The Money Conversation: Do You Have What It Takes?
It’s one of the biggest pieces of the real estate puzzle and simultaneously one of the hardest for property investors to manage – it’s the money conversation.
Discussing our finances is one of those taboo topics that desperately needs to be cracked wide open. As a society, it’s harrowing how many of us were never educated around economics while we were still at school or in the family nest.
Especially here in Australia, our increasing life expectancy means we need more money to retire on if we want to thrive rather than just survive. In order to do this, there needs to be a system each and every one of us follows – there also needs to be some real reality checks around finances.
Let’s get into it.
THE IMPACT OF THE HEDONIC TREADMILL
There’s a concept known as the hedonic treadmill, and it explains simply the issues so many of us face with money.
The hedonic treadmill essentially dictates that whether we’re rich or poor, we will find a level of happiness within ourselves – a level of balance. However, a lot of people fall victim to this ideal when it comes to money.
These people don’t track where their money is going. If you aren’t able to look at your finances and easily determine what percentage is being invested, what is for entertainment, and what is for everyday costs like housing and transport, you’re already in trouble.
See quite often when you don’t understand your relationship with money, you experience highs and lows psychologically around it – that’s the hedonic treadmill. When our economics freak out us, we spend to make ourselves feel better. It’s a lifestyle literally centred around doing something to feel good in the moment.
Yet feeling good is not helping you to become wealthy. Feeling good is not replacing your income. It’s just a temporary state of mind that the hedonic treadmill pedals.
PUT A GOOD SYSTEM IN PLACE
If the aim is to create wealth, then we absolutely want to avoid the hedonic treadmill. Instead, we want to create a system for ourselves which is going to work.
One of the biggest lessons I have for people is you’ve got to recognise that investing in itself is a system. Being able to draw on other income streams, particularly through investments, is what creates wealth.
As property investors, our system is centred around real estate. We buy real estate, pull equity out, then buy more real estate. However, every day we have to wake up and make decisions in order to maximise the results from our money. We’ve got to refinance, fire banks, create offsets or dip into joint ventures with people.
Once you understand that every year you should be working towards something that financially engineers your world, you will open up so many other doors to happiness.
ONE JOB WILL NOT SET YOU UP FOR LIFE
Every game has rules, and in the money game one of the biggest rules is you can never really work yourself to a wealthy place.
Of course, there are some exceptions, but for most people in society their job is never going to make them richer – having one income source being your job is not going to help you. So, what might that mean for you? It could mean starting a side hustle, getting a second job or my favourite, investing in real estate.
Remember inflation is very real and it will eat away at your savings. If your plan is to just let your money accumulate in the bank, you’re going to end up bitterly disappointed. The cost of living goes up every year – that’s just a fact – and your wages likely won’t keep up with it.
This is why economics is not really about how much you make, but how you invest what you have. For example, I’ve known flight attendants, who only earn $51,000 a year, manage to buy five properties and turn them into successful Airbnb assets that over time replace their income.
Investing in multiple income sources is no longer a choice, it’s a necessity. You will never save enough off of one job to live well after retirement, so you have to get your relationship with money fixed now.
LET THIS BE YOUR REALITY CHECK
The truth is there are a lot of property investors that need to have a better relationship with money.
It’s not easy to retire financially free from real estate. Sure, a lot of people will get some great results, and property can certainly help people create more options in their life by adding to their wealth asset base.
Yet to be financially free from it, well it’s fair to say 99 per cent of people don’t go the distance because they don’t have a system in place.
So, what’s your end goal? Because financial freedom will only happen if you implement some winning money habits, and you’ll only create them if you start getting real about your situation.
If you’ve decided investing in real estate is the system you’ll use to generate wealth, then you need to know how to make your money go the distance. Our free property investor seminars cover the basic know-how of paving a path to financial freedom.
Spots are always limited so book now to avoid missing out.
By Sam Saggers