Rich men of all ages share the secrets that can help you build the wealth you dream of
A W E A LT H PL AN FOR EVERY M AN
BY RICHARD SINE, CASSIE WHITE AND DANIEL WILLIAMS P h o t o g raphy by j amie ch u n g ill u strati o ns by C hantel de S o u sa
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THE BREAKTHROUGH YEARS
THIS DECADE IS ALL ABOUT YOU. DON’T WORRY, WE’LL SWEAT OVER YOUR RETIREMENT SAVINGS, HELP YOU SCRUB AWAY DEBT AND LAY THE GROUNDWORK FOR A LIFETIME OF COMPOUND INTEREST
YOU’RE LIKELY TO BUY YOUR FIRST HOUSE THIS DECADE. IT’S ALSO THE TIME TO PROVE YOURSELF. USE THESE TIPS TO GET AHEAD, EVEN AS YOUR TIME, MONEY AND PATIENCE ARE STRETCHED IN EVERY DIRECTION
LEARN TO SAVE YOURSELF
Develop smart budgeting skills, says Curtis Chambers, of the Chambers Financial Group. Sign up with an online service like mint.com that tracks your spending and net worth. Use these figures to prioritise.
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Stay Ahead of the Game
THE EXPLORATORY YEARS
ARON D’SOUZA
29, EXECUTIVE CHAIRMAN, GOOD SUPER
1
2
$1m
Pay off your credit cards and set up a financial panic room Live like a monk to pay off your credit card debt as quickly as possible. Then build an emergency fund with six months of living expenses, so you’ll never get caught in a debt trap again. Chip away at your HECS debt, save for a house and open a superannuation fund Take on some long-term goals. Prioritise credit card and loan debt over HECS because of their higher interest rates. For that deposit,
open a first home saver account. The Government will make a 17 per cent contribution on the first $6000 you deposit each year. And make sure you have a decent superannuation account. Employers must make a contribution of at least 9.25 per cent but, if you earn more than $37,000, consider boosting it by salary sacrificing, which sees your employer redirect a portion of your before-tax salary into your super. You’ll benefit from a 15 per cent tax rate on the contributions and more super (find out more at moneysmart.gov.au).
Growth of a SUPER fund with STANDARD contributions from age 25 vs 35
$900k $800k
SHARE WISDOM Many entrepreneurs I know closely guard their ideas. I believe in sharing my ideas with anyone who cares to listen. Through discussion, ideas are improved and collaborators discovered. Many entrepreneurs are concerned that their “one great idea” will be stolen. Resist this. BUILD NETWORKS As much as we’d like to believe that modern Australia is a merit-based society, it’s still true that who you know is arguably more important than what you know. Building networks of peers and mentors has been a key driver of my success. In particular, I’ve found that political and business leaders have plenty of spare time after retiring from office. This older generation is often willing to share its knowledge, experience and insights – particularly with a whippersnapper! GET TECHNICAL Every great company of the 21st century will be a technology company and will be driven by young people with technical skills. The large, bureaucratic organisations that dominate Australian business aren’t agile enough to innovate and will face disruption from these new, tech-driven innovators. To profit from this transition, you’ll need to understand technology, particularly computer programming. Don’t think that you can just hire some nerds. You can’t effectively lead any company today without understanding how to build tech systems. THINK MACRO Political institutions, social structures and economic systems are in a state of flux. The best businesses not only anticipate macro change, but profit from it. Studying for an MBA will prepare you to become a middle manager. Studying philosophy or political economy prepares you to understand systemic change. Add a bit of commercial acumen and you can profit from social and political events that your competition can’t even understand.
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$700k $600k $500k
HOUSE MONEY
Fixed rates for five-year mortgages among major lenders can vary by as much as one per cent. Shop around: try banks, credit unions, even online lenders.
$59,400 Amount you’d save over 30 years on a $250,000 mortgage if the interest rate was six per cent instead of seven per cent.
Build Your Brand Want to boost your earning potential? Develop your personal brand. It describes the qualities that differentiate you and that you can deliver on. Find it at the intersection of your passions, values and job strengths. Then write a creed that hits those three areas for your résumé and LinkedIn profile. – William Arruda, founder of Reach
$400k
SEED SERIOUS GROWTH
Your finances are on track and you have some dough left over to invest. “Consider exchange-traded funds,” says Yianni Tsimopoulos, managing director of Nationwide Wealth Advisers. Think of an exchange-traded fund as your typical managed fund, except it trades just like a share on the ASX. “They tend to be lowfee and more tax-efficient than similar funds,” says Tsimopoulos. “They also offer greater diversification than individual shares, though some ETFs contain higher risks than others.” Tsimopoulos created this growth-risk portfolio for MH guys, typically designed for investments of seven years or longer. A traditional growth portfolio would consist of a 30 per cent allocation towards income-asset classes (assets that aim to produce a regular income) and a 70 per cent allocation towards growth-asset classes (assets that aim to produce capital growth above inflation).
