Unlock Your Financial Future - BUILD AN INVESTMENT PORTFOLIO

UNLOCK YOUR FINANCIAL FUTURE JACQUELINE WILLIAMS Unlock Your Financial Future helps people BUILD AN INVESTMENT PORTFOLIO through providing the correct structure and support, REDUCE MORTGAGES by teaching basic strategies and ACHIEVE FINANCIAL GOALS through designing a special plan.

0412-051-579 www.unlockyourfinancialfuture.com.au

INTRODUCTION My name is Jacqueline Williams Director of UYFF. We do introductions like this so that you can understand where we come from and our philosophy with our clients.

We tend to work over a long period of time with our clients to really help them do lifechanging financial matters.

Here at Unlock Your Financial Future we help people BUILD AN INVESTMENT PORTFOLIO through providing the correct structure and support.

Showing People how to REDUCE their MORTGAGE by teaching basic strategies and ACHIEVE FINANCIAL GOALS through designing a special plan.

TABLE OF CONTENTS 1. MOST PEOPLE FAIL FINANCIALY 2. RETIREMENT YEARS 3. HOW TO GET MONEY WORKING FOR YOU 4. What's an Asset?

5. PEOPLE FAIL TO PLAN 6. WHEN IS THE BEST TIME TO START? 7. BUILDING YOUR FOUNDATIONS 8. SHARES AND PROPERTY EDITED TO HEAR SO FAR 9. NEW VS OLD 10. WHAT IS OPM? 11. GEARING 12. CAPITAL GAINS TAX 13. SELF MANAGED SUPER FUND 14. BANKS CALCULATE THE INTEREST DAILY AND CHARGE YOU MONTHLY 15. WHAT IS A OFFSET ACCOUNT 16. WHATS YOUR EXIT STRATEGY 17. WE HELP YOU GET STARTED

CHAPTER 1 MOST PEOPLE FAIL FINANCIALY So, what I want to do is I want to subtitle how to make money.

Much better than television. How to make money. And as you understand, I am talking about how to make serious money.

So, the first thing I want to do is I want to share with you a fact, a fact that kept me motivated, a fact that kept me going, especially when times are tough. A fact that sort of woke me up and I am hoping it has some sort of impact on you, a similar impact that it had on me.

The fact of the matter is most people fail financially. Most people fail financially. I like to share that because that should shock you, and so it should. Also ... Lots and lots of people I meet feel that it is not going to happen to them, or they are probably not even woken up to planning financially. It depends what stage in life you are at.

What do I mean by they fail financially? What I mean by fail financially is that for most people, and it really does not seem to matter what their income level is or what their standard of living is, but for most people, at some point in their life, that standard of living comes down.

The belt must get tightened; the money must get counted more closely.

When does that happen? That tends to happen in retirement because the only money you can maintain your standard of living on during retirement is whatever money you have set aside for that time in your life. And if you have not set enough aside for that time in your life, you're going to cop it. You can't survive.

You're going to have to pull the reins in.

There was an ad put on television about seven or eight years ago. It said something like, "82% of people's retirement fund money will run out by the time they're 79. Before 80." Run out. I don't know about you, but I don't want to be 82 years of age standing at a bus stop in the pouring rain with my little bag of shopping because I can't afford a cab. I want to life to get better.

CHAPTER 2 RETIREMENT YEARS It's going to get harder and we're going to need more money to make life easier as we get older, but because what happens is people carry their same spending patterns through into retirement that they had while they were working generating income.

And so, what they do is they go on trips now, they do not have to get up for work. So, they go around to Americas, or they do Europe or Asia, or they go on a few cruises, and they buy their grandkids things.

And then suddenly they hit mid-seventies and just like that the money is running out. We better stop all this, and that is actually when you need more money.

But then it occurred to me. You see, a statistic hit me. It said that if you make it to age 60, statistically you're going to live another 30 years, 30 years on your own money, 30 years to survive for.

So, I ask people, "If you retired tomorrow, how many years could you survive on what you've got right now? How many years would you last?"

Some people say, "I'd only last 10 years." Some people say five, some people say two or three, and some say less than one because that's what happens. You stop work, you have no income coming in, you have to survive on whatever money you've got.

But then I thought, "Hey, that's the doom and gloom side of it. That's the necessity side of it, if you like.

"Thirty years retired and I don't have to set the alarm clock anymore, 30 years and I can do whatever I like, whenever I like. And when I sit down with people and I say, "What do you want to do for those 30 years of your life? Thirty years, that's about one third of your life, and you don't have to get up for work anymore, so you can do what you like, whenever you like.

What do you want to do with that time in your life?" And most people say, "I want to be financially secure."

Well, that's the wrong answer. Why is that the wrong answer? Because it's like how long is a piece of string? Financial security to some people means something different to others, and if you don't know specifically what you want, how the hell are you going to plan for it?

Because planning is crucial.

So, what we need to do, one of the first steps if we want to make serious money is take control of what we want out of life, and say to ourselves, what do we want? What do we want to do for the longest holiday in your life?

What do you want? I recommend you get a bucket list. You start realizing what you want to get out of life. Most people let life happen to them.

How they average it out over those years they were retired. Eighty-six and a half percent average are on the pension basically. Yep, $300 a week. Eighty-six and a half percent is most people, isn't it? That's a bit sad and sorry, isn't it? Because that's most people by a long, long way.

Look at the other end, about one and a half percent of people have an average income of more, more than $700 a week. So that means we have to do something different to most people around us. If you think about it, what we do is we learn from most people around us, subconsciously. We were never, ever taught at school, the subject how to make money.

CHAPTER 3 HOW TO GET MONEY WORKING FOR YOU What teachers do, and if you're a teacher, I take my hat off to you because it's one of the toughest jobs. but what we're teaching kids is how to go and get a job. And you say, "What's wrong with that?" so all I had to lean on was my mum's advice and she was like most people. So, I say to her, "I want more money."

She says, "Go and get another job." So even before I left school, I working in the family business What does that teach us?

What everything is teaching us is that the way to make money is to work for money, work for money, work for money.

Now of course we have to go and work and we should all work hard, but the rich learn how to get money working for them. I'm going to tell

you how they do it. They learn to get money working for them, and that's what we need to do and it's a shame we're never taught it because if we were taught it from the very beginning, we would all be doing it and we wouldn't be scared of it. It would come naturally to us and it's possible to achieve.

