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We all know the statistics, 95% of the world’s wealth, is owned by 5% of the world’s population.
Hardly, causes a flicker of the eyelids, means nothing to the average Australian. After all, you know how much you earn, and how much money you have in the bank, and you also know that you would like both those numbers to be more… right? And besides, a bread roll in Asia is one tenth the cost, so realistically, you only need one tenth of the money if you live there… makes sense to me!
But – There’s a few other statistics you may be interested in. Did you know, that out of every 100 men, aged 25 (yes, let’s be sexist for just one moment without having a meltdown), all of them start off enthusiastic, all of them think they will have a great life, but by the time they are 65, only 5 will achieve financial success and have the life that even remotely resembles their hopes and dreams. The rest will live with a bitter pill, called regret. Why do so many men (and women) fail to achieve the things they thought they would in life?
Theory suggests that the difference between the 5, and the 95, comes down to a number of factors. The first, and most important of which, is a clear goal. You must KNOW your outcome… Know it, see it, feel it, taste it, smell it. You need to have a clearly defined picture in your mind of exactly what you want, how it will look, feel, and what you will see once you have achieved it. It must be measurable and specific. A ship without a destination has no route.
The second thing that differentiates those who achieve success is a reason. Without a reason, the destination has no purpose. What is the purpose of achieving your goal, if you have no reason? Without a reason, a goal is nothing more than a nice dream, something you desire, but will not achieve. The secret here is that your reason, will be aligned with your highest values, for example, a person who’s highest value is family may have a goal of saving $100k to take a year off work to travel Australia, his reason might be to give his family a wonderful experience they will never forget. Another person may have the same goal, but their highest value might be adventure, so the reason for the goal would be vastly different. It doesn’t matter what your reason – as long as you have one you will have the motivation to persevere and achieve your goal.
The third difference our top 5% have is flexibility. This is not as easy to apply as the first two points. Flexibility is the ability to recognize when a particular behavior is not bringing the desired results, and then change the behavior. This can also mean letting go of ideas, letting go of grievances, making decisions quickly, accepting other people’s ideas, and seeking advice. Flexibility, particularly behavioural flexibility, is a personal characteristic that is exceptional. There’s a quote that says “The one who has the most behavioral flexibility, controls the game of life”. Learn to be flexible.
And finally, the fourth difference which leads to success, is the ability to take risks. Not stupid risks, but to be able to weigh up the pro’s and cons of a situation, and make a decision, then follow through.
So where in all this does intelligence and brute strength come into the success formula? Well the truth is, success has very little to do with being the fastest, best looking or getting the highest marks. The most important keys to success are there for everyone who is willing to change their mind.
Come and speak to us at Encompass about your mental strategy and leave regret for the other 95%.
Blog
I don’t know how many times I’ve heard people talk about saving $5 per day by not buying a coffee, and the cumulated effect of this if you were, instead, to put it on your mortgage. It’s a great theory… for those of you who enjoy doing without, scrimping on the pleasures in life, and whose primary goal in life is to pay off your principle mortgage before retirement. But that definitely doesn’t work for me.
Yes, I believe we all need to pass through the proverbial ‘rite of passage’, save our first deposit by working two jobs, live on toast… walk barefoot to work, up a hill, carrying the family donkey… you get the picture. Character and perseverance are formed through overcoming obstacles… BUT… there has to be a point where you put down that donkey, buy yourself some shoes, and get into the game of life as a legitimate player. At this point, the sufferance stops, and you start seeing rewards, after all, that is the whole point isn’t it? Work hard, get rewards?
I like to think that by the time you are ready to look at investing in property, you would have worked out that the whole purpose of the word ‘investing’ is that you put down a portion of the money you have worked for, with the expectation of that money multiplying… Investing, is a breeding program for your hard earned money. Investing is about getting your hard earned money working for you.
So, if your hard earned money is properly invested, working for you, breeding like bunnies… wouldn’t it make sense that rather than skipping your well deserved daily coffee, you should now be easily able to afford two? Isn’t that part of enjoying the rewards that you have worked for?
See, my view is, that smart investing will feel good, enrich your life, enable you to do more, enjoy more, live a better life. Not just in 50 years, but right now. In fact, what you are actually believing and telling yourself by depriving yourself of such a small daily pleasure, is that you don’t have enough, that you are struggling, that life is hard… and what you tell yourself you will eventually believe… and what you believe, well, look around you… pay close attention. Everyone’s life is just a reflection of what they believe, isn’t it?
Talk to the team at Encompass and challenge yourself to do our “From Here to Where?” goal setting session… I’m off to have my second latte, might make it a decaf! – Cheers for now, Nick
Blog
Many of us are programmed from an early age to SAVE YOUR MONEY IN THE BANK!!
