way to learning to negotiate ways to get what they want, even if it seems impossible to you.  Try not to stifle this creativity by being a "realist".  Instead, foster their excitement and give them the responsibility for saving and budgeting.  They should quickly learn what purchases are important to them and temper their need for instant gratification.

Tax cuts and what to do with them

I heard a comment on the radio this morning about the new tax cuts for this financial year.   You may already know that in Australia this financial year, the tax-free threshold has tripled.  It was $6000 but now individuals can earn up to $18200 before having to pay any income tax. The other rates have been adjusted accordingly so that a person earning $80000 or more is taxed similarly to last year.  Everybody else gets a tax cut.  We also have money coming to us in the form of the Household Assistance Package and some people are also eligible for the Schoolkids Bonus.  The radio program also mentioned a decrease in petrol prices and interest rates.  All of this adds up to more disposable income for low-to-middle income earners.

I love that word "disposable", don't you?  It implies that we have money to literally "throw away".  And as much as we would disagree that this is the case, chances are, most of us will effectively do that - throw our money away - if we are not careful.  You see, without a working budget, the average person gets their wages, pays their bills and spends whatever is left over.  The fact that there is an extra amount (whether that be $5 or $50) doesn't change their spending habits.  People do not tend to purchase the same things they did before a payrise and then have the exact extra amount left over at the end of the week or month. "But what is it spent on?" I hear you ask.  Perhaps a small treat for getting the payrise, perhaps an unexpected expense such as new brakes on top of the car service.  Perhaps a new toy for the kids or something that you should have been saving for but have decided to charge to the credit card instead.  You wouldn't be able to trace the amount because your expenses vary each week anyway.  There is no conscious decision to spend $37 on something if you know you have an extra $37 in your pay packet.  In fact, the radio program I was listening to mentioned in increase in "Consumer Confidence" which sparked a debate about how this would have been measured.  They speculated that it might mean that people are spending more.  Wether this is the measurement or not, it is likely true that people are spending more money, since they evidently have more to spend.

So what can we do?  Well, it has been proven time and again that if you put money aside to save before the bills get paid and you follow your existing spending habits, then that money doesn't get spent with the rest.  I would suggest that we compare our wages and benefits and our estimated tax with previous  years and put some or all of the extra amount either into your savings or to pay off your debts.  Do this at the beginning of your pay cycle not at the end.  That way we'll be further along the road to financial freedom.  If you don't already have a savings plan in place then have a look at my post on  Saving 101 and Separate Bank Accounts to get some ideas on how to set one up.

Enjoy your extra "disposable" income.  Try not to throw it away.  But if you do, make sure it's a conscious decision and have fun with it.

How to get what you want

How do I get what I want?  That's the million-dollar question isn't it?  Sometimes I find it impossible to believe that I can get what I want.  Maybe I'm just impatient.  Maybe I'm not being realistic in what I can actually get.  Or is the form of what I want inconsistent to the how the universe works.  Let's say that I want one million dollars to appear in my bank account.  I realise that this is perhaps a silly wish.  After all, if one million dollars suddenly did appear, and it wasn't a bank error, would five minutes actually pass before I started to spend it?  So for that reason alone, I would never really achieve my goal.  Perhaps I need to think things through a little more.  On the other hand, certain things like my million dollars, seem like such an impossible dream that I don't even allow myself to want them.  The thought is so fleeting that I don't even realise that I even entertained the thought that I wanted something, let alone remember what that something might have been.   My mind automatically dismisses the idea before I'm even conscious of it. 

So how do we get what we want? The first step would have to be, to allow ourselves to want something.  After all, if we don't want anything, or don't let ourselves want anything, nothing is going to change is it?  So... step one.. decide what you want.  For people who have never let themselves want anything, this can be the hardest part of getting what you want.  Get yourself a piece of paper and write down anything and everything that comes into your head that you might want.  When I start doing this, I tend to think of cliche-type stuff. Private Jet, Helicopter, Jet-ski, Beach House, Yacht, etc.  I actually want none of these things but I write them down regardless just to get them out of my head and move on to the things that I actually want.  I try to write down at least twenty things because then I have to really think.  I really can't get excited about those first few, not because they are so far out of my reach that they are silly goals.  By all means if you really want a private jet then you should keep it on your list, but I don't regard them as realistic goals for me because, I don't like travel, I don't like salt water and sand irritates me.  My parents have a beach house and when I go there to visit, I can spend an entire week without touching the sand or surf, or sitting on the balcony looking at the water.  So lets get these ridiculous fantasies onto the page and then really think about what we actually want.  Stick with this step for a whole day.  Like a shopping list, put it somewhere handy and keep coming back when you think of something else.  Go do your daily routine and let your mind wander back on its own accord to add to your list when the inspiration arises.

