Category Archives: EXTRA INCOME

How HS retired at just 28 yrs with millions of dollars after growing up in poverty

My parents grew up poor. Eight-people-living-in-a-one-room-apartment poor. Food-stamps poor. “You’re a busboy, and maybe one day if you work really hard you’ll move up to being a waiter” poor.

Keeping six key principles in mind can help you retire early.

When I was a kid, my parents constantly emphasised how important financial freedom would be, and what one must be willing to do to achieve it. I eventually retired early, at 28, with a little over $US2 million. My entire career totalled less than seven years before early retirement.

Here are six building blocks that helped me get to multimillionaire status quickly.

Average habits lead to average outcomes — if you want an above-average net worth, you need to make above-average efforts.

The median retirement age in the US is 63. The median net worth of households age 65 to 69 is $US193,000 ($272,000). Between that and the average Social Security, that means the average retired couple has to live on less than $2,000 a month.

If that doesn’t sound appealing to you, then you’ll have to do better than average.

While it sounds obvious, this is actually a game-changing thought. To retire early and enjoy atypical wealth, you will be employing strategies that most of your friends probably don’t use. You will be investing your money differently. You will be living differently. And that’s OK. It’s to be expected.

Information is the key to riches

While a certain amount of effort and discipline is required to amass wealth, the biggest distinguishing factor is knowing where to apply that effort. What we pursue is limited by our knowledge of what’s out there. The difference between two people with the same circumstances but different knowledge of their opportunities can easily be a million dollars. A few examples:

  • I discovered that graduating from college in three years instead of the usual four could completely pay for retirement. Between the cost of a year’s worth of tuition and the value of one year’s worth of income, the swing in my net worth was over $US1 million if I set it aside and let it grow until I was 55. In other words, knowing about and employing that one strategy could pay for my entire retirement.
  • I’d just had my first child and have started thinking about how I could set him up for success. Did you know that the average family can make their child a millionaire? The strategy doesn’t even require them to find more money in their budget, just to deploy it differently.
  • Americans have $US4.2 trillion in actively managed equity mutual funds, which could probably be deployed differently for better returns. According to Dow Jones S&P Indices’ Scorecard, passively managed index funds outperformed 82% of their actively managed peers over the 15-year period. Not only that, but the fees charged for a passive fund are significantly lower.

Between fees and superior performance, it’s very likely that moving your investments from one to the other could improve your returns by at least 2%. Did you realise if you invested a $US200,000 portfolio in low-cost index funds rather than high fee mutual funds, historical performance would suggest you would make $US600,000 over the course of 20 years? No additional work for you – just an hour or two to research and make the decision. That’s $US600,000 of lifetime value for two hours’ work.

The right small effort, applied today, can yield six figures in the future.

So how do you ensure you’re in the know about the best opportunities? We have never lived in a better age for this. The advent of technology allows us to reach well beyond our normal circles and get exposure to the best, most impactful ideas globally. You can build a system to regularly show you the best ideas, and let those ideas stack on top of one another to grow your wealth for you.

Career skills and career-management skills aren’t the same thing

Earning an extra $20,000, $30,000, or $100,000 a year is a lot more achievable than you think.

Career management – figuring out how to position and improve yourself for the fastest promotions and highest compensation – requires a set of skills very few people invest in. All the talk is about the technical skills required to perform one’s job. Obviously, you need to be competent in your role, but the skills that make you a good accountant are not necessarily the skills that will help you land a great job as an accountant or get the highest raise once you are an accountant.

An accountant has to have good knowledge of the tax code. She has to be detail-oriented and independent. The additional skills necessary to land a role as an accountant are emotional intelligence, initiative, networking, and negotiation. And these are completely different.

The job I held was a highly competitive one. Before my first interview, I reached out through friends of friends to try to find someone who was already in the industry who would spent 15 minutes talking on the phone with me.

After I did this, I cold-emailed someone at the firm I was interviewing with to do the same thing, hoping that I could get a little background on their specific style and adjust my approach. Turned out the gentleman I spoke with ended up being one of my interviewers, and he told me after I got the job that he’d spoken highly of my initiative in contacting him to prepare.