Our parents, family members and teachers program us to thinking that in order to get anywhere in life we need to earn money, save it in the bank, then purchase the item we need, be it a car, property, holiday…. Whatever.
The main issue with this theory is that by leaving you money in the bank, year after year after year you are actually losing money….. let me explain.
Say you have $100,000 sitting in a savings account with a financial institution. Over the past year the average rate of return was around 3.0%pa. So that means that after 12 months you will have a balance of $103,557 (Obviously this interest scenario is compounding with no regular deposits). Now that interest that you have earned over that 12 months period is $3,557, great you may say, I just made $3,557 in that 12 Month period for doing nothing at all!!!! WRONG…….
You see you now need to declare the $3,557 as part of your income, if you are a middle income earner you will pay about 37% tax on this, that leaves you with $2,241 after tax. Mmmm ok you might say, well at least I made something for nothing, right? WRONG again………
Did you know that because your money has been sitting idle for 12 months it is now NOT actually worth $100,000 anymore? This is due to inflation.
Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service.
Now the average rate of inflation over the past few years has been 2.5 – 3%.
So what does this mean you say?
Well what it means is that the Car, boat, holiday etc that you could have purchased 12 months ago will now cost you an extra 3%. If the interest rate is equal to the inflation rate then it would be like having a small faucet pouring water back into your bucket at exactly the rate it was leaking out, then take out the tax, so you are actually losing money!
Yes but how does that affect the above scenario?
The $102,241 that you now have sitting in the bank after paying tax has not grown enough to compete with inflation, you would have needed $103,000 after tax in order to have broken even (Assuming inflation rate of 3%).
Unfortunately, compound inflation is just like compound interest working against you. When you look at the effects of 3% inflation on your savings over 25 years we find that prices will have more than doubled and you will need $209.38 to buy the same basket of goods that $100 would buy 25 years earlier.
How does this affect me and property, what else can I do?
If you invested your $100k in a property in Sydney 12 months ago in 2013 and purchased a $500k house as an investment, it could now be worth over $550k ( Assuming a growth rate of 10%). That’s an increase of $50k. If you were to refinance this property at 80% LVR you may be able to access $40k in equity. Basically you have just used your $100k to generate $40k of accessible equity ($ CASH $) in your property in 12 months. (Note we have not factored buy costs etc).
Note:
Australian house prices have increased at the average annual rate of 8.4%. This implies that over the last 30 years property has doubled on average every 8.5 years.
In summary you can see what affect inflation has on your savings and how investing in property can provide some protection against inflation and offer strong capital growth as well. I am not saying that you should not save, cash gives you options and flexibility and is the foundation for kicking off a strong investment portfolio; however look at other areas of financial growth as well.
I have never met anyone who has saved their way to millions by squirreling away their pennies……. However I have met many successful people who have used their money and equity to build a profitable property portfolio…..
Blog
Have you ever wondered why some people seem to cruise through life, claiming all the prizes and scoring all the goals? Why some people’s lives seem easier, they seem to get what they want and get ahead no matter what the circumstances? Do you wonder what they have, that others don’t?
Success isn’t about luck. It isn’t about fate. It isn’t about skill or intelligence. Success is a formula of the mind… and one of the key ingredients of that formula is a person’s attitude to risk… It is the absence of FEAR.
Successful people lack fear. They don’t let fear hold them back. They don’t waste energy worrying, and they don’t spend time doubting and fretting about the ‘what if’s’… They take fearless action, and have faith in their choices. When we meet a person like this we feel inspired by them, they motivate us with their confidence and assurance.
Look back at your life now… take a few moments to do this quick exercise… Think about a part of your life that perhaps isn’t as successful as you’d like. Something that could be better. Perhaps money, or work, or relationships… now ask yourself “Is this a part of my life that I doubt myself in?”… “Is this where I place the focus of my fear?”… Are you fearful of making mistakes, of failing, of not being good enough, of making the wrong choice? One thing is certain… Any time we are fearful, we WILL make the wrong choice!
Now think of an area of your life where you have success, and notice, that you have confidence in that area. When we are confident, we attract success. You are not fearful or worried. You have no fear, and you achieve success.
Fear is the greatest human motivator. A person will take drastic action to avoid feeling scared, and to feel secure. Governments control whole nations with fear… And this is the barrier we all need to recognize and overcome if we want to reach our goals.
So how can fear be managed and overcome? First, we must know our desired outcome (KNOW YOUR GOAL), second, we must identify and avoid the pitfalls (MITIGATE THE RISK), third, we must have a plan (BUILD A STRATEGY), and fourth, we must make educated choices (ENGAGE PROFESSIONALS). When all four of these stages have been carried out – Fear will be behind you, and you will have the confidence to be someone people that inspires others.
Book a professional consultation with Encompass Investment Solutions and learn more about how we help our clients choose wise investments.
