THINK MONEY $ THINK PROPERTY $ THINK WEALTH
Think you can’t get your money working for you...
Think ThinkAgain. again...
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Think you can’t control your money? Think Again. Money stress can be one of the worst type of stresses we can go through. We hear old sayings every day: ‘Money can’t buy happiness.’ ‘Money isn’t everything.’ ‘There are so many things more important than money.’ And while these sayings could be considered true, lack of money can actually cause many, many more problems than having money does. While money isn’t everything, I put it right up there with oxygen, because in today’s world being able to earn enough to live is a necessity.
meet CHris Childs In this Wealthy’n’Wise
Many people get trapped into the consumer debt cycle. This cycle means you borrow to buy something, you end up paying twice as much as it is worth because of interest and by the time you have paid it off you often need to replace it, and therefore have to borrow again. Paying double price for everything means you often can’t save and start to get ahead.
edition property investment expert Chris Childs gives you her professional tips on debt reduction and creating wealth through property. • Fast Debt Reduction Reduce your debt, not your lifestyle. • Goal Mapping Get focused on what you want. • Why Property Learn the strategies, structures and solutions. • 10 properties in 10 years Our how to guide to manage the holding costs.
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Worse still, is credit card debt. The extremely high interest rates mean that you can actually stay in debt for many years paying off silly things that have long since gone into the bin, clothes, toys, holidays etc. You can break the cycle so easily by changing the way you are doing your banking. Learning how to beat the banks at their own game, and utilising strategies to break the cycle is the first step. Budgeting is a bit of a dirty word and most people consider writing down their income and outgoings and working out what is left as a budget… it isn’t; that is just a list. A true budget or as I prefer to call it – a Cash Management System – is when you take this list one step further and with the right tools, record what you are actually spending against what you planned on spending and make decisions on a weekly basis on what is still available for the month. That is true control. Once you have control of your spending, you will find you have more money. The more organised you are – again the more money you will seem to have. There are many many options and tricks to reducing debt – I have written an easy to read debt reduction magazine that gives you an insight on how to gain control of your money and your life. Call us today to make a time to discuss your current situation, and pick up one of our magazines. You can also download it as an ebook on our website.
Look forward to seeing you soon, Chris Childs
THINK MONEY $ THINK PROPERTY $ THINK WEALTH
Chris continues to cover each of the 7 things about money over the next editions of Wealthy ‘N’ Wise.
WHERE TO GO FOR ADVICE Most people go to a bank for advice on the right bank accounts and loans to have. A bit of a laugh really when you consider their profit margins. It’s like asking the mouse where to put the cheese! I wish I had been taught to ask someone who has money the best way of handling it.
CREDIT CARDS ARE JUST LIKE GUNS A loaded gun in a playground is dangerous, but treated correctly it isn’t. Credit cards are the same. Most of us just use them to help the banks, but you can turn the tables and use the banks’ money for free and use your money to reduce your interest. This secret could have saved me thousands!
THE MORE ORGANISED YOU ARE THE MORE MONEY YOU HAVE It is a fact that if you get organised with your money, you have more of it. Bills get paid on time, you don’t waste precious money on fines, fees and overdue payments, and you make your money work for you instead of against you. A cash management program accelerates your debt reduction and wealth creation.
YOU CAN MAKE COMPOUND INTEREST WORK FOR YOU OR AGAINST YOU Saving to buy something instead of borrowing can halve the price you pay for most items. This sounds boring to us in this ‘have it now’ world, however, compound interest working for you instead of for the loan company saves you thousands. I wish someone had told me that ‘interest free’ isn’t free at all. The interest has been tacked onto the price – ask for the ‘cash’ price and see.
DEBT CONSOLIDATION CAN BE YOUR BEST FRIEND OR YOUR WORST ENEMY Consolidating credit card and consumer debt onto your home loan can reduce your repayments each month and lower the amount of interest you pay. I wish I had been told to use this extra money to then reduce the home loan much faster, and not fall into the same trap again and again – burning up precious equity that could have been used for investing.
