What Advice Would You Give Yourself 10 Years Ago?

"The time for extracting a lesson from history is ever at
hand for those who are wise." Demosthenes 

Ten years is long enough for any of us to see how an important decision we chose to take at the cross road has led to the point in the road that we are facing now. What significant decisions have you made ten years ago?

Was it the choice of which college or university to attend? Which degree to study? Which employer to work for? Which business to start for yourself? How much you decided to save up in those years? What and how many properties or shares you have bought and invested in? How many holidays you have had? The significant others that you have dated, married, had a child with or separated from?

Do you regret some of the choices that you made ten years ago? Or are you happy with the choices you made all those years ago?

After reading the Somersoft Property forum about what the forum posters wished to tell their younger selves, I thought it would be interesting to post up some of their advices that they wish they could have advised their younger selves. We only get older right? So if what we learn today can mean that we gain knowledge to implement and action for the rest of our lives to make our life easier, wouldn't you want to know?

Here are some of the advice that the forum posters wished they could have given their younger self ten years ago after knowing what they know now, happy reading =). Oh and read with an open mind because the quotes below are from a PROPERTY forum and as such, they are pro-property investors less inclination towards investing in the stock market compared to members of stock forums:

*  "buy something, for goodness sake. Get into real estate. Be careful- but not so careful as not to buy...If someone was going to buy another property, I would be suggesting, as Rolf de Roos does, to at least aim to look at 100 properties.I'm not sure about his other figures- but, at least, if you look aim at looking at 100 properties, you'll start to get at some ideas of good vs bad value"

*  "Get a real education, a financial education...Read as many books on financial topics as you can...Read as many books on financial topics as you can...Your borrowing capacity is not a problem (if you know the rights things and speak to the right people)"

* "Educate myself on all things financial, Property, Tax, shares etc...Invest as early as possible as time is the essence of good investing...Do not be suckered into public or media hype or fear...Device a plan and stick to it...Keep all things in perspective...By(sic: buy) all the property you can! "now"!!!!!!!!"

* "If I was to give myself advice for 10 years ago it would probably be to put into practice the principles from the book The Richest Man in Babylon."

* "FINANCIALLY – Educate yourself. Don’t follow the crowd. Take a chance now and then. MORALLY – Stubbornly believe in your abilities and be good to those less fortunate.For one thing I would have hugged and kissed my mum a lot more often and not taken her for granted."

* "1. First, last, foremost: Educate yourself financially, friend. Read some good books, it's not really difficult, get to know the basics and understand how this money stuff works!! Learn, learn, learn so you can work smarter, not harder. 2. Spend less. Those doodads add up. Did you know you can afford a property on what you spend on lunches/coffees/etc? 3. Use 1 and 2 to buy effective investments. Buy property now. Don't wait to 'save up the deposit', don't wait 'to pay off your mortgage'. Use the house equity & buy now. Balance negative geared with positive cashflow."

* " I would have got into property and not share traded or bought into managed funds like I did then!! That is for sure!" [Must have been burnt by the stock market]

* "What I would do differently if I could go back would be to purchase a property as close to the beach or city as possible, take interest only loans for 90% of purchase price (and pay the LMI), wait 6 - 12 months to see the effect on my cashflow and use surplus savings from my income to fund the next purchase....quite a conservative strategy but one that would have me sitting on at least 5 properties that as a group would be putting cash in my pocket and worth substantially more than my purchase costs. I would have my current accountant preparing my tax returns and give me advice on how to structure investments."


* "I wish I had read the book E-Myth by Michael Gerber back then. The best book for business owners I have read... I invest in what I know, which is real estate and I always have a plan "B", my what if it doesn't work plan. I have written goals, a business plan and I let those around me know what they are and try to keep them focused on them also. Being part of a great network is a very big help, I now know the advantage of franchises although I had never before been an advocate."

* "*make sure you are armed with information
*develop your strategy and then make a move
*don't blindly follow the advise of someone else
*don't be complacent, know what's going on at all times
*use the rental income to your advantage
*do everything possible to avoid selling."

* " 1. Invest whilst you are living at home with your parents. It would seem to be the easiest way to gain a good foothold for achieving financial independence.
2. Buy property that you can rent out, not land. I bought land at the age of 21, with the intent of building my future home on it in X years time. Would have been much smarter to buy a rental property, especially one I could live in later, perhaps.
3. Obtain financial education - not from your parents because more likely than not their "advice" will be ultra-conservative and keep you in the rat race (but you still gotta love your parents).
4. Get into the habit of saving a'la Richest Man in Babylon. Material possessions are not everything.
5. Balance your life and your work, and value your health."