But what do most people do? Let's learn the mistakes of most people. And if you're making any of these mistakes it's really just your attitude to money, that's the difference between make it or break it. So, if you're doing the silly things that I'm going to mention, one of the ways to make more money immediately is to stop doing them.

And then what I'm going to teach you is the way the wealthy do it, and then if you start copying those strategies and avoid the mistake strategies, you're going to end up making more money, hopefully loads more money.

So, what do most people do? What most people do is they go to work. There's nothing wrong with going to work, don't get me wrong.

It's what do we do with the money we earn. So, what most people do is they save a bit, spend a bit, save a bit, spend a bit, save, save, save, spend, spend.

That's what most people do. We learn these habits from a very early age. What's the first thing a young person does when they leave school or college? They go get a real job. First real money in their lifetime, right? Not the parttime McDonald's job anymore. So the first thing they do when they get this new job and money starts coming in, they go, "Oh, I've got some money." They rush out and buy an asset.

Nothing wrong with buying assets. This asset, they borrow money for. This asset, they commit $100, $150 a week of their hard-earned money to buy this asset. This asset is called a CAR. Car an Asset? Do yourself a favor tomorrow, go and buy a car. Any car. Drive it around the first roundabout you see, take it back to the car yard. Say, "Oh, excuse me. I made a bit of a mistake. Are you like Kmart and Myer, do you give refunds?" "Yes, we do." But unlike Kmart

and Myer, they won't give you a full refund, will they? You'll get a refund less about $8,000 or $10,000 of what you paid for the car, won't you?

If you want to call that an asset, it's called a depreciating asset.

So I say to the young person, "I know you needed a car and all right, maybe a silly move."

But then I see people at 55 doing the same thing. They're nearing the end and they go buy themselves a car, a bigger car. So I say to the young person, "That's great, and how much are you saving?" "Oh," they say, because now they start making excuses. You ever made an excuse while you made an expenditure? "Oh, they say, "I can't afford to save right now because I'm paying off the new car. But when I've paid off the new car, then I'm going to start saving." And they shake their head and they really, really mean it. Except in four years' time when they've paid off the new car, what do they go and do? Buy another one. And it's got to be more expensive than the first one.

Then you've got to get a credit card, haven't you? Everyone's got to have a credit card. Now

this is clever, right? I got a credit card when I went to England about seven or eight years ago and I got a $10,000 limit. I spent the whole $10,000. I was there 10 days, spent the whole $10,000. Came back, paid the $10,000 off and kept the frequent flyer points, right? But because I went up to my limit and because I went there so quick. I don't know whether you've ever had the privilege of this letter you get from the bank, right? So you get the letter, it's all on one page, and there's a definite reason why the bank prints it all on one page, right? I'll tell you in a minute.

So the letter goes like this. It says, "Dear Jacqui," like they've known me for years.

"Notice you've gone up to your credit limit, never mind," they say, "because this happens in life. These things happen. Now we're here to help you. We understand what you're going through, so we would like to offer you another $2,500 worth of credit. Now the good news is, Jacqui, you don't have to prove you're working.

We don't want proof of income; we don't want proof of health. You could be dead for a week,

just sign the bottom of this page and quickly send it in. See, if the signing page was on another sheet, you might lose the other sheet, So to keep it all on one letter. Clever, right?

So this is what happens. You come home from work, both of you open the mail. "Oh look, darling, there's a letter from the bank. It says because we've gone up to our limit they will offer us another $2,5000 worth of credit. We don't even have to bother you've just lost your job. We can get another $2,500 worth of credit." "Oh, do you think we should?" The other person says. "Because we don't really need any more." "No, we're not going to spend it. No, it's there in case we need it in an emergency." "Oh, is that ..." "Yeah, we won't spend it." "All right. Quick sign." What happens within three months is they now owe $12,500 worth of debt instead of $10,000, correct?

CHAPTER 4 WHAT'S AN ASSET? So consequently, because of all those stupid things we do, we end up on a pension, right?

So what do the wealthy do? Well, they go to work too. Great, we've got to collect an income.

What they do is they save. Like everyone instead of spending it, they invest it, and then what they do is they build a thing called an asset base so they can retire wealthy one day with loads of money.

But what I wanted to do is I wanted to concentrate on the word asset. We've just understood that certain assets aren't really assets. Like a car isn't an asset, your furniture isn't an asset. Why do they when you fill out a loan application form, ask you what your furniture's worth? Why do they do that? And you proudly go, "Well, my fridge is worth $2,000 and that TV cost $12,000." Your not going to get it in a garage sale, are you? So it isn't worth it, it just makes you feel better, I think. But they aren't assets.

What do the wealthy consider assets?

So, like maybe some of you, I've read up on what the wealthy do. Not how they make their money, that's interesting too, but what do they do with the money they make. So, I found this little book And I'm going to share some tips out of this book because this man is a multimillionaire and he learned from another multi-multi-millionaire.

So they must be worth listening to because they've got more money than I have. This book's called Rich Dad, Poor Dad. It's written by a guy called Robert Kiyosaki and one of the things Robert explained is his take on what an asset is. As Robert says an asset is something that goes up in value and gives you a income.

Robert Kiyosaki had the benefit of learning from a rich dad and a poor dad. His own father was the head of a university. Head of a university. Very clever guy. Head of a university, he was on a six-figure income, So clever guy earning loads of money. Robert Kiyosaki's dad

did that, and he was the poor dad. You know why he was the poor dad?

Don't let circumstances or what you see with people kid you, because lots of people with big houses have bigger and better debts than you, bigger and better mortgages. They drive flashy cars, but they have bigger and better loans on those cars. They go to bigger and better restaurants. They buy bigger and better clothes, they have bigger and better holidays, their kids go to bigger and better schools with bigger and better school fees. That does not make them rich, does it? It means they've got a fantastic lifestyle, but if they don't protect it, that lifestyle is going to come crashing down really hard.

Someone I know bought $180,000 Mercedes because his business was doing well. Eighteen months later his business wasn't doing well, and he had to sell the Mercedes. Obviously, he took a lease out on the whole thing. He sold the Mercedes for less than $100,000. the other rest of it he's got to payback. See, it's not flashy, is it?

