3 Myths

Crown Money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money podcast. I'm Jethie Edge and I'm joined as always, by Scott Parry. How are you, buddy?

Nice tracking very well. And your young self?

Well, I'm cold and I'm a little bit sick and so that must mean that I live in Melbourne in the middle of winter. So yes, that's how I'm feeling.

That's your choice.

Yeah. Meanwhile, you're sitting in 24 degree heat.

At the moment, it's only 22. Anyway, enough about me, more about how we can help you guys out there make more money and save more time. The most precious currency of all.

Yes, absolutely it is. So we read a really great post. Who was it? Somebody on Twitter. What was their name? Yep. And I. And they just were going on a bit of a myth busting post and just talking about kind of three big things that we tell ourselves and we just want to go through them because they really resonate with what we do and how we think. And the first one is, I'll save more money when I earn more. I love this one. It's such a. It is such a big one because we all tell ourselves this. When I earn more, I'm going to do this. When I have. When I'm a bit older, I'm going to do this. When I have more time, I'm going to do this. Like it's, it's something in the future, I'm going to do it. And honestly, if you don't start now, you never will.

Facts, nothing but the truth, the whole truth. So everybody is of the misguided perception that they're going to be richer in the future, they're going to be in a much stronger financial position in the future. That's the limiting belief. That's where everyone goes wrong with it. Think that they're going to be better off in the future. But you look at your track record, doesn't really show that. And you've been working for X decades and look what you've got to show for all that income you've earned over X decades. Not as much as you'd hope. I'm sure we all believe we could and should be in a better financial position than what we currently are today. But we all believe that we're going to be in a lot better financial position in the future. That's where the disconnect is. And so waiting until you are earning more money is if you told yourself 10 years ago that you're going to be earning the money you're on today, you're going to be sort of really not in a great function. God, there's no way I would great function position if I'm earning that much money. And so this is the facts. You're in a position where you've got to just start doing something. Now, as little as it may be. Like some clients are just putting 50 bucks a week into Super. That's a great move. It's a low hanging fruit, super easy to do. You don't feel it or miss it because it comes from your pay. It's pre tax, which is smart. Goes into super, which has a 15% tax rate, which is smart. So just that one hack, I mean, and other clients are using little apps like micro investing apps like Raise or Bamboo and they're just investing the spare change from all their purchases.

Yep.

And I had one client, a really good client of mine, Andrew, spoke to me on Monday and he's been kind of ours for at least 14, 15 years. He's bought and sold, paid off many, many houses with us. And he said, mate, can you remember sitting down and telling me about raise like five, ten years ago? I'm like, yeah, I do. Actually goes, guess how much we got in there? I said, I no idea, mate. He goes, I haven't touched it since the day you set it up. I haven't touched it. We haven't done any recurring investments. It's just done the spare change. Got $17,000 in there.

Wow. What? He wouldn't have even noticed it. Out of mind. Just little bits here and there because it does add up and we know and you know so many people. I think Warren Buffett's one of the kings of saying that, you know, just little bits over a long period of time. That's when true investing will pay off. It's not, you know, investing big for short term. No, it's investing repeatedly little amounts over time. Getting the benefit of, what's the word?

Compounding.

There it is, getting the benefit of compounding that. Out of sight, out of mind. And it's just there and it's just working for you. We love that.

I did.

My, my, my brother actually said to me just the other day, he goes, do you remember Jess telling me about 15 years ago, no matter what you do, just always put 10% of your income away either in super or Invest. He goes, I have lived by that and honestly it is the best thing you ever told me. And I Was like, oh wow, I don't even remember telling you that. How unreal that he did it and it's paid off. So, yeah.

And so the three reasons why that's a very successful strategy and a little bit of bank and finance jargon. One is it's a dollar strategy. So what that means is you're investing a set amount of money on a set frequency. Like I'm doing $50 per week and it's put in perpetuity, which means there's no end to it. You just keep doing it.

Big word.

