Note: This episode is a re-run of one of our older episodes. It originally aired on 8th June 2017 😊
According to Albert Einstein, “Compound interest is the eighth wonder of the world. He who understands it, earns it...and he who doesn't, pays it.”
In this week’s episode, Bryce and Ben discuss the fascinating power of compounding.
Tune is as they answer listeners’ questions, explain how you benefit from delayed gratification, and share their experiences and advice on property investing!
Free Stuff Mentioned
LISTEN TO THE FIRST 20 EPISODES HERE >>
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👉 Web platform: https://www.moorr.com.au/
FREE MASTERCLASS:
- How to Build a Property Portfolio and Retire on $2,000 a week >>
FREE BEST-SELLING BOOKS:
- The Armchair Guide to Property Investing
- Make Money Simple Again
FIND US HERE:
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Note: This episode is a re-run of one of our older episodes. It originally aired on 8th June 2017 😊
According to Albert Einstein, “Compound interest is the eighth wonder of the world. He who understands it, earns it...and he who doesn't, pays it.”
In this week’s episode, Bryce and Ben discuss the fascinating power of compounding.
Tune is as they answer listeners’ questions, explain how you benefit from delayed gratification, and share their experiences and advice on property investing!
Free Stuff Mentioned
LISTEN TO THE FIRST 20 EPISODES HERE >>
MOORR MONEY MANAGEMENT APP:
👉 Apple: https://apple.co/3ioICGW
👉 Google Play: https://bit.ly/3OT86bW
👉 Web platform: https://www.moorr.com.au/
FREE MASTERCLASS:
- How to Build a Property Portfolio and Retire on $2,000 a week >>
FREE BEST-SELLING BOOKS:
- The Armchair Guide to Property Investing
- Make Money Simple Again
FIND US HERE:
- Website
- Instagram
- Facebook
- Youtube
G'day Couchers, ben Kingsley here with another Back Catalog episode. This time, we're talking about compounding, or the power of compounding. It is the famous power that Albert Einstein once famously called it the Eighth Wonder of the World. So that's what we're going to be focusing in on here the power of value building up over time. And so this episode again another one of our foundation episodes that you must listen to. So check it out the power of compound. We're going back to episode 119, which was recorded back in 2017. We hope you enjoy it and always remember knowledge is empowering, but only if you act on it.
Speaker 2:Welcome to the Property Couch where, each week, you get to listen to two of Australia's leading property experts Bryce Holdaway, co-host of Location Location Location Australia on Foxtel's Lifestyle Channel, and Ben Kingsley, chair of Property Investment Professionals of Australia and the 2014 and 2015 Property Investment Advisor of the Year.
Speaker 3:Alright, folks, you're on the Property Couch for each week. Ben and I bring you the Insiders Guide of Property Investing Good old.
Speaker 1:Collingwood forever. They know how to play game. I was.
Speaker 3:Not only did I predict that I put a note here.
Speaker 1:No hellos. I knew it was Kallan.
Speaker 3:Go Pies For those New South Wales and Queensland listeners who don't give a rip about AFL and we get a few people right in to say just cut the 40. Clearly, ben's team gave my doggers a little touch up, just wanted it more, but I was prepared right. I knew it was coming. So what's your return of serve Well? Rule of statecomau.
Speaker 2:We shot a video. Yes, we did.
Speaker 3:And you had a little sneaky one liner at me at the end of the video. I'm off to watch Collingwood playing for the Don't give it away. So, folks, we'll have that up on our Facebook. The latest video in the series with ruleofstatecomau. The key here for all the listeners is go and check it out to see how I got one back on Ben at the end of the video.
Speaker 1:And mate, you bought a dog yes, well, jane bought a dog.
Speaker 3:yes, what sort?
Speaker 1:A brown one. It was a brown one.
Speaker 3:Any extra detail on that, or is it four legs Tail?
Speaker 1:Hasn't had a tail clip. I don't think they do clip these type. It's got two ears floppy ones. I had you let that happen, so no slobber. So I only had one request no slobber. And she doesn't like hair, so it can't lose its hair, so we've got a dog that's brown.
Speaker 3:That's it.
Speaker 1:You don't know what type it is Well Jane's 40th present to herself. She wanted it. The boys are happy. Oh, the boys would be Happy. Wife, happy, life Quite life.
Speaker 3:We're going to get one next year because we toyed with it this year as sort of the Easter gift to the boys and I just realised I wasn't ready for the early morning crying the laundry 12.
Speaker 1:Oh, last night, 2am in the morning and then you know like the toilet training going on Like. I come out this morning and there's three spots on the floorboards where you know it's a, so it has a name. Yeah, it took a while for them to decide on a name, but it's Bella, not Deafa.
Speaker 3:Not, deafa Not.
Speaker 1:Deafa Dog. Deafa Dog.
Speaker 3:Bella, bella, chocolate Bella, I'll look at you going all soft in your old no.
Speaker 1:That's not my dog. Good luck to them.
Speaker 3:I was just funny. I said to him. I said to him I guess what's? Sort Brown one, just a brown one, that's very very you know.
Speaker 1:it's a, it's a, it's a manufactured thing, Can it fit in Jane's handbag? Better not.
Speaker 3:I just did that on purpose. I did that on purpose. All right Today we are going to talk about compounding Ben, mastering the power of your money.
Speaker 1:Putting your money to work.
Speaker 3:Putting your money to work, so we've got a bit to talk about. This week, you and I wrote some features for the Money Magazine.
Speaker 1:We did.
Speaker 3:And that is going to be.
Speaker 1:You didn't know that I was doing a lot of work with money.
Speaker 3:So they got a property special coming up. So, once that's been released we'll let them know. We we contributed to a bit of that stuff. But, ben, my mindset minute today is actually Tom Panos who says this a lot? Yes 80% of winning is beginning, and context of that for me is you know what I'm like I love writing these articles, but I put so much into it that I procrastinate on them all the time. So in the end I decided to say to myself mate, if I just begin the day, I've got 80% of it done.
Speaker 2:And it's true.
Speaker 3:Because I said I'll just, I'll just get the rough aim.
Speaker 1:And then all of a sudden I'm off to the races and I read it last night and it was a cracker. So it's a great article. So 80%.
Speaker 3:There we go, folks. If you're procrastinating on anything, 80% of winning is beginning.
