Category Archives: RICH PEOPLE

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

Meet Lex Greensill and the fintech that’s Australia’s newest $2b success story

A supply chain financing company with its roots in regional Queensland Australia, Greensill, has become the country’s next $1 billion-plus unicorn, thanks to a $US250 million ($336 million) venture capital injection from growth equity firm General Atlantic, which also creates the country’s newest top rich listers.

Queenslander Lex Greensill started his own finance supply-chain company that’s now worth $2.2 billion. John Chapple

Greensill, founded in 2011 in London by Bundaberg-born farmer Lex Greensill, 41, provides businesses in industries from telecommunications to manufacturing with working capital based on their invoices, allowing them to be paid faster and fulfil the work, without shortening payment terms for the buyers.

The capital raise, which is the first for the previously bootstrapped company that had only taken capital from family and friends, values Greensill at $US1.64 billion and makes Mr Greensill and his brother Peter, who runs the family sugar cane and sweet potato farm in Bundaberg, collectively billionaires.

“The business is extraordinarily capital efficient and we’ve invested fully ourselves in growing the business because we wanted to maintain control,” Mr Greensill told The Australian Financial Review.

“The firm is still substantially owned by myself and the staff and I’m very proud of that … Dozens and dozens of our employees have become millionaires on the back of this.

“We weren’t looking to raise at all. General Atlantic approached us and the strength of their experience in multiple markets where we’re looking to grow, combined with the capital and expertise, made it worthwhile. But there are no plans to raise again or do an initial public offering.”

The investment from General Atlantic, which gives it a minority stake in the company, will allow the business to aggressively expand in major markets where it’s only got a small presence – China, India and Brazil – as well as rolling out in Africa.

From Bundaberg QLD to London

Having been raised on his family farm and seeing his parents deal with long payment terms, Mr Greensill worked full time in a law firm after finishing high school and undertook a law degree by correspondence.

After becoming a solicitor, he joined a few start-ups based in Sydney during the dotcom boom, one of which was in supply-chain finance.

This venture ultimately failed and Mr Greensill went on to be involved in a few other start-ups, before making the move to London and eventually starting Morgan Stanley’s supply-chain finance business, before moving to Citibank during the global financial crisis and becoming managing director of its supply-chain finance business for Europe, the Middle East and Africa.

But Mr Greensill, who has also been an adviser to former British prime minister David Cameron and US president Barack Obama, said he became frustrated with the big banks’ inability to adopt new technologies quickly and decided to start his own firm.

“I ultimately decided there was a bigger opportunity outside of the bank because so much of the market was not being served by them and they weren’t adopting technology at the pace I thought they needed to,” he said.

“Our business model is that we work on an industrial scale. We’re low margin and we’re passing through the advantage of the extraordinary access we have to Greensill Bank [in Germany] and capital market financing through to battlers in Australia and the 56 markets we serve.

“Full enrolment online takes under one minute and in terms of accepting legal terms and conditions, it takes just one click. We marry our financial and capital markets technology as one of the biggest bond issuers in Europe, together with access to the enterprise resource planning systems of our customers in order to make credit available.”

‘I’m a farmer at heart’

Greensill bought a German bank in 2013, whose balance sheet it uses to invest in its various programs.

The company is growing at around 300 per cent year-on-year and in Australia it has gone from providing $US800 million in working capital to businesses in 2017 to more than $3 billion in the first six months of 2018.

In 2017 it made a profit of $US32.9 million on $US115.9 million in revenue.

“We see ourselves as the Amazon of the working capital world … We’ve come a long way, but the marketplace we play in is quite enormous,” Mr Greensill said.

“Our market share today is about 0.4 per cent, in a market with the potential size of a $US3.5 trillion asset requirement. That’s the market we’re going after. We want to go from 0.4 per cent to [the full] $US3.5 trillion.”

Mr Greensill’s brother Peter also sits on the board of the company, but day-to-day runs the family farming business, which is separate to Greensill.

While the company was founded in the UK, Greensill is still registered in Bundaberg and Mr Greensill, who was named a Commander of the Order of the British Empire last year, has no intention of ever changing that, admitting he’s still a farmer at heart.

“Bundaberg is my home. It’s where I came from and I visited there about eight times last year with my wife and. We have never considered the thought of changing our roots,” he said.

“I’m a farmer at heart. Whenever I’m home I jump on a tractor and have a play. I don’t think of myself as a corporate titan.”

