You don't pay me for my time...

I recently had to go to an eye specialist. 

The guy I went to was recommended to me as the best in his field.

I showed up at the clinic on time, feeling a little nervous and unsure of what was happening next.  

One of his assistants explained the process to me step by step.  I was really grateful for that – I was getting a little freaked out, thinking about someone sticking sharp tools into my eye while I was watching!

I had to wait a little longer and then I was taken through to the surgery. The doctor’s assistants and a nurse started preparing my eye – cleaning the skin around it, putting on the protective material, adjusting the lights and laying out all the tools.  

I was laying there for about 20 minutes before the actual specialist came in.  He sat down next to me, looked into my eye and did a few tiny but precise moves with his tools.  Within a minute he was done and said, ‘There you go, all fixed.’  I thought, ‘wow, that was quick!’

As I was waiting to pay, l there was a guy in front of me who’d had the same procedure.  ‘That’s $745, sir,’ said the secretary.

He shook his head and said, ‘Wow, that a hell of an hourly rate!’  

The specialist overheard him.  He came out of his office and walked over to the guy.  He smiled and calmly said, ‘You don’t pay me for my time.’  Then he turned around and went back to his office.  He didn't need to say anything else.

I was gobsmacked!  This guy was spot on!  I immediately thought of the work I do with my clients.

Even though it takes me a little more than a few minutes to do my job, it’s not about billable hours, or the amount of time I spend in front of my client.  The value is somewhere else - It’s about the outcomes we can achieve together. The outcomes they care about.

I help them build the fundamentals which lead to the life my clients want to live.  

The value of that can rarely be expressed in numbers. 

by Michal Bodi

I thrive on a feedback, please let me know what you think, drop me a line to mbodi@sydneyfinancialplanning.com.au or simply comment on this article. I'd really love to hear from you.

Where the wild things grow…

I grew up in a small town, somewhere in the mountains of Europe. Life was easy for me; I didn’t have to do much. My parents worked and every time I needed money I just asked, and it was given.

Then there was my Grandpa. I spent more than half of my young years with him. Life was very safe and simple those days. I was only thirteen, but if I didn't come home for dinner my parents just knew I was staying with my Grandpa. No phones, no SMS, they knew I was safe.

My Grandpa has always been my hero, my mentor, my hope. He was also happy to fund my adventures (banned by my parents), whether it was a train ride to a nearby lake or camping trip with friends.   He always left money in the same spot – a decorative coffee cup in the living room bookcase; right next to Grandma’s black and white photo. Even after so many years, he missed her greatly.

Grandpa gave me so much more than just pocket money. As I was growing up, I started to face my first challenges. I received my first setbacks. I was often lost and I never seemed to know the answer to the question ‘what I want to do in life’.  I had no idea, but he always encouraged me.  He was my sounding board for everything. He told me that everything will happen at the right time – when I will be ready. And whatever it was, he would stay by me because he believed in me.

My parents were ‘too close’ to me emotionally to discuss my problems with them.  I always went to him.  He listened, he told me not to worry, he put things in perspective and showed me the bright side. ‘It’s never so bad; it can’t get any worse’… he used to joke. He told me to lift my chin up and to keep going. Then he played some old records and watched me smile again.

Even though he didn't necessarily tell me something I haven't already heard from my parents, he did it in style. He was bigger than life. Nothing was too hard not to have a go at. He’s been my inspiration and an example of how you will never lose in life if you always do your best and always see the good in people.

I couldn't be there when he finally left. He didn't want me to be there. They found him in the morning with a smile on his face.  He’s accomplished everything he wanted in life.

His Great Grandson, my son, will grow up learning the principles of perseverance, a positive attitude and courage. He will also witness his Dad teaching and spreading these qualities through his work, so as many people as possible will give things a go, and achieve their wildest dreams.

It’s the best way to make sure my Grandpa will always be around, and to make sure he’ll keep smiling proudly every time he looks.

I love you ‘stary oco’. And THANK YOU!

by Michal Bodi

If you connected to this story, please let me know what you think by sending me an email or commenting below. I'd really love to hear from you.

Well done is always better than well said...Stop procrastinating!

Well done is always better than well said.

Procrastination is no doubt the number one reason why people don’t become successful at achieving what they dream of. 

It is caused by the change that needs to happen. And we, humans, don’t like change that much!

