Blog
Blog
Category: News
01/02/10
Financial Freedom ...
First of all, before you think I am going to drum into you the importance of having good financial disciplines, I want to let you know that not everyone needs financial disciplines to look after their money.
If you look at some of the world’s richest people in history, most of them do not stick to a budget or a saving program, they don’t even care whether they maintain positive cash flow in their businesses or families all the time. Many of them are the typical gamblers to most of us, they bet big, win big and often lose big too.
There is no fixed way to become wealthy, for every rule you can think of, there will be an exception to it. While I think majority of the people need to have some financial disciplines to ensure their financial future, this doesn’t mean you need to. I leave you to be the judge on that after you finish reading the following section.
What is financial freedom?
Many text books define financial freedom as the condition where a person’s passive income is greater than their chosen life style expenses. This implies that the person can not have any lifestyle he wants; otherwise his passive income may not be sufficient to cover its expenses. So in a sense, financial freedom is not free after all, it comes with a condition which has something to do with your lifestyle discipline.
I have found that many people have been able to increase their income (passive or not) over the years, only to find themselves not being able to keep up with their ever increasing life style expenses.
I thought I would go and find some examples of people who have an ever increasing income but manage to keep their life style expenses relatively low and manageable, and if I can find out why they can do so, maybe there is an answer for everyone.
I found a guy named Warren Buffet ! His income seems to be doing better than most of us every year, but his lifestyle expenses seem to be under good control. He still lives in the same US$300k home, eats the same hamburgers and drinks the same coke, goes to the same hairdresser. I have gone through everything I can find on this guy, just couldn’t find his next lifestyle upgrade plan! He seems to fit my description for my test case perfectly.
Last year, Bill Gates and Warren Buffet were invited to jointly speak to the MBA Students at Columbia University, where Warren Buffet disclosed his secret. His secret was:
“Money means absolutely nothing to me!”
This is just so unfair! Anyone with less money saying that, we could at least discard it as the sour grape syndrome, but it comes straight out of the mouth of the richest man in the world on national TV! Then Warren went on to explain why, he said that what keeps him happy is his work, the more money he has, the more he would just put them into his work.
In my own interpretation, he doesn’t need money to make him happy, he doesn’t need his lifestyle to improve to make him happy either, and it is his work (i.e. contribution) that makes him happy.
A New Definition of Financial Freedom
I would love to redefine ‘financial freedom’, as I think the old definition has misled too many people. Financial Freedom to me is a state where a person is free from the fear of not having enough money. This state will have the following ingredients:
• A person is in Outflow Mode.
o An Outflow person is less likely to worry about losing their income from their job or business, because they know they are always wanted for their continual contribution.
o An Outflow person is less likely to need bigger lifestyle expenses to make them happy; they are more likely to keep their expenses under their income.
• The discipline to stick to a sound retirement plan.A good retirement plan can set you free from the ultimate fear of lack of money when you stop working.
Can you see that this new definition of ‘Financial Freedom’ has really only two focuses: outflow and discipline?
If a person has no fear of not having enough money while they are working and during retirement, then this person technically has no fear about not having enough money. He is then Financially Free. The advantage of this definition of Financial Freedom is that an average person with an average income capacity or asset base can move towards it rather quickly as long as they focus on ‘outflow’ and ‘discipline’, they can get to enjoy what they do rather than doing something largely dictated by the lack of money. B.Zheng
If you would like to be shown how you too can achieve Financial Freedom , give me a call on 1300 882 981!
Regards
Scott Parry
First of all, before you think I am going to drum into you the importance of having good financial disciplines, I want to let you know that not everyone needs financial disciplines to look after their money.
If you look at some of the world’s richest people in history, most of them do not stick to a budget or a saving program, they don’t even care whether they maintain positive cash flow in their businesses or families all the time. Many of them are the typical gamblers to most of us, they bet big, win big and often lose big too.
There is no fixed way to become wealthy, for every rule you can think of, there will be an exception to it. While I think majority of the people need to have some financial disciplines to ensure their financial future, this doesn’t mean you need to. I leave you to be the judge on that after you finish reading the following section.
What is financial freedom?
Many text books define financial freedom as the condition where a person’s passive income is greater than their chosen life style expenses. This implies that the person can not have any lifestyle he wants; otherwise his passive income may not be sufficient to cover its expenses. So in a sense, financial freedom is not free after all, it comes with a condition which has something to do with your lifestyle discipline.
