Negative Gearing - What is it all about?

Negative Gearing

"Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy. - Groucho Marx"

You'll often hear about rich investors utilising negative gearing to purchase investments (such as property or shares). Negative gearing is simply getting less income from an investment than what you incur in expenses. The most common example is the income you get from property (i.e. rent) is less than the cost of holding the property (includes interest cost on the loan, strata, and outgoings). Keep in mind these expenses are accounted for in your tax return and reduces the tax you will need to pay. 

On the face of it, it sounds strange. Having an investment which ultimately is losing you money. Let's say if your rental income is $400 a week, which is about $1732 a month. During the same month, your interest charges is about $2000 a month. For simplicity we will assume no other expenses or outgoings for the time being. We can see that the deficit is $268 a month ($2000-$1732) which we have to pay out of our own pocket.

So in your tax return, you declare the $20,800 in rent that you received during the financial year. Expenses, for simplicity, would be $24,000 resulting in a yearly loss of $3,200.

Now, let's say your taxable income from salary/work is $60,000 a year. Adding the $20,800 rent, but then deducting the expenses of $24,000, results in taxable income of $56,800. So we will pay tax on the $56,800 at your own marginal rate (you'll immediately see we will pay less tax as we have lower taxable income). Effectively we save tax of $3,200 times your marginal rate. At 2014-2015 rates, this is on the 32.50% tax bracket, so $1,040 tax reduction is obtained. The net cost of this investment is $3,200-1,040 = $2,160 a year.

This is the main reason why investors have a big advantage over someone that buys a house to live in, also known as the principle place of residence ('PPOR'). While the investor can deduct the interest expense they incur in their tax return, the PPOR purchaser does not have this same benefit. This is also a reason why interest only loans appeal to investors. They can have the maximum deductions on their tax return due to maximising the interest they pay. They want to maximise tax deductible debt, while minimising non tax deductible debt such as the one on the PPOR. 

Now, there's a few scenarios that can occur over time:

After a while, 2 things occur which should hopefully mean your once negatively geared investment becomes positively geared. The first is that as your loan balance reduces, your interest payments to the bank also reduce. The second factor is that rents are expected to increase over time to reflect inflation and market demand for the area. These factors can mean the income you receive from the investment is more than the expenses you incur from having this asset in your possession.

The return on investment has 2 sources of value – one is the income stream from the rent, and the second is the potential capital gains from the increase in value of the property. In a few years, the investment may still result in yearly losses for you. However, as the Sydney property market has shown, property prices can increase significantly over the course of a few years and this has been the case for pretty much every suburb in the state. Heck, most of the country has experienced surging property prices. The ‘gamble’ is that property capital gains will outweigh any loss during the waiting period or that the income stream will increase by enough.

• o   Let's say after 5 years, your property has increased by $250k. Assume that during this time the rent hasn't increased as much as the home value so chances are your property may be still negatively geared
• o   If we continue with our example, with yearly after-tax expense of $2160 a year, then over 5 years, we are $10,800 out of pocket due to the investment
• o   Should we decide to sell, the after tax profit at year 5 would be $250k increase in value, less tax on the discounted capital gains balance (‘CGT’), less the $10,800 we incurred over the 5 years. A very simplistic explanation of how CGT is calculated is that it is the difference in value when we sell the investment and when it was purchased. When it is held for over 12 months, you pay tax on 50% of the gain at your marginal rate, instead of the total difference.
• 
  

Now, here’s the kicker. You don’t even have to actually SELL to unlock the value from the investment when it has increased in value. What many people do is refinance their existing loan to borrow more money. The value of the property has increased so the bank is generally willing to lend more to you. Where previously you borrowed 80% of the original value, if your property did increase by $250k over this period, you then can borrow up to 80% of the new value which the bank will decide based on a valuation. If we use an original value of $500k and new valuation of $750k, the amount you can borrow is up to $600k (which is 80% of $750k). If you use these funds to pay out the old loan, you have potentially $100k to play with – to contribute to your next investment.

