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If you have a surplus of money each week you don’t need to hear this. If you never pay a late fee and know exactly how much cash you have available to purchase something you’ve had your eye on, then I’ve got nothing for you.
If, however, you have pulled out the plastic on more than one occasion before your paycheck arrives, we need to chat. If you are on a first name basis with the clerk at your local payday loan company, then have a seat and let’s get down to business.
You – and your family – deserve more than living paycheck to paycheck. You go out there in the workforce, do your thing, and then have precious little left at the end of the week to show for it. There is a better way, but it takes both direction and determination to break past the barriers that are keeping you from living the lifestyle you want.
Begin by asking yourself a few questions. No need to raise your hand, just make a mental note of the answers…you know who you are.
- Is your weekly pay sitting in your regular bank account – doing nothing but waiting for fees and bills to be deducted from it?
- Have you accounted for every possible deduction on your tax – reducing it down to zero?
- Do you know what the fees are for your superannuation fund?
- Do you carry balances on your credit cards or have any outstanding loans (including your mortgage)?
“Now wait a minute,” you might say. “Just about everybody I know fits into these categories!”
You’re right. That’s why you (and “everybody” else) who share these behaviours, are part of the 99% rather than the 1% of investors who are financially independent.
So what’s wrong with these things?
1. Let’s have a look at your bank account.
You get your pay, drop it into your account (or more likely it’s automatically deposited) and it just sits there, waiting to be withdrawn to pay bills. Why not make it work while it’s waiting to pay the light bill?
One smart strategy – establish an interest bearing, offset account and put your entire wage into it. Then either pay your bills out of that account, or use an even crazier strategy and pay your living expenses (including bills) with your credit card (which of course should have a grace period), paying the credit card bill each and every month in full, out of your offset account. Brilliant!
2. Stop needlessly giving money away!
No tax deductions? Then be advised you’re giving the tax man just under 25% of your lifetime earnings! Imagine the possibilities if you were able to keep that 25% in your pocket! Fortunately, property investors enjoy many tax deductions!
3. Superannuation not so super?
When was the last time you took a hard look at your super? Chances are good that you’re paying exorbitant fees for very average returns. It’s very possible to pay as much as $250,000 in fees over a lifetime! You can do better yourself, wouldn’t you agree? After all, who cares more about your retirement – you or the government?
By the way, don’t forget that your self managed superannuation fund (SMSF) can purchase investment properties!
4. “Bad” debt
If you pay a mortgage on your home, you’re simply throwing money away each and every month. This is otherwise known as “bad” debt. As a property investor, the costs of owning an investment property can be deducted from your taxes – a good thing, therefore this kind of a mortgage is known as “good” debt.
As an owner/occupier, you can change over your “bad” debt (mortgage on your principal place of residence) into “good” debt by purchasing investment properties. How does this help your “bad” debt? By harnessing the “magic power” of compounding interest.
Simply put, you can eradicate your bad debt by paying it off more quickly. In fact, if you gear your investment properties correctly, it’s possible to shave as much as 20 or more years off of your 30 year loan – and who wouldn’t want to do that?
Bottom line, every bill, fee and deduction will impact your financial situation.
It’s very possible to manage your finances in such a way that more money – potentially even 100% of your money – is at your disposal. Now that’s financial freedom!