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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

Palmer notches $200m court win against Chinese state-owned enterprise Citic Pacific

Clive Palmer has described his victory in the long-running royalties battle in the Pilbara against Chinese state-owned enterprise Citic Pacific as a “win for all Australians”.

Palmer was awarded around $200 million in damages and a further $200 million to be paid annually for the next 30 years by the Western Australian Supreme Court last week in the dispute over royalty payments.

The dispute stems back to dealings between the two parties in 2006. Citic had paid Palmer $US415 million as part of takeover agreement, which included two separate royalties, for the Sino Iron project.

However, Citic refused to pay the second royalty, causing Minerlogy to make the claim in court.

WA Supreme Court Justice Kenneth Martin ruled that Citic’s wholly-owned subsidiaries Sino Iron and Korean Steel pay Palmer’s Mineralogy the damages.

“This is a win for Australian law over Chinese Communist Government powerhouses who have wasted precious court time, resources and energy,” Palmer said.

“Many Australian companies have lost these battles because they haven’t been able to afford to fight them.

“For too long they have used their power to try and crush Australian enterprise and thankfully today justice has been served.”

Another hearing will take place this week to address remaining issues in the dispute.

Henry Sapiecha

Billionaire Mike Cannon-Brookes confesses to having impostor syndrome

The man in the baseball cap and hoodie may be Australia’s 17th richest individual but is scared of being found out as an impostor.

As a keynote speaker at TEDxSydney, Mike Cannon-Brookes  confessed he suffered from impostor syndrome and most days felt like he did not know what he was doing.

“Have you ever felt out of your depth, like a fraud, and just kind of guessed-slash-bullshitted your way through the situation, petrified that at any time someone was going to call you on it?” he said on Friday.

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“It’s not a fear of failure. It’s not a fear of being unable to do it. It’s more a sensation of  getting away with something, a fear of being discovered, that at any time someone is going to figure it out.

“And if they did figure it out, you’d say to yourself, ‘well, that’s fair enough actually’.”

Mr Cannon-Brookes said when he and his partner, Scott Farquhar started their IT company their main aim was not to wear a suit to work but success brought complications.

Hiring their first HR manager, he did not know what questions to ask and later, attending board meetings in a T-shirt, he found himself  “surrounded by suits, acronyms flying around and feeling like a five-year-old as I write them down secretly in my notebook so that I can look them up on Wikipedia when I get home later”.

“For me impostor syndrome is a feeling of being well out of your depth. Internally you know you’re not experienced enough or qualified enough to justify being there. Yet you are there. And you have to figure a way out because you can’t just get out.”

The Australian Financial Review‘s 2017 Rich List named Mr Cannon-Brookes, 37 and a Sydneysider, as the nation’s 17th most wealthy individual with a personal fortune of $2.51 billion. He co-founded Atlassian , a collaboration software company that helps teams organise, discuss and complete shared work. More than 68,000 organisations – including eBay, Twitter, Coca-Cola, Visa, BMW and NASA – use Atlassian’s products.

Mr Cannon-Brookes joked he had met his wife posing as an impostor.

A weekly commuter to San Francisco some years back, he was in the Qantas lounge when she approached mistaking him for somebody else. He did not disabuse her of her initial impression.

“Classic Aussie bullshit became some sort of forward movement and a phone number … a decade later she is my wife and we have four children,” he said.

Mr Cannon-Brookes thought most successful people “felt like frauds” but the key was to realise they were out of their depth and harness self-doubt as a force for good.

Recently, when South Australia had a power crisis he saw something on Twitter that Tesla thought it could solve the situation so he fired off some tweets only to see the media descend on him as “some sort of expert in energy”.

At the time, he said, he did not know the difference between a AA battery and 100 megawatt battery.

“A chronic case of  impostor syndrome … I remember thinking, ‘I’ve kind of started something here I can’t really get out. If I abandon the situation, I could set back renewables in Australia and maybe look like a complete idiot on Twitter’. All I could do was to not freeze and try to learn,” he said.

He ended up brokering talks between Tesla boss Elon Musk, South Australian Premier Jay Weatherill and PM Malcolm Turnbull on the nation’s energy shortages.

Henry Sapiecha

 

Ever heard of the Australian Rae family? They just reaped in over $300m

It is one of the richest families in the country, and now the low-profile Rae family of Perth has pocketed more than $300 million from the sale of its New Zealand fuel retailing business to Caltex Australia.

