Financial Education

We as a society are at a tremendous disadvantage to the few who are financially literate. Why is this in a highly educated society like Australia? (you could name virtual any western country instead of Australia)

We are taught in schools and university's to read, write and arithmetic, we are taught to study hard and get a good job. So we can work for someone else. We are never taught to create wealth and energy for ourselves.

But basic financial literacy isn't that hard, nor is it a highly complex thing (although financial people like to use weird words to describe things, I think to keep the masses in confusion)

So where to start??

I know where not to start, that's in any program or group that charges thousands of dollars for a weekend course in Property, options, foreign exchange, day trading any any other thing they can dream of. Just think if they are truly making the sort of money they claim, why are they wasting there time teaching you, not sun baking on a island somewhere??. Because they make there money from scamming average people out of there money, with get rich scheme's. Do these simple things and make thousands of dollars for little effort they say.

Here is one of my golden rules..

The more people between you and your asset/investment the less money you make!

Most knowledge can be found for free on the internet or my personal favorite your local library, which is a tremendous resource for free. There is very little that any thousand dollar course can teach you about, that is not in your local library. Just search for any subject go get a few books read them over some time, then go get some more. They can even order books in for you from other library's, just ask!! Start with basic books, then work your way up.

The most important things is to take responsibility for yourself!! Understanding the basics in the previous post is vital. If you can't save 10% on 30k a year you don't have the discipline to save 10% on 200k a year. In fact many high income earners are struggling under the weight of there debts and obligations. If you are struggling on 40k a year a 10k pay rise may seem the solution to all your problems, but in 12 months time 95% of people will be in the same struggling position. Which leads to another golden rule of mine...

If you can not make saving money a habit, you will never be rich!!

Make saving 10% of your income a habit that you do every time, this gives you the disciple to achieve many things. Trust me before you know it, you will not even notice the money gone!! Then when you have a reasonable amount of money in savings you can invest it, and save some more. There's nothing like the feeling of security in having income and assets the make money while you sleep.

This is why alot of Lotto winners end up broke? Because they know how to spend money but not make it (without working for it) and the sum total of there investment ideas is to put it in the bank and live off the interest.

Financial education is vital because we all live with money, use it daily, and require it to live. Just learning to manage your own money and personal situation will give you confidence in your own life and free you do do some things that you want to do. Whatever they are.

I personally don't have a much of a desire for wealth in itself, but a I have burning desire for choice in my life! I don't want to work for 45+ years and retire on less than my average wage. I want to have the ability to choose my own destiny. That's what drives me. I want to go to Uni and get a degree in History for no other reason than it interests me, I want to spend lots of time with my kids, I would like to learn to sail and travel the world, I want show my wife Europe and the wonders that the world has to offer. I would like to improve the life of people less fortunate than myself. This is what drives me! This is what motivates me, making money is a by-product.

The fundamentals of a secure future

What do I think are the keys to a financially secure future, they are as old and timeless as money itself and have been written about endless in so many books. But maybe because they are simple and boring most people ignore them and focus on the next best thing or a get rich quick scheme.

Here is what I think is the fundamental basics

1. Save at least 10% of your income (before paying any bills)
2. Live on less than you earn
3. Invest in secure assets that grow over time
4. Reinvest the returns

Thats it in a nut shell, not complicated or sexy or even exciting. The only hard part is number 3, finding good assets to invest in. The rule of thumb I use is will this company still be selling it's products or services in 10 years time or will this property still be a good rental in 10 years. I'll talk more later about finding quality assets.

Over time this method virtually guarantees results because to do this you will become disciplined saver, live within your means, and have assets that independent of you appreciate in value.

There are 2 other parts that I'll write about later, Financial Education and Leverage these are the keys to unlocking future wealth. But without the basics everything else becomes meaningless. You must build a secure foundation before building wealth.

Where do I want to be.....

This is the interesting bit, the future, my plans and ideas. I have two goals one in the short term and one long term.

My mission statement or goal...

1) By early to mid 2010 I shall have paid off my house.

2) By age 40 (2017) I shall have a passive income of $100k.

This is my basic Financial plan

Shares
- 10% savings each week, when it reaches 1k, transfer it into share trading account, and wait for opportunity’s
- Leverage and High growth is primary focus (about 80% of my funds)
- Secure Blue Caps with good yield (about 20%)
- My wife's share portfolio look to buy high yielding good cash flow equities.

Property

- Look to buy a property when I can put about 25% deposit in, and get about neutral cash flow.
- Be selective, look for properties that I can value add to.

