Get rich quick schemes abound. They sound great don’t they?

I invested $10,000 in XYZ company and now they’re worth $2 million!!!

They trigger our greed glands and even better, we don’t have to work for it. Think about the latest billion dollar US Powerball Jackpot that saw record numbers of people shell out their hard earned money for a hope and a dream.

Unfortunately for the vast majority, the reality of making money can be a lot slower than we would like it to be. How many millionaires do you know who made their fortunes instantly? Maybe the odd one or two whose savvy investor parents left them with a substantial inheritance, but not many. Popularised in the media, we hear of a few great business people who ‘made it’ on a stroke of luck. We seldom hear of the years of study, research and work well into the wee hours that occurred behind the scenes.

Everyone needs to start somewhere. A house is built one brick at a time. A child learns to read by first learning the alphabet. A person seeking to lose weight does so kilo by kilo. Why would the road to wealth be any different?

That may be a downer for some to read, but an alternate view is that a house is a prized possession because it takes such a long time to build. Reading is celebrated because it is an incredible skill that takes a young child years to develop. A person who is overweight astounds everyone by shedding kilos and reaching their goal weight through hard effort and dedication. Working towards your wealth creation is no different and it is something to be celebrated every step of the way.

This post is about creating a habit that will dramatically reshape your financial future.
I would like to suggest one little, tiny change that you could make to your everyday circumstances that would have a huge long term effect on where you are in the future.

Allocate 5% of your income per week towards your retirement fund.

I can hear some already saying that there is no way they could possibly contribute 5%. Others might be saying that it is not enough.

In Australia, the average income for 2015 was $1,545.60 per week or $80,371.20 per annum.
Let’s take a look at what 5% would look like over the course of a working lifetime.

I’m sticking with the average wage as a basis, but it would be fair to assume that it would be less when you commence your career and slightly more as you gain seniority in your profession. 5% equates to $4,018.56 per year or just $77.28 per week.
If you saved $4,018.56 per year from the age of 20 until the age of 65 you would have $180,835.20. This is a good start to have towards your retirement, but would you just keep that amount of money in an account bearing no interest? Unlikely. Most of us have some form of superannuation or a 401K retirement fund encouraged by our government and our work places. These tend to be invested in global markets, local markets and in cash.

In fact the Australian share market has returned 10.8% on average over the past 30 years. The beauty of this is that by leaving your money in that account, making regular contributions, receiving positive (and occasionally negative) returns that compound over time, this money drastically grows from your deposited amount.
I’ve written about this previously in a previous post but compound interest really is, as Albert Einstein said, the eighth wonder of the world. It is a way to grow wealth slowly and it should be in everyone’s plan for wealth generation. Those $77 you deposit, directly from your paycheck into your retirement fund, compound and compound and compound over time. Incredibly, at retirement age you are left with a whopping $4,125,880!

Use ASICs Money Calculator tool to try it out for yourself.


I’ve included a screenshot to show you what happens over time. Notice how your investment really begins to pick up momentum in the final years. Bear in mind, however, that the final figure does not take into account management fees, taxation or inflation.

$77 dollars per week may seem unattainable for some but consider getting all your insurance and utilities requoted, maybe only eat out once this month or perhaps give Aldi or Costco a go? A suggestion would be to not focus on that $77 as a punitive measure, but to focus on the cool $4.1 mill that is gained at the conclusion of your working career. Think of how much better you’ll sleep each night knowing that you are financially secure.

I know we all have a tendency to gravitate towards a get rich quick scheme but there is something truly beautiful about having worked and saved for your financial future. The marathon is the most well regarded of all endurance races for a reason. Start today and save towards your financial future.

Source: Australian Bureau of Statistics (2015). Average Weekly Earnings. Retrieved January 18, 2016 from http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0/
Source: Fidelity Worldwide Investment (2015). 30 Years in Australian and Global Shares. Retrieved September 18, 2015, from http://www.fidelity.com.au/fidelityP2/?LinkServID=B91D14A6-B125-E8DC-BB83AAD60C35BC5A
Australian Securities and Investment Commission (2015). Compound Interest Calculator. Retrieved September 18, 2015, from https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator

Hayley and I have one month till the birth of our beautiful baby girl and I have recently resigned from one of my work places, thereby kissing farewell to 2 days salary. The craziness continues.
In the past 6 months we have purchased an investment property of around $400,000 and placed an additional $140,000 in a managed investment. We have almost paid off our home but used the equity in our home to finance the loans.
The rental property we purchased came with a delightful tenant (since evicted) who enjoyed avoiding rent payments, boxing holes in doors and taking various illegal substances. In the past month and budgeting ahead into next month, the property has required around $11,000 in repairs and upkeep to make it tenable again.
It gets better, the 3 days of employment that I do have is as a teacher, which is not renowned as being one of the highest earning jobs.
Why in God’s great earth did we decide as a family to drop down to 3 days a week? I’ll give you a few reasons:
1. To spend more family time together. I’d rather live frugally and have time with my kids during these formative years.
2. It gives me a chance to put my money where my mouth is and see if I can save and invest successfully enough to subsist, or better yet, thrive!
3. We have saved and saved for years and know we can do it! Years of budgets proves it even if the knees are a little wobbly.
I realise this might seem silly to some. As I said, we have saved for years though and would have a debt to equity ratio of approximately 1.5.
I have elected to reinvest the returns from the managed fund which is nearly $11,000 in net profits since the beginning of the year.
My wife also earn $8,000 as an editor and we have no personal loans, credit card debt or car loans.
In addition to this we are paying principal and interest off of our remaining home loan and envisage paying off an additional $10,000. We’ll see in a year’s time if this is achievable.
I do have a fall back, I can get contract work as an emergency teacher if the situation becomes dire.
Please if you are going to comment I’d appreciate keeping it positive and I’d love hear any well wishes. I’ll certainly be reading SavingAdvice.com a lot more carefully.