* "Don't waste your time on jealousy. Sometimes you're ahead, sometimes you're behind. The race is long and, in the end, it's only with yourself...Get to know your parents. You never know when they'll be gone for good. Be nice to your siblings. They're your best link to your past and the people most likely to stick with you in the future. Understand that friends come and go, but with a precious few you should hold on. Work hard to bridge the gaps in geography and lifestyle, because the older you get, the more you need the people who knew you when you were young."

* "Keep going with your plan. It works out. Don't get scared as the numbers get bigger."

Living Large When You're Less Than Flushed

Andre Rison in the promotion of the documentary 'Broke.' Credit: Broke

I thought I’d approach lifestyle from a different angle and perspective. Instead of the slow and steady ways of saving up to buy, there are other reasons as to why and when using credit can be an attractive option. Did I just say using credit can be an attractive option? YEP!!

The financial responsibilities that new homeowners face can feel overwhelming. Due to the higher cost of living, many people simply cannot afford all aspects of the "good life." Particularly when it concerns furnishing their house.

An effective way to create a luxurious life for yourself without having to spend a great deal of money upfront is through furniture rental.

If you have plenty of expenses such as school fees, children, living, social, clothes or starting a new business, you can create leverage for yourself through the judicious use of rental credit options. Credit options allow immediate gratification until you are able to save up the money to make cash purchases.

When Renting Furniture Makes Sense

If you have attended open houses before, you may notice that some houses are lavishly and stylishly decorated. The owners don’t necessarily have exquisite taste nor style, they simply rent their furniture to decorate their houses so that it looks beautiful to prospective home buyers.

If you’re starting up a business or decorating a home office, you may not wish to spend lump sums of cash on furniture and equipment upfront and may wish to rent furniture and equipment so that it helps with your cash flow.

If you’re keen on changing the style of your home frequently, then renting furniture can be a good option because you can indulge in the latest seasonal trend. You may not know how you wish to style your house permanently so renting furniture can be an option until you decide on which pieces of furniture you wish to acquire for the long run.

Renting furniture oddly enough, makes a lot more sense than renting luxury cars and luxury handbags because you get to use it daily. Used as part of a strategy to sell your home, you can attract more buyers to bid for the property you are trying to sell. Used as a strategy to look stylish and professional to clients when you're operating a home office or starting up a business, it can look a lot more professional and help with your monthly cash flow.

Used as a strategy to counter your fickle styling taste and desire to be on trend with home decor, you don't get stuck with permanent pieces of furniture that you'll have to dump afterwards or try to desperately sell so that you can upgrade to the latest fashion.

Are 'Working Age People' Saving Enough?

Whilst reading the Sydney Morning Herald, there was an article saying that, "One of the nation's biggest superannuation funds has urged the government to encourage people to make more voluntary super contributions, saying most working-age people will have inadequate savings to fund a comfortable retirement."

The problem with those type of statements and claims is that the Australian super funds aka retirement funds, have no idea how much assets and investments that the 'working-age people' hold outside of super. So their comments aren't exactly applicable for certain subsets of the population.

Why would 'working-age people' voluntarily contribute more into their super funds when there are inherent risks in contributing more?

Risks such as legislative risk with successive governments constantly fidgeting with the tax rates and tax structures within the super fund environment. Increasing the access age also is a deterrent. Instead of being able to access at 55 years old, later generations are able to access at 68 years old. Lastly, the super fund's performances has been erratic at best. They charge fees to maintain and 'invest' our super money but I've yet to see my own fund outperform the index and justify the 'management' and 'investment' fees that they charge.

Not everyone is driven by the tax incentives and think that contributing the maximum into super is a great strategy simply because the tax on super is 15% on contribution and 15% on earnings. Even marginal tax rates of up to 45% outside of super isn't going to encourage people to maximise their voluntary super contributions.

So on the surface, if the super funds were to look at my balance or my friends' balances for example, then they're likely to see minimal voluntary contributions and think, "this generation has inadequate savings!". But they lack the ability to see that many friends and relatives prefer to invest directly into property and the stock market. It's not all about the tax savings! It's also about accessibility and flexibility to our savings, the ability to use our money however we desire and whenever we desire.

Once any money is voluntarily contributed into super funds, access is restricted. Early access is pretty much nil unless you are under extreme financial hardship and are about to be homeless, then you may be 'lucky' to be able to access $10,000 of your own money that's been locked up in super. The only other way you can have early access is if you've got a terminal illness. Those aren't attractive incentives to encourage my generation to contribute more into super.

Limited access and flexibility is a huge disincentive for the 'working-age people'. If those 'working-age people' are anything like my friends and I, then they'd prefer their funds outside of super so that it can be used to buy a house to live in, fund any family plans such as having children, pay for weddings, travelling and all the other financial demands of living life.

