No matter what you did yesterday, today begins anew and you have the same rights and opportunities as everyone else to become wealthy. Yet the sad reality is that the majority of Australians will never achieve financial freedom.
On the other hand, a small group of Australian property investors are becoming very wealthy. In this, the first part of a two-part series, I begin exploring the common myths about money that hold many people back from achieving their financial goals.
Myth #1: It takes money to make money
Despite what some people believe, it doesn’t really take a lot of money to make money.
Many Australians have untapped equity in their homes that they can use as seed capital for investments, while others will have to learn the discipline of saving to get some start-up capital. Then all they need to do is invest in high-growth investments such as residential real estate and use the magic of compounding leverage and time to grow their asset base.
You don’t need a fortune to begin making your first million; you just need to commit to making a start and stick with it.
Myth #2: I don’t make enough money
Almost everyone makes enough money to become an investor. The truth is most people don’t have an income problem; they have a spending problem.
Look at your current wage and ask yourself; how much am I likely to earn over my lifetime? For most of us, the answer will probably be more than a couple of million dollars. The problem is most of us spend as much as we earn. You’ve got to start living within your means, paying yourself first, saving a deposit for a property and investing in order to break your current pattern.
Myth #3: My job and superannuation will take care of my financial future
If you accept my definition of financial freedom as having enough passive income to finance the lifestyle you desire without having to work, you will never achieve this through your job or superannuation. Instead you will need to take control of your financial future by investing.
Even if you try to save 5% or 10% of your income as many financial planners suggest, you’ll find it won’t give you a big enough nest egg to fund your retirement.
Myth #4: I’m not smart enough
In our country everybody has the ability and opportunity to become rich. Successful people come from different backgrounds and while some have university degrees, others have never finished high school.
To reassure you that an education doesn’t equal a financial fortune, here are a few multi-millionaires who never graduated from college: Bill Gates (Microsoft), Michael Dell (Dell Computers) and Steve Jobs (Apple). The truth is you can do whatever you want; not being smart enough is just another excuse.
Myth #5: Investing is complicated
Developing your own financial freedom is only as complicated as you make it. Sure, gaining the knowledge to become financially independent is challenging; but many new things seem more difficult than they are until you develop an understanding of them.
Investing is no different.
Now it’s easier than ever before to learn the fundamentals of wealth creation, with limitless tools available in today’s high-tech, info-laden world. The key is to learn from the right people – those who’ve already achieved what you want to achieve. The process is also simplified when you select an investment niche such as residential property investment and develop specialist knowledge in that area.
Myth #6: Investing is risky
The dictionary definition of “invest” is: “To commit (money or capital) in order to gain a financial return.” The word “risk” doesn’t even get a look in.
However, many people speculate when they think they are investing – they buy a property in a secondary location or off the plan “hoping” it will increase in value. Speculation is risky.
On the other hand, finding a property with an element of scarcity so it will always be in strong demand, in an area that has always outperformed the averages and buying it below its intrinsic value, is a proven investment strategy that minimises your risk.
Myth #7: You have to know how to time the investment markets
It’s often said that timing is everything when investing, but that’s not really the case.
Sure timing matters – you don’t want to buy property at the peak of the boom, but successful investors find that timing isn’t really that important. Have you noticed how some investors do well in good times and do just as well in bad times, while others do poorly in good times and even worse in bad times?
The truth is successful investors know how to create wealth at any point in the property cycle while unsuccessful investors manage to lose money at the same stages of the cycle. This suggests to me that it’s not our external world that determines whether we make money; it’s our mindset.
In a future blog, I’m going to share another eight wealth myths that tend to hold back ordinary Australians from reaching financial freedom.
The good news is that as you become aware of these myths, you can do things differently. You can choose to change your beliefs and produce outrageous results and reach every goal you set.
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.