I have found that many people have been able to increase their income (passive or not) over the years, only to find themselves not being able to keep up with their ever increasing life style expenses.
I thought I would go and find some examples of people who have an ever increasing income but manage to keep their life style expenses relatively low and manageable, and if I can find out why they can do so, maybe there is an answer for everyone.
I found a guy named Warren Buffet ! His income seems to be doing better than most of us every year, but his lifestyle expenses seem to be under good control. He still lives in the same US$300k home, eats the same hamburgers and drinks the same coke, goes to the same hairdresser. I have gone through everything I can find on this guy, just couldn’t find his next lifestyle upgrade plan! He seems to fit my description for my test case perfectly.
Last year, Bill Gates and Warren Buffet were invited to jointly speak to the MBA Students at Columbia University, where Warren Buffet disclosed his secret. His secret was:
“Money means absolutely nothing to me!”
This is just so unfair! Anyone with less money saying that, we could at least discard it as the sour grape syndrome, but it comes straight out of the mouth of the richest man in the world on national TV! Then Warren went on to explain why, he said that what keeps him happy is his work, the more money he has, the more he would just put them into his work.
In my own interpretation, he doesn’t need money to make him happy, he doesn’t need his lifestyle to improve to make him happy either, and it is his work (i.e. contribution) that makes him happy.
A New Definition of Financial Freedom
I would love to redefine ‘financial freedom’, as I think the old definition has misled too many people. Financial Freedom to me is a state where a person is free from the fear of not having enough money. This state will have the following ingredients:
• A person is in Outflow Mode.
o An Outflow person is less likely to worry about losing their income from their job or business, because they know they are always wanted for their continual contribution.
o An Outflow person is less likely to need bigger lifestyle expenses to make them happy; they are more likely to keep their expenses under their income.
• The discipline to stick to a sound retirement plan.A good retirement plan can set you free from the ultimate fear of lack of money when you stop working.
Can you see that this new definition of ‘Financial Freedom’ has really only two focuses: outflow and discipline?
If a person has no fear of not having enough money while they are working and during retirement, then this person technically has no fear about not having enough money. He is then Financially Free. The advantage of this definition of Financial Freedom is that an average person with an average income capacity or asset base can move towards it rather quickly as long as they focus on ‘outflow’ and ‘discipline’, they can get to enjoy what they do rather than doing something largely dictated by the lack of money. B.Zheng
If you would like to be shown how you too can achieve Financial Freedom , give me a call on 1300 882 981!
Regards
Scott Parry
12/05/09
Secrets Your Bank Won't Tell You...
If and when you are looking for finance, try to look past the banks ‘lowest interest rate’ marketing ploys as it is usually those mortgages with the low interest rates that will actually cost you more over the term of the loan, not only in fees but also the most important factor being TIME!
I often ask my clients, would you prefer a home loan at 6.99% over 30 years or a home loan at 7.95% over 17 years? I’d much rather be Debt Free is 17 years rather than 30 years – wouldn’t you?
Banks have trained you to think that if you ask the golden question – “What’s the lowest interest rate”, that is equivalent to you asking for the ‘Best deal’… However, this is
not the case, as the banks use the ‘low rate’ to hook people on these FAT PROFIT ridden 25 or 30 year Home Loans. They know that by getting you in on a so-called ‘low’ rate, the banks will be getting more than their fair share of profit out of you, over the long and expensive 30 year term!
Did you know that you will pay back MORE than double what you originally borrowed from the
bank with a 25 or 30 year P & I loan ?
Based on the last 7 years I have spent in the finance industry, if I could offer you only one piece of advice - it would be: “Look at the STRUCTURE of your home loan".
What I mean by that is, make sure you look at a loan which allows you the freedom and flexibility to actually get your income working for YOU on YOUR loan. By getting your income working for you on your loan, you will be able to save thousands of dollars in
interest payments as well as get debt free quicker!
No, I’m not talking about the Line of Credit (Equity Line) which turns into a massive headache just like the credit card that is attached to it. This type of loan makes it easy for you to spend MORE than what you earn. It not only allows you to spend more than what you earn, it magnifies the negative effect and your repayments actually INCREASE each month as your Debt level increases.
Every week I refinance clients off of Lines of Credit, especially when the clients have unfortunately chewed up all of their equity, and have their loan balances just sitting under the facility limit. This loan is a trap which will expose you if you lack self discipline (95% of Australians) and sound money management.