It's feasible for folks over 50 years old to contribute more to super but for Generation X, Y and Generation iGadgets, the restrictions are a HUGE disincentive.

So will my generation have a comfortable retirement just because we don't contribute large amounts voluntarily to our super funds?

Just by looking at my peers and friends' peers, I can resoundingly say yes. The majority that I know of, have invested outside of their super fund. They're saving and they're investing, but they're simply doing it outside of the super fund environment because the freedom and flexibility of using their funds however they wish outweigh the allure of the super funds' 15% tax environment that comes with plenty of strings attached.

Moving From One PPOR To A New PPOR

Sorry to any international readers but this post is particularly for the local readers in Australia.

What is a PPOR? A PPOR is the acronym for Principal Place of Residence. The Australian Tax Office (ATO) has various capital gains tax free arrangements for PPORs depending on when you moved in, when you moved out, when it was sold or how long it has been rented out for.

A friend of mine recently bought a new PPOR home. His previous house is going to be rented out when he moves into the new one. These actions have several tax implications.

If you find yourself in a situation where you've outgrown your current house, need to buy a new one and move into it but still wish to retain and rent out your old home, then there are a few crucial steps to take.

These steps help to ensure that you can minimise the potential income tax payable while the old property is rented and the capital gains tax payable later down the track should the ex-PPOR be sold.

The Three Scenarios

1) PPOR are capital gains tax free if you buy, move in and then sell and move out. Any price appreciation on the PPOR is tax free.

 2) However, if you buy, move in, move out and then rent the property without nominating a new abode as your PPOR(so you are renting your new residency), then the property can be rented out for 6 years before capital gains tax is payable on a pro rata basis.

3) If you buy a new PPOR house, move out of the ex-PPOR house and turn that ex-PPOR into a rental property, then capital gains tax is payable on the price appreciation on the ex-PPOR the moment it is a rental property and there is no 6 years of rental grace with regards to capital gains. Income tax is payable on all rental income, expenses for running and maintaining the property becomes deductible and various items and expenses becomes depreciable.

When You Turn The Old PPOR Into A Rental Property

This is a crucial moment for a few important steps to be taken if you wish to save yourself a lot of taxation headaches.

1) The moment that you move out, engage a professional property valuer to value your old PPOR before it is rented out so that any property price appreciation that the property has experienced thus far is capital gains tax free and you will only be taxed capital gains on any price appreciation once the property is available for rent.

2) Engage a Quantity Surveyor to provide you with a property depreciation schedule which consists of two parts:
       A) Capital Works Allowances which is depreciation on the construction cost of the building(items such built ins, kitchen cupboards, floor tiles, clothes hoist, toilet bowls and tubs) if the residential building was built after 18 July 1985. For applicable residential properties, refurbishments and renovation works are also deductible. Capital Works Allowances also applies to any structural improvements such as fencing, paving, pergolas, garden sheds etc that have been constructed after February 2002. 
       B) Plant And Equipment Depreciation covers items such as carpets, curtains, washing machines, stoves and hot water tanks for example.

Both Capital Works Allowances and Plant And Equipment Depreciation will be applied to reduce your rental income and thus, your income tax.

These are a few important steps that can save you thousands of dollars of income tax annually and should you sell the old-ex-PPOR in the future, potentially save you thousands in capital gains tax as well. And just when you thought relocating all the furniture was the hardest part...

Bought A House And My Portfolio Is Up 20%

Finally, Mr SMG and I have bought a house. If you've been visiting my progress bars on my homepage then you will have noticed that last year in June, I reached my goal for a house deposit and have since then, been house hunting madly. It's either dump the funds into another asset or leave it earning a pitiful amount of bank interest that becomes bugger all after tax.

After checking out almost seventy open house inspections, making a few multiple re-visits, reading property contracts after contracts, I can definitely say that I'm much more of a walking encyclopaedia when it relates to property structures, easements, covenants, location, aspects and layouts.

It's significantly tougher looking for a house to live in than buying an investment property(IP).

With IPs, you can literally overlook annoying little things like the ceiling being an average standard height or the bedrooms are smaller than usual. But oh my...when looking for a house to actually live in, the hunt is tougher because of minor things like some rooms not receiving sufficient sunlight(installing skylights being impractical or impossible due to the house being double storey), the kitchen pantry is too small, the ceilings aren't high enough, there is scruffy or dingy carpet that has to be pulled off and wooden floorboards installed, the master bedroom is too small, no built ins, the stove isn't gas but electric, the house isn't double brick, three bedrooms and one bathroom aren't big enough, it's strata or community titled and not free standing...so on and so forth.