So, the rich dad in the book was also a good lesson for me. The rich dad was Robert's friend's father. He was a mechanic truck driver, a kind of knockabout guy on the street, You don't have to Have a good education and you don't have to have a high income; you just have to know how to use the money you've got.

So Robert says to the rich Dad, "How'd you do it?" So, he says, and I really loved this when I read it, he said, "Look, I don't care whether you're a butcher, baker, candlestick maker, I don't care how you make your money, whether you're employed or self-employed, that doesn't mean anything. It's what you do with the income you generate.

So what you should do with the income you generate is start a business. The business is called your asset base. You don't have any staff.

It's not like a shop or anything. You've just got this going on behind the scenes. You get your money that you're making, you take some of

that money first and you invest it and then you spend what's left.

What do most people do? They get their wages, they spend, and if there's anything left, then they'll save a bit. Won't they? What happens at the end of most weeks or months?

There's none left. Oh, we won't save then this week, we'll save next week.

So he says, "That's what you should do. You should go to work, get as much money as you can out of that, and start building a business called your assets." I like that concept. So what we're going to do is we're going to look at the smart, I'm going to teach you some smarts, and safe way of building this business.

Stockpiling your assets.

CHAPTER 5 PEOPLE FAIL TO PLAN Two mistakes' some people make, first mistake is people fail to plan. I promise you; I really promise you, What I was trying to say to you is if you've got some visions about what you want out of life, get them going get them to motivate you.

I heard that lots of people hate the job that they do, but if you knew you were doing that job because what you've got is a business that you're creating so that you can go and do whatever it is you want to do for 30 years of your life, that's more exciting now. You know why you're toddling of to this job early in the morning in the freezing cold or whatever. So, you've got to have a plan.

It also helps people like us help you to plan and strategize. If you've got a plan and a strategy, you feel much better. If you're just dancing around and letting the wind blow you around from tree to tree, you don't really feel so good.

And not as good as if you've got I know what I'm doing, I've got it all marked out now.

The other thing is, people never start. Of course, I can guarantee what will happen if you never start. That's the only guarantee apart from death and taxes I'll make.

Or maybe you started, and you stopped. I met a Someone a few years back and starts telling me there story. . Ten years ago, they met a consultant and loved what they explained to them, so they went and bought themselves a property. Six months later, they liked it so much they went and bought themselves another one. I'm going, "You're kidding. Two in six months. That's fantastic. I never heard anyone do it like that before. Well, that's great.

How many you got now?" "I've still got the two," they said. "Oh no, no." I said, "How old are you?" they said, "I'm 52." I said, "What do you earn?" they said, "$120,000 a year." I said, "How much are the properties worth?" they said, "500,000." S120 grand a year. I said, "How much of the property's worth?" they said, "500 grand each." I said, "That's not enough." They said,

And the story is not that good either, I took the loans out on interest only loans, which is not a bad strategy. 250 grand each. I owe 250 grand on each property. So, I owe 500 grand." So, I said, "You're worth a mil. You have 500k." I said, "You're nowhere near enough." They said, "Yeah I know."

They're lucky they shared the story with me because they weren't going to do it. they thought, well, at least I've got two. "I'm doing it," there not doing it. There just touching the edge. So, I showed them what they have to do and now they're getting a bit better off.

But if you started and you stopped, start again.

And if you've never started, the only way you're going to make any money is to get started. Grit your teeth and jump in and get started. So the key is build a strategy around what you want out of life. What your goals are, have that strategy constantly, work towards that strategy by sticking to it. Stick to it.

CHAPTER 6 WHEN IS THE BEST TIME TO START? Have you ever been on a lousy diet? I have. But there's no such thing. It's impossible to have a lousy diet. How can it be a lousy? Except the cabbage diet. Have you ever tried the cabbage diet? You only eat cabbage. You lose all your friends. There's no such thing as a lousy diet.

You know why? Because all it is, is calories in vs calories burnt. and we all know how to lose weight. So, we all really know how to make money. You've got to start doing something about it.

So, people then say to me, Jacqui, that's all very well. Right? I've realized I'm on the wrong track financially. "I don't think we've got enough. I think we're on the wrong track. Okay, we've got to do something about it. Yep. Okay. They then say to me, Jacqui, I've got to do something about it, but Jacqui, in all honesty, when is the best time to start?"

So of course, I say, "Well obviously the best time to start is after Christmas." I mean, you can't do anything about your finances. You can't look after yourself before Christmas. That's just totally ridiculous because you're having Christmas at your place this year. You don't know whether it's a ham or a Turkey, should I buy some prawns? I've got auntie Sally and Uncle Ben coming and They don't get on. And little Millie, I bought her a present last year and it was totally wrong. , I just hated myself. I got buy her up something better. And the Christmas lights don't work. I can't look after myself financially. So, I say, " Wait till after Christmas, get all that out of the way.

Then don't do it in January because you've got Rego. There's always bills in January. You've got Australia Day. February is a good time to start thinking about it. The only trouble is it's getting close to Easter and chocolate is really important. You getting the message? When do you reckon the best time to start is?

NOW

But it is now, isn't it? Don't you agree? I mean, if you want to change your life financially start now. So, if you were going to start now, this is what I recommend you do because now means now today, right?

So, what I recommend what you do is you go home... On the way home, you stop at the ATM, you get a hundred dollars. You take the hundred dollars home. You find a tin box. You put the hundred dollars in the tin box and you slide it under the bed. Next week, you do the same again. And the same again, you do it for four weeks. You'll have $400 saved up. You could have started four weeks ago, Christmas or no Christmas. You would have $800 saved in that tin box, under the bed.

So if you haven't got enough money for your future. Why don't you start saving today?

Well, we don't want to put it into a tin box under the bed. I mean, we could for the first few weeks, but then what are we going to do with it? Where did I put their money? . It's no fancier than this and your superannuation money is invested in exactly the same way.

They put their money into cash in the bank.

They buy some property, and they buy some shares. That's it.

The reason I mentioned that is because every week I met someone who wants to buck the system. They want to get fancy with it. They want to do something new. They want to try quick fix.