Speaker 1:So just start it and how to build a property portfolio. So, it's a really good foundation piece. I love it, yeah, so check it out in Money when it Comes Out in the next couple of weeks.
Speaker 3:Check's in the mail, mate. Thanks for saying that, and part of that is every winner was once a beginner. Yeah, there's a couple of pocket phrases. Others, even you. Hey, you were once a winner before you you were once a winner. You were once a winner before you're the champion winner that you are now, ed.
Speaker 1:Sheeran, best pop artist in the world at the moment. He didn't know how to play a guitar, but when he first picked it up, oh, don't talk about guitar. Oh, he's struggling. Talk about push-ups or a club, don't talk about the guitar. Don't talk about the guitar. Yeah, just to reach out to him. Don't talk about the guitar.
Speaker 3:Just to reach out to anyone on the podcast how do you overcome just that lack of practice thing with guitar?
Speaker 2:Finding the time.
Speaker 3:I just can't find the time All right. So, mate, we are going to talk about mastering the power of money.
Speaker 1:Yeah, just money.
Speaker 3:We don't talk about money. Should we build some context bent? Yeah, can I start?
Speaker 1:Just to throw you.
Speaker 3:Yeah.
Speaker 1:Because I know you like your structures. So GDP numbers came out, but there's also, you know, changes to how we're spending. We're saving money, I should say. So our saving ratio is sort of down around that 3 to 4% range.
Speaker 1:Now it was as high as sort of 7, 8% in 2013. So it basically means we've got a little bit of confidence out there, but a lot of people don't panic with that. That means we're still saving money. So generally we're saving money, but it is off the peaks of that. So that's a starting point. So if people are saving money, it means they've got surplus. The question is, what are they doing with that service and can you save your way to retirement?
Speaker 3:It's a good question. It's a good question, we might refer to that later you did throw me. So what's next?
Speaker 1:Why don't we read out one of the listeners' questions? I think that's a good start.
Speaker 3:That was a test in your path, will it All right? We've got one here from Chris. Hey guys Love the podcast. I've told so many people about you guys out there flying the flag. One day I'll probably knock on your door for a job. Seriously, that's what he said, so just on that panel just a quick way, oh yeah. Yes, if anyone is interested in working for Empower. Wealth. We have a number, we have a number of opportunities, so reach out to us. We might get more on that a bit later.
Speaker 3:But I find that one of the biggest advantages slash disadvantages to building wealth can be determined as to whether you are or aren't on the same page as your partner when it comes to finance and household spending. I meet so many people in life who are either money savvy to some degree or they just aren't. I love that. We all have different passions in life. It makes the world go round. But wouldn't it make life, relationships and wealth building easier if we all loved the concept of making our money work harder for us? We're all money smart. Thanks rubbish. Australian education curriculum. Yeah.
Speaker 3:Well that's it. Have a dig Quote, unquote With an asterisk. So my challenge is to you, not an easy one Do one podcast that, in the most effective mainstream fashion, gives those that aren't interested yet just a taste of how they must be money smart, because it is not actually that hard, how it can impact their lives so dramatically and how they should take a bigger interest in how to make their money work for them now if they want options of living a wonderful life, a life of experiences, inspire them.
Speaker 3:One podcast I can make my loved ones listen to make invite, encourage encourage to try and flick that switch in them to take more control of their finances with joy, like when I read Rich Dad Porthead. I know how amazing compound interest is, I know how amazing leverage is, but so many people just don't. Well, they don't know why they should be delaying gratification, so they simply choose to spend in a time that is crazy busy for you guys, building a business and living your own family lives and getting family pets. Well done on giving so much back to society. You never know how great an impact you have had on generations to come. Chris, thank you.
Speaker 1:Chris. Thank you, chris. Well, it's he said ask inspired the podcast so today's, podcast is inspired by Chris, so let's start with the most powerful thing in the universe. We've talked about it before the power of compound brass, so why don't we talk about compounding?
Speaker 3:yeah, well, some people might have heard of this, ben, but so the question is to the listeners would you prefer us to give you a million dollars now, or would you prefer us to give you one cent today and double it every day for 30 days?
Speaker 1:yes, that's a good question. So what? Obviously, naturally, you know, we've sort of we put you on a hook and the reason why we've done that is to, basically, most people say, just give me the million bucks. But obviously there's a reason why we don't do that, isn't it?
Speaker 3:well, Ben, there's right up until day 27. There's a reason why you would still take the million take the million bucks, so on day one.
Speaker 3:If I gave you a cent on day two, I gave you two cents. On day three I gave you four cents. Day five 16. Day 10 five dollars 12, day 25,200 I'm not feeling the price, give me a million dollars. Bros, give me a million dollars looking good, and then I'd fast forward to day 26,335,000 still give me a million dollars, five hundred and four dollars and 32 cents give me my million dollars. I'm still impatient.
Speaker 3:So, ben, I'm going to tease you right up to day 27 because, 671,088 and 64 cents up until day 27 you would have been better off taking your million dollars on day one what about that delayed gratification?
Speaker 1:don't be home bros, take me home day 28 1.342177 million.
Speaker 3:But here, jump one more day, 2.6, jump one more day 5.3. Here, in fact, the total is five million 368,709 and, ben, I'll throw the tip in 12 cents, you can have my million dollars, I'll take your five too late. You've already chosen. You've already chosen on day one that you're going to take your million.
Speaker 1:It's a power of compound and you know there is that video, the documentary on Warren Buffett, which we always, you know, we've come across in the last couple of months ourselves Warren Buffett becoming Warren, buffett becoming Warren.
Speaker 3:Buffett 99% of his wealth created after his 50th birthday, 95% of his wealth created after his 60th birthday wow, there you go talk about long-term investing so that is the power of compound.
Speaker 1:Now can I put that into a, just into a context, in regards to just 7% compounding? So that was doubling. So obviously that was a significant power. But if I had a hundred thousand dollars price and I had time, okay, so we talk about, we talk about our levers, income expenditure, time and target, okay, and I got a seven percent return on that hundred thousand dollars. Okay. So if I started at the age of 50, let's say, and I've got seven percent return, and I put that hundred thousand dollars to work, that hundred thousand dollars moves to 196 thousand dollars in 10 years time if I get a seven percent companion return per annum okay, better than poking a stick with sharp stick if I've got 20 years for that money to work for me, bryce, my hundred thousand dollars turns into 386,968 dollars.