I have absolutely no qualms about renovating but at this stage of my life, I don't have time to sniff paint, rip carpets off, drill and rebuild. Theoretically, ripping up the carpets, installing polished wooden floorboards, adding skylights, building outdoor alfresco dining areas, fresh paint, building built ins, renovating kitchens and bathrooms all add value to property than buying one that already has all those features in place(thus building equity to enable refinancing for further acquisitions) . However, like mentioned, I simply haven't got the time to do those things in the near future...perhaps with the next property in the coming years.

All these fussy complaints would have been overlooked if we were just buying another IP. If it was just another investment property, I'd have no issues with buying a single brick, fibro, cladding or whatever type of property as long as it met the simple requisites of location, transport, shops and possibly schools (it depends on which type of tenants you wish to target).

With our latest acquisition, my finances have become merged somewhat with Mr SMG's finances so it is getting rather difficult to break down the performance of my investment portfolio. The only thing that hasn't been merged or intermingled is my stock portfolio, which I'm happy to say actually grew by 20% over the past year. If you have read previous posts of mine, then you'll know which stocks I hold across the various sectors (mining, agricultural, retail and financial).

The power of compounding is nothing to be sneezed at. Every single dollar has been working hard over these years and it's amazing how much capital growth and passive income there have been from investing and reinvesting the income from those investments back into obtaining additional assets.

So far, so good.

Simple Ways To Increase The Value Of Your Home Before Selling

 

If you have ever tried to buy or sell a home before, you probably already know that negotiations can be tough to get the best price for yourself. The best way to quickly increase the value of your home in readiness for a sale is to embark on simple, but value-increasing home improvement projects.

These can be as extensive or as small as you would like depending on your budget. Ultimately, the smarter your approach to improvements before a sale, the better placed you will be to reap the rewards come sale time.

Here are a few clever ways to increase your home's selling price that won't take a lot of time or money.

Increase Curb Appeal

The first thing that potential buyers see when they approach your home is the driveway, the front yard and the front door. Since so many buyers make their decision based on sight alone, it is important to make a great first impression. ‘Curb appeal’ is an important part of the process, so you should be willing to spend some time tackling this. If you have a driveway, rent a pressure washer to clean it completely. Mow the grass, plant some flowers and even look to replace – or at least paint - the door if it’s looking a little dishevelled. Seems minimal, right? But this alone may be enough to plant a serious seed of approval before they even walk through the door.

Invest in Designer Flooring

Flooring is something that many people overlook when selling a home, but it represents a huge part of how potential buyers will perceive a property. Old, cracked or unattractive flooring can set the tone for the rest of the home, turning people off before they’ve even gotten past the entrance. Although elegant designer flooring might seem like a bit of an outlay at first, you might be surprised to learn that vinyl is actually very affordable, and these days pack a serious design punch. The contemporary styles can replicate the look of wood or stone and will give your home a stylish, modern look.

Replace Existing Window Treatments

Do people pay attention to windows and coverings? You bet you they do! Since curtains, blinds, shades and shutters take up a large portion of the home and are typically at eye level, any old and shabby blinds or curtains should be replaced. Dusty curtains should be wiped clean. A simple, sleek design works best for most homes, and white blinds can often be a contemporary option that blends in cohesively without imposing much onto the space. Replacing window treatments is a simple, but highly effective way of revamping the look of your home entirely.

Add a Fresh Coat of Paint

Perhaps the simplest way to increase the value of your home is to apply a fresh coat of paint. This simple task instantly eliminates any dings or scratches on the wall, and it makes the entire property look newer and more valuable. If you only have time to do one thing before showing your home to potential buyers, make sure it is repainting the interior of your home!

Update the Kitchen

The kitchen is often called the money-maker when it comes to real estate. Buyers like to see a kitchen with new appliances and a modern look. They want to be able to imagine themselves eating, cooking and entertaining within the space. Therefore it’s a good idea to dedicate some time and budget to this if you can afford to.

Simple ways to update your kitchen might include replacing some of the older appliances or resurfacing the cabinets. If you are short on time or money to do these larger projects, focus on thoroughly cleaning the kitchen from top to bottom.

Light Fixtures

Ugly lighting not only detracts from some of your other improvements, but it says something about the legitimacy of the overall improvement process as this can represent a massive weak link in the chain. Replacing old light fixtures with newer, stylish models does more than simply update the look of your home. It also acts as a way to make the property more energy efficient.

Signalling to potential buyers that the lighting is energy efficient and environmentally friendly will likely go a long way in keeping them interested. Select lights that allow you to dim in the main living areas as this will help set an overall tone and this is something potential buyers WILL test as they walk through your home. By the way - bright lights are fine for task lighting such as in the kitchen and wet areas.

