Friday, 24 April 2015

Finding, gaining and keeping a mentor

How do we get ahead in our careers and our financial life?  It's a question that many of us ask all the time.  If you have read any books on getting ahead you will almost certainly have been told that seeking out the right mentors is incredibly important.  The problem that most of us face is twofold:

  1. How on earth do we find a mentor who is where we want to be in life?
  2. When we do find them how do we convince them to take an interest in us?
I suspect that most of us would love to be mentored by Warren Buffet or Bill Ackman but that's never going to happen.  I also have never really liked 'mentoring programs' that workplaces and student organisations typically run.  The mentors often treat it as an obligation and they are never really seem to have a real interest in you personally succeeding.

I therefore concluded that mentoring, while great in theory, was never really going to work in practice...until it did for me.  I found a mentor without actually searching for one and the experience has been far more positive than I originally imaged.

How did I find my mentor?

I didn't go out searching for a mentor.  I've always found the concept quite strange.  Of course there were people I wanted to learn off and I certainly didn't think I could do it all myself...however what did I have to offer?  Why would they take a particular interest in my life?  I found a mentor without intending to find one.  I'm not even sure that he realises that we have effectively fallen into that sort of relationship.

Where did I find my mentor?

My mentor is actually a

Monday, 20 April 2015

Why haven't I bought a second investment property?

When I first thought about buying an investment property I imagined that it would be the start of a property portfolio that would grow incrementally over time.  However almost 5 years after buying my first investment property I still only have one property.  Why haven't I bought more and why am I not some sort of young property baron?

My decision not to buy more properties was by design...

I actively decided not to buy more investment properties.  I could have done it several times and I definitely had the finances to do it.  My decision to stick to one investment property (for the moment) was by design and not through laziness or lack of opportunity.

I want to own a diversified portfolio of assets

My desire has never been to be a property baron.  Whilst I do want to be financially secure / well off and to reach my $90 million target I don't think that this needs to be within one investment class.  I want to own property, shares, bonds and alternative investments.

Owning an investment property puts a whole heap of your assets in one bucket.  Even if you can use a small deposit and use your cash to buy shares your actual exposure to the property market is still incredibly high.

If you want to own a physical property the fact is that you will be overweight that asset class for a very long period of time until everything else can actually catch up.  One of the reasons I haven't bought another investment property is that I was building up my other portfolio of assets during the last 5 years.

Your own home is an investment in the property market

When I was young I was very taken by Rich Dad Poor Dad.  I thought provided me with incredibly revelations that I had been completely missing before.  Once I did a bit more research and actually educated myself a bit more I realised that the book actually provided very little other than an idea of "you too can be rich".  

One of the core ideas that Robert Kiyosaki pushes in that book is that your home is not an asset because it takes money out of your pocket each month.  On face value this seems to be a true statement.  How many of us actually make money from our homes?  However the more I thought about the less I believed in this statement.

Your home is an asset.  You can spend too much for an asset, you can over-invest in an asset and you can over-capitalise an asset.  And most importantly not all assets put money in your pocket each month.  If you invest in physical assets (such as gold or oil or silver) they will typically take money out of your pocket each month due to storage costs and they certainly don't give you any cash until you actually sell the asset.  This is the same for your house.  Also owning your own home helps you avoid a cost - i.e. rent.

In fact your home is often one of the most tax advantageous investments you can own (in Australia).  You don't have to pay capital gains tax on your home and it is exempt from almost all forms of asset tests.

I don't own my own home (one that I live in) yet but it is definitely on the horizon. When I buy this home it will be an additional exposure that I have to the property market...and I will need to balance my other investment classes before I even think about buying property #3.

I can own additional property exposure through listed property funds and companies

I have written about buying listed property funds and companies before.  The major benefit of them is that you can buy them in small parcels and get exposure to sectors of the property market that I wouldn't normally be exposed to.  The major disadvantage of these types of investments is that you have much less control, the ability to leverage this investment is less and you have to pay fees on top of the natural costs.

I actually have a fair bit of exposure to the property market through listed funds although I have been reducing this lately.

The market doesn't look attractive to me at the moment

I'm a bit believer in value investing.  That is - putting my money to work where I believe there are fundamental traits which will make the investment more valuable in the future (even if these take a little while to realise).  At the moment I can't justify buying another property and increasing my exposure to the market.