Why?

Well, it’s got a lot to do with our ego and the actual process of admitting that what we’ve been doing is wrong. 

It can be especially difficult when we’re surrounded by people with same views as us. Why should I stand out?

Generations Y and Z ...

When you’re young, it feels nice to have a first job, still live at home and spend the money on travelling and going out, but just think about where you are at the moment. Your whole life is only starting.

What you may not fully realise day by day (because you just don't) is that the time is on your side and you will never (ever) be in this position again. 

Use that competitive advantage! Trust me, you don’t want to end up like the vast majority of adults – looking back in ten or more years’ time, realising what a massive opportunity you had… And you blew it!

What I’m talking about is the power of ‘doing’.

You have two choices

Choice number one – do nothing and spend every cent. This is what most of you will do. Just like everyone else (I thought you wanted to be different?)

Choice number two – start implementing tiny changes into your spending habits. Time is your best mate here. It will do the rest, as long as you stay committed.

Remember, if you change nothing, nothing will change. The change doesn’t need to happen all at once, you can start with baby steps. 

One year later, you will be definitely in a better position compared to if you did nothing.

There are many ways to put money aside but here’s a fun example to start getting ahead – something that I call the reverse version of The 52 week savings challenge:

You start with $52 that you put away in the first week – that is the biggest commitment you need to make, it gets easier from here.

The next week it’s only $51. And as you continue, you decrease the money by a dollar every week, until you will end up with a dollar contribution in the last week, year later.

Over the course of the year, you will save exactly $1,378.

This can be used as a nice little deposit into an investment plan which can one day be converted into an investment property deposit. It will give you that competitive advantage.

It can be the difference between having to work every night to earn extra money for your ski trip compared to having a passive income to fund your travels so you can spend more time with your friends.

All you need to do is start. 

Anything. Just start…

by Michal Bodi

How to invest in property

Question:

I have just started investing in property. I want to grow my property portfolio as fast as possible. How do you recommend I achieve this while minimising risk? I currently own my primary place of residence with about $220,000 remaining on the mortgage (valued at $450,000) and have just used this equity to purchase an investment property valued at approximately $585,000 (will rent for approximately $540 per week). From here I would like to purchase additional 4 - 5 properties over the coming 5 - 10 years.

My answer:

Thank you for asking this question. Achieving solid investment outcomes only happens via disciplined strategies with a long term outlook. The trickiest part of investing is avoiding making bad behavioural decisions based on the emotional. 

Successful investing starts with realistic expectations, respecting the investment fundamentals and hiring a third party professional who will draw your investment plan and will ensure you stick to it.

You want to buy one property every year, or every two years – how? If you plan to put cash into each property (minimum deposit plus costs on each purchase) you’ll need to save hard. What is your cash flow position? If you want to keep using equity (by relying on future growth) your goal is not realistic.

From your question it kind of looks like you’ve made up your mind, so if you do go down that road, here’s a few things I would consider and encourage you to implement in your plan.

Avoid acting emotionally

Partner with a third party professional who can draw a time and dollar specific plan in order to help you making objective decisions about your future. This may sound basic but hiring an experienced professional with the objective point of view is money well spent.

Diversify 

If you’re going all property (which I would not endorse) then think of different types and locations. If you’re narrowing your investment strategy to only one idea, you’re putting all your eggs in one basket - all your planned assets would end up in same property. If  you don’t have exposure to different assets you have no backup plan. Also, consider investing in equities to increase an exposure to different assets in your portfolio.

Avoid euphoria

Don’t buy what’s popular, otherwise you possibly lose the sense of risk (when you’re worried that others are making more money than you, you’re in the euphoria zone). It’s the opposite of panic and capitulation and it’s equally dangerous. False expectations are set, your behaviour is completely emotional and the investment decisions are not being thought through. You also lose the sense of value and you end up buying overpriced assets.

Have plenty of equity

Protect yourself against unforeseen events (interest rates, loss of tenants, etc.) and make sure you put at least 20% of cash into each property. This will likely go against your goal of growing your portfolio ‘as fast as possible’, but it’s crucial you don’t expose yourself to high debt.

Don’t speculate

Take a long term view and look for an increase in value over time, rather than chasing short term price movements. You may still think you’re investing but you haven’t realised you crossed the line. If you’re looking at short term price fluctuations, you will end up burning your fingers. Don’t overthink the process; keep things fairly simple, an excitement belongs to Vegas.