In 2010, the family sold its Gull petrol retailing operations in Western Australia for an estimated $500 million

gull-founder-fred-rae-with-then-new-zealand-prime-minister-helen-clark-in-2007-image-www-money-au-com

Now it has offloaded its Kiwi interests, Gull New Zealand, for $NZ340 million ($324 million) to Caltex Australia.

A few years after the sale of the WA operations in 2010, the Rae family’s fortune was estimated by The West Australian newspaper at $392 million, which has been pumped up significantly with Thursday’s sale.

The family moved into petrol retailing in the 1970s after Gull’s founder, Fred Rae, had spent time working in both the house building game as well as building grain silos.

It built its stake in the fiercely competitive fuel industry by sticking to a low-cost strategy, which in New Zealand has seen it rolling out unmanned petrol stations, helping it carve out a handy 5% share of the market from the majors.

the-rae-family-has-offloaded-its-kiwi-interests-gull-new-zealand-for-nz340-million-324-million-to-caltex-australia-photo-gull-image-www-money-au-com

Gull New Zealand is an independent fuel importer and distributor, which brings with it a fuel import terminal at Mount Maunganui, on the north island, and the company’s petrol stations and retail outlets.

Caltex has established a large fuel import centre at the recently closed Kurnell refinery site in Sydney, while also establishing a buying and trading arm in Singapore to supply its Australian operations.

The New Zealand acquisition “optimises Caltex’s infrastructure position, builds trading and shipping capability, grows the supply base and enhances Caltex’s retail fuel offering through low-risk entry into a new market”, the company said in a statement on Thursday.

It was acquiring the company on a multiple of 8.2 times the forecast earnings before interest, depreciation and amortisation for 2017, it said, which will decline to around 7.5 times taking annualised synergies into account. The acquisition is expected to increase earnings per share from the first full year of ownership.

Gull operates 77 retail sites in total, of which it controls 55 sites. Around a third of those are unmanned. It also operates a further 22 supply sites. The company sells about 300 million litres of transport fuel annually.

The Mount Maunganui terminal is the largest facility of its type in New Zealand, with total storage of about 90 million litres. Its retail network is concentrated in the northern half of the north island of New Zealand, and “is well placed to profitably grow via new to industry and/or new supply site expansions”, Caltex said.

Caltex would retain Gull’s brand, management and employees, it said.

Gull has a reputation for being a low-priced market competitor by operating a large number of unmanned outlets with payment by Eftpos or credit card, with no retail outlet. Its outlets are concentrated near its import terminal, with negotiations in the past with rival importers to acquire competitively priced wholesale product blocked when it has sought to expand onto New Zealand’s south island.

The bulk of the country’s population is located on the north island, with Christchurch the largest city on the south island.

The purchase by Caltex follows a period of upheaval in the New Zealand market following the exodus of US group Chevron, which operated the Caltex brand in New Zealand. This was bought for $NZ785 million ($750 million) by Z Energy, which now has close to 50 per cent of the local market.

Ratings agency Standard and Poors said the purchase “will enhance Caltex’s regional supply base, adding scale to its trading and shipping activities”.

“We view New Zealand as being a low risk market for expansion of retail fuel assets,” it said.

 

Atlassian: the Australian millionaire factory. Story in videos & pics.

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Atlassian surges in debut

Shares of Australian business software maker Atlassian soar in their Nasdaq debut.

They’re known as the “Royals” and “the chosen ones” — the select few invited to be in New York on Thursday morning to ring the bells celebrating the opening of the stock exchange and Australian tech darling Atlassian’s massive IPO.

About 40 Atlassian employees — many of whom were hand-picked by co-founders Mike Cannon-Brookes and Scott Farquhar in the company’s early years — celebrated overnight as they became multi-millionaires and Atlassian became a company with a market cap of $US5.74 billion ($7.9 billion).

Atlassian, a leading provider of collaboration software for teams with products, opened for trading on The Nasdaq Stock Market image www.money-au.com

Atlassian, a leading provider of collaboration software for teams with products, opened for trading on The Nasdaq Stock Market on December 10, 2015. Photo: Christopher Galluzzo

By the end of Thursday’s trading in the US, however, more than just those 40 became millionaires. Former Atlassian employees say more than 100 staff are now either millionaires or multi-millionaires.

It’s also understood the shares of a number of staff who joined in recent years are now worth six figures.

“There are going to be a hundred people who are going to be millionaires today — at least on paper,” a former Atlassian employee, who didn’t wish to be named, told Fairfax Media.