CHAPTER 7 BUILDING YOUR FOUNDATIONS Now, what a financial planner might show you is the pyramid shape. I like the pyramids. So, they were built very well and very strong. And one of the things they had was a strong foundation. Any building the builder would tell you that a building to stay put must have a strong foundation. So that's how you must view your business, your asset building business. I need a strong foundation. I'm going to focus on building this strong foundation because what a lot of people do, what most people do. And this is one of the reasons they fail is they flip. They have a bit of investment here, a bit over there, a bit of this and a bit of that. What you've got to do is build your foundation first, then build the next layer and so on. That's how the pyramids were built.

So the width of the pyramid is how much of your money is invested. The height is the risk.

So obviously the pyramid, the foundation is the

widest. That's most of your money, it's the lowest so it's the lowest risk. And then as you build, you have less money. It's higher risk but it could have a higher return, but you've got less exposure when you've got all that in place.

So which are you going to choose as your foundation. If you're on the wrong track financially, you've got to make a decision.

There's no shortcut. You can't put it off. Cash, shares or property? Which one is going to be my foundation? These are four important ingredients that your foundation should have.

Okay. This man just told us to have them. Do you remember? It's got to go up in value. That's called capital growth and it's got to give us an income.

Robert says to the rich dad "Why and give you an income?" He says, "Because one day you're going to want to stop work. And you're not going to be able to generate an income anymore. So you're going to need a thing called a passive income." Those assets that you've accumulated should be giving you a

passive income. Okay. So you might as well start collecting them now. That made a lot of sense to me. Here's something he did to him.

Let's do this now for you. He says to the reader of the book, do a stock take of where you're at right now. Because it's valuable to understand where you're at. You've been working, how many years you've had, how much money go through your hands.

If there's two of you, you have two incomes So what I want you to do is imagine an A4 piece of paper, draw a line down the middle line, across the top, do this in your head. So just do it for yourself. Head up one column my assets, and head up the other column, my liabilities. And what you should do is list all the assets that you've got so far. What's an asset? Anything that goes up in value and gives you an income.

Are you doing it? You're doing it?

Now, what you got to do is list your little liabilities, which is all the money you've pumped into things that won't go up in value amount and give you an income. So what

happens is your liability list outweighs your asset list. Just let it remind you once again that you need to do something. That's all. And then to do something about it. If this balance sheet isn't right all I can say to you, the basic way to make more money is to look at your balance sheet and go, we need to change and start changing straightaway after Easter. No, not after Easter.

The third ingredient is tax advantages. This one gets very little attention, and it can be very, valuable. I'm going to tell you later on. Did you know that the Australian government will help you by giving you your tax dollars back if you buy assets that go up in value and give you an income? Did you know the Australian government will give you your tax dollars back if you buy assets that go up in value and give you an income and help you get rich? Why have I told you that twice? Because it amazed me when I came over here, you see the English government does not help the English people get rich by giving them their tax dollars back so that they can go off and buy assets that will go up in value and give them an income.

It's a fantastic thing. And you should take advantage of it. Anything we can get to help us is worth it, isn't it?

The fourth ingredient is it must be low risk.

Because that's their lowest one, right? So, we've got cash shares and property. Which one are you going to choose? Can I help you? Do not choose cash. Why not? Well, yes, it is low risk. Your grandma was correct.

The bank is a good place to put your money.

But it doesn't give you any tax advantages and it only gives you income or capital growth, whatever you want to call the interest on your money. Plus that is very low and cash in the bank is what I call a slow track way of investing.

It's very slow. What the wealthy learned to do is fast, track their money. They get their money working much faster. I'm going to tell you how they do it. It's a strategy you sort of already really know, but you might have not viewed it this way before.

So we're going to need to get our money moving as fast as possible. Don't we? We don't

want have money moving slowly. It's safe and we can get it moving fast. I'll show you how we do it. So that just leaves, shares and property.

Which one are you going to choose? Which one do I choose? Well they are very close. They are very close. I've got property first, share second, bit of super bit of cash in the bank. Oh, there is some clear-cut reasons why I put the property just in front of the shares. And it's not necessarily for the obvious what you think are the obvious reasons I'm going to tell you why.

I'm going to go through these four ingredients and tell you why I would do it that way round.

CHAPTER 8 SHARES AND PROPERTY You can disagree and do it the other way around. That's fine. But just do something, And to me, property from a capital growth point of view and shares are about the same.

Shares You keep them for 10 years and they'll perform. Property Keep it for 10 years and it'll perform.

Simple. So to me, property and shares both get a tick.

Income. Shares give income. I'm talking about the top 200 companies. If you invest in them, they give you dividends. Lots of shares give you dividends. But the dividends of the top 200 are called blue chip dividends. And they are fully franked. Which means obviously if you get income every year, you've got to pay tax on it.

The fully franked dividends are tax paid at company rate which is about 30%. You might be a 38% taxpayer, so you'll pay very little tax on the income.

Property Does that give me income? You don't need me to tell you that property provides an income by a tenant paying rent. But what a lot of people do ask is do people rent, is there a demand out there? Is it going to stay consistent? Well, here's some stats for you. 95% of people have rented a property at some point in their life.

Now walk around Australia, knock on the doors. Are you buying or you're renting? About 30% will say I'm renting, but that's on the increase and we know why that's on the increase. People are finding it harder to get into their first home. So, what does that means though, from an investors point of view.

There's an interesting stat that now people know they've got to rent. They don't want to get a six-month lease anymore. There's 12 months. They know they're going to be renting and don't want to keep changing house every six months. I want to stay there.

So capital growth, they both get a tick and income They both get a tick. So now they're level pegging tax advantages.

The law says, and I'm going to squash it down if you invest into anything that is income producing, any expenses associated with that income production are tax deductible. Any expenses.

You invest in shares. Are there any tax deductions? Well, maybe a bit of account keeping fees. There might be a bit of this and a bit of that. If you've borrowed the money, the interest on the money borrowed, just the interest payment, is tax deductible and that's about it for shares.

An investment property is exactly like the one you're living in. It has all sorts of expenses.

They're exactly the same. They're the same type of house. It's just that you don't live in both of them. They have expenses and are they tax deductible? So to answer that question for those of you that don't know, yes they are.

The rates are tax deductible. The insurance are tax deductible. The interest on the money borrowed just the interest payment. That's why it's okay to go interest only loan because the principal payment isn't tax deductible.

If you've got any extra money, don't pay off your investment property, get rid of your own home first, get rid of your card debts, get rid of your credit cards, get rid of all that first because it's not tax deductible. Leave your investment as tax deductible as much as possible. Once your debt free on your home, you can start being debt free on your investment property.