If there was a crash or an amazing buying opportunity came my way I would not hesitate to go for it...but this does not seem likely in the current market and in the near term.

Over time I will probably buy more properties...but not right now

I don't have a problem with property investments in general.  In fact I think they are some of the easiest to understand and to own however like all investments you want to understand why your investing in something and have a thesis about how and when it will make you money.

Over time I will probably buy more properties and continue to hold onto them however this is not the right time for me.

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Thursday, 16 April 2015

Financial questions to ask BEFORE you get married

You don't have to be a regular reader of this blog to know that I'm interested in finance.  Almost everything I write about is finance related and I am quite content sitting down and reading a finance book for hours on end.

I am also quite open about finance with those I talk to and am friends with.  Whilst I don't disclose how much I earn or what I am worth to those who know me I will happily talk about money and finance with anyone who would like the discussion.

With that sort of background you would be forgiven for assuming that I had had every single discussion necessary about finance before entering married life.  In fact I thought that is the one area that I had nailed down and that we didn't really need to talk about any more...but I was incredibly wrong!

There are a range of topics financial topics you need to talk about before committing to another person

I honestly thought I had covered all of the financial topics possible with my future wife.  We knew how we were going to save for a house, how we were going to pay the bills, what we were going to do when kids came around...everything...or at least I thought so...

One of the things people highly recommend is doing a marriage course so my fiance and I went along to one of these courses which gave us a huge multi choice questionnaire which covered a heap of different topics.  At least 30 of the questions covered finances and how much we had discussed them...and they covered incredibly important topics that we hadn't even touched.

Instead of just writing about my experience I thought I would make a list of topics that you should discuss with your significant other before you get married.  This list isn't exhaustive and if there are other things that concern you then you should definitely talk about them!

Financial topics you should talk about before getting married

Broadly speaking the things you should talk about fall into a few broad categories
  1. Life plans and preferred lifestyle and the income you will need to support these
  2. Attitudes towards spending and saving
  3. Debt, current and future and how this will be incurred
  4. Savings, goals and how you will achieve these
  5. The day to day organisation of your finances

1. Life plans, lifestyle and generating the income you need to support this

This is the first thing you

Monday, 13 April 2015

Refinancing your mortgage can save you THOUSANDS

Home loans are a funny thing.  They are probably the biggest liability that most of us have and we research them to death when we actually get them but once they are set in place most of us fall into the pattern of paying them off as fast as we can without thinking about whether we can get a better deal.

Sometimes the deal we are on is so good that we want to hold onto it for as long as possible.  However when competition heats up between banks in the home loan market (as is currently happening in the Australian market) you can often save a lot of money by renegotiating your home loan or moving to a different provider altogether.

How a great deal when refinancing your mortgage

Getting a great deal when refinancing your mortgage is basically being able to do 3 things:
  1. Know exactly what you want and need from your mortgage;
  2. Knowing everything you are currently paying for your mortgage and all the benefits you are getting; and
  3. Leveraging the best offers in the market with the financial institution you want to deal with

Step 1: Know exactly what you want and need from a mortgage

This is the most important

Friday, 10 April 2015

Importing my Japanese Sports Car...Step 4: Getting the car in my hands

After an agonizingly long 3 month wait my sports car (that I have been posting about for years) finally arrived in Australia.  Unfortunately I couldn't just drive the to the port and pick it up off the ship.  There were several steps the car had to go through before I could get it in my hot little hands.

If you have stumbled across this post and are wondering how to get a sports car into Australia (and why you may want to do so) I have written a series on my experience from buying the car, to getting it onto the ship and then getting it to Australia.  This is my final post in the series and will cover actually getting the car in my hands.

Getting the car compliant with Australian standards

After getting the car out of customs the first thing you need to do is to make sure that it is compliant with Australian standards.  There are a range of things that need to be done to a car to take it from compliant on Japanese roads and make them compliant for Australian roads and these are different for each car.  The cost is also different for each car.