No matter where you live, you are competing with many sellers in the same position as you. So think smart about how you tackle your home improvements and you will add value to your property, enabling you to demand a higher resale value. Increasing the value of your home is within everybody’s reach, and the short term expense of doing so pays off in the long run.

Sequencing Risks: Bad Luck With Bad Timing

Sequencing Risks: Bad Luck With Bad Timing

Been reading the papers and encountered a new financial phrase dubbed as 'sequencing risk'. So what is sequencing risk?

Basically it refers to the risk that you will experience annual returns in the wrong order. That a negative year or negative event closer to retirement is significantly more detrimental than a negative year or event occuring earlier on in your younger years. A negative financial event in your later years will impact on a larger balance than the balance you have in your younger years.

You may have heard the general idea that younger people have a longer time frame for their funds/savings/investments to recover and grow than older folks have.

The 'Woe Is I' and 'Poor Me' Attitude

Michael Drew, a professor of finance at Griffiths University commented on baby boomers and their bad luck and bad timing, "In their last decade of work, they experienced the bursting of the dotcom bubble, the subprime (mortgage) crisis, the GFC and they're now living through a sovereign debt crisis."

Those sequential financial events are nothing out of the ordinary if you analyse the global financial market going back to the 1930s. Does he think the last ten years are abnormal? If you look at the financial markets from the 1930s to the late 1990s, the business cycles have been marked with booms and slumps due to over gearing, too much loans, inflation and house prices escalating, Black Tuesdays, Asian financial currency crises and suicides.

2008 and the events thereafter impacting the financial markets are nothing new and I find it ridiculous that people behave like it was unexpected and a surprise. As markets rise, they eventually fall. If they don't drammatically fall, then they go sideways. Markets simply don't rise forever and ever in a straight line.

That's why retirement planning shouldn't always be about growth and particularly for those in their 50s. The reason why many baby boomers were caught with their pants down were because they hadn't saved enough in their younger years, and due to desperation to grow their retirement funds closer to their twilight years, they placed their money into growth funds when they should have been ideally moving their funds into more stable income funds or income investments (with a lower allocation in the riskier stock and property asset classes).

Close To Retirement?

Don't have all your funds invested into the stockmarket. If you've got ALL your savings and retirement funds saved in a superannuation fund(for Aussie readers) or a mutual fund (for US readers) then that is the WORST strategy you can ever devise for your money. Even if you have your money invested into two or three superannuation or mutual funds, you are NOT spreading your risk in the best way.

That is the worst investment strategy. Ever.  

The best strategy is to be diversified ACROSS asset classes (eg: property, stocks, cash, bonds, super/mutual funds) and to be diversified WITHIN the asset classes (eg for property- a mix of residential and commercial, for stocks- a mix of financial, resources, retail and for cash- in different banks and financial institution and for super/mutual funds- in different allocations such as property, domestic and international shares.)

5 Tips To Achieving Your Financial Goals For 2013

The New Year is in full swing, bringing with it a clean slate and a year full of promises. So if you haven’t set your financial goals for 2013 yet, then now’s the time because setting financial goals at this point of the year can mean a very different Christmas in 2013 to the one you had in 2012.

Different people will have different financial goals for 2013. For some, clearing credit card debt is a major win, for others putting more money against the mortgage. Some will want to set aside money for a new bathroom or kitchen, others for a vacation or dream purchase. To each their own. Irrespective of what your goal is, the important thing is that you have a financial goal for 2013. Whether it’s clearing debt, increasing savings or saving for a specific goal, any goal is better than no goal. It’s cliché but true; it’s very hard to hit a target if you don’t know where to aim!

Can you imagine yourself lying on a tropical beach in Fiji next Christmas? Or relaxing at home with a glass of champagne on New Year’s Eve holding a credit card statement bearing a zero balance? How nice would that be? And if these options don’t sound good to you, what does? At this early stage of the year, it’s important to think about your immediate, medium and long term financial goals, because the actions you take today will help bring you closer to your financial goals sooner. 

Tips To Help You Set And Achieve Your Financial Goals For 2013

The first step is to choose a financial goal that’s important and realistic to you. The point here is that there’s no sense in aiming for a Ferrari if you’re having trouble making ends meet day to day. Better to set a goal that’s focused on having enough money in the bank to cover unexpected eventualities so you don’t have the stress of living pay check to pay check. So take a good hard look at your current financial state and decide on a clear, simple goal that you’d be really pleased to achieve.

After you have your clear goal, write it down. And when you’ve written it down, put it everywhere where you can see it regularly: on the fridge, behind the toilet door, in your office, taped to your bedside table or your cat, even on the sun visor of your car. Doing this keeps your goal top of mind.

Then, every time you see one of your reminder notes, take a moment to clearly visualise the outcome of your goal. Take a moment to imagine the satisfaction you’ll get having a zero credit card balance, or to imagine the sun on your skin as you laze on a Fijian beach. Feels good, doesn’t it?