Why I believe property prices will continue to increase:

1.     Simple supply vs demand. Majority of people want to own their own place. There is only limited amount of houses/land in Australia in the desirable suburbs, so you will have to compete with others to secure the place you want. Sure – there’s heaps of apartments being built, however they too are limited in how many can be built in one location and apartments may not suit everyone eg, families.

2.     As the population increases, demand for property increases which places increased pressure on prices. Why will the population increase? Well Australia is a fantastic country – we always get net increase in migration. People live longer.

3.     Property has done exceptionally well for investors and PPOR owners alike, and there is nothing to suggest to the good times will stop anytime soon. People stick with what works and what they consider to be safe.

4.     A lifetime of rental is not practical or smart. You’re effectively paying someone else’s mortgage and a prisoner to their choices. If you’re still renting and approaching retirement age, with minimal savings, you’re gonna have a bad time. If the pension or personal savings doesn't sufficiently cover the ever increasing rent and outgoings, you will have to supplement your income via work or other money making ventures, when you should really be looking forward to your retirement

Superannuation in Australia - Why you should care about your super balance

"It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong"

 - George Soros

For most people under 50, superannuation is equivalent to a pot of gold that is not able to be touched until they are retired and in their 60s. Currently the rate stipulated by the government for compulsory super is 9.50%, with the view to increase by 0.5% each year from 30 June 2018 until it reaches 12%

Because of this extreme long term view, especially for anyone just starting out in their career or only a few years into their career, superannuation can seem like the last thing they should be concerned about. Admittedly, at the young age when you need to start thinking about responsibilities - buying a home, getting married and having a family of your own - super is generally not on the top of your priority list.

However, small changes now while you are young and have a long term horizon can significantly impact your ending super balance and thus your quality of life during your retirement years. It can mean the difference between holidaying every 6 months to exotic locations, or eating baked beans 5 days a week because the pension doesn't stretch far enough.

Assuming a person has gone to university for a standard 3 year degree, they enter the workforce around 21 or 22. If someone retires when they reach the age of 67, then that is 45 years worth of super contributions and your pot of gold has been compounding for 45 long years.

Let's say you're 25 and you decide to get serious about your super. At 25, you have probably 40 years worth of super contributions and work years in front of you. Check out the 2 graphs below to see just how much 1% difference compounded over 40 years can yield. We compare the difference of $500 starting balance, and monthly contributions of $500 each month over 40 years.

The difference is simply amazing for 1%. The money difference of getting a 6% return instead of 5% return is $234,534.80. Having that extra 234k, means that during your 20 years of retirement, you can draw income of over $50k a year. Not bad right?

$500 initial balance, with $500 a month in super contributions from the employer. Assuming 40 years of compounding at 5% growth rate

$500 initial balance, with $500 a month in super contributions from the employer. Assuming 40 years of compounding at 6% growth rate

So - what can you do to ensure you get that extra 1% return?

What I recommend, and what a lot of financial advisers recommend is that you structure your super in such a way that during your earliest years, you set your super investment option to the most risky option, and as you get older, slowly step down and change it to more risk adverse options.

For example:
20 -30 years old: Highest risk-highest reward option (Growth). Invest in property, Australian Shares, and International shares
31-40: Slightly less risky, but still growth portfolio. Still property, and shares, but more allocated to cash and other safer options
41-50: Moving away from shares and property and more towards annuities and less risky options (Balanced).
51-70: Most, if not all the money towards cash and the lowest risk options (Cash).

Your own super fund might call it different names, but in general they should be similar in name/type - they will definitely be sorted by risk profile of the portfolio allocation.

