A new Resolution – Living Awesome

Since the start of this year I’ve been writing about money. Not for the sake of money alone, but because I would like to live a life of freedom. Not being a slave of a mortgage or a loan. Making my own choices.

I knew I had to learn a lot about money and that’s why I started this blog. It motivated me to read and learn more about money and it also encouraged me to stick to my goals.

After a couple of months I became less inclined to write about money. Yes, I still believe that being financially independent will increase my happiness and my personal freedom. I’m still sticking to my saving goals, and I’m working on improving my career opportunities. But money can’t be the only goal.

What I really want is an AWESOME life!

My money goals are putting a lot of pressure on me and it has taken things out of perspective. My career, my day to day work, and my savings account are becoming too important. This pressure starts to have an influence on the people around me, on how I enjoy my spare time and most of all it has an influence on my sleep.

Money is only one part of the equation. An awesome life is about happiness, challenging yourself, joy and fulfillment, being authentic, respect for others, personal freedom, feeling connected and a good sense of humor.

From now on this blog will focus on living an AWSOME life.

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Boost your career and walk your talk

It is time again for job talk. I’m currently going really well, but my job ends at the end of this year. It’s a demanding role, I get great feedback and I really love it. As I have to move on, I wouldn’t mind making a promotion. A higher income will help me to achieve my goal of becoming financially independent within ten years.

All the positive feedback in my current role has made me a little complacent. I haven’t focused much on how I can improve my performance.  I received quite an unfortunate wake up call recently. I applied for two jobs without getting an invitation for an interview. In February I wrote a post on “How to coach yourself into a better job”. Maybe I needed some of my own advice? The first step in my post was to list what needs work. The question is, if everything seems to go well, how do you know what to improve?

With this in mind I stumbled upon Richard Templar’s book “The Rules of Work”. Ten clear rules, broken down in 10 steps. Reading through it I could suddenly see so many aspects of my performance that can be improved!

rules of work

The Rules are simple, make sense and will boost confidence. The book pays attention to personal standards and elevating your individual principles. It motivates to improve the way you do your work, but equally important, how others perceive you to be doing it. Other people’s perception is what is now important for me to get an interview and make the next step. Not just the perception of colleagues in my unit, but the perception of the executives in the organisation.

So let’s start with he first rule: Walk your Talk. Templar calls this the underlying rule that governs all the others – know your job well, do it well and be better than anyone else at doing it. And most important: get your work noticed.

Another good advice is to never let anyone know how hard you work. How often do I hear myself say to other people how busy I am. When I think about it, I don’t perceive others who do this as the most competent. So, by acting in this way, I probably don’t get perceived as professional as I’d like either. Templar also focuses on commitment to your role and on enjoying it.

A big obstacle for me is that before I can ‘walk the talk’, I have to work on’ talk the talk’. With English being my second language, I tend to communicate in an informal way. I need to improve my language skills and improve my formal and business communications.

It seems that this book has helped me to identify a variety of objectives to work on over the next couple of weeks! Walk your talk is only one of the ten rules. Altogether, the ten rules offer quite a holistic approach on how to improve yourself at work. I’m going to focus on them one by one.

Payoff mortgage early or invest?

Since the start of my money quest I’ve mainly focused on paying off our mortgage. In the past three months we brought down our loan  with $12,654 and this makes me extremely happy. This really brings me closer to my goal of financial independence.

As a non-permanent resident in Australia, it has been a bit of a hassle to open an investment account. This saved me the dilemma of deciding whether it’s better to pay off the mortgage early or build up an investment portfolio. I am now in a situation where I can start investing, so time to give both options some thought.

Advantages of paying of the mortgage early:

Freedom
The most important reason for me rushing to pay off the mortgage is to be free to travel, to work less, and do whatever I like without having the obligation of monthly payments.

Peace of mind
If one of us won’t be able to work for whatever reason, we can still maintain our normal way of living. It will be a great feeling to 100% own our home and always have a roof over our head, no matter what will happen.

Risk free investment
Paying of the mortgage has a garanteed return of, in my case, 5 percent. No exposure to the volatilities of the sharemarket. By paying off fast, I will save paying $300,000 on interest. Not a bad return.

Simple investment
I won’t need to spend much time on researching investment options or build up specific knowledge, all I need is the discipline to make extra payments into the mortgage.

Liquidity
Because I have an offset account attached to my mortgage I still have all the necessary liquidity. I can access a large sum, that offsets the interest of my mortgage when I don’t need the cash.

No tax advantage
It’s important to know that Australia has no tax deduction on interest payments, unless it’s for an investment property. So there is no tax advantage in having a mortgage. With investments tax has to be paid over capital gains, which brings down the return on investment.

