Send your money to work.
You work hard for your money. Then, you spend it. You work hard for your money. Then, you spend some more. You work hard for your money. Then – you guessed it – you spend even more. Current figures compiled by the Australian Bureau of Statistics reveal the average Australian full-time wage is $1,545.60 per week. According to Moody’s Australian Housing Affordability Measure, Aussie households paying a home loan spend, on average, about 27 per cent of their income making mortgage repayments. In Sydney this figure is much higher, at 35.1 per cent on average.
Michael, 41, and Rebecca, 37, don’t fall into this category. The Aussie parents of two spend around $5,000 a year (before doing their yearly tax return) making mortgage repayments, and they aren’t just paying off one property – they are paying off seven (to put that in perspective, they are only paying $97/week to hold 7 properties)!
The pair begun purchasing in early 2013. Within a year, they had accumulated a portfolio of 10 properties. Over the last six months they have sold three of these – worth around $920,000. Their portfolio is currently worth $2.9 million.
And they don’t intend on stopping there. Michael says, “We had to take a break while I started up my own business but we will definitely be back to buy more properties with Binvested.”
Michael and Rebecca achieved these numbers by finding a strategy that worked for them. The strategy they used, however, may not be a possibility for many.
What about households with only one bread winner?
The Moody’s Housing Affordability Measure found families in this situation would need to spend, on average, more than 70 per cent of their income to pay off their mortgage. For the average Australian wage, this means over $1,081.92, leaving less than $500 for food, bills and medical costs – just to name the most important expenses. What about property maintenance costs, insurance premiums, the costs of public transport, car problems – the list goes on. According to the report, “Using 70% of income to service monthly mortgage repayments is not sustainable.”
Return to work?
Under these conditions, many young mothers see returning to work after taking time off to have a baby as a financial obligation rather than a lifestyle choice. But at what cost? Recent figures compiled by the National Centre for Social and Economic Modelling show that due to the cost of childcare “The average Australian mother keeps only one-third of her hourly wage when returning to work full-time”.
This means a woman earning minimum wage would take home $4.55 per hour. A mother who returns part-time to a well paying job of $100,000 a year would lose 48 per cent of her take home salary to childcare costs, income tax and loss of Government benefits, reducing her $48 per hour pay to $25 per hour.
Young families face a difficult choice in Australia.
Do they struggle to make ends meet and risk a downward spiral into debt while living off 30 per cent of their income, or do they leave their babies and toddlers in Long day care, only to see them for a few hours a day (and several during the night), in order to earn one-third of their usual pay? How many mothers are missing out on seeing their baby’s first steps, or hearing their first words because they are working hard for less than $5 an hour?
‘I had the time of my life…’
According to former President of Uruguay, Jose Mujica, “When I buy something, or you buy something, we’re not paying with money, we’re paying with the time from our lives we had to spend to earn that money. The difference is that you can’t buy life, life just goes by and it’s terrible to waste your life losing your freedom.” So, how can we reverse this trend? How can we get our money to work for us?
Think outside the box.
Society would have you believe that the way to live life and earn money is to get a full time job, save, earn a little bit of interest from your bank and then spend your savings purchasing your ‘Australian dream’ house. But most soon find out that this is the path to financial struggle – unless one decides to take their finances into their own control and break away from what is considered to be normal.
Patience is a virtue.
Consume, consume, consume. Get a bigger house right now, get a better car tomorrow, be the first to purchase the latest iPhone, iPad, iWatch – we live in a consumerist economy where we get what we want when we want it – and when do we want it? Now!
Investigative journalist, Jacques Peretti, traces the history of “the idea of continual spending” in a three-part documentary series (originally aired on the BBC), The Men who Made us Spend. In episode one, he shows how ‘built-in obsolescence’ – where products are manufactured to break and become useless within a specified time-frame – has created a throwaway culture, where consumers are pushed to constantly update their possessions. The marketing strategy began in 1920s Germany, where light bulb manufacturers intentionally reduced the working life of their globes from 2,500 hours to 1,000. A more recent example is that of the iPod and iPhone. In the 2003 short film, iPod’s Dirty Secret, Casey and Van Neistat showed how Apple pushed continual upgrading by manufacturing the iPod’s battery so that it lasted only 18 months. Peretti also shows how Apple used unique screws to make battery replacement on the iPhone next to impossible.
Adopt a delayed gratification mindset.
If you want more freedom of time through financial independence, then you are going to have to adopt financial strategies that may not deliver instant results. Don’t believe the hype – be frugal and buy only what you need. You may not have the latest smartphone or tablet every year, but you will have capital that you can use to invest in something that will make money for you in the long run.
According to Michael and Rebecca, becoming property investors “has changed our perspectives on debt and also about making your money work for you.” By working hard and making solid investments now, they are aiming to “Exit the Matrix” sooner than the average family.
Increase your financial intelligence.
Research is the key to any enterprise – and we don’t mean using google. Start by reading books such as:
- The richest man in Babylon – by George Samuel Clason.
- Rich Dad Poor Dad – by Robert Kiyosaki.
- Exit The Matrix – By Nathan Birch and Daniel Young
Build a network.
Surround yourself with people who have achieved what you want to achieve. Learn from them. Talk to them about money and break the taboo that has kept us from empowering ourselves as consumers.
Find a strategy that suits you and don’t give up until you reach your goals.
Not everyone can build a portfolio of ten properties within the space of one year like Michael and Rebecca, but if we know our numbers well, we can come up with strategies that will help us achieve goals that are within our reach.
If there is one thing that we can learn from Nathan Birch, who comes from a blue collar background and now has over 170 properties in his portfolio, is that once you set a goal, you must do everything you can to reach it. It’s about commitment.
But what about know-how? According to Michael and Rebecca, Binvested did all of the “grunt work” for them. “From choosing the right property with immediate equity available and good growth prospects, to providing the right finance team to be able to get us the capital needed, they pretty much did everything. All we had to do was jump in with both feet and trust in the process.”
Are you ready to take the plunge?
If you want to join this community of investors and send your money to work for you, Michael offers the following advice: “Talk to Binvested. Ask lots of questions. Listen to Nathan and the team. Plot your journey, take a deep breath and jump in. It’s quite a ride!”