The reasoning behind this is quite simple: During your earlier years, you can afford to take big risks - you have 40 years where the money will be constantly compounding and you want the highest reward possible, so you'll inevitably assume the highest risk. But that is okay. It's better to have 70% chance of getting 6%+ return than a 100% chance of getting 3% return when you are in this age bracket. As you approach retirement age, it is more important to preserve your nest egg, so that is the reasoning behind moving towards cash as you get older. You simply cannot afford to have wild swings when you're that close to retirement as you don't have that same luxury of a long time horizon.

If you think you can predict the market and change to high risk during booms and then cash just before recessions, then you should be actively trading the markets and not worrying about super so much, because clearly you can predict the future. For the rest of us that can't predict the future and can't time the market, it makes sense to adopt the life stages approach as per above. During good times, you will buy less units with each contribution, but during bad times, you will buy more units. Overall it will even itself out over time.

Below is a screen shot of my super investment. I have it invested in the high growth option, which is the riskiest but also the highest chance of above average returns when the market is performing well. I am in the first age bracket and I have heaps of time to weather the storm in terms of the ups and downs of the stock market.

You'll notice from the pie chart, that my selection of this high growth super option has meant that my super fund has allocated less than 1% of my super portfolio into cash or fixed interest. It is almost completely made up of shares and other investment options that yield higher return than simply keeping the money in the bank. Over the last 12 months, I have been fortunate enough to enjoy over 10% return using this structure, and finger crossed that this rate of return can continue for the long term.


There are a few other things about super that not everyone may know about - one of the most important facts is that you can salary sacrifice additional super contributions at a reduced tax rate of 15%. I'm not going to go into specific details as these rules and thresholds are constantly changing - but know this; super is treated favourably if you are on the highest tax brackets. Why else would they cap the amount you can contribute at the concessional tax rate?

Also for those on lower incomes, such as students or part time workers, you can take advantage of the super co-contribution payments. Basically if you are a low or middle income earner, and make personal after tax super contributions, the government will make a co-contribution of up to $500 automatically and for free when you lodge a return. You just need to earn the money from a business or employment and earn less than $48,516 and less than 71 years old. For example, to get the max $500, you would deposit $1000 in your super after tax, and have to earn $33516 or less.

see https://www.ato.gov.au/individuals/super/in-detail/contributions/super-co-contribution for more info on the co-contribution.

Finally, one last thing to remember: if you change jobs and subsequently change your super fund, make sure to consolidate all your different super funds into the same fund to avoid paying unnecessary fees which can eat away at your profits/returns. On that note: if you had a choice of funds, look for those that suit your needs but also charge lower fees. It will certainty impact your ending balance if the compounding period is long enough.


Disclaimer: While every effort has been made to ensure all the information in this post is correct, you must not rely on it to make a financial or investment decision. Please make your own further enquires into this or consult a financial planner professional who can take into account your personal situation and investment needs. Everything above is general in nature and not a recommendation to proceed with a particular investment strategy.

Rainchecks - An easy way to save money

“While money can't buy happiness, it certainly lets you choose your own form of misery.” 
― Groucho Marx

Have you ever gone to the supermarket or store when they have a good sale on and found that what you were looking for has been sold out and there is no stock left at all?

It feels crappy because (A) you wasted time going to the store and (B) you couldn't buy what you wanted at the cheap price.

Well that is when 'Rain-checks' come in. Not everyone may know what a rain-check is, so I am here to explain it briefly. 

As you can tell from the picture above, a rain-check gives you the opportunity to purchase the products that were on sale but sold out, at any time within 12 months, or however long the store stipulates. The rain-check above gives me the option to purchase up to 6 quantity of 4 pack Red Bull 250ml cans for $4.99. (FYI - this 4 pack usually retails for twice as much, so I will stock up when I need that additional burst of energy for study or overtime at work) - works out cheaper than a cup of coffee!

This is handy because when the product is not on sale, there is usually a lot of stock available for you to purchase - now with the rain-check you can purchase at your leisure and at the sale price point. This is also handy if you don't have the money right now, but wish to purchase at the lower price point later on perhaps, and you want to lock in the savings.