Management fees that go through a real estate agent, get a real estate agent to look after it for you. It does help. get ray white or somebody to look after them. Maintenance is tax deductible, but It doesn't mean a full refund. Do not buy something that's deliberately high maintenance.

CHAPTER 9 NEW VS OLD New is far better than old as far as maintenance goes. You've got builders guarantees. A lick of paint is not a tax deduction. Some plants they've pretty up the garden and it might add value, but it's not a tax deduction, okay?

Now these things all cost us money.

So what the government will do is they will allow us to depreciate the cost of construction of the property.

And I'm now going to tell you something that could be worth hundreds of thousands of dollars in tax deductions to you. Your real estate agent won't tell you.

Your bank manager won't tell you. Your financial planner may not tell you, but I will.

Way better than watching TV. This could be worth a fortune to you.

The rule is this. We can claim two and a half percent a year on the cost of construction, not

the whole total cost of the property. The cost of construction for a maximum of 40 years. 40 years Times two and a half percent over 40 years is a hundred 100%. That means we can write off a hundred percent of the building cost on that property.

Please note. Here's an example. You have decided with your partner that you're going to go and buy a property. You have narrowed it down to two properties, just down the road.

One is in Jerry Drive and the other is just around the corner in Ben Street. So, they are both worth, $400,000 each. $400,000 each. They are both in the same area and the same type of house, so capital growth, remember our four checklists? The capital growth is going to be exactly the same.

Because they're the same type of house, the rent is going to be exactly the same. So, tick tick.

The one in Jerry Drive is brand new. Just finished on the weekend. The Ben Street one is

20 years old. But here's some other very, very important things you need to know about Ben Street. Around the fence line is a beautiful white freshly painted picket fence. It's beautiful. Over that picket fence are roses, that are the best roses you've ever seen in your life, and they smell glorious, right? The fence itself surrounds the best lawn in Australia, it's immaculate. And in the middle of the lawn is a lemon tree. Beautiful, beautiful lemons with green shiny leaves. And the house itself has been freshly painted.

So Saturday morning, you're going to get up early and you're going to go house hunting.

You're going to start attacking this new business called asset building. Off you go so you drive down to Jerry Drive, pull up outside Jerry Drive house number 14. "Ah, I like that!

You both go? That's nice, I like that. Yeah, let's buy it! Oh look, can we just go around the corner? You know, it's only round the corner we should look at it All right then.

You drive around the corner, pull up outside

Ben Street and you go, "Ah!" One person in the car goes "Oh wow! Ah look at that picket fence look at that rose garden and look at that Lovley lemon tree. Oh my God! The Fence has been freshly painted it's a lot, ah what a pic, I'm going to take a photograph! Quick, quick, Let's buy this one!" The other person in the car goes, "Let's just do the checklist like Jacqui you know, capital growth, income, yeah? Tick, tick.

They both got the same capital, both same.

Now the one around the corner is brand new.

We got it for $400,000. The brand new is made up of two components. Any house is. Land component and build component, Can we go half each, 50-50? Half a land, half to build it. So $200,000 land, $200,000 to build it. That means the Jerry Drive one, we can claim 2.5% on $200,000 for 40 years. Smith Street. It is also worth $400,000, but it was built 20 years ago.

Let's say property doubles every 10 years just to make life easy. So if it's worth $400,000 today, it was worth $200,000 10 years ago, and it was

worth $100,000 20 years ago. Got it? $100,000 half a land, half to build it. $50,000 to build it. If you think about it 20 years ago, it probably was only $50,000 to build a house, right? So that means we can claim 2.5% on $50,000 for 20 years. Got it? 2.5% on $50,000 for 20 years or 2.5% on $200,000 for 40 years. the brand new one, not only is it lower maintenance etc., but It is also worth hundreds of thousands of dollars more in tax deductions than the old one.

It's a lemon? That's good. No one said that before. You get it? What people do is they make a mistake, and they buy with their heart. if you go and buy a house or own, it's not the real estate agents' fault because they're not taught what I've just taught you. So a real estate agent doesn't think like that, right? So they go, "Well this one's nice, it's got a lemon tree, this, that, and the other..." You're never going to see the lemon tree because you aren't going to live in it, are you?

If it was your own house, different matter. But why buy with your heart when it's money-

making decision? Anyway, back to this I've got $45,000s' worth of tax deductions nearly. The property is bringing in a rent, it's a taxable income. So I have to take the income away from my tax deductions, that leaves me with a net deductible figure of $26,000. I can lower my taxable income by $26,000. I've already paid tax on it, so I'm going to get a tax refund on that $26,000.

And you say, "Ah Jacqui right, great. I've got how, it works. But yeah, you're kidding. I've got to wait till next June, July. I mean, I don't do my tax returns in July, so by the time it's nearly a year away before I get that tax refund." Wrong.

Not only do we get the tax refund in the first place, which I think is brilliant because you certainly won't get it in England. Not only do we get it over here, which is great help. If we fill in a thing called a tax variation form, we can tell the tax department, our referral partner do this for our clients, that we're going to make a $26,000 claim. They say, "Okay, I'm going to write to your boss." And he will say to your boss, "Please do not tax that person so much

anymore. I want them tax less because they're going to make a claim." So, in other words, you get the tax deduction in advance. you haven't had the expenses and you get in it.

You will walk home with an extra $150, $200 in your pay packet. Extra, you can't spend it because it's designed to pay, help pay, the cost of owning this investment.

Now if this is the cost of owning this investment it's about $30,000, right? So, if it's going to cost us $30,000 to own this asset within my business. So my business is to buy these assets. I've got a yearly cost of $30,000 in my business. Where the hell am I going to get the $30,000 from?

Who pays the $30,000? The tenant will pay you rent each week or fortnight. The tax man will pay you $150, $200, give you back your taxable income. Give it back. And if there's a shortfall, you find the shortfall. Oh, how much is the shortfall, Jacqui? Typically, worst case scenario!

It's $100 a week. So instead of putting $100 a week in a tin box under the bed, you can have

another house. Your own house costs you more than $100 a week, especially if you've got a mortgage on it.

Loads of people have got their own house.