For my V35 Skyline the cost was

Tuesday, 7 April 2015

I FINALLY made money from a Share Purchase Plan

If you have been reading this blog for a few years now you will know that I almost always get shafted when it comes to share purchase plans (or SPPs).  My investment rationale is always sound however I am always shafted by the mega scale backs that come with guaranteed profits.

Interestingly this time I ended up with a larger profit because the end result wasn't as guaranteed as in the past.

A recap on how to make money from Share Purchase Plans

I have gone through this in a significant amount of detail before but basically you make money from share purchase plans because
  • You are able to buy shares at below the current market price (often in excess of your pro rata entitlement)
  • If the current market price is higher than your purchase price from the share purchase plan you have made an (almost) instant profit
Basically the bigger the discount is to the current market price the more certain you are of making a profit.

However the big downside to SPPs (as I mentioned above) is that because the profit is so certain everyone wants to take part and everyone applies for their maximum allocation.  Companies often don't need this much money and scale back your allocation significantly.  They also don't issue the shares for a long time and take even longer to return your money.  You therefore lose out by having lost the ability to earn interest on this cash in the interim.

I participated in the recent Macquarie Group SPP...even though the terms didn't look as good

Macquarie Group (ASX: MQG) recently decided to do an institutional equity raising and an SPP to raise cash for a purchase that they had done.  When I first looked at this deal it didn't look great at all:
  • Macquarie's share price was already incredibly high.  
    • I was actually looking to sell out of my MQG shares after years of holding them
    • A high share price isn't great because it can go anywhere in the time it takes for you to be allocated your shares and able to sell them
  • The discount was tiny
    • The higher the discount the higher the guaranteed profit.  In the case of Macquarie SPP it was only a 1% discount which is not really worth your time and effort (especially if you think the stock is expensive)
  • They weren't actually issuing that much capital
    • Relative to the size of Macquarie this was actually a really small capital raising.  In smaller capital raisings you are more likely to get scaled back which is the thing you want to avoid at all costs

This deal on the face of it didn't look that why did I participate?

There were a few key points in the fine print which caused me to participate in the deal.  They included:

Wednesday, 1 April 2015

March 2015 Net Worth: $549,000 (+2.2%) and Goal Tracker

I love updating my month end net worth post.  I actually don't spend that much time during the month focusing on it because unless I'm actively changing something in portfolio it does me no good to keep track of where I am day to day.

This post includes a category of liabilities I included recently called "future liabilities" which is where I account for the fact that I have committed to spend a certain amount on different activities and that some of the cash on the 'assets' column of my balance sheet are actually already accounted for.  At March 2015 my future liabilities balance sits at $52,000 - a significant drop compared to last month.

March 2015 Net Worth: $549,000 (+2.2%)

% Change
Net worth

My performance this month was actually much better than the $540,000 I was originally aiming for.  It was really driven by a reduction in my future liabilities balance (which I discussed above) with some other small positives along the way.

Below I have outlined some of the positive and negative factors which affected my performance

Positive factors

  • A significant reduction in my future liabilities balance
    • My future liabilities balance decreased by ~$13,000 this month.  Although some of this reduction was offset by cash (or an increase in credit card debt) to pay for the expenses, a lot of the expenses were also borne by my fiance
    • We are planning a wedding together and a large part of the liability relates to the wedding and honeymoon expenses
    • For the sake of simplicity I include the whole liability on my balance sheet however she has been saving and paying for significant parts of the wedding and honeymoon as well
  • A large reduction in my credit card bill
    • My credit card balance was abnormally high last month and I have managed to bring this down slightly this month (although not nearly as much as I should have)
  • Continued savings towards my employee share plan and emergency fund
    • My employee share plan is the only guaranteed return I will ever get in my life and I continue to contribute the maximum amount that I can 
    • I will discuss this below but I also continued to save towards my emergency fund
  • A particularly good outcome on a recent share purchase plan
    • I have historically had pretty bad luck when it comes to my share purchase plans however one finally went well for me.  I will write about this in more detail soon.

Negative factors

Unfortunately this month had a slew of negative factors which affected my result including
  • A significant step up in my capital gains tax liability
    • As mentioned before I am starting to feel uncomfortable with the levels the stock market is currently reaching and I am taking the opportunity to sell some of my more overvalued stocks
    • However this has the downside of crystallizing capital gains tax