Now take action every day towards your goal. It doesn’t have to be massive action, but action each and every day will keep you on track and keep your goal top of mind. Small actions, like bringing your lunch from home rather than buying it or walking to work instead of driving, will keep you goal-minded and ‘on mission’.

Most importantly, if you fall off the horse, get right back on the horse. Life throws us curve balls at times, so if your goal calls for you to save a portion of each pay check but you get an unexpected bill, or heaven forbid you splurge at a sale, don’t beat yourself up about it. Just remind yourself what the end goal is and get back to your plan.

Life happens, so when it does, simply remind yourself what the end goal is, recommit to it, taking a moment to visualise it - then get back to it!

You can achieve financial success a lot quicker with a professional team of experts around you such as a great property manager, a fabulous financial adviser, an expert solicitor or lawyer, reliable tradesmen and a for those who live in Sydney and/or Brisbane, a team of Sydney Chartered Accountants such as Azure Group at your beck and call to help you with tax deductions and depreciations!

2013 can be a year of financial success, or “same old, same old”. Whether it is or not is up to you!

Questions To Ask Your Car Insurer

Everyone who drives a car should have car insurance. If you can't afford car insurance, then you can't afford to drive. If you can't afford comprehensive car insurance, then at least get third party insurance.

With so many companies offering car insurance quotes online, it’s never been easier to find the right car insurance cover for your needs. Having said that, it’s still vitally important to take the time to compare apples with apples after you have a short-list of prospective insurance providers to make sure you get the best deal and you understand the fine print. So after you have your short-list, take the time to get on the phone and ask them the following questions; it may save you hundreds of dollars on your premium and potentially thousands of dollars if the very worst should happen.

Claims

First, don’t be afraid to ask them outright about their claims process. It’s important to dig into the nitty gritty here to find out how long it normally takes them to process a claim and what factors usually slow down a claim process. Plus it’s worth asking, after a claim is approved who sources the quotes and repairers (you or them) and how long it normally takes to get a vehicle back on the road.

Vehicle

If you’re into modifying your car, ask them what, if any, modifications you can make to your car. The last thing you would want to do is obtain an insurance policy for a stock standard vehicle that then becomes defunct by you naively adding mags, extractors, or other standard and non-standard modifications.

Reducing Risk

Ask your potential insurer, what difference it will make to your premium if you install anti-theft devices like car alarms and vehicle disabling technologies. Installing an alarm or anti-intrusion device prior to obtaining a policy may reduce your premium, or at the very least reduce your theft excess.

What Does Your Rating Look Like?

Another question to ask is whether an insurer is willing to transfer your existing insurance rating and no-claim bonus from your current provider. These are key factors in determining part of your total premium cost, as well as reducing your excess, so don’t be afraid to ask as it can save you money.

Be Up Front

When you’re on the phone with insurance providers you should also come clean about your driving history. Some people may be tempted to try and leave out any negative incidence in their past, but insurance providers need to know if you have had any licence suspensions, as well as any history of accidents that you may, or may not, have been the cause of. Failing to disclose your driving history may sound like a good idea if you think it will save you money on your premium, but if you have an accident and your driving history is discovered your policy will become void.

It’s worth keeping in mind that your past driving history may not have as large an impact on your premium or excess as you may think, as the type of offence and the recency of the offence are both factors they will consider. A few extra dollars out of your pocket for the premium, or a slightly larger excess commitment, are small prices to pay to ensure you are adequately covered and protected.

Robert Kiyosaki: Retire Young Retire Rich

Robert Kiyosaki's book, 'Retire Young Retire Rich' makes a brash statement that it can teach you "How to get rich quickly and stay rich forever!" 

This book is all about leveraging. The power of leveraging. Your mind is one of the most powerful form of leverage in the world and what you think and believe will influence how you make your decisions and take action. Laws of attraction.

How to leverage your mind, how to leverage your plans, how to leverage your actions and the leverage from taking that first step.

The three main assets that you can employ to enable you to retire young and retire rich are:
1. Real estate
2. Paper assets/stocks/shares
3. Businesses

Most of his books have repetitious sections and again, constantly spruik his own cash flow game and various other products. For the sake of this book analysis, I read everything.

Leveraging your mind

* Learn investment terminologies and words. The more financial words you learn, the greater your ability to invest and take advantage of various investments

* How did Kiyosaki get wealthy and successful? He writes that it was by increasing his:
a) Business skills
b) Money management skills
c) Investment skills

* Words that will work against you:
a) "But we don't have any money."
b) "I can't do that."
c) "I'll think about it next year, or once Kim and I get settled."
d) "You don't understand our situation."
e) "I need more time."
f) "Maybe someday when I have the money I'll begin to invest."
g) "Do you know how busy I am? I don't have the time to to learn to invest."