I know, I know. Something sitting on that one for many. And so it's something where your dollar cost averaging, which means you're putting that $50 per week, which your employees doing. If you're doing the salary sacrifice, you set up a direct debit. If you're doing a raise or a bamboo sort of micro investing strategy. And so those are the keys that it's gotta be dollar cost averaging. It's gotta be automated because you're busy, you've got kids, you've got family, you got work, you've got all this other stuff. It's just not the top of your to do list. And you're gonna forget one month and then it's gonna come unstuck. So automatically happening. So bud, direct debit and all your employer doing it and compounding that magical word that you, at the very, very end of your little explanation there was so important because everyone seems to think that it's about getting the right investment. And Warren Buffett, the great man that you just mentioned, he said the only reason why I'm worth billions of dollars is because I started compounding in my 20s or late teens. And I've had, it's like think of a. I like snowball on the top of the hill. And as that snowball goes down the hill, it gathers more momentum, it gathers more snow and gets bigger and bigger and bigger and bigger. And so he just said the benefit I've had, he was like, he's 70 or 80 right now. I've actually had a 60 year old, 60 year heel. The hill has been for 60 years. He said, that's the only reason why I'm so rich, is because those last few decades, like the last 10, 20 years of the 60, that snowball is just this behemoth that just the momentum, you can't stop the interest on interest on interest. And so like if you've got kids, you need to start getting them to, to set up a raise or a bamboo or a dollar cost Averaging or put their 50 bucks a week into Super. From the age that their first job. When I see a client, I saw one last week, he had is like 45. He had 900 grand in super. Wow, 45. I straight away said you salary sacrifice, didn't you? Because. Yep. From the first day you want. Oh, from day one.

If you can do nothing else to set your kids up, it is say right from your first job, you must pay yourself first. And pay yourself first means I'm putting extra money into super or an investment or something that's out of sight, out of mind. And just put that little amount. You'll never notice it's not there. And it's like axe to yourself. It's brilliant.

You know my favorite acronym for this, bst. But Jess hates this one. So because of these governments taking our money out of our pocket, they call it gst. What about paying me st. What about paying yourself for a chance for a change?

You love that one.

I just, I've resonates, you know, I stuff the government. I'm paying the government 10% of everything I'm buying. Why am I not paying myself 10% of everything I'm earning?

And 100%.

If you just have that. That was, that's what your brother did. He paid himself the best.

Yeah, yeah.

And look at him now.

Yeah, I think another thing that I'll mention. So yeah, kids, definitely. You've got to drill that in them from day one. That and never get a car loan. That's just minus some sweet pence. But yeah, pay yourself 10% of your income into an investment vehicle or extra into Super. You do that from day one, you'll never notice it. It sets a habit. And that's that long term dollar cost averaging investing that compounding.

Compounding.

Yeah, yeah. What if, what if some of our listeners are sitting there going, whoa, I'm, you know, in my late 40s. I haven't done that. Is there still time? You know, there's that real like, have I missed the boat? And I think the answer is absolutely not. You have never missed the boat. It is never too late to start investing and, or start saving or start putting more into super. That's, that's just something that as long as you're earning an income, that's something that you should be thinking about.

I think it's the opposite. I think. Have I missed a boat? No, no, no. You've got to go double as hard to catch the boat.

Yeah. And what I'm really excited about is that we're about to see interest rates coming down. So everybody, for the last couple of years, how long the rate rise? Rate's been going up for two years now.

Yeah.

Ever since they're going up, we've all been paying more on our repairs. You just have to do it right. It's, it's annoying, it's frustrating, and we've all felt the pinch, but that's about to start coming back down again. All right, so we're going to start to alleviate a bit of that expense pressure. Now. A natural thing to do would be like, oh, I've got more money. I can go on a holiday or I can spend more on X, Y, Z. But it's like, hang on a second, I've been doing fine. I've actually made it fine up until this point. I've got to think of that extra money is just extra money that can be paying down my debt or going towards an investment vehicle.

Yep. It's money didn't have.