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THE POWER OF SEPARATING YOUR LIFE FROM YOUR INVESTMENTS One and a half million people in Australia invest in property, only 0.5 per cent get to five properties or more. Why? They don’t keep their personal and investment money separate. I wish I had learned the key to successful investing and stress-free living was to keep these sides quite separate from each other.
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NOT TO ASSUME A HOME LOAN IS A LONGTERM DEBT I wish I had been taught that a home loan doesn’t have to be a stone around my neck for 25 years, or best case, if I paid weekly or fortnightly, 17 years. What most people don’t know is that handled correctly a mortgage should be paid off in five to seven years just by doing your banking differently.
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It is as simple as getting organised...
...the more organised you are, the more money you will have!
The steps to creating a successful finance platform in more detail... STEP 1 – ANALYSE YOUR STARTING POSITION Getting your personal money organised is a vital part of getting started. It is like spring cleaning your money house. Knowing what money comes in and goes out and ensuring that there is actually a surplus is a good way to start. Obviously if your expenses exceed your income the future of any plan would be very bleak. It is amazing just how many people use the ‘head in the sand’ mentality to avoid finding out if that is the case. This is the source of spiralling credit card debt that can only end up in disaster. Filling in a budget is the first step, but the secret of a healthy financial life is to actually use a cash management system. Most people think a budget is a list of income vs outgoings, however, this is just a list. A true budget or
cash management system requires the constant tracking of spending against income to ensure the budget is staying on track. STEP 2 – Review your current Loan structure There are so many different banking options available it is hard to know where to start. Most people get their advice from a bank – what sort of accounts to open, what sort of loans to have. A bit of a laugh really, with most of the profits the banks make coming from their smallest account holders it’s
like asking the mouse where to keep the cheese. Getting independent advice on what would work best for you rather than the banks is an important part of setting up your finance platform successfully. Working out how to reduce your debt fast, finding out about the up and down sides of debt consolidation and creating a perfect system of using credit cards to benefit you and not the bank are just a few things a wealth coach can advise on to accelerate your debt reduction and get you on the road to investing. STEP 3 – Separating your personal and investing lives Creating a self-funding property portfolio. The most important step of wealth creation is to set up your investment finances totally separately from your personal side. Yet strangely enough, it is rare to see this happening. The reason most property investors fail is the financial pressure that occurs when the rental property expenses and income flow
THINK MONEY $ THINK PROPERTY $ THINK WEALTH
in and out of their personal accounts. When the rent comes in it is often tempting to use it for personal bills and expenses, leaving a huge financial pressure when the mortgage payment is due. This constant in-flow and out-flow brings the property to the forefront of any financial decisions, such as holidays or personal purchases. Worse still, should there be a problem, such as a tenant kicking a door in or leaving without paying rent, the financial burden of the investment weighs heavily on the personal lifestyle of the investor. This can be totally overcome by having an investment pot or buffer fund in place to allow breathing space during these times of crisis, and to also ensure the income is only offsetting the true investment expenses. STEP 4 – Getting your money working for you Let’s cut out the middle man, your bank account that earns you nothing but costs you to have it is like the middle man in a transaction. Banking your money straight into your home loan is like going straight to the wholesaler – saving you a fortune! Your line of credit is just like a bank account. You can bank money in, set up direct debits (but first check if the direct debit can be on the credit card for no extra cost), and you can use an Eftpos card to withdraw cash. All the while your cash is sitting on your loan, reducing the principal and you are paying much less interest. All of your normal spending is being done on your credit card, and you are paying no interest at all on the card. The credit card can be paid out in full on the due date from the line of credit. This can also be set up automatically so you don’t forget!
