The Bottom Line - First
Work. Most people think of it as their worst enemy. Yet it is far better to treat it like a friend and enjoy it. Even if it is hard work.
If you were building your dream house by hand, would it bother you if the beams were heavy and the mornings were cold?
Work. Hard or not, but properly done, makes you a better person.
After all, a person doesn't fall their way to the top.
- An adaptation from George Clason's The Richest Man In Babylon
To complete this section on Banks, you'll need:
- A tax file number
- Motivation for hard work
- Driver's licence or passport, and
- Up to one hour
- The details of an insurance policy that's got nothing to do with an insurer, and
- What I look for in bank accounts
- How Jane spends $800 per year less than Stacey by making one tiny change
Disclaimer: Rask Invest provides the following information for general informational purposes only. We do not recommend or provide advice on bank accounts. The information does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) of the financial product before making a decision to acquire the financial product.
1. Who's Most Important?
Charlie Munger is one of the world's richest people. Sure, he's a smart guy. Very smart. But he did something else that changed the course of his life.
As a young lawyer, likely on a decent wicket, Charlie realised that his number-one customer or client was himself. His time was much more valuable than his that of boss, even if their respective payslips didn't show it.
So Charlie put aside an hour each day that might otherwise be spend with a client. He lost a few dollars in hourly wages, sure, but he used that time to read, work on his own finances, learn from and listen to others. He invested in himself.
It might sound like 'an hour here' or 'an hour there'. But knowledge has the potential to compound faster than money ever could. The work you do for yourself today is worth more and more over the years because you build on it as you go.
Today, Charlie is a billionaire. He would be worth a more but he has given much of his money away to charity or universities.
Ultimately, I think Charlie's success can be traced back to his decision to make one small change - to work for himself.
Carry this lesson with you as we go on a fun journey to improve your finances.
2. It's Worth It
You're about to discover how simple it is to get your financial house in order - regardless of your income, knowledge, debt position or relationships.
But here's the thing:
It's simple, but it's not easy. And that's why most Aussies end up 'kicking the can down the road' so to speak.
Unlike a $20 self-help finance book, I've got an easy job. You're already a Rask Invest member, which tells me you're committed to getting your finances in order, hopping in the fast lane (investing) and becoming financially free.
Those books have to motivate you with boring stories about blah, blah, blah…zzzz…. because we know 80% of readers don't do a thing about their finances even with the knowledge.
We need to be MOTIVATED!
I won't give you the life lessons, a sob story about my childhood, or tell you about the time I climbed Mt Everest. Walking backwards. On my hands. At age 12. In just 19 minutes.
Instead, I'll give you access to the first-ever financial calculator we developed. It's our compound interest calculator.
All it does is measure how fast money can grow when you allow it to earn 'interest on interest'. You'll see that you don't need a $100k job, $500,000 portfolio or inheritance to make a life-changing amount of money.
Click on this link and try the calculator for yourself after you read this next section...
Just imagine an Aussie household which takes home $1,000 each week. Here's a snapshot of the difference between an Aussie household investing 5% ($50!) of their take-home income (yellow line) and the "alternative" of investing 10% ($100) of their take-home income (black line).
Source: Raskfinance.com; assumptions: 10%p.a. compound return, take-home household income: $1,000 per week, the effect of taxes and inflation are excluded.
If an Aussie household can save and invest 5% of their income it will turn into a cool $427,684 after 30 years, compounded at 10% per year. Pretty good, right? Just $50 per week becomes $427k!
But now let's imagine the same household can save and invest 10% of their income. The final amount becomes $855,369. From just $100 of saving and investing.
Obviously, if you can invest more than 10% -- I think 2o% of your income is ideal -- the result is even better!
You can try the calculator for yourself by clicking here. The link includes a video explaining compound interest.
So, is it worth sitting through the next one or two hours to invest in yourself?
Yes, I think it's worth it.
All you have to do is stay motivated.
Here's the lesson: Little bits, lots of times, makes the world of difference.
3. The Hustle
So you're ready to start tackling your finances?
Before we can get your finances in the fast lane by investing for for the long run, we need an insurance policy to protect your backside just in case something bad happens.
This insurance is not a 'financial policy from the buggers at Commbank, Bingle or iSelect.
In the spy biz they call this type of insurance a "go bag". It's loaded with a handgun, $100,000 in different currencies and about half-a-dozen passports.