Speaker 1:Well, and it's on, it's working for me, isn't it?
Speaker 1:Now if I had 30 years oops, 30 years where I had seven percent compounding return, that number has now increased to 700 and 61,226 dollars. That's just getting seven percent of my money. So when you put money into a check account and then one percent or two percent not good you've got to start thinking about how you're making your money work for you. If you put it in an offset account and you're getting, say, four, four and a half percent, a lot better because also the you know you're not earning income, so it's not taxable, so it's basically pure saving of interest, so you're reducing that cost. But then if you actually put that money to work for you and I want to bring the two together, I want to bring leverage and also compounding together in a minute. But do you want to talk to people, bryce, about how cash on cash return works?
Speaker 3:In fact, we did that in the real estatecom video we did so check it out. I guess what we're saying here to Chris, because we don't know if Chris is Christopher or Christine so we're saying to Chris that your partner first of all time in the market. Power of compounding, that's the first message you want to send. Then the power of cash on cash return is all about leverage, really, isn't it?
Speaker 1:It is, it is so look, we're not going to say shares, property or anything like that, we're just going to talk about the basics, okay, and for illustration purposes we're using a 10% common return. Now, that is a high number, okay, but it just articulates, it's just very simple.
Speaker 3:We're just trying to get very simple math's at 10% we've got a hundred thousand dollars.
Speaker 1:We've got two investments. If we got a 10% return on one investment, without any leverage or at any gearing our hundred thousand dollars, after 12 months we get $10,000 return, so we make it's 110,000 in total, but we've made a 10% return on our money pretty logical. Okay, what if that hundred thousand dollars could be a deposit and we could potentially gear that money so we could turn, we could use that money and also borrow some other money? So let's say we bought a $500,000 property. Now that means we have to take $400,000 in debt. Now this is keeping it very simple is obviously, if it is property, the stamp union, a couple of other things in there. So just want to make it for illustration purposes only.
Speaker 1:So we've got a $400,000 debt, so we've got an 80% leverage position. All right, so that means our return is now not on the hundred thousand dollars and this is the light bulb moment, hopefully for everyone it's on $500,000. We're controlling something of the value of $500,000, of which we're getting a 10% return on. So all of a sudden our return is $50,000 for that year. But there's a cost because we can't just go and bother other people's money without actually paying them for it. So let's assume that with the $400,000 that we borrowed, we had a 6% interest. So that means $24,000 of that $50,000 in value that we've created has now got to be returned or paid to the person who lent us that $400,000 ie a bank.
Speaker 1:So that means our net return is $26,000, so our cash on cash return is 26% because, we put $100,000 to work and now we've basically made $26,000 in value, which means that we've got a 26% return. It's a it's a big return in terms of what it looks like, so that is really good. Now I want to finish off, if I can, because this is, this is my little, so I'm bringing it home, I'm bringing home I'm gonna bring it home.
Speaker 1:So remember that first example I use where I had time, you know, and I said 10 years, 20 years or 30 years. Well, imagine if we could actually leverage. So imagine if we could leverage that money. So let's say we go back to that example where we've got the $100,000 okay, and we've got 30 years of time. Now we learned before that if we just got the $100,000 at 7% compounding return, that turned into $761,226. Okay, that's no gearing. Okay.
Speaker 1:Now what if we had 20% leverage on that? So what if we just borrowed 20%? That 761,000 turns into 800 and 32,000, just with that little bit of leverage. What if we had 50% leverage? That that $100,000 over 30 years turns into $1,044,608. What if we had 80% leverage? Now again, I am not saying to everyone go out and leverage yourself to the hill, because it's not possible for all people. You still have to cash flow management. We'll talk about money smarts later. Over the end of the day, because we're borrowing money and gearing at such a high level carries high risk, obviously higher returns. So it's really important. But let's say, hypothetical 80% leverage over a 30 year period, your $100,000, wait for it turns into $1.894 million. Okay, so that is a significant number, $1,894,755 if you combine leveraging, gearing Mate back when I was 22, 23,. When this came across my desk I was like I'm very, very interested, how do I make my money work harder for?
Speaker 3:me Is that all Just very, very interesting.
Speaker 1:I was a light bulb moment, you know like, tell me more. So then, what led me to property was the low volatility, the essential need that is shelter, the fact that the banks will lend me, you know, higher gearing, as long as I was really smart and sophisticated with managing my money. Now just a message to everyone. You can't tell everyone about this.
Speaker 4:Not everybody can do this. All right, because if everyone did it, it wouldn't work. So, chris, I know you want to shout to the world, but just keep it between us.
Speaker 1:That this is basically what you need to do all right, Because the reality is you can still do it in other investments, and Warren Buffett is obviously the perfect example of that. He understands numbers and he understands the power of compound. So it doesn't just have to be property. It can be a multitude of things, but that is the power of putting your money to work.
Speaker 3:Oh, mate, you are a genius. Seriously, how did he live with this stuff? So the point here for Chris is why should we be delaying gratification? Because if you put the money to work, and the longer that you're putting it to work, and if you apply some leverage, the results are infinitely powerful.
Speaker 3:That I think. A side note with this question too, ben, is some people just aren't motivated by money, and I grew up like I find that hard to understand. But I get as I get a bit older I meet people who just they're just not driven by money at all. So part of it here is one podcast how can I make my love? Well, you can't, but you can invite them and encourage them to see the power. But ultimately, the best thing you can do for you and your partner is to put some system around your money management, ie the money smarts and then hopefully encourage them to take a little bit of risk in the leverage example that you've talked about, so that you can actually get some exponential compounding returns from that.
Speaker 1:I totally agree. And whether you are interested in material things or not because a lot of us necessarily aren't I mean, I'm not here to have the Ferraris and have the, you know the ski pad in Aspen or anything like that, you just want the designer dog.
Speaker 3:Yeah, got that one.
Speaker 1:So I honestly talk. When people come in and have a consult with me, I have one question for them Is anyone here under sufferance? Now, there is a reason I actually asked that question, because the body language is there, you know. One sits down and they've got their arms crossed and they're leaning back in their chair and they're highly skeptical and I don't mind that. And the other ones really eager, they've been listening to the podcast, they're trying to get their other partner involved.