Some sales may state no rain-checks due to the nature of the sale and if the store wants to clear out old stock. In these cases, the prices are not to be replicated later on and you cannot ask for a rain-check. 

Next time your desired product is on sale at the stores, why not ask the front counter if you can get a rain-check for the product at the sale price. 

Enjoy! 

Opal Card - Sydney, NSW

A quick comparison of the Opal Card vs periodical tickets.

I'll admit it, I was quick to dismiss the Opal card as a gimmick seeing how it is more expensive than a quarterly ticket over a 90 day period. For example MyTrain 2 costs $32.80/week for Opal, but only $27.22 for a quarterly. It looked like we waited so long to get this ticket-less system and it appeared to be more expensive, and thus useless to those that want maximum value.

I've always espoused the benefit of a quarterly ticket. I mean, what's not to love?

- You get the convenience of being able to plan your holidays around your train ticket (unlike yearly)

- Only difference between a quarterly and yearly is 5 extra free days with a yearly

- Much much cheaper than a monthly and weekly

- Only have to line up 4 times a year (so much win on Mondays or after long weekends)

- Can lock in old prices before announcement of price hikes

- Nice, durable plastic ticket

- Can register the ticket so if it does get lost, can order a replacement one

I find it hard to be friends with those that continue to buy weekly tickets when they work full time. There is simply no reason for it. If you want to hand over money necessarily, I will gladly give you my banking details on where to deposit the money you don't want.

However, I looked deeper into the specifics and conditions of the Opal card and stumbled across something quite interesting. There are a few perks of the Opal system to entice users to adopt this new technology.

Some of them include:

- 30% discount when travelling during off peak (any time outside 7am - 9am and 4.30pm - 6.30pm weekdays)

- After 8 paid trips in a week (Monday to Sunday), all modes of travel is free after that, no matter how far you go or how often, called a weekly bonus. This is the key to maximising value off Opal. Why not catch a free ferry just for kicks on a nice sunny day?

- Sunday all day travel costs only $2.50 

- You can do transfers at different stations within 60 minutes and you will only pay one fare, instead of 2.

Eg, Central to Wolli Creek. Meet up with a friend to return their book. Within 60 minutes, Wolli Creek to Rockdale. You will only be charged Central to Rockdale fare and it counts as 1 trip toward your weekly bonus.

One big concern though would be privacy. When you login to your Opal account, every single trip you take, at the precise time you tapped on (and presumably tapped off) is recorded and who knows what the information will be used for. You cannot travel anonymously using Opal. (Update: August/September 2014 - unregistered Opal cards can now be bought at retailer such as convenience stores and news-agencies)

Why is the Weekly reward interesting? Well think of it almost as like a membership card where if you get 8 stamps, you get free coffee or burger the next time you visit. The Opal card counts 8 trips and then after that, your trips are free and it doesn't matter how much each trip costs you. If you make 3 trips in 1 day, that's 3/8 trips taken care of to reach the weekly bonus.

It's easier to see with a few examples. For simplicity sake, I will use MyTrain 2 (10-20km travelling distance). Keep in mind, a quarterly ticket equates to $350 for 90 days or $27.22 a week

Scenario 1: Typical week, travelling during peak hours Monday to Friday

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
Morning	4.1	4.1	4.1	4.1	FREE	FREE	FREE
Lunch time					FREE	FREE	FREE
Evening	4.1	4.1	4.1	4.1	FREE	FREE	FREE
				Total cost $32.80

Scenario 2: We adjust our schedules so that we tap on after 6.30pm when we go home to get the offpeak discount.