Cover yourself and your plan

Have relevant protection strategies to protect your ability to earn income (may need it if property income doesn’t meet your expenses) and to have available cash to deal with the unexpected without pulling money out of your plan.

Lastly, you’re not mentioning this in your question, but what’s your end strategy? 

Assuming you reach your goal of owning ten properties, what do you plan to do with them? Keep them to fund your retirement? Sell them one by one to free up cash? You need to think about this before you start so you won’t get stuck at the end (you may have unnecessary problems with tax, liquidity – access to your money, reliability of income etc.)

Hope these tips help you clarify your points of focus. I believe you’ll consider them carefully before making any investment decisions. Shop around and invest in quality financial advice. It will be worth your while to look for someone who will focus on the dominant determinant of your financial outcomes – your investment behaviour.

Best wishes,

Michal Bodi

Struggling to get ahead? Start transforming your dreams into goals

Struggling to get ahead? Start transforming your dreams into goals

We all have dreams. And we love to talk about them. We know exactly what they mean to us and how they make us feel. 

Reaching these dreams and making them true means that our lives matter. But most people don’t succeed and don’t realise their dream potential. 

Why?

What successful people do differently is that they also have goals. 

And it’s having goals and a plan to reach them what separates them from the pack and helps them achieve their dreams.

How do we set goals? Here are some practical tips:

1.       Think hard about your dreams and what exactly they make you feel. Think about why you feel that and what it would mean to you to realise these dreams. Write notes.

2.       Write them down (include the notes from the point 1). Unless we write our dreams down, they will forever remain in our head. Prioritise them, start with the ones important enough for you to take action and do something about. It’s the very process of writing your dreams down when you start transforming them into your goals.

3.       Match them with pictures – do this for every dream you have and display them in your home. Somewhere you look every day. This might sound silly but visualising is a very powerful trick especially at times when we feel like giving up. It’s when these pictures will remind you why you are doing what you are doing.

4.       Share them -You need a commitment to make to yourself. I find social media to be a great way to do this. Once you make your dreams public, it cements them in. They are official now.

5.       You have done as much as you can on your own. The next thing to finalise your dreams into goals is to make them specific - time specific and dollar specific. 

    

    This can only be done by a third party – a quality financial planner. They specialise in goal formulation and creating the journey – financial plan - to reach your goals and dreams. They will also remind you of your goals and ensure you stick to your plan.

Visit a few firms, take your time and find the right one - someone who will ask the right questions and you will feel comfortable that they understand what is important to you and why.

You will eventually find that it’s not necessarily reaching your goal itself but the actual process of getting there, the excitement of the progress what made you feel happy. You will now also have a blueprint and know what to do in order to successfully reach your next destination. 

So, go ahead; what’s your next dream?

by Michal Bodi

There's a story behind each of us...

There's a story behind each of us...

I started with nothing, I mean nothing material, but I had my desire to succeed, almost forcing me to make many decisions (including the bad ones)…

I have pursued my freedom and travelled the continents to the other side of the world. It was a crazy idea and yes it was difficult to leave my mum and dad, my brother, my grandparents and the rest of my family behind…but although I didn't know it then, I was pursuing my dreams and finding my purpose.

Over the years, I’ve learned a lot of lessons. I’ve learned about the importance of focus and the absolute necessity of having a plan. I’ve also learned that if you want something, you go and get it. It probably won’t be easy and it may hurt…but that’s when you know it’s worth it. You add some tough love coaching and you have a structure to hold on to. 

It was almost inevitable that I have become a successful financial coach myself. My beliefs are reflected in my work and they help others move forward. I always share my story because I use my own example to demonstrate that we are all creators of our own future.

If we surround ourselves with the right people, have a plan to stick to and focus on what really matters we can achieve the unthinkable.

Using ‘the best’ products, having complicated investment structures or managing an investment portfolio is something that every professional adviser should be able to help you with.

But if you want to make sure you are on the right path to accomplish something you always wanted, please make that step and connect with me. I might be able to help. There is no such thing as failure, only lack of trying.

I look forward to speaking with you and hearing your story.


by Michal Bodi

For practical financial tips and ongoing updates and my professional opinion please connect with me on LinkedIn or follow my tweets.