Atlassian co-founders Scott Farquhar (right) and Mike Cannon-Brookes image www.money-au.com

Atlassian co-founders Scott Farquhar (right) and Mike Cannon-Brookes. Photo: Trevor Collens

They added that the Royals had been “going out on lavish dinners and celebrations” while in New York in recent days and were already discussing how they should splurge their cash, and whether it should be on luxury cars.

Many are also considering investing their money in Australian start-ups, or starting their own.

“Mike and Scott’s legacy will be beyond Atlassian,” the former Atlassian employee said. “They want to make billionaires in Australia that are going to invest in Australian companies — the next wave of start-ups

Those likely to make the most from the IPO are those who joined between 2002, when the company started, and 2008. That’s when Atlassian offered employees the chance to buy shares at a much lower price than $US27, the price shares were trading for on Thursday as the market closed. For employees who were offered — and purchased — shares at 50 cents several years ago, their stake is now 5300 per cent more valuable.

While some employees chose to hedge their bets and sell some of their shares last year for $US16 to T. Rowe Price and Dragoneer Investment Capital in a financing round, many are understood to have held on to most of them.

When Atlassian received that financing, which valued the company at $US3.3 billion, Mr Cannon-Brookes declined to specify how many millionaires his company had made at the time, but said it was “not double digit”.

“That number [of millionaires] blew both Scott and I away,” Mr Cannon-Brookes said at the time to The Australian.

“That was probably the biggest achievement to come out of this [new investment] and [something] we hadn’t thought about.”

There’s never been a more exciting time to be an Australian — as Prime Minister Malcolm Turnbull would say — or, in this case, to be an Atlassian employee.

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Henry Sapiecha

Australians are getting poorer, comparatively speaking…

 australian bank notes image www.money-au.com

The global purchasing power of Australians is diminishing Photo: Jessica Hromas

Australia is sliding down the ranks of purchasing power and in US dollar terms we can’t nearly buy as much as we could at the peak of the commodities boom.

As recently as last year, gross domestic product per person in Australia (in USD terms) was the fifth highest in the world. Only Luxembourg, Norway, Qatar and Switzerland outranked Australia in 2014, Deutsche Bank points out.

For 2015, however, the International Monetary Fund estimates Australia’s ranking will drop from fifth, to ninth.

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Deutsche chief economist Adam Boyton expects the country to fall further down the rankings due to a continuing plunge in the dollar and lower nominal GDP growth over the next years.
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“If we apply our 2015 and 2016 forecasts for nominal GDP growth in Australia (and assume 5 per cent nominal growth in 2017) as well as our forex forecasts – a decline in the AUD to 65 US cents by end-2016 and 60 US cents by the end of 2017 – then Australia’s ‘ranking’ falls from ninth in 2015, to 11th in 2016 and then 17th in 2017, Mr Boyton wrote in a note to clients.

A further decline in the dollar was a necessary element of the economy’s transition to non-mining led growth.

Mr Boyton said that the strong Australian dollar during the boom years had also led to a surge in online shopping from offshore retailers and overseas tourism, which allowed a large number of Australians to benefit from the mining boom.

“As the Australian economy and the Australian dollar adjust to the end of that boom, one of the unfortunate ‘side-effects’ will be a decline in the global purchasing power of Australians,” Mr Boyton added.

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Henry Sapiecha

The remarkable life and lessons of the millionaire janitor . Lesson in frugality for us all.

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Ronald Read quietly accumulated a fortune worth millions by the time of his death at the age of 92. Photo: Bloomberg

You may have read about the remarkable life and times of Ronald Read. He was the gas station attendant and lifelong resident of Windham County, Vermont, who had quietly accumulated a portfolio worth a fortune.

As the Brattleboro ­Reformer reported earlier this year, Read died in June 2014 at age 92. Despite his relatively modest wages, he left an estate with “stock holdings and property” valued at nearly $US8 million ($AU10.1 million). His bequest was to leave most of it to the Brattleboro Memorial Hospital and Brooks Memorial Library.

His close friends and family were shocked when they learned the value of his estate.

There is wisdom to be learned from Read’s investing and life experiences. How a man of modest means accumulated so much wealth contains exemplary lessons for saving that apply to all of us. But there is also a cautionary tale about recognising the value of your finite time here on Earth. Perhaps learning to enjoy life while you can is part of that equation.