They're very proud, and so they should be. You know, I've got my own house. They're still going to fail financially because they can't find $100 a week to go buy another one. In fact, some people rent and have a stream of other properties because they're only costing them $100 a week, and then they'll go and sell some of their investment properties and then buy their home with no loan on it. Now, here's the cruncher. Here's one of the reasons or towards the reasons why I like property over shares, right? Because if you get this next little concept, if you understand this next little concept, you will understand that the rich get richer. And you will understand how to fast track your money because this is the concept.

CHAPTER 10 WHAT IS OPM? The reason we can have another house for $100 a week is because we are using OPM. OPM other people's money. This is the cruncher. The more OPM you can use, the quicker your portfolio will grow.

Other people's Money who in this situation are the other people, the tenant and the tax man, because until you started this strategy you are happy to just let your taxes go down the drain, well not down the drain, but to the tax man.

Now you're getting it back. And you're getting some other person called the tenant giving you money and you are buying this asset. So, what you're doing is you're using a small amount of your money to gain a much larger asset. Let me explain to you. If we are using $100, which is $5,000 a year roughly. We are gearing that up to a $400,000 asset. Now here's one thing I like about property. I know, because statistics tell me, and I've lived long enough to see it

happen for myself, to not have to argue with myself about this. So, I'm suggesting you don't either because you know them, Property will double in value every 7 to 10 years.

So, I know if this is my strategy, I'm going to find myself $100 a week. This is my business what I'm going to do is I'm going to find $100 a week, I'm going to get this for $400,000 Investment. The way I'm going to do it is I'm going to use somebody else's OPM. Whose OPM do I use? The banks', right? That's what they're in business for. They supply funds so that people can borrow the money and they live off the interest, right? That's how they make money. So we can use their money. The bit you need to understand is the more OPM you can safely get, safely and comfortably, it has to be comfortable for you, the more money you're going to make because when this thing doubles in value in 10 years, it's going to be worth $800,000.

My strategy is to sell it in 10 years' time. So, in 10 years' time from today, I'm going to sell it. I still owe the bank the $400,000 because I had it on

an interest-only loan. I pay back the bank the $400,000 and I keep what's left.

Now there's a Mr. Negative in the room, He's got negative stuff going through his head. I'm going to deal with you in a minute, Mr. Negative, all right? don't worry. I'll answer your negatives. Okay? A couple of them anyway. But getting back to my business, let's go one step at a time, I put $100 a week into my business. $5,000 grand a year. I did it for 10 years, which means into my business, I contributed $50,000 over a 10-year period and I turned it into $400,000. That's it. That's how it works.

CHAPTER 11 GEARING Now you can see that if I can get the banks' money working for me and I can use other people's money, like the tenant and the tax man, to pay for the cost of the banks' money, that's how I'm going to make money. I've turned 50K into 400K. So, it's called gearing.

Now have you heard the phrase and never really understood it? Well, it's just the word but you're gearing or leveraging up your money.

That's the way to fast track your money. Do you think Richard Branson uses his own money when he wants another plane? No. He uses the banks' money.

Developers are developing townhouses or high rises or shopping centers. They use the banks' money! They just know how to manage it. I don't care what it looks like, you just must understand the money management of it. And if it boils down to you having to contribute 100 and you're comfortable with the 100, go get the

$400,000. So if the bottom line is we want $400,000 working for us, this is one reason.

Another reason I like property.

You walk into the bank, "I got to get $400,000 from the bank manager. Mr. Bank manager, I want to borrow $400,000." He says, "What'd you want to borrow it for?" I say, "I want to buy some Pigeons." He goes, "What? Get out of here you idiot." Right? You go in the next day.

"Mr. Bank manager. I want $400,000." "What for?" "I want to buy some shares." "Oh, you guys, I don't mind shares. Let me ask you, how much are you contributing to this venture?"

"I'm putting in $100 a week." "That's $5,000 a year. Okay. I'll give you $10.000 He'll give you two to one. So now you manage to gear up to $10,000.

But that Wasn't the goal. The goal was $400,000.

"Mr. Bank manager, I want to borrow $400,000 "What for?" "I want to buy a property." "Oh," he says. "Come this way. Please sit here Would you like a tea or coffee? Would you like some muffins, Tim Tams, croissants?"

Because you see, the fact of the matter is, they will lend much more money against the security of property than they will the security of a share portfolio. So if your aim is to gear up as comfortably as possible, you want as much money working for you, you choose property over shares because that's what the banks do.

They make billions don't they? They have a bigger loan book on property than they do on shares. Fact. Go ask them. So, if they do it that way around, I sure as hell aren't going to break the wheel. I'm going to copy them. And that's why I suggest it. That's why I said to you, probably isn't for the obvious answer. It's just simply I can gear higher with property than I can with shares, okay?

CHAPTER 12 CAPITAL GAINS TAX Now Mr. Negative goes, "Yeah, yeah, yeah, yeah, but you've got to pay capital gains tax on that!"

Let me just address this tax thing because this is how most people think. Is that a negative to not do it? I don't think so, is it? I mean, let me explain something to you about tax. I want to offer you a job. You're going to get this job, and you can start as soon as you want, right? The job is well within your capabilities, you can do it, and it pays $360,000 a year. Would you take the job? You would take the job, wouldn't you?

The catch is this the tax is $145,000. Would you still take the job? Yes, You're going to have to pay capital gains tax on that. Of course you are. We have to pay tax on money we make, but it's on half the gain. $200,000. Half the gain at your marginal rate of tax at time of selling. So, if you sell at a low marginal tax rate, you aren't going to pay

much tax, are you? Maybe pay $60,000, $80,000 in tax. Would you still not do it? Isn't it better to make the $400 and pay the tax, then not make the $400?

Here's something that I know about lots of people, right? Lots of people can find $100 dollars a week. So, over a 10-year period, you'd find your $50,000. Would you ever, over a 10year period, save $400,000?

So, if you don't, you've got two choices, you, see? In this money-making business, you've got two choices. You are either going to decide you are going to gear. Even if it's scary, you're going to grit your teeth. "I'm going to gear, I'm going to get some OPM." Or you're not going to gear because you can't half gear, can you?

You're either going to do it or you're not going to do it. You've got to do the whole hog or nothing, right? You can only get growth on your $100 a week, $5,000 a year. If you get 10% return on $5,000 a year, you're making $500 a year. Or you can get 1% return on this and you make $4,000 a year. Do you get me? I'm very

simplistic with the math here, but that's how it works. Leveraging your money. You must make more money.