How much do I need to retire comfortably?

How much do I need to retire comfortably?

Question:

What would be the super amount/balance needed for a ‘comfortable’ retirement for couples when we reach our retirement age, which I understand is $56,406 in today’s dollars? My husband and I are 56 and 50 respectively, and have an SMSF with $600,000.

My answer:

Retirement planning is an ongoing, evolving process that requires plenty of foresight and I applaud you for thinking about it now. 

This is a common question that unfortunately cannot be answered based solely on the information you have provided. The answer will depend on many variables and your own expectations in regards to longevity of your money. 

Are you happy for your capital to run out at a particular age or you would prefer a perpetual income and the ability to pass your wealth on to the next generations? When do you wish to retire and what is your own idea of a comfortable retirement? 

The figures you have quoted as a comfortable retirement income are based on averages (ASFA Retirement Standard survey, June 2013) and they very rarely reflect reality. For example they only include $2,725 per year for an overseas holiday and they don’t allow for any extra cash for gifts to your grandkids...

Once you work out your own retirement budget you end up with a retirement income figure that reflects your own financial reality and you've completed the first step of many.

It’s important to realise that the retirement planning process is not a mathematical equation. It’s not just a matter of plugging the figures into a calculator. We live in a fast pace society that suggests it should be that simple. But even a simple calculation is only as good as the figures and assumptions used.

It is absolutely critical to realise that retirement income planning is way more complex and way more important to people than a single conversation. It requires expertise and the careful consideration of many factors. It requires wisdom – we know that a tomato is a fruit but we don’t put it in a fruit salad.

The next vital detail is to remember that every date and dollar specific retirement income plan (that also addresses ‘what if’ scenarios) requires a financial coach and their ongoing assistance to ensure you to stick to your plan. This is the only way of knowing whether you are on track with your retirement plans or not. And having this certainty is priceless.

I realise that the hardest thing for most people is the first step – to recognise and overcome the fear of experience and make an appointment to consult an expert. But it will take a lot of pressure off your shoulders. It can also mean the difference between getting it right and living the retirement you always wanted … and getting it all wrong.

by Michal Bodi

As published on FPA’s Ask an Expert website dedicated to promoting the value of financial advice - ttp://askanexpert.fpadifference.com.au/

Image courtesy of Michal Marcol / freedigitalphotos.net

Being smart about life insurance

Being smart about life insurance

Rather than looking at life insurance as something we need, it should be considered as something we want. It’s more about having peace of mind knowing that if things don’t exactly work out the way we want, it’s not the end. 

And who wouldn't want that? 

The problem is that life insurance is a very intangible thing and it’s only used at the time of grief – and no one wants to think about that.

The other problem is that our human nature loves shortcuts. We often seek the cheapest, the easiest, and the least painful way to obtain life insurance because, subconsciously, we don’t want to overcome the fear of new experience and seek a professional’s help.

 And that in itself is a tragedy waiting to happen.

We all make future plans for our family or a business. We assume these plans will be successful – pay off the mortgage, save for regular ski trips, having regular holidays, give our children education they deserve, retire worry-free, build our family’s wealth, grow our business, or how about simply maintaining and enjoying the good lifestyle, spending as much time as possible with the family and generally being happy… does it ring a bell?

I am no different and I sincerely hope you will be able to achieve all of them and more. But hoping is not planning and smart people have a plan in place. 

Proper planning requires relevant expertise.  There is no harm in 'googling' information and gaining some self-education prior to seeking help. We all do it every day. But when it comes to decision making there is simply too much to consider and you want to get every detail right. 

Only a qualified and experienced financial planner will be able to:

• help you dig deep and articulate everything you value and need to plan for

• translate it into financial terms and calculate the dollar figures reflecting the cost of not being able to achieve these

• evaluate all the risks and asses the probabilities of them happening

• work out a relevant protection strategy including appropriate types of cover, sums insured, structuring, ownership and potential tax consequences

• consider alternatives and recommend a suitable insurer that will pay the claim

Every single step can make a huge difference. At the end of the day, you want to have the confidence that if needed, the cover will be used for what it is intended– to pay your claim.

Hiring a financial planner means having a professional looking at your personal circumstances and recommending a tailored solution that fits your plans, reviewing its appropriateness over time, as well as helping you through the overwhelming process of making a claim. 