Yeah, exactly. So it's like we're about to get pay rises. And we always say, even with a pay rise, you don't want to let. We love this, this term as well. Lifestyle creep. Come in saying that as I earn more, I spend more. It doesn't have to be that way. You've been absolutely fine up until this point. And what really more do you need in your life that you can't be putting that extra money that you're earning towards more important things like your assets?

Can you remember one of our favorite people on the planet, Tony Robbins, telling us about the strategy called the Save More Tomorrow program?

Yeah. Love this one. And so commitment to yourself, isn't it?

Yeah, yep. To run through it.

I can't actually remember fully, but basically, was it you? You. Did you write yourself a letter or a commitment or a contract and you're signing it and you're saying X portion, you know, X amount of all pay rises in the future, I will be investing or putting into super. What are paying down debt.

Yep, that's it. And so remember at the very start I told you that you all thinking you're going to be in a much better financial position in the future. And so this plays off that psychology. It's like, oh, yeah, in the future, man, if I get a pay rise, I totally can commit 50% of that to investments. And so that was really the concept was the Save More tomorrow plans. Okay. For any pay rises from here on in that I do get, I commit to putting 10%, 20%, 30%, 50% of that pay Rise that difference between what I'm earning now and what I will be earning into investments, into super, into whatever it may be that floats your boat. We've got some bitcoiners out there. Whatever you feel is going to be worth More in 10 years than what it is today. It's very rare that quality assets are going to be cheaper in 10 years than what they are today. And so that save more tomorrow. Like, you can Google that, look that up. It's just a great strategy to basically trick your future self into committing more towards investments, more me st for this future pay rise that you haven't had and you won't miss.

But I also think that, look, still give yourself a little bit of your pay rise into, you know, your expenses and stuff. Enjoy a little bit more creature comforts, whatever it may be. But you might say, okay, I'm going to take 20, 10% of that, you know, income, or 20% I'm going to be spending on myself and my family. I am going to go on an extra holiday. I'm going to do wherever it may be. But then I know I'm putting that extra 80 or 90%.

Calm down. Jesus said 50, I said 10, 20, 30, 40, 50% into investments. You're like, hey.

Like, come on. But I think that, you know, it's just about having a plan before it happens and just kind of committing. And it's actually, there's such a great feeling to making a plan with an investment or super strategy. And then in 12 months time looking back and go, wow, that actually worked like all your micro investing and you turn around and you've got 17 grand in there that you didn't even think about or didn't even remember. You know, it's all those, you know, it's, there's, it is really, it is such a great feeling looking back and going, what a decision I made. That's awesome. All right, so that was myth one. We've got two more. Okay, the next one. Is investing is too risky or is.

Not investing too risky?

Yes, absolutely.

What's more risky?

I think, you know, there's an, you know, old adage that says you need money to make money. And as we know, investing your money does pay off. Like if you can find the right investment vehicles, if you can do it consistently over time and get that compounding effect, like you're going to make money for nothing. It's passive income. And passive income is the dream. Passive income is, I don't get out of bed today and I still earn that money.

Yep.

That's a nice feeling.

Yeah. I think from where it sits is where are in this position where you sort of fear for, oh my God, it's going to go to zero, I'm going to lose all my money. I mean, your super is invested every single time you're paid from your employer. And so you've just got to think of it as exactly the same, invest into the same things that your supers invest in. That's not going to zero. You've got these index funds which track the entire index. What that really means is, so for example, the ASX 200, that's the Australian Stock Exchange. It's the top 200 companies in Australia. They're not going to zero. What, what are those that the banks? Cba, westpac, ANZ Nab. You've got bhp, Woodside, Rio Tinto. These companies aren't going to zero. You're not going to lose all your money, which is your fear. Obviously, if you're jumping on a speculative stock that your mate told you at.

The bar could be different, not a good idea.

But I mean, and these are, these are just that fear which is costing you. That fear is the risky part. The fear of losing everything when it's actually not really realistic is holding you back. And so I think not investing is too risky. And I just have never met anyone over the last 23 years of doing this who've said, oh my God, I'm pretty shitty with myself. I started investing 20 years ago. Yeah, I could suggest you're never gonna regret doing that earlier. You're always gonna regret not doing it earlier.