Speaker 1:So a few people nodding right now and the reality is it's like okay, so their trigger isn't money, but their trigger might be time, because if you have money, you actually have potential to free up time and for choice. So I then say to those people we do need to have this conversation about planning for retirement, because how would you feel if you had to work until you're 85? All of a sudden those skeptical people go hmm, fair point. So it's not about potentially super riches, it's just about sort of saying to yourself if I wanna stop work, what is going to supplement that income, what is going to give me that opportunity to stop work so I can enjoy it? Because you know the beneficial advancement in medical and all of those things means that people are gonna live for a long period of time.
Speaker 1:I mean, if we go back to our grandparents' generation, they retired at 55 or 60 and died at 62 or 63. You know our parents' generation. The baby boomers are now living in their 80s. You know our generation X and Ys are gonna live to their 90s. Now, that is 30 or 40 years that you need your money to work for you and you know your great money article just highlighted.
Speaker 1:If you didn't wanna touch the capital base and you just wanted to live off that with your rule of 25, check out the article rule of 25, coming out in the Money Magazine. That is conceptually true. So if you're only gonna build up a small wealth base, then the reality is you're gonna live on a pension and you're gonna be like the vast majority of Australians who are gonna be whinging about you know not being able to do anything and you know your weeks and months are gonna be about how you pay the power bill, how you just put food on the table. Well, a lot of people don't see that as quality of life and they're the people we wanna reach out to. They're the people we wanna connect to through this podcast in showing people a vehicle Cause all we are is just a conduit and intermediary to share our knowledge which has been passed on to us by the people who are before the Noel Woody because of this world. You know all those, the Alan Kohlers, everything like that the Jan Summers.
Speaker 1:Yeah, the Jan Summers is all those great people who come before us and we're harnessing that. Now we're trying to improve the efficiencies of that, trying to understand technology and innovation, to develop things like MoneySmart, understand and develop things like location score and things like that to help people try and select a better asset and try and get a better return.
Speaker 3:I guess for Stephen Covey one of his seven habits is first seek to understand, then be understood. So, that's probably a good message for Chris. Understand, you know, which is a segue from what you talked about Understand what's important to his or her partner and then talk to them, because my wife is not motivated by money. She doesn't give a rip about the minutiae of the ins and outs of it, but what?
Speaker 1:so my wife likes it.
Speaker 3:Well, no, no, no, she likes nice things, but the thing is she's not as motivated as me is to make sure that the MoneySmart system is in place, and you know, she's very encouraging of our property portfolio, all that sort of stuff. But she's interested in and so I talk in her language. She's interested in freedom, energy and experiences. So I talk about putting everything that we put into place will buy us more freedom, will buy us more energy and will buy us more experiences, and then I've got her attention.
Speaker 1:Yeah, and look, the state of your wallet plays you the state of your mind. So for some people it's really tough, you know, and you know those people who don't have really strong circumstances. They're still a road to a better and healthier and wealthier retirement. Those people who do have a lot of money, well, take pull a bit of it aside as well, and you're also going to be able to enjoy the spoils of the effort that you've put in over the journey.
Speaker 3:I always say that leverage, which Ben gave a beautiful example before, is the independent umpire that solves all barbara trade discussion spend. Shares are better than property. Cash is better than shares. I think we should go and get derivatives, whatever. I always say I'm pretty simple, bloke. Just keep it really simple If whatever asset I can get the most safe leverage on is what I'm most interested in.
Speaker 3:We've talked about that off a million times. We don't love property. We love it as a vehicle because of the leverage that we can get from it and the returns that we can get from that cash on cash return. It's productive.
Speaker 1:We talk about it being productive debt. So you know the three levels of debt you talk about. You know that's the main one. That's the one that sort of says okay. And put it into a property context. If I've got a 50% loan to value ratio, more than likely the property is neutrally or positively geared, so the property is actually covering the gearing through the rent. That's pretty powerful when you think about it.
Speaker 1:Now, if you go further and beyond that, with potentially no depreciation anymore, you're probably talking about having to then kick in. So if you're going to go to your 80s and beyond, that means your risk profile needs to be a lot higher. Your tolerance needs to be a lot better. You need to understand that by doing it too aggressively you could ruin it all and it could be a stack of cards on top of each other. So you just want to be sensible about that and that's why we really do focus in on, you know, cash flow management, borrowing power, asset selection and defense. We've got that perfect circle of A, b, c, d that people need to make sure that they don't just go hard and get too aggressive and get too greedy. They basically bring it back to the fundamentals.
Speaker 3:And Ben, you talked about the cash contribution. Some of the people that are negative towards property as a vehicle cite the fact that why would you just keep funding this property?
Speaker 2:that is a money pit to use in terms.
Speaker 3:It's because they're only talking from a 10-year time frame because, you showed it beautifully, warren Buffett's demonstrated it that it's not until the end of the game, and the earlier the start, the end of the game gets even more exponential that the benefit of holding multiple assets. You know, buying the right assets correctly, financing them, holding them for the long term and adding to your portfolio whenever your cash flows allow. That's the bit that's forgotten in that discussion. So, yep, you do need to kick the can.
Speaker 3:You do need to make a contribution you are gonna make a sacrifice. Can I spend that on my latte or do I put it towards a property? But ultimately, if you're playing the long game and you stick around for long enough, it's infinitely better off than having your cake today.
Speaker 1:Totally agree. I mean interesting. Last night I had a situation where I had a client come in and they bought a property not with us, and the property they bought settled in 2010,. They paid $369,000 for that property and the valuation of it was $404,000. Ouch, and they've had 100% gearing on that property and so once we work out the interest that they've paid on that property, that one has been a very poor investment. In fact it's been a negative return. Dud, yep, dead on arrival. No, it's dead. Dud, dud, dud, absolute DUD.
Speaker 3:That's what I love about you, mate.
Speaker 1:So I mean what are you doing?
Speaker 3:Acronyms or whatever you're doing. We just stick to dogs. Yeah, that's what we're good at Brand dog, brand dog.
Speaker 1:So that is. It looks a sad result. It's an absolutely sad result for that particular client, and so we've got to look at the opportunity cost of that in terms of what it looks like. So that's the.