What Is Your Net Worth?


Money in, money out, a transfer here, automatic debit there. Sometimes we almost need a full time accountant just to keep track on all the comings and the goings of our hard earned dollars. The more accounts and investments you have, the easier it can be for money to float around in the ether. You know you work hard, you haven’t bought a Harley in the past month so you must be getting further ahead right?

Sometimes we can all feel lost in a crowd when it comes to our finances. It is no good guessing that you are on track. One thing I can wholeheartedly encourage everyone to do, if you haven’t already done so is to KNOW YOUR NET WORTH. It is imperative to your financial growth!

It is very hard to aim at something without having measured increments to gauge your progress. Imagine asking your basketball coach about who won the game and getting a response like “You got some in. They got some in. I think you won?”

There is a fabulous saying: What gets measured, gets managed. You know those charity telethons with those humongous goals to raise $10 million for the hospital upgrade? There is always a scale that denotes the amount donated. Why? Because psychologically we are instantly excited and motivated when we see dollar figures ticking over and momentum being gained.

Your savings journey is no different. Know as accurately as possible your net worth. Write it down, monitor it and manage your financial growth. If you drop behind in a month, note down why and take steps to mitigate any future losses.

The calculation of net worth is super simple:
Assets minus Liabilities (Money owing and taxes) = Net Worth

Calculate the values of your assets as a best estimate. Personally, I don’t tend to calculate motor vehicles as they sink like a stone in value over the years (unless it is a historical vehicle).
The way to work out the value of your home and investments is to spend 30 minutes scanning sold properties on the internet. Compare apples with apples. Stocks are easily by checking on the internet too.

You may even find it helpful to calculate 3 prices:
- An ‘I wish’ price
- A ‘Sounds About Right’ price, and a
- ‘No Way’ price.

From that point I would always choose the middle price. The process above might look unnecessary as you could just start with a ‘Sounds Right’ price. The challenge is that we aren’t always quite so objective when it comes to the appraisal of our beloved family home.

Now that you have a plausible valuation, take away any loans and debts. To be even more accurate I like to calculate the tax owing on any potential profits made.

The next step is to write your net worth down on a piece of paper that you won’t lose, a document or a spreadsheet. I use a spreadsheet because I calculate my debts again at end of each month with a fine tooth comb.

Watch your net worth carefully and celebrate each saving milestone that you make. Maybe you can plan a little celebration with your family each time you save an additional thousand. Associate pleasure with saving and you will be guaranteed to form good habits for your financial future.

Have you ever heard about the amazing Chinese bamboo tree? If not, keep reading. There’s a lot we can learn from this plant in relation to budgeting and investing.

The Chinese bamboo tree is impressive! Over 90 feet of towering greenery above you. But do you know what it takes to make it grow?

In your first year of growing a Chinese bamboo tree you plant it, lovingly water it, fertilise it, carefully remove the weeds surrounding it, and… nothing happens. Year two the same process and… again, not so much as a tiny bit of green bursting through the ground. Year three and four is frustratingly more of the same. At this point, most would think something had gone wrong and would probably be tempted to plant something else in its place.

But in year five something incredible happens. Green life begins to burst through the soil. Not gradually either, but at an astonishing rate, 90 feet in just five weeks! Isn’t that amazing? You could practically pull out a deck chair and witness a transformation before your eyes.

5 financial lessons from the Chinese bamboo tree:

#1- Plant a Chinese bamboo tree. This is sometimes easier said than done but you need to ‘plant a tree’ (or invest) in something that will produce great growth. It might be a savings goal, prospective business, property or other form of investment. Write a plan about what your 90 foot tree will look like, plan what it needs to help it grow and what daily contributions you need to make to ensure its success.

#2- Consistency is the key. Set a goal and pursue it relentlessly. Keep ‘watering’ by saving and investing with that goal at the forefront of your mind. Before you go to bed each night plan one step that you will take to get you closer to achieving that goal.

#3- Have faith that your ‘tree’ will grow. You might be saving, saving, saving while your friends are borrowing and buying, living the high life. Don’t get frustrated! Bad debt is just that. Save and invest towards good assets that will earn income for you. The goal is not to pull the seed out of the ground now, but rather to allow it to grow. If you are doubtful that your investment/savings ‘tree’ will grow, seek the counsel of financial advisor of some sort. You should feel confident in the seed you’ve planted.

#4- Plant other trees. One tree is great but you could help others more in the world by having other trees planted. Once you know how to plant one, plant another or teach someone else.

#5- Enjoy the planting process. Savings and investment is not meant to be like sucking on a lemon most of your life so you can eat cake in your final years. What kind of a life is that? Enjoy the process along the way. When you save more than you spend, you feel liberated. When you invest in something that grows while you sleep, you feel empowered. And when you can help others along the way, you feel purposeful, proud and free!