How to Control Your Financial Destiny

HOW TO

CONTROL YOUR

FINANCIAL

DESTINY

JENNIFER LANCASTER

Copyright © Jennifer Lancaster 2015.

First published in 2008. All rights reserved.

This ebook is licensed for your personal enjoyment only. This ebook may not be resold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

Published by Power of Words. Clontarf, Qld, Australia. www.jenniferlancaster.com.au

Disclaimer: This book is written as an educational guide only and does not constitute financial advice. While every effort has been taken to ensure all material is correct and up-to-date, the publisher/author takes no responsibility for errors or omissions. Each individual’s situation is different, and all readers should seek professional consultation before undertaking any investment-related strategies suggested herein. The author accepts no legal responsibility for the performance of any investment tools or products suggested herein. The author does not receive any commissions or benefits from any organisations mentioned.

Lancaster, Jennifer (Jennifer Lee), 1971- .

How to Control your Financial Destiny. 2nd edition.

1st edition called ‘Sack Your Financial Planner’ (2008)

ISBN 978-0-9804112-5-6 (eBook)

About the Author

Jennifer Lancaster spent fifteen years of her adult life working, travelling, studying, and shopping. Then she met the man of her dreams, had a baby, got married, stayed home, and had to stop spending... well, mostly! Not to let an opportunity slip by, she wrote of her tricks to save money in a little book, ‘How to Kick Bad Spending Habits’.

In 2006 the Lancaster family moved to Redcliffe, Queensland, to find an affordable home near the beach. While getting organised and saving, house prices moved up 20%. What a great time to buy (not!).

After purchasing a mortgage, the GFC hit, taking the regular business income away. The couple worked hard in new service businesses. Money kept in their offset account home loan came in handy in the down times, as did their built-in ‘granny flat’.

Now, with three businesses between them, the stability of having multiple sources of income has helped even out the bumps of life.

"Like many, becoming financially independent is our goal".

Other titles by Jennifer Lancaster:

Power Marketing: An Aussie Guide to Business Growth

Kick Bad Spending Habits, and Save for what you Really Want

How to Start a Freelance Business (ebook)

Contents

About the Author 3

Contents i

Introduction: The Right Mindset 2

Growing an Income for Life 12

Planning Ahead and Knowing Yourself 19

Financial Professionals:

Their Wealth… or Yours?

22

Income, Expenses and The Gap 29

Understanding Debt and Debt Reduction 37

Basic Investing Strategies 50

Choosing a Broker 56

A Retirement Nest Egg 60

Choosing the Right Wealth Vehicle 67

Following the Market Cycle 68

Property Vs. Shares Debate 74

Shares: What to Look For 81

Managed Investments 88

What about Super? 95

Direct Property Investment 105

Protecting Your Wealth 113

Tax Deductions and Other Rorts 118

Advanced Wealth Strategies 123

Returns on Investments 130

Furthering your Investor Education 136

Tips to Remember When Investing 143

Glossary 144

Appendix A – Family Financial Planner 149

Introduction: The Right Mindset

Most of us would like to be financially independent on retirement, yet few retirees achieve it. In fact, only about 6% of Australians are financially independent or wealthy. On retirement, the majority of seniors go from being independent to being financially dependent in some way.

While some retirees are proudly self-funded, most cannot sustain their former standard of living, surviving on a meagre portion of their previous salary. Because it is difficult to achieve ongoing passive income, we come to accept such a poor standard. Here are some startling statistics:

1 in 3 senior Australians live under the poverty line¹.

Average superannuation balances at the time of retirement in 2011-12 were around $197,000 for men and only $105,000 for women, meaning many will substantially rely on the Age Pension (ASFA).

Whereas wealth can be measured by net worth (assets minus debts), financial independence means not only money, but also freedom and control. We would probably all like to have the ability to control our financial destiny!

So how rich are we? As individuals, a 2014 report stated the median Aussie adult has a pot of gold of $258,0003². (Americans only have a median of US$54,000). But… 43 percent of household wealth is tied up in the family home³.