 

Disadvantages:

Higher returns on the share market
II might be giving up on investment returns that significantly outpace my mortgage interest rate.

Inflation
My payments are currently a large percentage of my income. With fixed payments, this amount will be worth way less over time, due to inflation. Expensive dollars now, are cheap dollars in twenty years.

 

So, what am I going to do? A bit of both I suppose. I will keep focusing on the mortgage, but will start building a modest investment portfolio on the side. My spouse favours paying off the mortgage, because he worries about the volatility of the share market. I need him on my side to keep our spending low.

The frugal reality

Another week has passed. No lunches from the cafeteria, no lattes, no takeaway pizza on Friday night, no shopping on my day off. It can be quite difficult to keep my urge for a splurge under control. But hurray, I made it another week.
I had a discussion the other day with a colleague who tried to convince me that life is too short to be frugal and should be celebrated instead. I questioned myself if my goal has improved my life or made it worse.
Is it really that bad to plan meals instead of buying a fatty burger, because there are no other options available? I enjoy the nice salads I bring from home. I agree, it was a bit of a pain at the start, but I’m used to it now. I buy convenient ingredients at my weekly shopping trip and during the week I fill my little tub in the morning with lettuce, tomato, some cheese, nuts and whatever I have that week. No, I’m not happy early in the morning making a salad, but I’m more than happy when it’s lunchtime.
I bought a nice cup and fill it before I leave with coffee for the trip, instead of stopping at MacCafe. Saves not only money, I’m also in time for work now.
My step daughter absolutely loves helping me making pizza on a Friday night. She hasn’t complained once that she is not getting a takeaway pizza. Honestly, homemade pizza is nicer. Yes, I’m exhausted on Friday, but having some quality time is not a bad thing. It gives me new energy too.
When I see nice clothes I wait until sales are on. Not everything is still there, but surprisingly much is. No instant gratification anymore, but I still get what I want.
I keep my spending urge under control by focusing on my goal. I fill my previous spending time with learning as much as I can about money. I do online courses about investing. I’m doing a finance course at work. And I’m writing this blog. It all helps to redirect my thoughts from the shop windows to my goals.
No, my life has not gone worse. There is more mindfulness and also more peace of mind. A few months ago my husband suddenly ended up in hospital and this has set us back thousands of dollars, but we could afford it. We worried about his health, not about money. Our emergency fund was standby.
Thoughtless spending doesn’t make anyone happy. Being super frugal is not the answer either. Being aware of spending and being more mindful brings balance and peace to my life and a million in my bank account in less than 10 years. I will most certainly travel, party and buy things I like. I’m doing that in moderation now, and I will do that more once I’ve reached my goal. But I won’t splurge on my credit card, worrying sick later about how to pay my debt. I will do this all with the reassuring feeling that I can actually afford having a bliss time.

Where to start with investing

As a starting investor it can be quite overwhelming to learn about all the investment options available and feel comfortable with the choices you make. I am still in the process of reading books, doing online courses on investing and finding out as much as I can.

The more I learn, the more disappointed I am with the options the bank offers me. While looking for investment opportunities, I learned that government bonds are a very safe and a more profitable option for your money than a savings account or term deposit.

At the moment banks will give you at most 2.5% interest on your savings, while inflation is around 3%. Government bonds can give you around 6% interest and your money is always available. Bonds can be traded on the share market and they are regarded the most secure investment option. I don’t feel perfectly comfortable yet to put my money in shares, but buying some bonds is a good and safe start.

Crash course on bonds:

  • Bonds are limited term securities. This means they have an end date, called a maturity date.

  • At the maturity date you receive the face value of your bond, a fixed amount. The face value of a government bond in Australia  is $100.

  • You can also purchase indexed bonds. They increase in value in line with the inflation rate. This way your money will keep its value. The interest rate is lower, but you need to add the inflation rate when you make a comparison to other bonds.

  • When you own bonds, you regularly receive interest. The interest is a fixed percentage of the face value and will be paid one, two or four times a year. The fixed percentage that is paid  per instance is called a coupon.

 

So, how do you know which bonds you should buy?

All information on bonds can be found on the stock exchange website of your country. To compare bonds with each other you look for the yield to maturity. This number is a calculation of the annual percentage that you receive  and the  purchase price.  It assumes you keep the bonds until maturity. Don’t just compare interest rates. They don’t tell you how much money you will really make, as bonds can be purchased for market value. The market value can differ from the face value.