Speaker 3:I guess it's having a little giggle in the corner over there.
Speaker 1:Oh yes, he has to, because I'm like is this an acronym or no? Just spell it out, ben, it's DUD. It's just as simple as that. It wasn't any more context, it's just.
Speaker 3:DUD Okay, got it wrong, simple, no, you're not, so okay, well, next.
Speaker 1:Okay, well, I think we now want to. So we've talked about the sort of two biggest things that allow us to look at money. Now we want to sort of we've got this great also message here from who's next one From Greg.
Speaker 3:So I guess, in wrapping that up, chris, is the discussion is find out what motivates your partner. Talk about money management from the perspective of that person's why, what drives them, what makes them passionate. Because you're right, money management is about putting a process, having a system in place, Because it doesn't matter if you're a doctor, a dentist, a janitor or a teacher. The money's flowing in, the money's flowing out, so it's what you do when it comes in the door, before it goes out the door. As to we'll determine the difference between you and someone who's doing a bit better.
Speaker 3:Now ultimately, if you get that right, Ben, you start as early as you can and you put leverage to work. That's as complex as the discussion needs to get. That's it, and then a few layers make sure you buy the right assets.
Speaker 1:So that they end up like your client and the future cash flowing. Make sure you find it's a properly or it's a stuff. The future cash flowing is where it gets a little bit more technical, but that's basically it. So, chris, mate, you've inspired a podcast, as you Glad you have.
Speaker 3:Chris, thanks for sending that in and hopefully that's helped and hopefully there's been a few nods with the rest of our listener base that can relate to that. So, Ben, with these rulesetcomau videos that we're sending, I'm sure that I'm gonna get some feedback about the one that's come out this week, because I talked about leverage in very simple fashion. So, but in the blog we go into more detail. That sort of unpacks the interest component of it.
Speaker 3:But when we're portraying these concepts on the couch. We just wanna talk top line so that we can just evoke some discussion. But we have evoked some discussion from the first one that we sent out. Yes, the first video, the first video.
Speaker 3:So this is from Greg Hi guys, I just watched the first video you've done with rulesetcomau. Congratulations on the partnership and great work as usual. Just one comment on the first video the savings investment glass got filled with what was left over, so if you don't know what that means, go and have a look. I'll just put that up. This goes against many of the gurus the richest man in Babylon, robert Kiyosaki, et cetera who all say pay yourself first. So in the video, the savings investment glass should have its share first, whatever amount the person has decided, and then the other glasses define up what's left over. Keep up the great work. So, ben, we're going against some of the Titans.
Speaker 1:Oh yeah.
Speaker 3:Have a look at this. I did a little Google.
Speaker 1:Oh nice.
Speaker 2:A little sense of preparation Good work.
Speaker 3:Little Google About pay yourself first, the first title of the article. Pay yourself first, the winning strategy to starting a savings plan, and then, as I said, we're up against some of the Titans. Robert Kiyosaki, number four, on his 10 key tips to becoming financially free. Number four is what Pay yourself? First Okay so even Kiyosaki says what about Dave Ranji? He's got a huge following in the States.
Speaker 1:He does.
Speaker 3:Savings must become a priority, not just a thought Pay yourself first. The richest man in Babylon, which Greg refers to, a part of all you earn is yours. To keep Pay yourself first and if that wasn't enough, we've got Warren Buffett. You don't want to go against Warren Buffett?
Speaker 1:then so we better be out of back ourselves up. We're picking a good forward.
Speaker 3:Here we go. Don't save what is left after spending, spend what is left after saving. So, mate, we are up against it if we're going to go against that.
Speaker 1:So we need to qualify it. So let's see if I can qualify this for you. So in the years and years and years of helping people manage money and look at their financial situation certainly if I'm trying to save money in other words, if I don't have an offset account and I'm trying to learn the craft of a money attitude and money habits, then I think we've talked about it before on the podcast where I have said pay yourself first. So I have no problems in the sense of getting into a routine and a habit of paying yourself for it if you are trying to save money. Change of power.
Speaker 1:Yeah because what a lot of people get caught up in is the plastic money world Too much money, too much month left at the end of the money. That's the one, and what's also happening there is because we see it in our account and we want instant gratification. We don't see it as physical money in our hands. We will get into the poor habit of spending it and that's why there's $33 billion worth of credit card debt in Australia because people think it's their money and then they justify it to themselves to go out and spend their money. It's not your money, it's the bank's money. They're making money off. You Fire up. So we need to make sure that we are being sensible.
Speaker 1:So if you were trying to change a money habit, I don't mind the idea of paying yourself first. I love it. However, when you're talking about money smart, which is a holistic approach to managing your money and also making sure that you're living a little today, I know there's the delayed gratification, but in some cases, households can actually do both. They can effectively enjoy life, get the kids into swimming school and still have some money left over, and when they've got that money left over, it's about putting that money to work. And so our system of money smarts is not about paying yourself first. It's about doing a breakdown of your budget and effectively determining living and lifestyle costs and determining where the build costs are, and then working out a weekly amount that gets sent into a separate account with a debit card and you live to that amount.
Speaker 1:So it's not about paying yourself first, because the goal with this is the money stays in the offset account, and so if you were paying yourself first, then you would be tempted. If you haven't built a better money routine and better money behaviors, you could still fall back into that trap of saying, oh, that money's there, I'll spend it. So the reason why we separate out living and lifestyle into a separate account is because you've got to float. You talk about it the seven day float, don't you Bruce?
Speaker 3:I do Seven day float. You've got to find out how much it's going to cost you for seven days and if after four days you blow the entire float, don't go back to the well, make do for the next three days until reset button gets hit, because once you build that behavior and that habit up, it's incredibly powerful.
Speaker 1:And you blink and six months later it's like oh, we've got a bit more in the offset. And what we've just talked about is if you can then demonstrate that ability to trap that amount of money instead of having it in your offset price? What if?
Speaker 1:you bought a property with it. What if you had productive debt? What if you controlled a bigger asset that was growing with compound return, got me sold All of a sudden? That's the process you do. And what if you replicated that over 20 years or 30 years and bought four properties? Wow, imagine.
Speaker 3:Game over. Job done 91% of all property investors stop at one or two bends. So if they disimplied what you said, they might be one of those people to get three or more.