Now, is it $100? Do I even have to find $100?

Here's an example. This is a couple; I can't name them obviously. We found them a dual occupancy house It costs $539,000. It had $25,000 worth of purchase costs, like stamp duty, legal fees, etc. So, they needed a total of $564,000, how much of that could we get from the bank? All of it! 100% geared. No deposit.

The rate let's say it was 4.8%. You can get cheaper than that I know, so again, I'm going over the top here with my projection. Their rate of tax was 38%. The property provided us with $550 a week rent. The interest on the money borrowed is $27,000, the property expenses are $7,000, you know the maintenance, the rates, and so on That's a total of $34,000 nearly, which is $650 a week. We're getting $550 a week, so we're $100 short. But the tax man wants to chip in. So, at 38%, we got $7,000 a year back from the tax man, which is $133. We only needed $100. We're $33 positive each week. He's got more money coming in after he

went and bought the house than he has when before he bought the house. It doesn't have to be $100 if you buy correctly.

CHAPTER 13 SELF MANAGED SUPER FUND Now the other source of money that you may or may not have, and we can do all of what I've just described with your superannuation money may be if you've got enough but let me just share it for those of you in the room that might be able to take advantage of this. You can now run your own thing called a selfmanaged superannuation fund a S-M-S-F. You set up your self-managed super fund, and that can own by a maximum of four people. All four people contribute into that fund, can be just one of you, can be two of you, can be four of you. You contribute into that fund with your super money that's sitting there with whoever it is You're only going to ever get growth on your own money, right?

So, what this allows you to do is leverage your money. You need a minimum of about $200,000, the reason being is the bank will not lend you 100% and they will not gear 100% in a

super fund. They'll only lend you about 70%. So you need a bigger deposit. Whatever your proportion of your money goes into, that super fund is always yours. So if you team up with your brother and his wife and then you fall out they cannot touch your money, right? Because whatever your proportion is in the fund is always stays your proportion. So that's why I like it. But it allows you to leverage.

Lots and lots of people are turning from normal superannuation into self-managed super funds for what? Leveraging is one of the key reasons. It gives you control. So now you know what that money is doing it gives you consolidation too. If you've got more than one super fund, which loads of people have, you've got more than one set of fees, and you're not in control of that. So, it allows you to have enough insurance. There was an article in the paper that they say and loads of people, particularly as we get older, we're over-insured. We don't need so much insurance, but there's always a standard amount of insurance that's usually taken out in an industry super fund.

Also, it gives you the ability to leverage so you can borrow, and you have more than just your money working for you. And At the age of 60, you got two choices. You can sell it or keep it. If you sell it, there is no capital gains tax. Or if you keep it, there is no tax on the rent it’s a tax-free income.

So, there's a very good reason that if you've got enough money or you can team up with other people, and you can get enough together, it's got to be worth investigating. So at least investigate it, if nothing else.

CHAPTER 14 BANKS CALCULATE THE INTEREST DAILY AND CHARGE YOU MONTHLY People often ask me, "So why isn't everybody doing it? First thing I say to them is, "Why are you worried about everybody? Only worry about yourself ever. I mean, we all care about other people but, financially, look after yourself first.

Secondly, I tell them, "The fact is, the reason why most people aren't doing it is fear." There is a fear element. It means borrowing another half a million dollars. Because we're fearful of this debt situation and we're not sure if we're in control.

So, I just wanted to finish with a brilliant strategy to show you, on how to be in control of the bank's OPM First thing I want to do is I want to talk about mortgages, because most of you have got a mortgage I'm assuming. So, let's just use a 100-grand mortgage. Say we got a mortgage taken out for 20 years, and it's a

$100,000. You repay back the bank, just to keep figures round, $1,000 per month, which is 12 grand a year. Now, if you pay back the bank 12 grand a year for 20 years, how much have you repaid to the bank? Correct, $240,000. Did you know you pay back the bank a lot more than you borrowed?

Anyway, one of the first things we've got to do, if you've got any debt, mortgage, car, credit cards. We've got to manage that because it's not tax deductible and it's very expensive. Even a mortgage is. So, we want to help you get rid of that mortgage quickly. Now, a lot of people are paying their mortgage back weekly or fortnightly to get rid of it quickly.

Let me explain Fortnightly payments work, the most obvious reason why it works is you're making 26 fortnightly payments instead of 12 monthly payments. So you're making extra payments there, but the other reason it works is a technical one. It's all based on how the interest is charged on your mortgage, the interest is charged on the daily balance. So each day the bank's computer goes into your

mortgage and says, "How much do you owe today?" And it charges you one day's worth of interest. Adds it up, charges it out monthly. So if you make a payment halfway through the month, you are lowering the daily balance, aren't you, you've made a payment. So when the computer goes in the next day and says, "How much do you owe today? Ooh, you don't owe quite so much today, I won't charge you so much." So it charges you a little bit less for the rest of the month. But you keep the payment the same, so you're making an extra payment there as well.

If you only did that for a year it wouldn't hardly have any effect, but you do it over the life of the mortgage it's going to help you get rid of the mortgage a bit quicker, isn't it? And it does.

CHAPTER 15 WHAT IS A OFFSET ACCOUNT Some years ago one of the banks came up with the first type of one. They said, "How can we help people lower the daily balance as often as possible throughout the month?" So they come up with an account, the most modern one that some of you have got, lots of you have got probably, is a thing called an offset account.

It's like a type of savings account, for those of you that don't know. Whatever you put in this offset account you can take straight out, but whatever the balance is in this offset account, offsets what you pay interest on in your mortgage. So, if you're saving up for Christmas you put it in your offset account, you don't need another savings account anymore, it offsets here. If you're a self-employed beautician and you've got cash money coming in each day, and you need that money to buy products at the end of the month, you save it in this account, it offsets.

What if you're not self-employed and got cash?

What if you're not saving for Christmas? What if you just run out of money each month or week? What can you do? Can you take advantage of this? Yes, you can. I'm going to assume that you and your partner get paid monthly and you bring home $4,000 a month, $1,000 a week. So, what we do is when we get our 4k, we pay it into our $100,000 mortgage and we're going to reduce the daily balance to 96 grand correct? You say, "Fantastic, but how the hell, are we going to eat if I'm putting all my wages into my savings account?"