 

Reasons to buy bonds:

  • fixed interest rate that are paid with regular intervals, providing you with income

  • the interest rate is generally higher than the  interest rate on your savings account

  • bonds can be sold anytime, giving you always access to your money (unlike a term deposit)

  • bonds are a very secure investment as you receive your money back at maturity

  • bonds are also great to diversify an investment portfolio


Investors generally advise to invest a percentage of your money in bonds. This percentage should equal your age. The reason is the low risk and the regular income bonds generate. Once you are retired you might be more interested in having a regular income than in increasing your wealth without having access to it. When still young you can take more risks with your money, assuming you don’t need the income and you have more time to recover from a fall in share prices.

Back on track with my financial goals

During the past two weeks I had my parents over from the other side of the globe. I took some time off work and showed them around Australia. This was not the best time to try saving a few dollars on coffee, food and fun. I had saved up from my weekly budget in the weeks before and planned what I could spend during those two weeks.

Luckily I really love cooking and they enjoyed eating at home so much, that we only went out for dinner twice. They were interested in exploring daily life: the school of my son, the local supermarket, meeting our friends. Those activities didn’t strain my budget. We made several day trips and two weekend trips. I booked accommodation well in advance and managed to get good value for money.

Now they are back home, it’s time to make up the financial balance. And hurray, I’m still on track!

Results so far:

  • Since the start of my money quest on the 1st of January, we managed to bring our mortgage down with 8500 dollars by making more than double our mandatory payments. We are ahead of the 8 years payback schedule I had set as my goal, and I’m contemplating to move to a 7 years schedule.
  • I have been reading so much about money, that I feel confident about my strategy of building wealth. I have also developed an investment strategy.
  • I have opened a shares trading account.
  • At work I am focused on my professional performance and I’m looking for opportunities.

Things I can improve:

  • My fitness regime. I am more active since I’ve quit the gym and developed my free workouts , but I should exercise a bit more often. This will help me to stay positive about my goals and to feel energised at work.
  • I still have no idea about a side gig of any sorts  to make some more money.

How to coach yourself into a better job

What better way to make more money, than by a job promotion. I love new challenges, learning different tasks  and working with new people as much as I love the better pay. Being really good at your current job is the first requirement to line yourself up for the jump ahead. 

So, how to coach yourself into a better job:

1. List what needs work

When you attempt to identify areas for improvement, first ask yourself what needs work. Try to think of examples of situations in the workspace that you could have done better. Identify situations that keep going wrong.

2. Ask for feedback

You might have some idea about areas for improvement, but often we are not aware of the things we do well and the things we do wrong. Learning starts with knowing what you need to learn.  So, when you draft your list of what you need to improve, you need to dare to ask for feedback. Other people’s opinion on what you can improve are not an attack, they are little gifts that help you to improve yourself.

3. Be aware of your filters

People can look at the same phenomena, but draw very different conclusions from those events. When you analyse a situation, try to understand where your interpretations come from. Balance your views with different information and new interpretations.

4. Create a plan

Identify the goals you want to achieve and link your performance or behaviour issues to your goals. Give specific examples for the problems you experience in those areas and think of strategies that are going to improve your behaviour or will make things go different. What evidence do you need to prove that things are actually going better? Write your coaching action plan down and remind yourself regularly of your goals.

5. Keep a coaching diary

Keep track of your progress in a coaching diary. Be critical and analyse your performance every day. Write down solutions for further improvement. Be proud of the progress you make.

6. Go out there

Now you are doing an amazing job, it is time people start to notice you. Take on a special project and present your results.Write a report about what is going well and what needs improvement in your current role.  Put some effort in building your network. It won’t take long for decision makers to start noticing you.

4 Ways to make more money

Getting closer towards my financial goals is a mix of making money and saving money.

I save money by bringing homemade lunches to work. I’ve quit the gym and work out at home. I avoid buying coffees by brewing one for the trip to work and I save on take away by planning easy meals for nights I feel worn out. On average I have been saving $100 a week, without really making an effort. It feels normal already. I find it satisfying that I’m not just spending without thinking and I’m enjoying a sense of mindfulness.

To reach my ambitious goal of being financially independent in 10 years, saving alone will not be enough. I need to make more money as well. I’ve been thinking about ways to make money, but I’m keen to hear if you have some ideas too.

1. Selling stuff

The easiest way to make some quick cash is by selling stuff I don’t need anymore. Ebay or a garage sale should give some fast results.  I moved countries two years ago and had to leave most stuff behind. For that reason I don’t have as much clutter as most people. But a good look in the shed or in the back of some cupboards should provide me with some items to sell.

2. Investing

With the profits of my sales and the results of my savings, I can start my investment portfolio. I have been reading a lot about investing recently and I have picked up some valuable information on making a solid long term investment plan. My investments will give me dividends that I can use to expand my portfolio. I am aiming at building a portfolio that will give me a steady income in 10 years.