STEP 5 – The Power of Equity Equity in your own home is the quickest and easiest way to get started. Many people have a fear of using their property as leverage to purchase an investment property as they fear risking their own home. The risk can be minimised by having a clear plan and exit strategy. As the investment property increases in value, the bank would no longer require your home to form part of the security and the investment would be able to stand alone. However, for those people wanting to accumulate a bigger portfolio much more quickly, using existing equity allows for the building of a property portfolio faster. As the number of properties grow, so does the amount of equity as you are gaining equity on multiple properties. It is a simple matter of getting the right advice or doing extensive research yourself to purchase properties in the right area at the right time to maximise the growth. Buying the wrong property or buying in the wrong area can just as quickly stop you in your tracks. In any property cycle, you usually have two or three years of high growth, then can have five or six years when the market can be flat, and one or two years of negative growth. Timing the market is vital for gaining growth and therefore the ability to use that growth to buy again. STEP 6 – Diversification, Risk and SMSF Diversification: For the exact reasons regarding timing the market, another vital part of the puzzle is diversification. If, for example, you buy all of your properties in your own back yard, you will eventually go into a flat market. One of the biggest secrets of building a portfolio is to diversify not only the areas you
buy in, but also the type of investments. Demographics, yield variations and supply and demand should form part of the complex decision making when choosing where and what to invest in. Risk Management: Another important part of the plan is to cover your ‘bottom line’. Having the right insurances is vital to success. Not only do you need to make sure the physical things in your life are insured, you also need to ensure you have adequate life, trauma and income protection in place. This protects you, your family and your future retirement security should anything untoward happen. SMSF: Self-managed super funds are becoming quite popular as part of the bigger picture in property investing. Taking control of your super can be an exciting way of breaking into the investment property market when you have limited equity or resources in your personal life. There are obviously many things to consider before going down this path, however, a review of your current situation with a financial planner would certainly be a place to start.
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what our clients have to say Anthony and Alison Farquharson For Anthony and Alison Farquharson, just trying to reduce debt, pay off a mortgage and cut down on credit card repayments was proving to be one of life’s biggest stresses. It wasn’t until Anthony met a friend for coffee and learned about Think Money, and made an appointment to meet Chris Childs that their lives started to take a positive turn. Anthony says Chris made debt reduction sound easy and explained how they could get back on top, even though it seemed impossible at first.
“There was guile to her speech, we believed everything Chris had to say and we put trust in her team,” Anthony said. “She opened our eyes to what is possible, how to refinance our mortgage and use our super wisely, and now we have two investment properties.” Anthony said life for him and his wife has never looked so promising “I am looking forward to the next 10 years and what we are able to achieve.”
“It is a good feeling when there is a whole team of people who genuinely want you to succeed” David and Ann Dale The dream to be mortgage free, financially stable and settled in for an early retirement seemed like a lot to ask when David and Ann Dale approached Chris Childs at Think Money. Between the Wurtulla couple, David a carpenter and Ann a school teacher, they have two mortgages and although say they were “getting by”, they wanted to eliminate the pressure of debts. “Anna saw an ad in Profile Magazine and, like most people our age, just wanted to see how we could sort out our finances,” David says.
Although David admits he was skeptical, after being burnt by financial advisors in the past, he said Anne, who had attended Think Money’s Wealthy and Wise event, was confident Think Money could work for them. “I was so impressed with Chris’ approach to our finances and her calm and approachable way of setting us on the right track. It is a good feeling when there is a whole team of people who genuinely want you to succeed, you could say that walking through their office is like a breath of fresh air.”
Video testimonials are available online at thinkmoney.com.au
INVESTMENT REALTY
Jack Childs
5
ways to maximise your property portfolio
april APRIL events
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Property Wealth Workshop | Property Showcase 6:45pm for a 7pm Start, 55 Sugar Rd Maroochydore
Wednesday 02 April
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Tuesday 08 April
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Saturday 12 April
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find out more on our website or call us on 07 5430 4777 | www.thinkmoney.com.au