So we have a list... now what?  Pick out the thing that speaks to you the most and let's work on that.  It's all well and good having your wish on paper, but if we do nothing else, it's like my million dollar wish and probably not likely to happen.  What we need to do is tweak the wording or our goal to make it more achievable.  A good way to do this is to use the SMARTIE formula.  SMARTIE stands for Specific, Measureable, Attainable, Realistic, Time-bound, Inspirational and Emotional.  If we review these one by one and change our wording of our goal, I think you'll find that it goes from a silly wish to something that you may actually be able to get.  Lets use my million dollars as an example and really work it through this system.

Be Specific.  What is it that I actually want?  Do I want one million dollars? Or do I want something that the million dollars can buy?  What would I actually do with one million dollars?  When I think rationally about this, I imagine that one million dollars would be completely wasted, sitting in a bank account. After all, interest on bank balances is pretty pathetic.  I'd much rather have my money working harder for me than just earning bank interest.  Personally, the million dollars represents the opportunity to purchase investments such as property or shares.  These would be used to produce an income which I could use for the option of enhancing my lifestyle or increasing my investments.  Here, I'm going to change my original wish for one million dollars and instead, replace it with a One million dollar investment portfolio.  Still, I don't know that we've gotten specific enough so I'm going to get even more specific by suggesting that I want two $350 000 investment properties and $300 000 worth of shares.  There.  That's one million dollars.  It's not in my bank account but it is in a recognisable form.

That takes care of the S in SMARTIE.  Now for the M.  M stands for Measurable.  Can this goal actually be measured.  Will I know when I have attained my goal?  How will I know?  If my goal had been to maintain good health, this would be difficult as I wouldn't know when I have achieved this.  Even my investment portfolio is not quite measurable as I could have these things but with borrowed money.  The question is, does it count if I had to borrow the funds? And if so, how much of it can be borrowed and still have the goal considered to be achieved?  Let's explore the option of having my million dollar investment portfolio completely debt-free.  I would then have a net worth of one million dollars.  That's measurable.  I would know this has been achieved when I have two $350 000 properties and $300 000 worth of shares with no borrowings on them.  That works for M.  Let's see if it stacks up with the rest of the SMARTIE.

Moving on to A.  A stands for achievable.  This is a little harder to measure.  How do I know what I can reasonably achieve.  Is it possible for me to have this investment portfolio?  What would be an unachievable goal?  Flying to the moon using my arms as wings comes to mind as something completely unachievable.  Owning two houses and a bunch of shares is probably reasonable.  While I have the ability to earn an income, my portfolio is probably not out of reach.  It may take me fifty years to get there (hopefully not) but I'm going to suggest that we've covered the Achievable criteria and move on.

R stands for Realistic.  Is my goal realistic?  Possibly.  But I think that I can make it more realistic.  Having two properties and a share portfolio completely debt-free doesn't actually make a lot of sense to me.  After all, there's the theory of compounding to consider.  By this I mean that the more money I have working for me, the faster it will grow.  I could use equity I already have, to get a loan for a property and watch my net worth increase as the value of the property increases.  If I'm going to do this for one property, why not do it for more?  I don't think that I would realistically stop at two properties if I had enough equity to buy more.  More investments mean faster growth and a shorter time period towards reaching my goal.  I still want my million dollars in net worth but it makes more sense to me to use borrowings to get there.   Also, if I was to buy two properties worth $350 000 each, by the time I had these paid off, they would be likely to be worth a whole lot more because of capital growth.  I may even get to the point of having a property worth $550 000 and only owing $200 000 on it.  That would be the same as owning a $350 000 property outright wouldn't it?  Let's imagine that I get to that point.  I'm not likely to trade this one in on a lower priced property just to achieve my goal specifically.  So to make my goal more realistic, let's change it to this:  My goal is to have an investment portfolio consisting of shares and property which has a net value of one million dollars.  I concede that this is not quite as specific as the two properties and $300 000 in shares but I think that it is still specific enough to be measurable and it is far more realistic.