If you haven't got any funds to invest, then you can invest in your financial knowledge by taking the time to learn about investing in property, stocks and businesses. It costs nothing to acquire financial knowledge now that you can use the internet and you can always go the old school way and borrow books from the library. It's free to attend auctions, free to ask questions, free to attend open houses and free to analyse investment deals even if you haven't got the funds to invest. By the time you DO have some funds to invest, you will already be an investment pro to some extent because of the time that you've spent investing in your financial knowledge.

* "...the middle class and the poor fall behind the rich is because they use the financial power of bad debt to fall behind in life. The rich use the financial power of good debt to propel them ahead."

* Kiyosaki believes that his wealth resulted from the three asset classes mentioned (real estate, paper assets and business) and these were magnified by leveraging OPM (other people's money) and OPT (other people's time).

* Kiyosaki doesn't believe in someone being lucky simply by being at the right place at the right time. Luck happens only when you're "educated, experienced, ready and prepared to take advantage of the opportunity when the opportunity presented itself". 

* The million dollar question that you can ask yourself. If you can answer this question, then you can create your own leverage into wealth: "How can I do what I do for more people with less work and for a better price?"

* "A person who thinks investing is risky will often find all the reality they want to substantiate that reality." Change your reality and your views in life by choosing to say, "How can I afford that piece of beachfront property?" instead of saying,"I can't afford it."


* Three form of income is mentioned:
a) Earned income - from your personal labour, your pay cheque, when you get pay rises, bonuses, overtime and commissions etc
b) Portfolio income - from your stock portfolio such as stocks, bonds, mutual/managed funds
c) Passive income- from real estate, royalties, patents and intellectual properties

* Earned income is disliked by Kiyosaki's 'rich dad' due to various reasons:
1. Highest taxed income with the fewest control over how much tax you pay and when you pay your taxes
2. You have to personally work for it using your valuable time
3. There's very little leverage in earned income and the primary way to increase earned income is by working harder
4. There is often no residual value for your work. If you don't work, you don't get paid.

* Again, Kiyosaki repeats himself from previous books:
a) Employee -> Earns, taxed, spends what is left
b) Business owner -> Earns, spends, pays tax on what is left

I'll use a simple example to illustrate this concept for you:
a) Employee with 30% tax -> Earns $100, is taxed $30, spends $20, is left with $50 in the pocket
b) Business with 30% tax-> Earns $100, spends $20, is taxed 30% on $80, is left with $56 in the pocket

* "The idea of working all your life, saving , and putting money into a retirement account is a very slow plan. It is a good and sensible plan for 90 percent of the people. But it is not a plan for someone who wants to retire young and retire rich. If you want to retire young and retire rich, you need to have a plan that is far faster than the plans of most people."

* "...you need to invest in what is going to happen, rather than what has already happened...If you want to see the future, you need to see it through younger eyes."

* "Over the years, we have attended many investment seminars, seminars on marketing, sales, systems development, handling employees and of course investing...I meet authors who did well in school as writers but their books do not sell as many as mine do. When I suggest to them that they attend direct marketing courses, or sales training courses, or copy writing classes, many get very indignant. As I said in Rich Dad Poor Dad, I am a best-selling author not a best-writing author."

* Calculate your wealth ratio. The goal is to have your passive and portfolio income exceed your total expenses so that even if you quit your 'earned income' job, you can still maintain your lifestyle. Once the ratio is 1 or higher, it's a choice whether you wish to quite the 'rat race' or not:

Wealth Ratio =    Passive income + Portfolio income
                                         Total expenses


Example: $600 passive + $200 portfolio  = 0.2 wealth ratio
                      $4000 total expenses

* "When I think of the millions of people who are betting their financial future and their financial security on a stock market I cringe. Millions of people are worried about their financial future as the number of layoffs increase and the market continues to fluctuate....there are stories of how retirees have lost most of their retirement savings to investment advisers and insurance salespeople they trusted..."

* "Your life will change forever once you know the difference between saving money and making money."

* "The most life destroying word of all is the word tomorrow...the poor, the unsuccessful, the unhappy and the unhealthy are the ones who use the word tomorrow the most. These people will often say, 'I'll start investing tomorrow,' or 'I'll start my diet and exercise tomorrow.'"

* If you see an opportunity arise but were unable to take advantage of it, then "you are at the boundaries of your context, what you think is possible for yourself, and your content, which is the accumulated knowledge via which you handle problems and challenges..."