We're going to create your very own financial go bag.
For some people, setting up a financial go bag is easy. But most of us need to hustle.
What do I mean, "hustle"?
A hustler is someone who hustles (obviously).
Someone who's hungry.
Someone who will do what it takes to succeed.
Hustlers are prepared to work hard.
They are willing to get their hands dirty and get. The. Job. Done.
Fortunately, since you've bought a subscription to Rask Invest and you're reading this, I don't need to bother with all the motivational fluff (go back to the two lessons, above).
You're over the mountain of procrastination and, believe me or not, you are on your way to a better financial future.
You've already started hustling.
For many people, their inner hustler is born when they have had to go through something tough.
A drug addiction.
$130,000 in credit card debt.
Putting yourself through high school.
A bad divorce.
The death of a family member.
Or, D) all of the above..
It's the experiences from these tough times which you can draw on as you work towards getting your finances ship-shape.
Remember that time when life threw you a curveball.
Think back to the steps you took to fight back. Did you grit your teeth and 'just do it'? Or did you need to get knocked to the floor before you realised the only way was up? Remember, you can't fall off the floor. So long as you have the drive to change, the Rask Invest strategy and our community will help you kick your finances into the right gears at the right time.
Try to focus on the positive steps you took and need to take. Chuck a harness on that 'can do attitude' again and again. You'll need it to get the most out of the next section of Rask Invest.
Giving up isn't an option.
Your first hustle
There's nothing like your first time (wink wink).
Here's your first hustle: You need to find $2,510.
I know. I know...
"That's a lot of money!", you scream (holding a newborn in one hand and a credit card statement in the other).
For some Rask Invest members it will take time to come up with that amount of scratch. But you need to get to that figure ASAP.
You: "Why $2,510?"
We'll be using $510 of that money to make an investment. That's right, in coming days, weeks or months you could become an investor like me!
Yes, I sound like a crazy person now, but bear with me because it will all make sense soon enough...
While that might sound like too much too soon it's okay because the other $2,000 is most important to you right now.
You: "How do I get $2,510?"
Me: "You need to hustle!"
Don't go to Nimble or a payday lender. Get creative…
I like a live a pretty frugal life (I prefer to spend big on experiences), but even for a '[email protected]$e' like me, one of the easiest ways to get-cash-quick is to sell some unloved stuff online.
Repeat after me (but in a funny accent): "I'm going to sell my stuff on Facebook."
Think: TVs, books, clothes, the kids (just kidding)(or am I?), tools in the shed, closet, in the roof, kitchen, etc.
Haven't used the treadmill in three months? Sell it!
I'm guessing you'll be blown away at the stuff other people buy online.
To do: Get out your phone, take some pictures of your unwanted goods, upload the pictures and start hustling!
Got No Junk?
You might also consider getting a part-time job, watch movies from Netflix or Amazon Prime instead of going out, or work on your side hustle (turning a hobby into cash).
"I loved doing a detox" - said no-one ever
Finally, you might consider doing a month-long financial detox.
You: "A wahh?"
Here's how it works...
For one month you decide you won't buy anything outside of the house -- other than groceries and essentials.
(Also note: a detox is NOT an excuse to swap in-store retail therapy for online purchases!)
Keep in mind, a month of detoxing might not work for you and it's not easy, but it's simple.
And if you can get through just one week, your wallet will be a little healthier for you having done it.
If you're having trouble convincing the other half, you can inspire a bit of friendly competition by saying "a quarter of everything we save is yours and mine to spend on what we want".
For example, if you save $1,000 during your financial detox (compared to last month), $500 is saved and $250 goes to each of you to spend on what you like! The other $500 is banked or put towards debt repayments (which we'll get to shortly).
You save, you win.
I have $2,510. Now what?
Once you have your $2,510 the next step is easy peasy: do. not. spend. it.
Remember, it's not much of a 'go bag' if you spend your $2,510. It would be more like a 'stay and get shot by the bad guy in a spy movie' bag.
The Go Bag is reserved for financial emergencies.
- job loss
- medical bills
- your bomb of a Commodore finally packing it in, or
- waiting for income protection to kick-in after a bad sports injury
Every good financial planner will tell you to put cash aside for rainy days because it rains… more often than you think.
And it makes sense, right.