T is for Time-bound.  Here's where it get's a little scary.  Up until this point, I can brush off this exercise as a bit of fun or a bit of a dream but now we get to the point where we make ourselves accountable for actually achieving the goal.  In this part of the goal setting process we decide exactly when this goal is to be achieved.  Without this step, you can drag the process out indefinitely.  I'm reluctant to place a time on this.  What if I fail?  The answer to this question is this: It doesn't matter.  If I get the timing wrong, I'm still going to have made some progress towards the goal aren't I?  That's got to be better than not trying at all hasn't it?  After all, life happens and we can't predict what's around the corner.  But without a goal, without an estimated time for achievement, I have no real accountability for my actions (or lack of).  Let's just get something down.  I can always change it later if I think that I might get there faster or if something gets in my way.  Okay here goes:  My goal is to have an investment portfolio consisting of shares and property with a net worth of one million dollars by my fiftieth birthday.  That gives me about fifteen years.  Since the average home loan is for thirty years, this means I will have to put in considerably more money than the average repayment on a loan.  This should still be achievable and realistic as I will have tenants paying rent, and dividends from my shares. Is it still SMART? I think we're still good.

I stands for Inspirational.  So the question now is do I feel inspired by this goal?  Well, it started out as an example for the purpose of this blog but now that I have worked it through, I have to admit that I'm actually inspired by this goal.  Since I've been through all of the steps and decided that it is realistic and attainable for me, I  think I'll go for it.  It's even more inspiring since I know that I'm already on my way.  The vehicle for achieving the goal is already in place, so why not?  I'm inspired.

The last part of the SMARTIE is Emotional.  What is this and why is it important?  Attributing emotion to your goal is about getting up front and personal with it.  Have a think about the benefits that achieving your goal can provide for you.  What's so good about having a million dollars in net worth?  For starters, it can provide me with an income which means that I don't have to work.  It gives me options for the education of my children and that is really important to me.  Being able to enjoy a holiday without looking at the prices on restaurant menus is a big plus.  Mostly, having this money gives me choices.  I probably don't necessarily need a million to achieve this same outcome but it's a nice round number and a specific figure to aspire to.  Let's get excited.

That covers goal setting.  But it hasn't actually covered the how question.  We've decided what we want, made it specific, measurable, achievable, realistic, time-bound, inspiring and emotional.  What's next?  How do we actually achieve said goal?  We by now you should have enough motivation to start.  So start.  I decided that I want property and shares.  If I didn't have one already, I would look into setting up an online trading account.  I might start researching property investing.  I might go to a bank and ask about investment loans.  You have your goal, start.  Do something, anything that will make that first step towards achieving it.  You don't have to know the complete route to your destination, that will become more obvious as you move towards it.  Just begin moving in the general direction of where you want to go and you'll find yourself picking up momentum in no time.  Good Luck!

All About Attiude

Managing money isn't hard.  Building wealth isn't difficult. But you have to have the right attitude to do either.  We all start from different places and our experiences and perceptions of the world shape our opinions about money.  The world may teach you that it's hard to earn money and if that is the case, it would be difficult for you to earn money without seeing some struggle involved.  A person who has had experiences which have given them the opposite view may have the same struggles but would not be as focussed on the struggle as much as the money that was coming in.

To really get going with wealth creation, we need to scrutinise the beliefs that we have about money.  If they are negative beliefs, then we need to acknowledge these but let them go.  I have been through the attitude of "I can't afford...." and at that time in my life I had no goals and no dreams.  I wouldn't allow myself to want anything because I couldn't afford to buy it.  Meanwhile I was wasting money on too many small things that, had I had a plan, I could have used to do or buy something great.

I now live by the attitude of "I can have anything I want, however long it takes me to save for it" and I am finding that it is serving me quite well.  I seem to have the exact right amount of money when an opportunity comes up to do something fun or get something I want.  The universe lines up so that when the builder is available, so are the funds.  I decide how much money I want to spend on an item and then the item (which is usually many times more expensive) becomes available at exactly that price.

I have read plenty of books about the law of attraction and I am not 100% convinced yet but I am getting there.  There are too may coincidences.  But even if things don't appear just because we want them, denying yourself the opportunity to want something because you can't afford anything can't really help your situation.  Better to let yourself want something you don't have and then go about planning to get it, even if it takes 10 years of saving.  It gives a sense of purpose and something to look forward to, don't you think?