So if you’re considering insurance or you have some in place but you never consulted a financial planner, I hope I've inspired you to take action. Your family or your business partner might thank you one day.

by Michal Bodi

Image courtesy of Vichaya Kiatying-Angsulee  / FreeDigitalPhotos.net

Not your crisis...

Not your crisis

News from Cyprus has shaken the markets...

Who would have thought an island in the Mediterranean (that most people didn't even know existed) could generate so many headlines...

What's important is to realise that the odds of this most recent 'crisis du jour' having any impact on you are slim to none (unless you’re a depositor in a Cypriot bank).

It's your financial coach's job to hold your hand and reassure you. 

Remember we talked about this in the past. We talked about we would only deal with things that:

1. are relevant to our plan

2. we can control

And another world 'crisis' doesn't fit in any of these categories. 

... So remember, 'that' crisis is very rarely your crisis.

Hoping to retire one day? Consider this!

Hoping to retire one day? Consider this!

Retirement is a huge milestone in peoples’ lives. It has many faces and we reach it in a number of different ways. Sometimes it happens suddenly, sometimes it is planned for. Sometimes it is voluntary and other times it may be forced upon. 

One thing is certain though, retirement is the single biggest, most terrifying financial decision people ever have to make…and it involves large sums of money and lots of emotions.

Financially speaking, retirement is essentially an income problem. 

The only two objectives that matter and count in retirement are:

•  Lifestyle sustaining income that lasts a lifetime

•  The income needs to keep pace with increasing cost of living.

Unfortunately, due to extreme circumstances (the biggest, the most terrifying and emotional time) the focus of most retirees is everywhere else but on these two main concerns. The talk is about certainty and safety. But it is the concept of safety that’s usually misinterpreted and lures retirees into the trap of a financial tragedy.

Shift in retirement planning  

Most baby boomers have inherited their parents’ concept of ‘planning’ for retirement – being looked after by government and/or receive an employer supported pension. 

In past, many employers offered what were called ‘defined benefit pensions’. Although, far from perfect, these used to be a source of some income, which in combination with social security income, allowed the veteran generation to live a modest lifestyle they were used to.

Defined benefit pensions are no longer being offered. So unless you already have one in place or lined up, you will have to look after your retirement yourself. 

And the social security pension?

Firstly, it will hardly be enough to afford you a decent retirement.

Secondly, the demographics of Australian population are changing – the baby boomer generation has already doubled the long term average of people retiring per year. 

And it continues to increase it to an estimated number of 140,000 retirees per year in about ten year’s time. See the graph below:

The wave of new retirees is crashing over the next 30 years - started in 2008

So, what’s the point?

• There is more retirees, with no retirement plans, relying on someone else to look after them in retirement

• The government policies will inevitably have to change to deal with the dramatic increase in demand of age pension applications

• Relying on government support(or any other income support in retirement for that matter) is simply not a sensible strategy if you want to retire on your terms

If you still think that the government will look after you and you are happy with that prognosis, stop reading now. I wish you all the luck in the world.

If, however, you wish to retire on your terms, keep your dignity throughout your retirement and stay retired for the rest of your life, you might want to pause for a moment and think about the steps you are taking towards your own retirement.

We have now established that we need to shift the focus from government and employer support to relying on your own savings in retirement.  

But you will need to plan to make sure you’ll be able to rely on your lifetime savings.

Please notice the use of the verb ‘plan’. 

There is no secret to a successful and independent retirement other than having a long term, time and dollar specific plan which will clearly determine whether you are on the right track or not.

By having a plan I do not refer to a ‘good’ superfund, a portfolio, good investment returns, low fees, great product features and benefits, healthy economy etc… etc….

What I mean is addressing and knowing more-less exactly:

• how much money you will need at the time when you retire (so you'll be able to draw a lifestyle sustaining income for the rest of your life)

•  how much money you currently have

• how much money you need to contribute each year into your savings in order to get to the first number

• how you need to invest your funds and why

The only way to even begin answering these questions intelligently is to sit down with a quality financial planner and have an honest conversation. 

This is a first step of the planning process which will ensure that one day you will be able to look back with a smile.

Because you will have some certainties in life and you will be in control. And it will only happen if you decide to do something specific about your future today.

It’s called planning.

by Michal Bodi
 

Image courtesy of photostock and  freedigitalphotos.net