Speaker 1:This is where we drop the mic and we walk off. Job done, that's it. No other podcast to listen to guys. That is the science of what we do. Now it does get a little bit more technical because we've got future plans, maybe private school fees and all these other rocks in the jar that we want to do. So when we bring it back to goals-orientated financial planning, that's where all of it comes together. So, because, again, I don't want you to sit here and living on crackers and Vegemite until you're 65 so you can then have your first experience on a jet plane. Ultimately, it's about making sure that you are definitely enjoying life, because there will be times in life where you have some hardship. That will be times in life where you have some sorrow, where people die in your life and that will question your values, and those types of things are where people potentially have big change. They have radical change in their life.
Speaker 1:Now we also hear about if you're listening to podcasts, and people say how did you change your life around from being dirt poor to being wealthy? Well, I had this moment in time where I had six dollars left in my back pocket and I said I never wanted to be like that. So these people, that's their why, that was their motivation, their drive to be able to change. But for the rest of us, it could also be in reverse, where we do lose a loved one. I was unfortunate to lose a loved one in terms of my brother's fiancee at the age of 37, three boys with my brother terrible, terrible situation. But I noticed some of our friends saying that's it, I'm going to live life to the fullest now, because you could be gone tomorrow and it's like, well, you could also live to 100. And so you know, the challenge for you then is you're going to be working all your life if you do take this live now, live forever. So I think it's all about getting the balance right and making sure you're not too extreme in each angle.
Speaker 3:So, greg, I think it's important to realize that we actually agree with what you're saying.
Speaker 3:So we're not actually going against what these titans of money management across the world are saying.
Speaker 3:What we're saying is we want to use that as a base and build some further context to that. To give an example, ben, when you think about what's called the cup size, when I'm a graduate and I have a graduate salary, I then have a graduate style rental accommodation, I've graduate style car that I roll around in, and then I get a promotion and then all of a sudden, I go and buy a better car and I move to a better house and I start drinking better red wine. And as I go throughout the cycle of life, as my income grows, I usually rise and fall to the level of my cup size, and that's what we're trying to avoid through the Money Smart. So if you were to adopt the approach of pay yourself first, which is a good one, and I've got a $2,000 pay rise and it says pay yourself first 10%, I'm going to pay myself 200 bucks and then the remaining 1800 bucks I'm going to lift my expenses, whereas we're saying, no, don't do that. No don't.
Speaker 3:If you get that, if you do the system, the Money Smart system, if you get a $2,000 pay rise and you get what we've been talking about for the last 25 minutes, don't actually increase your expenses at all. Just park it in the Money Smart system and you will get further compounding.
Speaker 3:you get further leverage Because, ultimately, if I get a $10,000 pay rise, the same thing my expenses are going to continue to grow if I only adopt the pay yourself first philosophy and spend what's left. We want to flip that on its head. But you're right, I agree that it's a very noble paradigm shift for people who don't even save in the first place, because if you pay yourself first, it's just saying you're going to live within your means and you're actually going to keep your costs at a point where you can afford it on the remaining 90%. But as you get advanced and as you build some layers around your money management level of literacy, we think that there's another layer that you can go to, which is Money Smart.
Speaker 1:Correct, because if you do that you are actually accelerating the time in which you can retire. So if you were to say $1800 comes into the pot and $200 goes to discretionary, as opposed to the other way around, save 10%, man, I mean the compounding nature of that, either buying more property or retiring debt, because obviously we go through an accumulation phase and once we've got enough properties, it's about retiring that debt out. That is the powerful thing. So is it, mr Money Mustache?
Speaker 3:Mr Money Mustache yeah Like here's the perfect example.
Speaker 1:He was earning a certain amount of money and once he got to that he didn't change his living and he found joy in building and keeping his hand and just productivity, and life for him was about making stuff with his hand. So he's found his niche and the thing that makes him happy Now the reality is is he's found also more money. Because a lot of people are thinking well, what a great story. And obviously we've got Simon and Sarah, who we also know, who you know were in their early 30s and they're retired Because they have a certain standard of living that they are very happy with. But what others might say is frugal, living for them is complete happiness and joy, and that they haven't spent or their money is making money. Their investments are making more money than they're spending.
Speaker 3:And they're absorbing the criticism right now as they're traveling through Europe. I need to work for a living, yeah, so it's all.
Speaker 1:It's all about just basically exploring this idea of money management and and taking the journey that's most appropriate for you. And if you've got a loved one, it's about connecting together and then understanding, bringing it back to core values, bringing it back to, you know, personal and financial goals. Not just financial goals, guys, but personal. The money's got to mean something. If you're just doing it for money and money's sake, you ain't going to be happy. It is not going to buy you happiness. So, you know, get to that sort of sit down, work out the goals that he's going to be important to you and then go on that journey and plan it out. You know, plan to become what you plan to become.
Speaker 3:Very good, ben. I think it's a really timely message, because people are now going to be faced with a choice Depreciation changes have happened, there's economists calling the top of the market, and so people are now going to be faced with that decision on whether they will still invest going forward, because the front page of the newspaper isn't going to be as friendly as it's been for the last 10 years.
Speaker 1:Definitely not.
Speaker 3:And now and our suggestion to them is is has. If they rewind to any of our previous podcasts, it remains the same Keep accumulating good quality assets at the point when your cash flows allow, because your balance sheet will fluctuate over time up a bit, down, a bit, up a bit but as long as the overall picture, if you're playing the long game is, it's much higher than when you started, that's what you want to do. The only thing that will fluctuate between now and the next 10 years is the amount of cash flow that you have available to invest, so I think it's really important to heed this message at this point in time. Ben.
Speaker 1:Mate, I summed it up Beautiful. Well, I reckon that's that for me, this is one of my favorite episodes already, because I'm sort of thinking about that's it. We've got, we've got all the foundation stuff in there.
Speaker 3:Well, all of our listeners have been around with us since episode one. We've built all these foundations for them.
Speaker 3:So now it's just around getting okay, reframed on the why which you've eloquently put, and then playing this out over the long game. Because anyone who's been doing this long enough talk to Jan Summers, talk to Craig Stevens last week, talk to Brad Teal, talk to you and me. We've been doing it for a long time. We've seen stuff come and go, We've seen cycles, but hanging there for long term, Just hang. Just make sure in any time, when it's a good time and when it's a bad time, that you make decisions based on cash flow household, rather than putting yourself under pressure.