I also picked up a lot during my career about what levers influenced compensation the most. Things like knowing what to look for in an employer and how many years you want to stay at each company for maximum income are factors which will help you achieve 30 per cent-plus annual pay increases.

You can earn as much outside of work as you do at your full-time job

We live in a technological age. The opportunities to build a side hustle have never been better. Not only will they kick in extra income, but if you build a successful side business, it can easily become your main source of income with the added flexibility of working from anywhere around the globe.

I came to this one later than I would have liked: It was only after I retired that I realised I had underestimated the possibility of income during retirement and thus worked more years than I needed to because of it.

After I retired, I started a blog about personal finance. It was meant to be a hobby – it’s a subject I love. It became a passive income stream sort of by accident. In its first full year it made $US62,326 with only five hours of writing a week.

Having a job on the side can help you get out of the daily grind earlier. Credit:Josh Robenstone

It so happens that blogging could be a viable, lucrative side hustle for many folks. For one thing, the start-up cost is small, maybe $30 to $40 for hosting a year. And it’s an extremely horizontal business model – almost any subject can eventually become a profitable blog. There’s a fitness blog that makes the couple who own it $145,000 a year. A blog focused on entrepreneurs that makes $3 million a year. A blog on food recipes that makes $1 million a year. You’ll find breakdowns of how much bloggers can make over here.

If blogging isn’t your style, there are a million other options you can pursue. Perhaps you can submit your photographs on a stock-photo marketplace like iStock. You can host dogs in your home for $20 to $50 a night through Rover. Maybe you’re an accountant who wants to teach small-business owners the basics of handling their books through paid courses on Udemy.

While some side hustles are more lucrative than others, there will certainly be at least one option that fits your skill set and interests that could make you $US20,000 to more than $50,000 in a year in your side hours.

Earning more requires its own set of skills. If you spend even a little time thinking in this mindset, you will vastly outrun the average guy, who spends next to no time on these skills, and you will be rewarded big time for it.

Money begets money

The difference between having no money and even a little money is staggering. I remember reading an article about why those in poverty find it hard to save. One example the article used was about how someone might go to the store and not be able to afford buying in bulk. Certainly they can see that buying one roll of toilet paper is more expensive per unit than buying the 24-pack, but they don’t have the extra $US10 to “invest.”

This is a small example most people understand, but the principle applies at nearly every incremental increase in wealth.

  • If you’re not scrambling to get your bills paid, you might be able to consider taking on a side hustle for five hours a week. That side hustle might blossom into a six-figure paying business that allows you to travel the world while working only four hours a week.
  • If you have $US50,000 tucked away in savings, perhaps you can afford the down payment on a home so you can buy and build equity with your monthly payments rather than giving it all away in rent.
  • If you have $US100,000 or $US200,000, many banks and brokerage companies will offer you special incentives like lower trade costs and higher sign-up bonuses worth thousands of dollars.
  • If you have a million dollars, you are considered an accredited investor. You can invest in private-placement opportunities. You can be an angel investor in a startup and back commercial real-estate development projects. Your assets qualify you for a larger mortgage, which allows you to buy multi-family properties, which generally show higher returns than single-family rental homes.

In short, more money means more options open up to you. Better options. The more money you have means you accelerate faster and faster toward massive wealth. Money begets money, so it’s worth the hard work and sacrifice to build that first small nest egg.

One of the most recent examples of this in my own life is using my accumulated wealth to get a discount on my mortgage interest rate. When we bought our home, I spoke with the private client arms of some of the major banks. A common benefit of being a private client is a discount on your mortgages. All I had to do was transfer a chunk of my buy-and-hold stocks into an account stewarded by them in order to qualify.

What’s more, there was no time limit as to how long I had to hold my assets with the private arm. Simply having these accumulated assets got me a discount that was worth $US300,000 over the life of the loan. Those same accumulated assets allow me to regularly take advantage of brokerage sign-up bonuses. By moving my money twice a year, I make $US4,000 for two hours of work.