Having some cash set aside means your finances are forgiving. If you're a contractor and cannot work due to the man flu, that's ok, you have $2,000 set aside. If your mum gets sick and needs a hand, take a day to care for her. If your car breaks down and the mechanic says you need an "engine thingo worth $764" you can pay it.
Now, I know what you're thinking:
Why the heck is this the first step?
The answer is simple:
This step sets you up for the other suggestions I'm about to make.
As I said. It's your safety net 'just in case' your property portfolio turns south, your shares drop unexpectedly, your boss hires a change manager to push you out the door, or your puppy jumps out of a window… which is 8ft from the ground.
While you're waiting for your stuff to sell online, continue with the next step.
4. Bank Accounts That Make Sense
Tell me, would a spy put their Go Bag in an everyday Aussie bank account or a Swiss bank which has its headquarters hidden behind a chilly waterfall in Switzerland?
Can you imagine Jason Bourne coming out of his coma and walking into a bank branch?
Teller: "G'day Cobber. What's your name?"
Jason: "Mein Name?"
It wouldn't happen. He's smart. He would park his cash somewhere that makes sense.
If you followed my advice to find $2,510 -- well done.
But where do we put the $2,510?
To match our budget strategy (we'll get to that shortly), you'll need the ideal bank accounts for the money.
One of the easiest ways to compare bank accounts is to use an online service. I subscribe to Choice (www.choice.com.au) for their comparisons on bank accounts, research on home and contents insurance, household products, health insurance research and more. It's $100 well spent.
You could use a 'free' comparison site -- but you'll pay commissions. And in my view, when a comparison website takes commissions there's a chance they're not really working for you.
In the section on budgeting, I'll tell how many accounts you may need.
"Changing Banks is Hard!"
I know what you're saying to yourself: "Changing banks is hard!"
Me: You can throw your hands up in the air and choose not to take my suggestions on board.
But to get the most from Rask Invest (and your finances) you'll need to motivate yourself to work hard and hustle.
Let me put it another way, let's compare two people, with two different bank accounts:
- Stacey, she received one too many participation medals as a kid and her uptight parents bought her a new car for her sweet 16th. Stacey has bank accounts which her parents set-up for her as part of a school program. She withdraws cash from a non-bank-owned ATM twice a week. Therefore, she constantly fails to meet the "no withdrawal" requirement to earn interest on her savings, plus she pays ATM fees.
- Jane knows life can be tough, so she's prepared to hustle. So she shopped around and found a bank with low fees, good interest rates and few asterisks!
The Yearly Difference for Giving a Damn
By the end of the year, Jane is $938 better off because she hustled. Simple. It might only take a few minutes to find a good bank account using Choice and apply. That's a pretty good return on your time!
So once you get through the budget section (we'll get to that in a moment), I recommend using Choice to search for bank accounts with low fees and high-interest rates.
How to change banks without a fuss
I think the easiest way to change banks is to call your new bank (or visit their website) and fill out a standard form to allow your new bank to access and switch your regular/automatic payments and debits over to your new bank. Once you submit the form, your new bank will usually reply with a list of your regular debits and ask you if they should be transferred to your new bank accounts.
Chances are, their list won't cover all of your payments (e.g. BPAY, 'pay anyone' transactions or credit payments) but it could make changing banks just that little bit easier.
An alternative method is to download your recent bank statements or call your current bank and request a complete list of all of your direct debits and other automatic payments.
After you have taken a look at your direct debits and other automatic bills, start directing them and your next pay into your shiny new bank accounts.
Once you have all of your direct debits sorted, you could consider closing your old bank accounts to avoid fees.
You: "You still haven't answered my question! Where do I put my $2,510?!"
- Transfer $2,000 into your Go Bag (an account with high interest). Remember, don't touch this cash.
- Transfer $510 into a savings account called Investing. You'll use this account as a go-between. Meaning, if you plan to invest in shares around about once per month you can use this account to build up your balance until you're happy to transfer it. For example, I transfer the cash I've saved throughout the month into my share broking account on or about the 1st day of every month. Once it's in the share brokerage account I'm ready to buy. As you'll find out below, I do it religiously. But why $510? In Australia, $500 is the minimum amount needed to buy a parcel of shares -- compared to a property deposit, that's pretty good! The extra $10 covers the cost to buy the shares, known as "brokerage".
Now you are ready for a new budget!