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
Morning	4.1	4.1	4.1	4.1	FREE	FREE	FREE
Lunch time					FREE	FREE	FREE
Evening	2.87	2.87	2.87	2.87	FREE	FREE	FREE
				Total cost $27.88

Scenario 3: No way you want to stay back at work, even to get the offpeak discounts? What if you had alot of errands to run during your lunch time (offpeak) and needed to travel to a station closeby? *Assuming the station you travel to is within 10km

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
Morning	4.1	4.1	4.1	FREE	FREE	FREE	FREE
Lunch time	2.31	2.31	2.31	FREE	FREE	FREE	FREE
Evening	4.1	4.1	FREE	FREE	FREE	FREE	FREE
				Total cost $27.43

Scenario 4: Okay you're on tight budget so you will stay back at work, but you also like to go to nearby stations during lunch because the lunch is better at the other place

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
Morning	4.1	4.1	4.1	FREE	FREE	FREE	FREE
Lunch time	2.31	2.31	2.31	FREE	FREE	FREE	FREE
Evening	2.87	2.87	FREE	FREE	FREE	FREE	FREE
				Total cost $24.97

Scenario 5: Who needs sleep? Travelling only during offpeak and taking some sightseeing trips during lunch

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
Morning	2.87	2.87	2.87	FREE	FREE	FREE	FREE
Lunch time	2.31	2.31	2.31	FREE	FREE	FREE	FREE
Evening	2.87	2.87	FREE	FREE	FREE	FREE	FREE
				Total cost $21.28

Summary

The main take out of this is not to discount Opal too quickly. If you schedule your travel outside peak hours and take some cheaper trips, it may be worth your while. It may even motivate you to travel and explore Sydney because all the trips are free after your 8 paid trips!!

Credit Cards - Balance Transfers - How does Balance Transfers Work?

Hi all,

Hope everyone is on track with their financial goals during January of this new year! If you have been, congrats, it is easier than you thought right? If not, February is new start and a new month to regroup and focus your energy to making your finances work for you.

In previous posts, I've elaborated on the benefits of using a credit card (with the proviso that you have self control and don't change your spending habits drastically because of the new found plastic in your wallet).

Today I will discuss a feature of credit cards that some people may not know about and that is ' BALANCE TRANSFERS'.

Balance Transfers (BT) as the name suggests is where your new bank will accept to take on your existing debt from a different credit card, at a special rate that is lower than the usual credit card interest rate.

Often banks and other credit providers will offer special promotions with balance transfers. eg. 0% for 6 months, or 0% for 15 months, or 5% for 5 months. There is usually a lot of deals around in January or February, as people try to take control of their finances as part of the new years resolution.

Let me illustrate with an example.

Let's say you had a mind explosion and you somehow ended up with a Credit Card Debit with ANZ $5,000. Purchase interest rate at 19.95% p.a.

Take up new credit card with NAB using their 0% Balance Transfer for 15 months. Interest rate 0% for 15 months on balances transferred. I've highlighted this because this is an important distinction. There are different rates applicable for balance transfers, purchases, and cash advances.

To transfer that $5000 credit card debt to NAB, you would need to be approved for a credit limit of at least $7142.85 (being $5000/0.7). NAB will give you a balance transfer up to 70% of your credit limit.

*note different banks will have different rules regarding how much of the credit limit you can balance transfer.
Some may also charge a fee for doing balance transfer, eg 1% of the transferred amount (Citibank 12 month promos), please read the conditions carefully.

So ANZ $5k -> NAB $0, the transaction leaves you with
ANZ $0 - > NAB $5,000 balance transfer used out of your credit limit, eg $5000 / $8000 of your limit is used now.

Sure you have $3000 left to use, but any purchases or cash advances will be charged interest from day 1. ie. YOU WILL NOT GET ANY INTEREST FREE PERIOD IF YOU USE THE CARD FOR ANYTHING OTHER THAN THE BALANCE TRANSFER. Any purchases you make will incur interest at the relevant interest rate immediately, and any payments made to the card will be applied to the highest interest rate on the card (so cash advances then purchases then balance transfer).

Immediately put the new credit card that has the balance transfer debt on it, into a draw somewhere and do not use it again until the balance transfer period is over - in case you accidentally buy something on it!