Speaker 1:And some of those might be tough decisions, they might be hard to stomach. Like you know, the guy last night that I was speaking to we've got to get rid of that property, more than likely, because it's not going to give us the return that we want. So we've been chasing all this cash and, sorry, chasing potential wealth. But we've, you know, in terms of asset selection, we've, we haven't got a good one.
Speaker 3:Very good man You've been up and about. I've loved this episode doing it with you as well, mate, so well done. A couple of housekeeping things yes, we have got a location school webinar coming up next week, Ben.
Speaker 1:We do Well it's. We're recording it next week, but it'll be available as soon as we get it nailed. So I don't want to put a date stamp on it, but obviously location score is is is in in train and that's exciting for us.
Speaker 3:So there's a bit to show people, isn't there?
Speaker 1:So, we're.
Speaker 3:It's not easy to just say this is what you do.
Speaker 4:We're actually going to show them, so Ben how can they, how can our listeners register?
Speaker 1:So they just go to locationscorecomau and if they put their details in there and we're going to ask them a couple of questions about what they want to see in the research platform. Look, you know, we've tied, we've made our final decisions in terms of what's going to be in that research platform, but guess what? Your information is going to potentially build phase two or phase three or a whole new research platform that helps people get better at asset selection. So we absolutely love the feedback in terms of what type of data you want to get your hands on easily enough. So we've, we've, we make. Location score is a very simple product to use. We're starting, you know, as a catchall. Very simple, pointing you in the right direction. Don't want to get too much more away, but that's it. So go to there, put your registration in there and then Ivers will send an email out and letting everyone know that the webinar is now available and it'll be an on-demand webinar.
Speaker 3:So that'll be yourself and Jeremy, and myself and we might even have Ivers having a little cheeky giggle in the background as she loves to do, and a couple of things. Ben, we've clearly talked about MoneySmartz today.
Speaker 3:So, for those folks who haven't got the MoneySmartz system out, for those listeners who have heard us mention the MoneySmartz system and you've gone. I've got to get around to that. I've got to get around to that. If that's you, if you're nodding right now, stop what you're doing. Go to the propertycouchcomau. It's on the home page, you can't miss it. Put your name there, put your email address and we will send it to you instantaneously so you can start doing that straightaway. Ben, it'd be mad if you don't do that. Also, social media at the propertycouch at Bryce Holdway, at Ben Kingsley, au. And also keep an eye out for the Money Magazine that's coming up.
Speaker 3:Should be out at the end of this month Ben so for people to check that out and see, you contributed three or four times, I contributed three or four times. There's a bit of content. So life hack, a little bit of a shout out to our community band.
Speaker 1:Yeah, please.
Speaker 3:I don't want to do any life hacks that I don't implement myself.
Speaker 1:OK.
Speaker 3:So I could just go. You liked my little post at note on the keyboard. I actually have done that once, so I'll say it once Several times, I'm sure. But so a little shout out if they want to send me on any of my social media.
Speaker 2:Good.
Speaker 3:Just let me know any of your life hacks. I'm actually generally interested, because then I want to road test them myself implement them see if I can add some value, and then I will implement it onto the community. So let us know, and of course Ben, if someone's got a DGNA, that reckons the community would better for them.
Speaker 1:You want to do my job for me?
Speaker 3:Yeah, that's brilliant, so I wouldn't have phrased it that way, because that implies that I want them to do my job for me on the life hack. But yeah, so let us know. So my life hack is for you and Jane today.
Speaker 1:OK.
Speaker 3:Because I don't think you're mind me telling you when you're in a phase of building at the moment your house Rehabiting? Yes, so you're not currently living in your principal place of residence.
Speaker 2:No.
Speaker 3:So you will, at the end of the year, move from where you currently are back into your beloved home.
Speaker 1:All going well.
Speaker 3:All going well. So Marie Condo wrote the book the Life Changing Magic of Tidying Up Ben and I've read it. And I bet you just can't wait to get a copy of this.
Speaker 1:Oh, I bet you, I can't wait to give Jane a copy.
Speaker 3:No, just here's the thing Andrea bought it and then put it on and I just couldn't put the damn thing down. I'm thinking, really, bryce you a tidying up book, but it's for anyone who wants to tidy their house once in a lifetime. So what it does, ben, is it says arrange all of your belongings into a category. So, and Andrea and I have done this twice now and it's really powerful. So we go around the house and we grab all of the kids toys and we put it into the middle of the room, not just the toy room. We go into the bedroom, we go into the living room and just bring it, and then we arrange them and we go OK, which ones are we going to keep? Which ones do we see the kids using and which ones don't they use anymore? So we can pay those ones forward. Yeah, yeah, yeah.
Speaker 3:And so Marie Kondo says, when you look at it so I've done it with clothes as well. Do you know you keep that loud Hawaiian shirt that you've had since 1987?
Speaker 2:For the beach party.
Speaker 3:But what if someone says they come to my 50th party with a white shirt. The question is does it make you feel good anymore? Does it make you feel happy, or would you move that one on? So here's the point, Ben. Here's the point Start with the easiest category clothes, then books, and then go all the way to the sentimental items.
Speaker 1:Because if you start, so this is declutter or this is this is declutter and dividing up, so you only have to do it once. But you're in a perfect position, mate, because you're about to move back to your house, so now you could start to you know. Here's the irony right.
Speaker 1:Because it's a renovation, so it's not a complete rebuild. So we've got to truck a lot of stuff back at the other house. It's a good test If we don't actually use it for the six months that we're in the new home. We shouldn't probably have it, should we?
Speaker 3:Mum rang me the other day and she goes mate, you're coming over at Christmas time. We've got all this stuff in the shed. Dad wants to know, should we chuck it out or should we wait for you to get here to see if you want it? I said mum, I left Perth in 2002. It's 15 years. I don't even know what the stuff is.
Speaker 1:Well, there might be a little book in there, but so I said unless you can see some.