Yeah, yeah, I think, I think you hit the nail on the head as well with the speculative investments. You've gotta be. Those are the riskier ones and you've gotta be aware of that risk and be willing to take it. But you kind of average investments that everybody knows about, you know that you can't really lose.

So the other index is the American index called the S&P 500. That's a top 500 companies in America. Let's just look at some of them. Facebook, Google, Amazon. Do you believe these companies are going to zero? No. One of the strategies I told you about this earlier that my mom uses, I like it actually, it makes sense. It's basically she only invests in companies that she uses herself. And so you may have an Apple iPhone. Okay, well, that means buying Apple. You own a part of that company, she only flies Qantas for them. She plays Qantas, she spends a lot of time on Facebook. She bought Facebook. And so all these things where she is a believer in their product, she's a consumer of their product. And so from that perspective, just making sure that she actually gets to participate in the upside is one of the most important factors from being able to enjoy the product and say to herself, I'm just buying product from a company I already own a slice of.

Yeah, I think the other thing as well with investing is, you know, in the past, it was. There was. It was a kind of a big barrier to entry. Like you used to have to invest, you know, a minimum of $5,000, for example. Like, it was. It, you know, you had to go through a stockbroker, you had to do all those sort of things. That's, that's not the case. Now we have micro investing, we have all your big investment vehicles like Vanguard, et cetera, that, you know, it's. There's no minimum deposit that you can invest whatever you want, invest $100. So I think, you know, investing has never been more straightforward. You know, there's digital products, there's online platforms, you know, much lower investment levels. So anyone can be investing. And I think it can sound like a bit of a scary thing. And that fear, exactly what you're talking about. I don't lose my money, but just invest what you feel comfortable with. A small amount, something that you're not going to be thinking about, you know, you're not going to be able to lose sleep over. It's just sitting there, ticking away, earning money on itself for you. I think that. I think that's kind of the key for some people that maybe haven't invested before or are a bit nervous.

That's it. And like I said, my mom's strategy, just buying companies that she already uses. What's the fear of that? Like, it's something, you know, that they're decent companies that do decent products. I'm a believer in it, and so I'm going to support the companies that I'm already using. So, like, that hopefully should reduce that fear of, oh, what if I lose all the money? Well, I don't think those companies that you're using are going to go bankrupt anytime soon because they've got great products and you're using them, so you're a supporter.

And obviously, we're not giving financial planning advice.

We're not giving financial advice. General, this is for educational purposes only. Please go and seek financial advice from a registered financial advisor who will talk to you about all T's and C's. This is Whole and solo educational, mainly entertainment purposes if we shape.

All right, there's one more here, a myth. I don't have time to deal with my finances. This is a big one. And we do all tell ourselves that. I think as well, we as humans, you know, always kind of procrastinate or hesitate over something when we don't actually understand what we're, what we need to do or we're not quite sure what we're meant to. If you know what you're doing, you kind of just get in and get it done. So I think that, you know, at the end of the day you must make time because money is the only thing that can buy you time. So if you can get it right, if you can pay your debt, debts down as quickly as possible, if you can be investing, if you can be building up your super, potentially have an investment property, your retirement age is going to start dropping. Every single year. Every, every dollar that you build up your, your, your net worth, you are one step closer to retiring early. So the time that you can spend now is the time that you will reap tenfold later in life.

Your future self will definitely be thankful. So that extra 10 minutes you spent a week or per month, I mean the key is obviously automation so you don't have to be looking at it and juggling it all hours a day. So everything's automated, just checking in on it, tracking and measuring your numbers, which we do for all of our clients. We track their savings rate, their surplus cash flow position, their debt free date. What day will I be free from mortgage prison. And so that's motivating when you know what you're moving towards, you have a target, you're a lot better chance of achieving that than just floating like most Australians do, refinancing every three years just because they think that a cheaper rate is going to save them some money when actual fact is costing them time. And so the whole key here is just give it a little bit of a once over. It's being tracked and measured and compete against yourself.