What's the catch?
Well you still have to pay the monthly minimum repayment fees, generally about 2 or 3% of the closing balance. So if you had done a BT of $5k, then at 3%, you would pay $150 for that month. This is not interest. This is paying back the principle of the balance transfer assuming you took advantage of 0% special balance transfer rate. At the end of 6 month 0% interest period, you would have paid 6*150 = $900, leaving $4100 to pay off immediately.

Will this work for you?
Well you need to have enough salary to justify the bank to offer you a high enough credit limit
A good credit history will work in your favour
If you have too many other credit cards or too many expenses, this will work against you as banks take that into account when deciding if they want to give you a credit limit.
Access to easy credit is dangerous in the wrong hands. You must absolutely be sure you will not be tempted to spend irresponsibly and make sure that you have enough at the end of the promo period to pay off the FULL BALANCE!


Current special promo deals going on:
- NAB 0% for 15 months balance transfer (cheapest card is $30 a year annual fee)
- ANZ 0% for 12 months balance transfer (ANZ Platinum CC has the fee waived for the first year - usually $87)
- Citibank 0% for 6 months balance transfer - (Friends and Family promotion with their Signature and Platinum offer (annual fees of $299 signature / $199 platinum waived for life of loan)


What? I'm responsible and have no CC debt...
Well the current credit reporting agencies only have information on which credit providers you have applied to and defaults and that sort of thing. It doesn't show what the limit is, when it was opened/closed and rating. That is changing in MARCH 2014 this year. So it is likely this will not work after March 2014 for cards that have no debt - will still work fine for negative credit card balances .

What if we do a balance transfer from one card to another, but we don't have existing debt on the credit card? Well, the credit provider does not know how much you owe on the other card, so you can still request for the balance transfer. When the balance transfer goes through, your credit card will be in POSITIVE balance. That is, the credit card company owes you money because you have topped up your card.

You can use the positive balance credit card as normal, and the balance will slowly reduce as you spend your credit. You save money because you're not using your own money for however months the balance transfer is available for, leaving your money sitting in the bank earning interest or in the offset account reducing interest you need to pay. eg $5k positive balance from earlier example, to use as my spending allowance, where otherwise I would have had to use my savings money. Each month, I'm paying the minimum principle off the balance transfer, and at the end, I pay everything off in full.

However you can also use the hidden feature of credit cards - you can usually transfer the positive balance that has been created (from the BT) into your savings account, offset account or any other account for that matter really. Because it is technically your own money due to the positive balance, there is generally no fee to take the money out, or if there is a fee, it is usually a one off small amount like $2.50.

Let's say you have a mortgage at 5% interest p.a. If you chuck in $5k in the offset, that's $250 in interest a year that is saved. Your only repayments during the period is the 2 or 3% minimum repayment amount on the balance, and obviously the remaining principle at the end of the period.

You'll need to check with your bank, but some banks allow you to withdraw cash without any fees (or minimal fees) when your credit card is in positive balance. DO NOT TRY to take out cash if it is $0 or negative balance because you will be slugged with 'cash advance' interest rates immediately.

One cool thing is with Citibank, they have an option to get 80% of your credit limit in the form of a Cheque to Self balance transfer. Let's just say when you do request to have the cheque posted out to yourself, you don't necessarily have to deposit it into a credit card account ;) *wink wink*.

It's all mind games

“An investment in knowledge pays the best interest.”

– Benjamin Franklin 

Savings Habits and the Savings Mentality

The following are just some small things you can do in your daily life that can help you in your path to financial enlightenment. Some are harder than others, some take much longer than others, but all can be achieved by anyone that is willing to change for the better.

Do and implement the easiest tasks first. This is called the low hanging fruit, because of how easy it is to do and it can give you a lot of result for little effort.

Out of the 2 ways to increase your savings (more money coming in, or less going out), it is far easier to control what is going out.