* Kiyosaki spends pages and pages writing about your reality, how people don't realise that their reality is only limited by their mind. If you don't expand your reality then you will never see the answers to your problems because you are trying to solve your current problems with your existing knowledge and experience: "Most people try and solve their financial problems with what they know, rather than expand what they know so they can solve a bigger problem. Rather than taking on bigger financial challenges, most people wrestle all their lives with financial problems they feel comfortable with."

* In the book, 'Who took my money', you read about the E and S side of the quadrant and the B and I side of the quadrant. The goal is to move to the B-I side of the quadrant because income on the E-S side is limited whereas the earning potential from the B-I side is unlimited: "The trouble with selling your labour is that there is only so much you can do. If you learn to acquire or build assets to generate money, you can slowly but surely increase your income...your labour has no long term residual value. If you buy a rental property and you profitably rent it out, the labour you used to acquire that rental property can be rewarded over and over again, for years."

* "If you work slowly acquiring assets your income potential is infinite and that income can be passed on for generations to come. Your job or profession is not something you can pass on in your will to your children."

* "It is not your boss's job to make you rich. Your boss's job is to pay you for what you do, and it is your job to make yourself rich at home and in your spare time."

* "The moment you sincerely build a business or invest to increase your service to more people, you have forever increased your chances of becoming extremely wealthy and retiring young and retiring rich."

Leverage of habits that will make you rich

1. Hire a bookkeeper - having a bookkeeper keep your income, expenses, assets and liabilities in line so that you can keep professional records, have an unemotionally attached third party review your financial challenges so that you can make corrections via a monthly review of your financial situation
2. Create a winning team- the B+I quadrants are 'team sports' requiring team members such as your banker, accountant, attorney, stockbroker, real estate broker, insurance broker etc
3. Constantly expand your context and your content
4. Keep growing up- doing things differently as we grow older instead of doing the same old thing day in day out.
5. Be willing to fail more- by being willing to try new things and make mistakes
6. Listen to yourself- pay attention to what you are saying to yourself and focus on what you want from life and in your life

* "Kim(his wife) and I did not keep our money in a retirement account in order to retire young. We knew that we had to keep our money working, working hard to acquire more and more assets. Once our money acquired an asset, that money was soon reemployed to go out and get us another asset. The strategy we used to keep our money moving and acquiring more and more assets is a strategy that almost everyone can use."

* Comparing the stock market to the real estate market:
a) The stock market is simply buy or sell
b) The real estate market is negotiable- terms are negotiable, can lower or raise the price, can reduce expenses, can improve the value of the property by renovating such as painting, adding extra bedrooms, selling off extra land etc

* It does not take money to make money - Kiyosaki recommends people engage in option trading. I don't think I fully agree with his recommendation here because although you can write naked call and put options for a minor fee, if the naked options are being exercised by the holders of your put and call options, then you better HAVE the money to be able to buy the stocks off the put option holders or have the funds to buy the shares so that your call option holders can buy the stocks off you. So unless you wish to get into financial difficulty, it DOES take money to make money if you wish to pursue this particular strategy that Kiyosaki is proposing. Anyone trying to pursue this options trading strategy needs to ensure that they have backup funds that can be used to buy stocks off naked put option holders trying to exercise the put option that you sold them and similarly, have the funds to buy stocks that can be resold if holders of naked call options exercise their options.

I have to agree with Kiyosaki with respect to the statement that it doesn't take money to make money. You DON'T have to have money to make money. You can create money in so many ways even if you have zilch. If you are creative or have a great idea, you can sell your ideas. You have talent. You just need to capitalise on your talents, knowledge and abilities. You can create an intellectual property, you can create a blog (like this) from scratch for free and generate advertisement income from Google Adwords and from advertisers wishing to advertise with your blog/website. I created this site from scratch and it didn't cost me a single cent and it's been generating income for me. That's just one example. Obviously the more money you have, the easier it is to buy and create investments and the faster you make more money.

But work with what you've got. If you've got nothing, you can create something from nothing. The sky really is your limit. There is over 6 billion people on this planet and what is stopping you from generating a chunk of revenue from that population?

What would you do if there was no risk and it required no money to become rich?

Kiyosaki challenges us to think about what we would do if there was no risk and no money required to become rich. What type of business or investment or hobby would you start? What trade would you be in? Would you retire? Do you think that type of world exists? If you think that world is non existent, do you think you are destroying yourself by limiting your creativity?

In closing, Kiyosaki writes that "Leverage is power. Leverage is found inside of us, all around us, and invented by us. With each new invention, inventions such as the automobile, airplane, telephone, television, world wide web, a new form of leverage is invented. With each new form of leverage, new millionaires and billionaires are created because they used the leverage, not ruined or abused the new leverage. So always remember that the power of leverage can be used, abused or feared. How you choose to use the power of leverage is up to you and only you."