Households that owned their home outright (2.7 million households) had an average net worth of $1,237,000 (3).

So what is financial independence? I believe it is enough income to meet all of your needs – and some of your wants – without any assistance, be it from employer, government or family. It could be less than what you needed when you were working or it could even be more, if you have grand plans.

It’s obvious that many people want to improve their wealth, or at least their outlook. Millions have read the bestsellers, Rich Dad, Poor Dad, Think and Grow Rich, Automatic Millionaire, etc… So why don’t more people invest for the future?

It’s probably because they’re too busy spending it, thinking that they just cannot affect their own wealth. It seems shocking to me that many individuals who earn well over $80,000 per year admit that they can’t save anything. In fact, many are loaded with personal debt in their peak earning years. It’s almost like they have given up on allocating portions of their income to their various goals. This is reflective of a particular attitude to money – one author calls it a ‘money personality’.

If you understand the why, the how (of money) is much, much easier. You need to consider your core motivations, psychology and general approach to money – and how that differs to your partner.

– Greg Smith, author of Unlock Secrets of your Money Personality

Even though you may either be a spender personality, or have a spender telling you to lighten up, have fun and don’t worry about saving, if your goal is to invest for the future it’s important to make the necessary adjustment. Sorting out your wants from your needs is imperative to keep on financial track. If, after finetuning your monthly budget, you still feel that your regular pay is simply too low to put aside some, then why not offer your own talents and knowledge in your after-hours by writing, designing, or training / coaching others.

Immediate gratification cost you your wealth, but long-term, methodical, strategic vision builds wealth – John Demartini

Excuses, Excuses!

What other common excuses are used to avoid starting to invest? I don’t have time for all that research, it’s risky, I’m too in debt, my wife/hubby is in charge of that department, I’m going to win Lotto, I’ll die before retirement, etc. We’re going to refer to Lotto winners in a moment, but let’s cover some of those other excuses now.

Investing is risky

Compared with buying furniture or cars on credit (a sure-fire way to lose money), investing in growth assets is much safer: at least there is a good chance that the money will still be there next year!

The risks are more to do with the investor’s ignorance or greed (or combination of all three), than with the investment. Some people make money no matter which way the market swings!

I’m too in debt to invest

Much of the middle class in Australia use credit for consumer goods, whereas the rich use loans to build assets that will continue to grow, in order to support their lifestyle. Some families spend 110% of their total household income!

Accepting consumer debt as the norm, a lot of people just go get another loan or credit card transfer when they don’t have enough money for what they want. It takes a paradigm shift to start to see debt as leverage to build wealth, rather than as ‘lifestyle’ money.

If you are motivated to get on track, then once you commit to the discipline of paying off as much as possible, you’ll find it’s easy to continue the habit of automatically putting aside that amount each month.

I’ll talk more about debt later, since the pressure of housing and personal debt keeps many families from getting started.

It is not how much you earn, but what you do with it that counts.

I’ll die before I retire

In all probability, you will most likely survive to face retirement. Life expectancy improves with age, so for example, a man born in 1960 who has reached 45, can expect to live to 72.4⁴. But a female born in 2010 has a life expectancy at birth of age 84.3!

Even before normal retirement age, an unforeseen event may make you realise that you’ve neglected financial planning for too long… you and your family must struggle just to sustain your usual standard of living. Health should be a number one reason for financial planning. Suffering early-onset heart disease and cancer is a reality for many people, and it pays to plan ahead so you don’t have to rely on always working hard.

The Right Mindset

Belief in your investing abilities comes from small successes… experimental forays, not giant leaps. Expand your comfort zone slowly. Reading or hearing about similar people to us helps us believe we can do it too. We don’t learn as well if we think the teacher is far beyond us; they must be grounded. That said, ensure you are paying the teacher for education and not being led into any particular investment.

Start to bring people around you that are positive and enhance your self-worth. They will recognise your efforts to change.

A poverty mindset seeks problems. A wealth mindset seeks solutions.

An example is, a poor mind worries about the damage tenants could do so avoids investing, and a rich mind finds ways to minimise the risk, like landlord’s insurance, building