1. Get to work early and eat the free breakfast (toast, cereal, milk, fruit etc).

Key Message: Utilise the things around you

Not only will you show your boss/manager/ team leader that you are a committed worker by coming in early, you will save so much money each day by turning up a bit earlier and eating the free food, and making your own coffee. Coffee and toast outside is about $5 right?

$5x 250 working days a years = $1,250. How many more hours of work do you have to do, to recoup that amount?

You’re thinking – Kai, you are out of your mind. Even 20 minutes earlier to work means 20 mins less sleep. Well, do you really notice any difference in how alert you are with 20 minutes extra sleep?

If you plan to arrive early at the office, you generally can make it on time to work even if there are delays on your train or other circumstances, because of that time buffer you have created. You are also known in the office to be dependable and punctual, which never hurts ones’ reputation.

This plan is very good, as it can BOTH increase the inflows (potential raise) and also stem the outflows (saving money spent on food). DOUBLE EFFECTIVENESS. Oh Yeah.

2. Think of expenses not in monetary terms but in terms of how many hours are needed to work to afford it.

Key Message: Don't delay retirement for too long, you workaholic!

Okay so daily morning coffee $3 x 5 times a week is $15. Let us assume this makes up 80% of your hourly after tax pay per hour. 48 minutes of your life each week is consumed by your need for coffee.

That means your retirement is delayed by 48 minutes EVERY WEEK that you spend $15 on coffee. Over a year that is 2,304 minutes or 38.4 hours of extra work required to afford the morning coffees.

3. Think of money, not just in the present, but in the future value of money.

Key Message: Why work yourself, when your money can do it for you?

When most people think of money, they think in pure dollar terms. This cash can buy me that dress or game on sale.

In economics there is a term called opportunity cost, which measures the real cost of one decision by forgoing the other path.

So that purchase of the $2000 LV bag not only includes the hard earned cash you outlaid but the opportunity cost of having that $2k generate compound interest or other returns for you. The opportunity cost of you not staying back late to do the overtime is the money forgone and management seeing you in a good light as a team player.

All the potential money savings can be used to MAKE MORE MONEY or at least cost you less money. Shares, property, online savings accounts. These can all make money for you if you put aside some money. It sounds silly, but it is so true. Money can make more money.

The $15 a week savings you find, can be compounded, month after month, year after year. $100 in your hand could potentially be worth $300 in 5 years time. Obviously the rate of inflation plays a big part of this, so it is also important to find ways to protect your capital in the event of high inflationary environments. 

Think about this - $500 in my offset account saves me interest this month, but it also saves me money again next month, so and and so forth. The interest on my loan would be compounded by a lot more if I had not put that money there. You don't need me to repeat the power of compounding over a long period of time.

To sum up:

These things, when viewed individually may make a slight difference in your finances and views on money. But if you implement them regularly, and fastidiously, you will end up seeing results.

As your savings build up, use that capital to make even more money.

Hello World

This is my first ever post of my first ever blog. So here goes.

In the past I've always just posted tidbits of information and general observations on Facebook or emails.

The aim of this blog is to increase financial awareness and share the knowledge that I have acquired from my keen interest in all things money and finance related. This blog will also serve as a helpful reminder of my journey to financial freedom that I've always dreamed of (enough passive income that I could retire at 40 if I wanted to).

Most of the finance specific topics will be Australian centric, but topics on saving habits and theory can be universal.

A little about myself:
Mid 20s
Bachelor of Commerce/Bachelor of Economics (with distinction)
Generally quite frugal
One weakness is technology gadgets and computer stuff that I splurge on from time to time
Enjoys reading and keeping up to date with the news
Love the thrill of the share market and tracking my financial progress
Preacher of good money habits
Always searching for that next bargain or deal

If you're still reading at this point : wow props to you for your perseverance. You will go far I can tell.

I will aim to post at least twice a week, and respond to any comments or questions people might have.

I hope you do enjoy your time with me and that you find some of the information helpful in your own journey to financial happiness.