3. Having a side gig

I’m still building my life in Australia and I’m glad I’ve got a good job. The idea of finding a side gig seems a bit overwhelming right now, but I really want to start thinking about it. I’m not scared of public speaking, wouldn’t mind doing some advising work, or anything else that might come up. Right now I’ve got no idea how to get started on this, but I’m sure that will come. Even a small amount each month will help me to move towards my goal a lot quicker.

4 Getting a promotion

I want to set myself up for a promotion at work. I’m convinced that I’m doing a pretty good job right now and I should be able to move up within a reasonable timeframe. Although it’s hard to predict how any career will develop, there are some things that will support my luck. Building a network, doing courses, finding role models, helping others to achieve their goals, are just a few examples of what I can do. I will explore this subject further soon.

I’ll keep you briefed on my results and I’m keen to hear your suggestions.

Don’t buy property because people tell you it’s a good idea

In my last post I discussed the pros and cons of property investment. Because of the positive feedback and the many new followers I got after posting about this subject, I’ll discuss  this investment topic a bit further.

Ever since I started thinking about investing, I was playing with the idea of buying an investment property. It seems to be a bit of a hype and everyone tells you it’s a great way of investing your money. People around me were buying property and I started to feel I was missing the boat, while everyone else was getting rich.

images

I can assure you, this is not a reason to go into property. Don’t buy anything just because people tell you it is a good idea. The only reason to go into property is if you have calculated evidence that it’s going to make you money. If you’re not able to make those sums, I advise you to put your money somewhere else.

Many people think property will give you a passive income. But are you sure it does? To have a passive income from your property investments, you first of all need to buy the right sort of property. I told you in my last post about positive gearing. Your rental income needs to be higher than your mortgage repayments, management costs, maintenance costs and insurance. In many countries it will be very difficult to find a property that gives you a net weekly benefit. Suppose you found your bargain and the net weekly income from your investment is $200. You should be able to calculate now how many properties you will need to give you enough to live on.

You would also want to know how buying a property is going to affect your liquidity and if it’s worth it putting your cash in.

The table below shows an example of how you can calculate your cash return.

tableYou can find this table in Steve McQueen’s “From 0 to 130 properties in 3.5 years“. A really good book if you want to understand all aspects of building wealth with property investments. It is written on his Australian success story, but the examples and calculations will support you making a decision anywhere in the world.

I recently visited Thailand and the economy is booming. More and more workers receive a salary that is comparable to western salaries, but the houses are cheap. It’s easy to see that prices will boom in the next couple of years. This might be the perfect opportunity to build wealth from property. In Australia these times are well behind us.

Wherever in the world you live, do your sums. Compare your results to the income and profit you can make from investments in shares or indices. Decide how you invest, based on calculations and not on worth of mouth.

Investing in property or not?

There are several ways of investing your money: property, shares, managed funds, indices. This is surely not covering it all, but as a starting investor there is no need to go into more risky or complicated options. In this post I will discuss property investments.

for sale

See what you own

Many people like the idea of buying an investment property. It is tangible, feels less scary than investing in shares of big companies and you can get income out of it as well. Buying an investment property can be quite a challenge. The start up costs are high (deposit, stamp duty, sollicitor), which makes a short term return on investment hard. Some people like to make improvements to the property they buy. This is risky. You have to be sure that putting more money into the property will increase it’s value.  In general a new kitchen or bathroom, or even an extension does not significantly increase the value of the property.

Investment income

If you let your property for more than your mortgage repayments and additional costs, your property is positive geared. The income from renting it out, compensate your monthly costs. When house prices or interest are high, it might be very hard to find a positive geared property. You then have to rely on increasing it’s value in the long term. In the meanwhile you are losing money. When you buy a house like that, it is called a negative geared property. A negative geared property might be beneficial to bring your taxes down, but remember: paying a lot of tax means you are making a lot of money. There is nothing wrong with paying tax, it’s a side effect of your success.

Diversification

When you put your money in one investment property you break an important rule of successful investing and that is diversification. By putting all your money in one investment you increase your risk. If you are sure you want to invest in property and want diversification you can choose to put your money in property funds. Your investment will be less tangible, but you can more easily choose for positive geared properties, in multiple locations.

Having money to spend

I have discussed the concept of liquidity in my post “being rich but having no money to spend”. You might be worth a lot on paper when you own a property, but it doesn’t mean you can access your money. If you urgently need your money you risk having to sell your house below the price. And even a quick sale might take up months.

Buying an investment property might be worth it if house prices and interest are low and you can find a positively geared property in a neighbourhood where prices are increasing above average. According to an Australian report, shares generally outperform residential investment property in terms of capital growth.