DIvvy up your investments* 3 1 . 0 % R usse l l A ustra l ian V a l ue ETF (RVL) O ne Y ear R eturn 12.20%
3 0 . 0 % V anguard A ustra l ian Fixed I nterest I ndex E T F ( VA F ) O ne Y ear R eturn 2.93%
8.0% V anguard A ustra l ian P roperty S ecurities I ndex E T F ( V A P ) O ne Y ear R eturn 3 . 6 8 %
*Please note that you should seek financial advice before investing, as these strategies do not take into account your personal circumstances or objectives.
1 4 . 9 % i S hares R usse l l 2000 ETF (IRU) O ne Y ear R eturn 5 0 . 4 9 %
1 6 . 1 % V anguard A l l W or l d ex - U S S hares I ndex E T F ( V E u ) O ne Y ear R eturn 2 8 . 6 3 %
Do your homework Sites like infochoice.com.au and canstar.com.au let you search and compare loans, savings accounts, insurance policies and credit card rates, and categorise the terms, risks and expected rates of return on your investments.
$300k $200k
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Make a Killing
$100k age
25
70
35
NUPTIAL BLING
Goal-based saving tends to be successful. Start a wedding account and set up direct deposits to it
$4598 31 $48,296 Average cost of an engagement ring, according to Bride to Be magazine.
Average age of a first-time groom in Australia, reports the ABS.
Total amount spent on an average couple’s wedding, according to Bride to be.
BE A BETTER LISTENER Your career success will depend on how well you read your bosses. Confirm that you’re all on the same wavelength by asking, “You want me to do x, y and z, right?” Pay attention to tone (anger, satisfaction); if something is left unsaid, ask why. – Dr David A. Garvin, professor of business administration at Harvard University
(But Don’t Kill Yourself )
will dean
3 3 , f ounder o f tough mudder
PROVE YOU CAN HANDLE RISK I ask this question in job interviews: how many computers are there in Manhattan? I want to see evidence of the ability to form a hypothesis and defend it. We’re a four-year-old, $70 million company, and we often have to make decisions based on incomplete data – I did the same thing analysing information on terrorists when I worked for the British Government. So you’re making an informed guess, but you’ve considered all the options. Being comfortable managing that kind of risk is an essential skill. KNOW YOUR AUDIENCE One thing I learned at Harvard Business School is the power of marketing. It’s practical problem solving. It doesn’t matter how good your business idea is: 99 per cent of success is execution, 99 per cent of execution is good marketing, and 99 per cent of marketing is empathy. You have to know your audience. HIRE ONLY PEOPLE YOU’D GO OUT TO DINNER WITH That’s my rule: if you’re building a company, you need to like, trust and respect the people you hire. Otherwise it’s no fun and you won’t succeed. But that doesn’t mean you should always be a team player. Sometimes it pays to challenge the norm and go against the flow. HANDLE TOUGH QUESTIONS One of the tiebreaker questions I ask potential employees: tell me about a genuine setback that you’ve overcome. The first couple of answers are often scripted, like, “I’m a perfectionist”, so I cut them off and repeat the question. If you push someone, you will gain an insight into their character.
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First, go to superratings.com.au and see how your super fund stacks up. If it’s underperforming, switch to a better one. Second, talk to a broker or adviser about rebalancing your investments annually, says Robert Brokamp, of the Motley Fool (fool.com). It can reduce your risk and juice long-run returns.
Are you on track? 40
2x
45
3x
50
4x
55
5x
60
6x
65
7x
67
age
8x
retirement savings as a multiple of YOUR salary
THE HARVEST YEARS
TALK ABOUT A FINANCIAL HURT LOCKER: HOUSEHOLDS LOST 10 PER CENT OF THEIR MEDIAN NET WORTH FROM 2005 TO EARLY 2009, ACCORDING TO THE RBA. USE THESE STRATEGIES TO BOUNCE BACK
C O N G R A T ulation S : Y O U R E A R L Y F I F T I E S WILL PROBABLY BE YOUR PEAK EARNING YEARS. YOU’RE ALSO MORE LIKELY TO SELL A HOUSE. YOU’RE ON TOP OF YOUR GAME AND IT’S TIME TO RIDE YOUR SECOND WIND
POWER UP YOUR BOSS SKILLS
GUARANTEE A GREAT RETURN
If your credit card balance is consistently zero and your car is paid off, then consider paying down your mortgage. Your interest savings can be huge. One way to do this is by refinancing a fixed-rate mortgage to one with a lower rate, says Keith Gumbinger, of hsh.com. This approach is especially popular among people in their fifties who want to sail into retirement without house payments. Or just make additional payments on your current loan whenever you can afford it.