Speaker 3:if you feel it's got some uber-emotional value, get rid of it, get rid of it. So this is the point we hoard stuff right it doesn't necessarily make us any happier. So start with the easiest category. Entity wants to make the lasting change, ben. So a place for everything, and everything is a place. That's so. You Speaking of my language, but here's the tip for you you have to let things go. So I've made a little underline for you. The 1990 AFL group mate you might have to just let that thing go.
Speaker 3:Have you watched it? When's the last time you've watched it?
Speaker 1:When was the last time I watched it? Yeah, 13 years ago.
Speaker 4:Yeah probably it's got to go, mate. No, I've watched it since then.
Speaker 1:But what about my premiership thing on the wall with all of the sign players? Do I throw that out as well?
Speaker 3:Yep, no, that may be same, but the whole point is in discarding, and keeping things is to be happy. So the real problem is that we have far more than we need or want which actually plays into what we've been talking about today.
Speaker 1:Priority so here's it.
Speaker 3:Do you know how you get a double word in Scrabble Ivers? I am getting a double life hack Because this book that I'm talking about you can read on Blinkist.
Speaker 2:There we go. What do you really want? A double word, mate Double double word, doubled up.
Speaker 3:So there you go, folks, the life-changing magic of tidying up fellas. I'm telling you that shed will never look as good as if you read this book.
Speaker 1:Imagine if you brought that home to your wife. Just the brownie points in that.
Speaker 3:Oh yeah, you're going to get a brownie point with that mate. You got to be sensible about it. You got to be sensible about it.
Speaker 1:Well, you got to be sensible about it. You got to say we're working on this together, Don't just say here, honey.
Speaker 3:My tip to you, mate, is you read it first and then implement it Then you're going to get a brownie point. But the Blinkist, I'm thinking of you, mate. Oh, I've just clapped me.
Speaker 1:Well you are a modern Australian, Modern Australian, mate Well.
Speaker 3:I often get in trouble with what.
Speaker 1:I say on this I saw a girl who got grabbed in my back. No, I think it's absolutely fantastic.
Speaker 3:Did you know? Did you know?
Speaker 1:Drum roll. How did it get to? 52 minutes, 100 and four quarters, 104 quarters of positive economic growth in Australia World record. We're beating that lens. Well done. One generation of Australians have never lived through a recession, a technical recession, two negative quarters Anyway, that's pretty big. So we've now passed them. Now sluggish quarter though 0.03. So 0.3, I should say 0.3 of 1%. There's a but.
Speaker 3:There's a but to your good news.
Speaker 1:Bringing the annual rate down to 1.7. So we like to be in that 3% plus range. That's where most people have got full employment and the world's moving in a nice direction for Australia. But yeah, we are blessed to live in Australia. It's the best country in the world, agreed, we go to work, we contribute, we have a great life. We've got some of the best living standards, certainly, quality of life, standard of living, some of the best in the world. We're a very wealthy nation. We're very blessed to be here. So congratulations to Australia for taking the world record for the longest economic growth story.
Speaker 1:Alan Bond as he's lifting the winged bill as a CEO comes out.
Speaker 3:If everyone can see that. I know it doesn't work on a podcast with a caretaker.
Speaker 1:So I think I know I did the lead up to that, but yes, it's official now. So, because we had that positive quarter, because we had had a negative quarter, interestingly we would have passed because it's two negative quarters, but it wouldn't have felt right.
Speaker 3:Just wouldn't have felt right if we it's like Steve Bradbury winning a gold.
Speaker 1:That was gold. We get over the line and we had had a negative quarter. And then because obviously Cyclone Debbie was at the end of March, right. So the challenge is we might have a negative quarter for the next quarter, so we could have gone. We just we beat you technically because our first negative quarter was the 104th quarter, but we don't have to worry about that now. Point three got to save the line, but we still have troubles in the next quarter. But after that we should see a little bit more.
Speaker 3:As the executive producer used to always say to me on the show Ben, don't let the truth get in way. I have a good story. Don't let the truth get in way.
Speaker 2:There we go there, we go.
Speaker 3:All right, Well, big, big episode Ben.
Speaker 1:Yep, and I've got a sign off now. Oh yeah, I'm changing. Oh, I'm not going back to languages. Oh, oh, oh. I've got a little sign off, oh really.
Speaker 3:OK, here we go, folks.
Speaker 1:Because how I used to use it, I mean, our business has turned 10 this year. Oh, ok.
Speaker 3:And so enough. So we've grown up.
Speaker 1:Some of the first newsletters that I used to write used to have a sign off, and that sign off was All right.
Speaker 3:No, let's build it up. Let's build it up, and I do it in the books for some of the people who want us to sign.
Speaker 1:So I was. So you know. And if you haven't bought a book, check it out.
Speaker 3:Well, it's been a great episode, Ben so until next week.
Speaker 1:Knowledge is empowering, but only if you act on it, so I used to sign off. Knowledge is empowering, but only if you act on it.
Speaker 3:Oh, I like it. So the question is that enduring, or is that just this week? Is that?
Speaker 1:it really no, maybe every now and then, I mean, you know, knowledge is empowering, but only if you act on it. People.
Speaker 3:There you go, folks. Time to act, and until next week.
Speaker 1:So you like it, so you like it. So you like it.
Speaker 3:Hey folks, bryce here again. I just wanted to catch you real quick before you go. If you're new to our community, I want to encourage you to listen to our very first 20 episodes, as the concepts we share in EPS One through 20, are foundational principles, pillars and frameworks that you need to know for you to get the best value from our content week to week on our show. My little tip is to listen to it at one and a half speed. Now, for those of you that are time poor and don't have the option to go back to the beginning, don't worry, because we've got you covered as well.
Speaker 3:We've created a binge guide that summarized these foundational episodes into one easy to digest booklet so that you can get up to speed super fast. So go to the show description on whatever device you're listening to now and simply click on the first 20 episodes link to download it straight away. Oh and, by the way, whilst you're there, you'll find a few extra goodies for you, including a link to download our lifestyle by design app more, the home of Wealthspeed and Wealthcock, and our hugely popular MoneySmartz Money Management system, as well as how to get free copies of our bestselling books. Now, just a reminder that anything we cover on this podcast is not considered to be financial advice, and we certainly recommend that you seek out expert advice tailored to your unique circumstances, and everything we talk about is general in nature. Folks, I want to encourage you again to click on the show description, wherever you are listening, to access all the free goodies we have for you Until next week, thank you.