Do everything you can to accumulate that first $10,000, $20,000, or $100,000. It will create a snowball that speeds you toward wealth far faster than you can imagine.

Kickstart your journey to wealth by tracking your net worth

Say you’re interested in accelerating your financial progress and overwhelmed with all the possibilities you can pursue. What’s the single best thing you can do for yourself in the next five minutes? What can you do right now?

Keeping track of your expenses is key to taking control of your financial future.

Simple. Start regularly tracking your income, expenses, and net worth.

If you think about every engaging thing you’ve done, they probably had some way to measure your progress. How many goals you scored. How quickly you can complete a set of problems.

Personal finance is no different. You improve what you measure.

You need to be able to track your income, expenses, and net worth. It needs to be staring you in the face every day. Once you start seeing these key metrics improving regularly, it will spur you to dig into the details and find opportunities to grow it faster.

I use Personal Capital to track all of my finances. Their dashboard is free, accessible to you anywhere, and it hooks up to all your different accounts to give you a single pane of glass from which to view your financial life. It also imports as many months of data as your credit cards and bank statements allow, which will enable you to immediately dig in to spot trends in your past behaviour and opportunities to improve. But even a good old spreadsheet would be a vast improvement.

If you do nothing else today, start tracking your key metrics of income, expenses, and net worth. It will show you where the opportunities lie to improve your financial picture. It is the cornerstone habit that helps build momentum for all the other things you do to grow your wealth. And every new strategy you collect on the way will be reflected in your dashboard’s progress charts.

Do these things and you will find that you, too, can retire decades earlier than your peers.

JP Livingston writes about early retirement, money, and investing on her blog The Money Habit.

This story first appeared in Business Insider. Read it here or follow BusinessInsider Australia on Facebook.

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Henry Sapiecha

Domino’s boss scores massive multi million $$$$ pay day from cheap pizza

AUSTRALIA’S best-paid CEO has made his fortune selling pizza, it has been revealed.

A new report by the Australian Council of Superannuation Investors (ACSI) named Domino’s Pizza boss Don Meij as the country’s highest-earning CEO, after he took home a whopping $36.84 million last year.

The pizza boss made his dough after he exercised options to acquire shares worth $35.7 million.

Don Meij beat out Westfield’s Peter and Steven Lowy, who made a combined $25.9 million in 2017, and Macquarie’s Nicholas Moore, on $25.19 million, for the top spot.

After the news broke, Prime Minister Malcolm Turnbull said the pay packets of our company chief executives were “extraordinarily high”.

“As someone who most of his life has worked in businesses that I’ve only owned or been a partner in, I find the amount, the pay rates for people working as an employee for a lot of big public-listed companies extraordinarily high,” Mr Turnbull told 3AW radio on Tuesday.

He said Mr Meij’s salary “seems like a hell of a lot”.

“They’d have to be extremely productive,” he added.

The new figures reveal Aussie CEO’s are enjoying the fattest pay packets in 17 years.

ASCI chief executive Louise Davidson told the ABC the results showed CEO’s were not with it.

“At a time when public trust in business is at a low ebb and wages growth is weak, board decisions to pay large bonuses just for hitting budget targets rather than exceptional performance are especially tone deaf,” Ms Davidson said.

According to the survey, median-realised pay for ASX 100 chief executives rose 12.4 per cent to $4.36 million while bonus payments rocketed by more than 18 per cent.

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Henry Sapiecha

A spare bedroom may get in for you thousands of dollars, but is it worth renting it out?

There are eight million spare bedrooms across Australia, with almost 80 per cent of households leaving at least one room empty, an analysis of census data shows.

With the average cost of renting a room at more than $200 a week in 2017, this could add up to more than $10,000 a year into the pocket of home owners, Finder spokeswoman Bessie Hassan said.

”Renting out a spare bedroom could earn you $958 a month towards monthly mortgage repayments or household bills,” she said.