SHARPEN YOUR SUPERVISING
Too many bosses leave their charges rudderless because they think it’s “empowering” for employees to find their own path. Instead, set up one-on-one meetings at least once a month to provide guidance and talk about formalised goals. Spell out clear expectations and track the employee’s follow-through each time you meet. With good documentation of performance, you can convince higherups to reward your best workers – and eliminate the worst.
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Ride your Defining Traits
– Bruce Tulgan, author of It’s Okay to Be the Boss
I nt e r est R at e
M o nth ly Paym e nt
Annua l Paym e nt
Lif e tim e Tota l Paym e nts
Existing 5-year fixed
6.5%
$2212
$25,544
$766,320
$416K
You’re surrounded by people with darker hair, lower cholesterol and more energy. To adapt, ID a protege and propose “reverse” or “reciprocal” mentoring. This is hot at companies like Dell. It’s an informal way to encourage learning and facilitate crossgenerational relationships in the office.
New refinancing, 5-year fixed
5.5%
$1987
$23,844
$715,320
$365K
New refinancing, 2-year fixed
5%
$1879
$22,548
$676,440
$326K
RALPH GILLES
4 4 , S E N I O R V P O F P R O D U C T D E S I G N AT CHRYSLER AND CEO OF THE SRT BRAND
SHOW PASSION “Give-a-shitness”, gumption, spirit: that’s what I’m looking for in each member of my team in every aspect of the business, from designing to manufacturing to marketing. You have to really care about the car project you are working on. That kind of attitude can help create vision alignment and a value system that’s self-reinforcing and leads to obscene collaboration. DON’T BITE YOUR TONGUE One of my faults early in my career was not being vocal enough. I didn’t think I’d earned enough stripes. Now if I see or sense that anyone is holding something back, I tell them to speak up. That said, I’ve also learned to take a deep breath and count to 10 before I open my mouth. What comes out will always be smarter. SEEK CRITIQUES I mentor eight people, none of whom work directly for me, and I encourage all our staff to meet with people who don’t move in their normal orbits. Leaders love criticising and talking shop, and you will be surprised who will meet with you if you ask. This kind of skip-level meeting can help you figure out what you stand for, what your strengths are and ultimately what your brand is. For me, it’s team building. KNOW WHEN TO GET INVOLVED Micromanaging is dangerous. I’m involved at the start of a project to make sure the team is heading in the right direction. Then I rappel out and trust the members to execute. But I still like to buzz the studio. I drop down at night sometimes when no-one’s around and look at the clay designs. I’ve been known to leave suggestions on Post-its – signed, of course!
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gumption, spirit: that’s what i’m looking for
THE INFORMATION HERE IS INTEDNED ONLY AS A GENERAL GUIDE. As such, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs
– Lisa Quast, career consultant
Build Your Success Squad
50, CO-OWNER OF MAMBO
Lif e tim e I nt e r est Paym e nts
Mortgage Type
TRY REVERSE MENTORING
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ANGUS KINGSMILL
Own it outright*
*Based on 30-year, $350,000 mortgage
OPTIMISE YOUR SUPERANNUATION
THE CRUCIAL DECADE
BUSINESS IN A BOX
Relaunch your career by taking the reins of someone else’s idea
77% v 33%
SURVIVAL RATE OF FRANCHISED BUSINESSES NON-FRANCHISED VERSUS SMALL BUSINESSES
Return on independence Franchises are great for guys who have some money saved and want to work for themselves but aren’t willing to risk their livelihood on some basement invention, says Phil Dyer, of Dyer Financial Advisory. To search for franchises and for more information head to the Franchise Council of Australia website (franchise.org.au).
MAKE WORK FUN Recruiting and nurturing clever, talented people who enhance the culture of the company is critical. The entire team at Mambo enjoys going to work, socialising with one another and working passionately towards a common goal. Conversely, negative employees can be like vampires: they suck the energy and creativity of others. Provide an environment your employees will love. Within our art studio we have a bar, table tennis stadium, games area, art gallery and chill-out room. RESPECT MONEY A lot of businesses fall into the trap of spending loads of money before they’ve made it. Treat the money in your business as if it’s your own. Plan well; be conservative and strict with your budgeting and spending. Try to avoid debt at all costs. Negotiate hard so all parties win. Always stay ahead of your competition and be ready to evolve. TREAD YOUR OWN PATH When Mambo was at its previous peak through the late Eighties and Nineties, there were only 20 or 30 surf- and street-wear brands in the same space. Today, there are more than 500. We try to provide a unique brand, with products at accessible prices that you won’t find anywhere else in different distribution channels, along with humorous marketing. CLING TO YOUR IDENTITY Know your strengths and what your brand is. Mambo’s pillars are surf, art, music, humour, free beer and complimentary tickets. On a few occasions over the past 30 years new management has come in with a view to changing the brand values – even removing the fart from our beloved dog! We’ve returned to the blueprint set out in 1984, and global sales this year will be greater than at any time in the brand’s history. We focus on the art and marketing at the Mambo studio and outsource the rest.
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