What do we know of Read? He served in World War II, seeing action in North Africa, Italy and the Pacific theatre. The local paper reported that when the war ended, he returned to Brattleboro. For the next 25 years, he worked at Haviland’s service station, which the Wall Street Journal reported was owned by his brother. He apparently did not enjoy retirement much, choosing instead to “retire from retirement” to work as a janitor at a J.C. Penney store until 1997. He was extremely frugal, saving money, avoiding waste and eschewing even modest luxuries.

What follows are the lessons from the remarkable Read.

The good

Not an active trader: Read had remarkable patience. When he died, he had a “five-inch-thick stack of stock certificates in a safe-deposit box.”

The key word is “certificates.” Keeping his holdings in cert form meant that any time he wanted to sell them, a laborious process was involved. He had to drive to the bank, remove the physical paper certificates from his safety deposit box, then drive over to the office where his brokerage account was. Only then was a sale possible.

Compare that with launching an app on your phone, then a quick finger swipe. Trading in the modern era is too cheap and too easy for our own good.

Time was on his side: Many of the stocks he owned he had held onto for decades, the Journal reported. To do so required a great degree of patience. It also helped to live to be 92 years old.

That patience allowed the power of compounding to work to his advantage. His gains grew on top of earlier gains, over decades.

Most investors don’t take advantage of time. They start saving seriously too late in life, they are not at all patient, and they don’t allow the years to work in their favour.

Dividend stocks do well; reinvesting the dividends does even better:

Read typically bought shares of companies that paid out regular dividends. He owned railroads, utility companies, banks, health care, telecom and consumer products. Those dividend cheques were then reinvested back into more shares of the same companies.

The reinvested dividends allowed him to keep making regular purchases over time. Read was not an active trader — he was an active buyer. There is a very big difference.

Avoid speculating; own blue chips: What did he buy? He owned 95 stocks, with many blue chips among them: Procter & Gamble, JPMorgan Chase, General Electric, Johnson & Johnson, Dow Chemical. He also owned consumer names such as J.M. Smucker and CVS Health. Like an investor named Warren Buffett, he avoided technology stocks and the hot stocks of the moment.

He did not own a concentrated portfolio; instead, he had a diversified portfolio with lots of companies in many sectors. This diversification allowed him to spread the risk broadly. Even owning failures such as Lehman Brothers had only a modest impact on his returns.

Charity avoids the tax man: The estate-tax exemption in 2014 was $US5.34 million ($AU6.78 million), or $US10.68 million ($AU13.58 million) for a married couple. Since Read was a widower, his $US8 million estate ($AU10.1 million) was not subject to federal estate tax.

But any size estate can do what he did, regardless of whether it is $US80 million ($AU101.7 million) or $US8 billion ($AU10 billion). Simply giving the money away to a qualified charity beats the IRS.

There is an estate tax in Vermont, and it ranges from 0.8 per cent to 16 per cent. But there is no gift tax in the state, and that means Read’s bequest to the local library and hospital passed unmolested to their intended beneficiaries.

Consider a revocable trust: Depending upon the circumstances (and the portfolio), some investors might want to take advantage of a revocable trust. Also called living trusts, they are an easy way to avoid probate. Heirs avoid a lengthy court process; assets transfer after the original holder dies.

In the case of Read, the process appears to have been rather painless. It took less than a year after his passing to get to his intended beneficiaries. Vermont is better than many states; your heirs may not be quite so fortunate, especially if you live in larger states with more complex laws. By many accounts, California is among the worst for beneficiaries; a three-way tie for next-most difficult is between New York, Florida and Illinois.

A revocable trust will cost you some dollars in legal fees to set up, but your heirs will thank you.

The bad

Certificates are a pain in the neck: As the Total Return blog pointed out, Read was lucky in that the certificates were all current and up to date. “That doesn’t always happen.” It can be a challenge to determine “all of the income-tax return info via dividends over the year.” Stocks that are not in physical form or in an account can be difficult or time consuming to trace. Certificates that are in electronic form and consolidated with an adviser or broker can save heirs lots of headaches later on.

Money is a means to an end, not an end in and of itself: Read might have benefited from reading one of the very first columns I wrote for The Washington Post back in 2011: “7 life lessons from the very wealthy.” That column discussed the insights about investments and experiences with wealth.

Among them were some specifics that Read might have enjoyed. Perhaps he could have given away his money while he was still alive. That might have provided some joy to him, seeing the effect of his legacy.

Understanding the value of your time was another. Of course, money has value, but so too does your time. One can wonder if we are using our limited time on Earth in a way that brings us additional life satisfaction. It’s a trade-off we all make.

The Washington Post

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Henry Sapiecha

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