Renting out a room in your home can be lucrative, but there may be implications for the property owner and the tenant. Photo: Jim Rice

In total, 5.6 million owner-occupied homes and 2 million rental properties have more rooms than they need for its occupants.

It could also save renters money – equalling to a saving of about $3500 a year compared to the cost of renting a one-bedroom apartment.

Cost of renting a room in major cities

Weekly rent Annual rent
Sydney $289 $15,028
Darwin $225 $11,700
Melbourne $216 $11,232
Gold Coast $201 $10,452
Canberra $194 $10,088
Wollongong $193 $10,036
Brisbane $193 $10,036
Sunshine Coast $184 $9568
Perth $184 $9568
Newcastle $176 $9152
Cairns $173 $8996
Hobart $167 $8684
Adelaide $164 $8428
Townsville $156 $8112
Geelong $153 $7956

Source: Flatmates.com.au, Australian Bureau of Statistics, Finder

Room rent calculated as a weighted average by taking into account weekly rent and population of different regions.

But is it as straightforward as it sounds?

What home owners should know

Renting out a room can quickly net a home owner a substantial sum.

But while it might help owners pay off a mortgage when they have one – the promise of extra cash from the spare room won’t be considered extra income by the bank when they’re looking to buy in the first place.

As a result those whose income is less than necessary for their dream home won’t be able to point to rental income to get them across the line, Dream Financial mortgage broker Paul Bevan said.

And for those who want to use the income from a rented room to take on an additional loan will also face difficulties.

“There’s only one specialist lender that will consider this type of income and it’s limited to $100 a week and the owner would need to show a lease agreement and that the rental income has been declared in their tax return,” Mr Bevan said.

The additional income would also have an impact when it comes to tax time, and potentially when selling the home, which should be considered before leasing a room.

The income from the spare room has to be declared to the ATO at the end of financial year, and therefore it could be taxable, VJR & Associates and Keshab Chartered Accountants accountant Jeremy Iannuzzelli said.

“It is also an implication for the capital gains tax status of your home,” Mr Iannuzzelli said.

Usually, your home is exempt from capital gains tax – but if you use it to earn income then this may no longer be the case.

In many situations, capital gains tax could be charged pro-rata based on the proportion of the property that was rented, he said.

For instance, if 10 per cent of the property was rented for the entire time you owned your home – then tax may be charged on 10 per cent of the capital gains. The ATO has a tool for working this out.

And, alike to an investment property, the home owner can claim pro rata tax deductions based on the percentage of the space available for rent.

“This would be the same if you rented out a granny flat,” he said.

Renting out a spare room to a tenant isn’t the only way to cash in on unused rooms in the house.

Spare bedrooms, attics, sheds, driveways and storage cages could also be rented out to those looking for storage options, Spacer chief executive Mike Rosenbaum said.

In urban areas, this could net between $250 and $350 a month – without having someone live in the property, which Mr Rosenbaum said would suit empty nesters and retirees.

“Families are also renting out storage cages and garages to help pay for bills, and city professionals who tend to catch Uber instead of driving a car, rent out their spare parking space for extra cash,” he said.

For those renting out a room for any purpose, it’s also crucial to consider insurance policies that cover this activity.

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What renters should know

For those who choose to rent a room in someone’s home, there may be some difficulty determining whether they would be legally considered a lodger or a tenant, Tenants Union of NSW senior policy officer Ned Cutcher said.

This definition has a significant impact on the rights of the renter, including notice periods and how bonds are kept.

“The old common law test of ‘exclusive possession’ doesn’t apply to tenancy agreements as defined in the Residential Tenancies Act, but boarders and lodgers are expressly excluded from the Act’s coverage,” he said.

The new test – known as “mastery of premises” – relates to whether the landlord reserves the right to access the room. In this situation, in NSW the tenant is not protected under the Tenancies Act.

In most cases, a renter is most likely considered a tenant if they can lock the room, do not get meals or linen as part of the agreement, have their own cooking facilities and are not subject to “house rules”.

In most other states, including Queensland, Victoria and Western Australia, the specific Tenancy Act does not apply to boarders and lodgers.

Henry Sapiecha