What I’m talking about is getting a home loan facility where you are actually guaranteed to Pay Less each month in repayments, yet you will still be Debt Free Quicker.
And now you’re asking yourself “Why hasn’t the bank told me about this”… Think about it… The longer you’re in debt, the more money the banks make. The more money the banks make, the higher their profits. The higher their profits, the happier their share holders are and the higher the share price rises. The higher the share price, the higher the value ($) of the bank!
So why would any bank want to show you How To Get Out of Debt Quicker? They clearly don’t and they won’t – it is not in their best interests!
Whereas my mindset is different – I’m a very BIG believer in Debt Reduction AND then Wealth Creation! Now the banks certainly don’t give you any strategies on wealth creation….do they?
It’s pretty simple if you think about it – The Quicker I reduce your Debt, the Quicker you have more Equity to start creating Wealth. And guess what you’ll need to start creating wealth – an investment loan! Luckily, that is where I (your financial consultant) get paid again. So the quicker I can get your debt down, the quicker I get paid again….
Now that is what I call having a vested interest in your success – the better you do, the better I do! That’s the way it should be….and best of all, you get to use Crown’s Debt Reduction & Wealth Creation program for FREE - we get paid by the lender!
Scott Parry
Director
Crown Lending
1300882981
If and when you are looking for finance, try to look past the banks ‘lowest interest rate’ marketing ploys as it is usually those mortgages with the low interest rates that will actually cost you more over the term of the loan, not only in fees but also the most important factor being TIME!
I often ask my clients, would you prefer a home loan at 6.99% over 30 years or a home loan at 7.95% over 17 years? I’d much rather be Debt Free is 17 years rather than 30 years – wouldn’t you?
Banks have trained you to think that if you ask the golden question – “What’s the lowest interest rate”, that is equivalent to you asking for the ‘Best deal’… However, this is
not the case, as the banks use the ‘low rate’ to hook people on these FAT PROFIT ridden 25 or 30 year Home Loans. They know that by getting you in on a so-called ‘low’ rate, the banks will be getting more than their fair share of profit out of you, over the long and expensive 30 year term!
Did you know that you will pay back MORE than double what you originally borrowed from the
bank with a 25 or 30 year P & I loan ?
Based on the last 7 years I have spent in the finance industry, if I could offer you only one piece of advice - it would be: “Look at the STRUCTURE of your home loan".
What I mean by that is, make sure you look at a loan which allows you the freedom and flexibility to actually get your income working for YOU on YOUR loan. By getting your income working for you on your loan, you will be able to save thousands of dollars in
interest payments as well as get debt free quicker!
No, I’m not talking about the Line of Credit (Equity Line) which turns into a massive headache just like the credit card that is attached to it. This type of loan makes it easy for you to spend MORE than what you earn. It not only allows you to spend more than what you earn, it magnifies the negative effect and your repayments actually INCREASE each month as your Debt level increases.
Every week I refinance clients off of Lines of Credit, especially when the clients have unfortunately chewed up all of their equity, and have their loan balances just sitting under the facility limit. This loan is a trap which will expose you if you lack self discipline (95% of Australians) and sound money management.
What I’m talking about is getting a home loan facility where you are actually guaranteed to Pay Less each month in repayments, yet you will still be Debt Free Quicker.
And now you’re asking yourself “Why hasn’t the bank told me about this”… Think about it… The longer you’re in debt, the more money the banks make. The more money the banks make, the higher their profits. The higher their profits, the happier their share holders are and the higher the share price rises. The higher the share price, the higher the value ($) of the bank!
So why would any bank want to show you How To Get Out of Debt Quicker? They clearly don’t and they won’t – it is not in their best interests!
Whereas my mindset is different – I’m a very BIG believer in Debt Reduction AND then Wealth Creation! Now the banks certainly don’t give you any strategies on wealth creation….do they?
It’s pretty simple if you think about it – The Quicker I reduce your Debt, the Quicker you have more Equity to start creating Wealth. And guess what you’ll need to start creating wealth – an investment loan! Luckily, that is where I (your financial consultant) get paid again. So the quicker I can get your debt down, the quicker I get paid again….
Now that is what I call having a vested interest in your success – the better you do, the better I do! That’s the way it should be….and best of all, you get to use Crown’s Debt Reduction & Wealth Creation program for FREE - we get paid by the lender!
Scott Parry
Director
Crown Lending
1300882981