Yeah.

And not against your family members or friends or everyone else you're trying to keep up with. Irrelevant. You're going to be so unhappy if you want it to. Just make sure that you're not going to fall into the trap of comparing and trying to keep up with the Joneses. Compare where you are right now to where you were last year. Are you better off? Is your net worth higher? Yes. Excellent. That's progress. Progress equals happiness.

Yeah. I always think that, you know, and for Our clients, you know, it's really quite easy because every six months they're getting their report and they understand exactly where they are and you know, what their kind of plan is for the next six months. I think really use that as kind of a, you know, a point where, okay, this is a reminder that we need to check our finances. So what I do every six months with my husband, we sit down, you look at your statements, you go, okay, what am I spending my money on? Okay, what am I, what am I? A day to day expense? What am I spending my money on? Okay, is that, is that, does that sound about right? Is that where we want to be? Okay, awesome. All right. What are my bills? Where am I? Like, where am I, where is my money leaking out to? What am I paying my, you know, my electricity, my gas, my phone, my et cetera? You know, do I still need that? Can I get it cheaper somewhere else or can I get a discount with my provider? Okay, awesome. Then we look at our income. How's our income going? Are we deserving of a pay rise? Do we need to have a conversation with our employer? Like, what's, what's the roadmap there with our career? Okay, awesome. And then investing. Where am I investing? Do we need to put more into super? Can we put more into super? Are we in a position to buy an investment property? When are we going to be in a position to buy an investment property? And yeah, what are we doing to save for our kids? And those are kind of just, you know, you kind of COVID off on those bases and you're good. Like, that's, that's kind of. You've gone, yeah, I've ticked off everything that I need to. And because of that automation, most of that will be ticking along doing what it's meant to be. It's just a quick kind of review or refinement and then you keep more moving forward and at least you know, you're on the same page. You both, you know, you know exactly what the plan is and you can go for it.

That's it. That's. You nailed it. I mean, if you just do nothing but that, that's once every six months, man. Like, it's not every six minutes or every six hours or every six days, it's once every six months. And so your future self, what gets measured gets managed. And if you're not looking at your numbers and a lot of people have the ostrich head in the sand, I don't want to worry about. I don't understand it. I just want to work and spend like you're going to be working longer than the person who looks at their numbers because they know exactly where they're at, they're conscious and they know what they can be doing to improve those numbers. And, and that shifts the behavior which then shifts the result.

And I think you've got to with those kind of financial check ins and you know, I don't have enough time to deal with my finances. You've either got to gamify it or give yourself a reward for kind of doing this proactive planning. So one of the ones I read this suggestion a little while ago, which I love is you either organize like a really nice date or you organise a staycay in the city like a nice hotel or something. And you say, okay, we're going to spend two hours working on our finances together and our goals as a couple or whatever it may be and then we're going to reward ourselves with a nice dinner out and a night at the hotel or whatever it may be. So it's kind of. And then it's something really to look forward to. Hey, when are we doing our financial review? Awesome. This is sick. This is really cool. Or the gamification, which is the. You're competing with yourself. How can I, how can we challenge ourselves? How can we beat our results so far? How can we do even better in the next six months or the next 12 months?

And then rewarding yourself if and when you do beat it? Like the whole point of a game is what's a reward at the end of the challenge, whatever it may be. So both of them come back to rewarding yourself for being proactive. Like turn it into a positive and look forward to it. So you know you're going to get, I said a weekend away or a trip or whatever it may be, but just whatever makes you happy. And as I said just then, everyone's dialed in to get the best result.

Because it can be hard when you're talking about planning for your finances because sometimes it's very long term, especially with super. It's like, well, I'm not accessing it for another 20 years, what does it matter? Like it can be a real distant reward. So you do have to kind of give yourself some incentives along the way.

One million percent.

Nice. Well, I think we've talked everybody's ears off enough for one day, so thank you so much, Scott. Appreciate you buddy. And we will see you all next time.

Thank you. See you soon.