Stop Worrying About Money & Be Frugal

This week I have been sick and I was forced to take a few days off work. I finished work on Monday and took Tuesday and Wednesday off. Normally I'm keen to get back to work so that I can start earning money and get closer to my goal of complete financial independence, but I still wasn't 100%. Most people would have gone back to work at this point at the risk of not only making other people sick, but not allowing themselves to get better as quick as possible. Thursday morning rolled around and I decided that I was going to take the day off as well so that I could fully recover.

This left me with a two day work week. Which was enough to pay all of my bills.

I should mention

Another Day in Early Retirement

Today was a beautiful day. I started by waking up after a nice sleep in (7am, I normally get up around 6am) had breakfast and then I rode my bike to the gym for my daily workout.

I had some more to eat and then decided to ride down to the beach as it was such a beautiful, sunny day. I laid in the sun for a bit and went for a swim.

When I got home I decided to do a bit of "work", so I completed some of an assignment that I'm working on for my Advanced Diploma

Shoulders Workout at the Gym

One of my biggest hobbies is going to the gym, or bodybuilding. It's something that I've been into a long time. I enjoy watching fitness Youtubers such as the Hodge Twins and Physiques of Greatness/Pump Chasers.

The only downside of having bodybuilding as a hobby is that it doesn't take enough time! Generally half an hour to an hour at the gym most days and that's it, so it can't be your only hobby or you won't have anything to do for most of the day!

Today I got up and had breakfast, no work of course, took some creatine and WPC (Whey Protein Concentrate), watched a couple of fitness youtube videos to get motivated and then rode to the gym. Most people, and I mean at least 90% of people, drive their cars to the gym. My opinion on that is that it is pretty stupid. You either need to find a gym that's closer to your home or stop being so God damn lazy! I like 1.5km from the gym so it takes less that 5 minutes to ride and burns about 50 calories each way. If I was wanting to do cardio at the gym (I don't, I'd rather go for a ride) then this directly cuts down the amount of time I would need to spend on a cardio machine.

Some people would literally be better off

Should I pay off my mortgage or investment loan first?

I've seen many situations where someone will have  their mortgage nearly maxed out, yet they will have 50% equity in their investment property, as they feel that they want to own their investment. What they don't realise is that this could end up costing them tens of thousands of dollars over time.

Let me summarise it like this: if you have personal debt and investment debt, and the interest rates are within one or two percent of each other, then you should always have your investment debt maximised and be working to reduce your personal debt.

The reason? The investment debt is tax deductible, whereas the personal debt is not.

Let's say that you have two properties, a home and an investment property and a combined debt of $200,000 and the value of the two properties combined is $500,000. In this case, you would want to have the entire $200,000 debt against the investment property and none owing on your home. This will leave you with a Loan to Value Ratio (LVR) of about 80% on the investment property, which is usually the maximum that a lender will provide without lender's mortgage insurance.

You are therefore maximising your tax deductions as all of the interest on the loan is now tax deductible, potentially increasing your tax return by $10,000 (the interest on the loan). If you had 100% of the debt owing on your home, then you would get no tax deduction at all! This means by organising your debt to be more efficient can save you tens of thousands of dollars per year!

So if you have personal and investment debt, make sure you are borrowed to the limit on your investment debt and are reducing the personal debt as much as possible. When you no longer have any personal debt, you may consider starting to pay down the investment debt, or simply accumulating more assets, depending on your age/goals etc.

I hope you enjoyed this post, please share it on Facebook and Twitter and follow me @EarlyRetireAus send me an email at earlyretirementaus@gmail.com and leave a comment!

Peace! E.

Three Factors to Amass Incredible Wealth

There are just three things that will determine whether you will become a millionaire and whether you will be able to retire early and I'm going to give you that information, here it is:

• How much you can save
• The return you can get on your investments, and
• How long you invest for

All of these items by themselves can enormously magnify how much wealth you can build and if you can take advantage of all three, it is extremely simple to accumulate enormous wealth.

Factor 1: How much you can save can magnify your wealth

The first step of any retirement plan is to figure out how much of your income you can save. It's the single most important part of the process because it allows you to figure out how much of your income you can put towards increasing your wealth.

The more of your take home pay that you can save, or put towards investment assets, the faster your wealth will grow.

It actually works in two ways to speed up your early retirement, because the more you save, the more you are investing and the faster your wealth builds, but it also reduces the amount that you need to retire. For example, if you can live of $5,000 per year, you're going to have save more, but also need less to retire, so you could probably retire in one or two years!

Figure out how much of your after tax income you can save, commit to putting that away and never touching it. I'm not talking about saving for a holiday or a car (though that's important), I'm talking about committing to a certain amount of savings that purely put aside to buy your freedom, to build your wealth so that you can produce passive income from investment assets.

Remember, the more you save, the more you will magnify your wealth and the faster you will become financially independent.

Factor 2: Your investment return can magnify your wealth

Your return on investment plays a huge part in increasing your wealth. If you're simply saving cash and this is your plan for investing for your retirement, it's going to take a looooong time. Especially in today's environment where you're only getting 2-3.5% return on your cash depending on where you put it. While it is possible to save cash and retire relatively quickly by increasing the other factors (savings rate and how long you invest for), the higher the return that you can get on your investments is going to magnify your wealth.

I'll give you an example.

1. If you save $100 per week for 30 years into cash and get 3% per year, you will have roughly $247,000. Probably not enough to retire on.

2. If you save $100 per week for 30 years into equities and you average 9% per year (which is a fairly accurate long term average), you will have roughly $709,000. Probably enough to retire on! Certainly enough to retire on if you don't like an exorbitant lifestyle.

Just by increasing your investment return by 6% per year, this is an increase of nearly $500,000, tripling the amount that you end up with.

Not enough for you? Then magnify the other factors. Boom.

Factor 3: How long you invest for can magnify your wealth

The other important factor, and most appropriate for people who can't save a lot of money is TIME. Even if you can only save a modest amount towards your retirement, then simply letting time and compound interest work it's magic will work wonders for you.

If you start saving when you are 20 and you can save $100 per week (if you can't save $100 per week then you need to read more of my articles), investing this at 9% through equities, you will end up with $2.75 million by the age of 65. An astronomical amount compared to your average person.

$100 per week is not a lot of money, but by steadily putting it away over a long period of time, compound interest working with time with magnify how much wealth you build.

Too long? Increase the other two factors. Boom.

So if you want to build massive wealth, you need to maximise the three factors
1. Your savings rate
2. Your investment return
3. How long you invest for.

If you can maximise all three, saving a lot, investing at high rates of return (9%) and invest for a long time, you will build massive wealth that will be indestructible.

How much?

If you can save $500 per week, invest it at 9% for 45 years (your entire working career), you will accumulate $13.7 million  and retire on $1,200,000 per year without your capital ever reducing, so you can pass this on to your family.

Hey, if you liked this article, I would really appreciate you sharing it to Facebook or Twitter and following me @EarlyRetireAus

I look forward to your comments and you can email me at earlyretirementaus@gmail.com

Peace! E.