Business

- around 35-36 look to purchase / start a business
- May be online business or options/trading business
- Do ample market research and gain knowledge of what I'm doing

Investing Strategy

1. Income
2. Leverage
3. Capital Growth
4. Withdraw original capital and re-invest

Where am I Now....

Currently I have 3 Investment properties (2 apartments & small duplex) currently worth about $700k with mortgages of $520k and weekly rent's of $525. They are collectively losing about $13k a year (negatively geared) . The rents are due to go up soon, to close the gap.

I also have a share portfolio worth about $140k with a margin loan debt of $65k. Due to current share market volitility it's down about 30k from November. My portfolio is made up of 80% high growth companies and 20% income producing companies.

In that portfolio i look to invest primarily in growth companies that have a proven product, service or resource, and are 1-3 years away from massive expansion in there EPS.

I also have a house, my wife and I live in valued at about $700k with a debt of $550k. My goal is to have this paid off in 2-3 years.

My wife is building a small share portfolio as well at the moment it's worth $9.5k with a Margin loan debt of $3k. She is quite conservative. So I'm using the value investing model for her. 80% Income producing companies and 20% growth companies. Only investing in companies with long term secure earnings, that pay out a good percentage of profits in dividends.

Thats where we stand at the moment...

Where have I come from....

At the moment I'm 30 (turning 31 in 4 days!!) I grew up in an average middle class life in Perth, Australia. In one form or another i have been working since I was 10 years old. Odd jobs to part-time work, to full time work.

I bought my 1st Investment property when i was 19 (i went half's in a small 2 bed apartment with my brother). Over the following years i bought and sold some more properties, without actually making much money. I also put some money into the share-market for some hot tips that where a sure thing. Needless to say overtime, they all whittled away to nothing. I also put $10k into a online Currency program (that I now know was a Ponzi program) and lost that in short order.

As you can see I was doing all the classic things for losing money not making money. I thought I was smart for trying all these things!!
Looking back now, I can see I was wandering about in the dark without much of a clue as to what i was doing!

The online Ponzi scheme i got involved with, was the wake-up call I needed to start to think about Investing and money that I needed. Even now the $10k i lost in that scheme, has lead me to make 10 times that. That was the moment I started to see what I was doing. Chasing the next great thing that would solve all my problems for me. I was not taking responsibility for my own actions!!

I was the only person capable of making myself successful. It would have to begin with my own education. Over the next few years I started to learn about finance, property, money. It's a slow process sometimes. I was lucky one of my friends was a mortgage broker and he explained alot about how to get money from banks, what they where looking for, and how to use equity.

I read lots of books on property (this was my only focus in my twenties) started to buy a couple better properties, although they where far from perfect ie now i wouldn't of bought them.

In Perth where i live we had a massive property boom over the last 3 years property prices have pretty much doubled. So this set me up in quite a good spot. At the height of the boom I had 1.6 million in porperty with debt's of 1.3 Million. Quite high LVR (Loan to valuation ratio). I have since sold a couple to pay down debt and to buy our future family house.

I have been told by more than one person I was just lucky to get that sort of boom happen to me.Yes i was lucky to have prices double in such a short time!! But on the other hand was it luck to have positioned myself in investments that had the possibility of booming?? You have to make your own luck!!

Unsuccessful people make excuses and have all sort's of valid reasons why they didn't do something. Successful people just do it.

The Beginning, It all must start somewhere!!

Welcome to my Investing Blog, this blog's purpose is to crystallize my thoughts on Investments, Money and Economics. To force me to write down my plans, execute my investing life according to a plan, to judge over time how well I do and how much i deviate from my plan. To also see how much it evolves over time....

This blog is NOT written for members of the public, however I'm obviously writing in a public sphere so it will be read by people if they stumble across it, and I welcome that. Feel free to make any comments you may have or ask any questions. If you feel this blog has something you think someone else may get benefit from, feel free to link it. At this stage I will not make any attempt to publicize the location of this blog. It is merely for my own benefit, maybe down the track I may change my mind.

I have a passion and a deep interest for Investing, Money, Finance, Economics, Politics, International Relations and History. I am all self taught, i have no formal skills, training or qualifications to make me a expert on anything. I work a normal middle class laboring job on a average wage.

Being "rich" is not my motivating factor I see it more of a challenge, I enjoy forcing myself to learn something new and create wealth with merely my brain, to think outside the square, to put all the little bits of knowledge and snippets of ideas into a coherent plan. To see through what people, companies or governments are saying and try and decipher the truth (well at least elements of it)


So over the following post's (however long it lasts) I shall write down where I wanna go with my life and where i started from and where I currently am. I shall try to be as honest and open about the different investments i make, As long as i don't give any personal information away.