So I've got a solution, 2-minute noodles and water. No, it's a credit card. I've talked about credit cards, I've bagged them, but if we use them correctly, we can use the credit card company's money to make us money. What we do is we live on the credit card company's money. We do our tap and go, tap and go, tap and go, you need very little cash nowadays. You need cash for a newspaper, and a bit of this and that, but even a coffee now you can just tap and go, can't you? So you keep as much of your money in the offset account, all

right? At the end of the month, you must not go stupid with the credit card, obviously.

So you do your normal spending. Now, we needed $1,000 for the mortgage, remember, and we've spend the other 3000. The credit card bill comes in, we take the three grand out of here, the balance will go up to 99,000. We completely swipe the credit card, no part payments anymore, no minimum payments anymore. Get that out of your vocabulary, we're going to wipe the credit card. We live on the credit card company's money, interest free, for a month. Get some frequent flyer points as well, little bonus.

Now this is at the end of the month, what happens at the end of the month? The very same day or the very next day our four grand comes in, balance is down to 95 grand, and so on. Got it? So we start at 100, we want to end up at zero, the balance is going to zigzag on its way down. It will come down much faster, much faster. Typical circumstances, normal incomes, normal expenditure, this 20 year

mortgage could be gone in half the time, half the time. How much was it going to cost us to pay that mortgage back? 240 grand, remember? I've just shown you a way of paying it off in half the time, haven't I? And guess what It works.

So go do it, after Easter no I'm kidding do it tomorrow. But because all this is about human elements, I've just shown you a way of paying off your mortgage in half the time, and you can do that. But tell me this, if this was you in 10 years' time, the day you've paid your mortgage off, are you automatically $120,000 richer?

You're not, are you? It just means you don't need the mortgage payment next month, doesn't it?

So, the only way you can become 120 grand richer, is next month you save your mortgage payment and you save your mortgage payment every month for 10 years, and then you'll have the 120 grand, won't you? You are not automatically richer just because you got rid of your mortgage. What do most people do the next month when they go Oh wow we

don't have to pay a mortgage this month."

What are they going to do with that grand?

They Go and spend it.

We need a holiday, we need a new car, we need a new tele So, what we've learned is that's the fool's way of doing it, but what I've just told you is a very fantastic way of managing the money. So this is what you should do. We've agreed that you should do things now not after Easter. So, tomorrow go change the way you pay your mortgage back.

What we're going to do is we're going to get rent coming in, the tax man is going to give us his money, you are either $33 positive or you've got to find 50 dollars or something. There's a third element there. What you've just done, in your business of asset building, you've just created cash Flow. You cannot spend any of that cash flow because it's for the costs of the property, we understand that with the money coming in to pay the bills and the bills aren't due, so you've got to save that money somewhere, haven't you? Where would you save that money?

In the offset account.

So, You're pumping an extra 30 grand a year cashflow, reducing the daily balance. It must get rid of your mortgage even quicker, mustn't it? Of course. So, let's say, instead of 10 years we get rid of it in eight years. I've just shown you a way of being debt-free two years quicker, because you went and got more debt.

Remember the thing that most people are scared of? That more debt creates cashflow, which helps me get rid of debt." Got it? That's pretty clever, isn't it? Because it works.

CHAPTER 16 WHATS YOUR EXIT STRATEGY Now, one of the things I notice when I talk to someone, particularly When they're getting into their Retirment years, and they say Ive just bought a car and have still got 200 grand left on their mortgage, or whatever the situation is.

And I say to them, "What's your exit strategy?

How are you going to get out of this situation by the time you want to retire?" Here's an exit strategy, I've just explained you how to become debt-free on your own home, debt free, we'll include the car loan, the credit card. Boom, everything. In eight years' time, you've got $1,000 mortgage payment that you don't need any more, so instead of spending it on a holiday we pay off the first investment property.

We have a line of credit attached to this one now, an offset account. We put this money through it, put our wages through it. This debt is going to come down even quicker, isn't it?

So, you go buy another one because you're going to get more and more. In three- or fouryears' time, five or six, seven or eight, nine or 10, and each time you're getting more cashflow.

You got it? Can you sense the snowballing effect? Because the more cashflow I've got the quicker I can get rid of debt, and then I can attack this one, and so on. So, 10, 15 years' time, the younger you are the more time you've got, just quite simply, the more money you'll make, because it's all about time really? And obviously constantly keeping the wheels turning and building this asset business.

But let's say it's 15 years' time, let's say you have got six there. Your debt free on your own home, car, credit cards, you're not debt free on your investment portfolio your business has still got debt. So we sell two of them, I'm not an advocate of selling them because if we sell them we've got no passive income coming in, but we sell two of them to clear the debt on the other four. I don't know which two, it doesn't matter, whichever two have performed the best. If they doubled every seven years there's doubling going on there, isn't there?

You can wipe the debt, you got four properties.

Let's say $500 a week rent each coming in, that's $2,000 a week and you don't have to get out of bed. it's taken us a journey, but we've had to spend the time to go through everything to fully understand, so I hope what I've done is I've stepped you through. And so, you see how plainly you can achieve that.

CHAPTER 17 WE HELP YOU GET STARTED

What we then need to do is get together with you and the reason for that is we must do a financial health check, a bit like a general checkup at your doctors for health. We evaluate and analyze that information that you give us. We take it away, have a look, we want to come up with a strategy for you and we show you the strategy.

Finally, we help you get started. And then it's also about putting the process in place. If it's property we've got to find your tenant, we've got to find you a property manager, we've got to do your tax variation form, things like that.

We organize all of that. We organize the property, we find the property for you, we're not aligned to anyone. So, we're totally independent, but we can look all over Australia because we have people all over Australia

looking for our clients. 80% of our business is referral business, which mean people have recommended their friends to us, which is a good sign because they wouldn't recommend if they weren't happy.

So, we can help in all sorts of situations, we've got referral Financial Planning who are experts at setting up superannuation funds that understand everything that I've just said to you.

We've got referral finance brokers that can help set the finance for you, and we've got property Experts that will find you a great property. We'll have maximum tax deductions, see, your real estate agent won't do that.

So, make an appointment with us, let us speak to you, and we'll see where we go. Thank you for your time. www.unlockyourfinancialfuture.com.au