Bulletproof Investing E-Book

James Fitzgerald

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 232

Veröffentlichungsjahr: 2021

Beschreibung

Take the reins of your financial future with this powerful and insightful new resource In Bulletproof Investing, real estate expert, investor, entrepreneur, and author James Fitzgerald, delivers a collection of personal stories and experiences that will show how you too can gain and retain financial control of your life. You'll learn how to spend less than you earn, find a mentor, identify a purpose for your financial wellbeing, and, ultimately, learn to achieve financial independence. This important book shows you how to: * Improve your mental health by removing the stress and anxiety of financial insecurity * Familiarise yourself with the right tools to control your financial destiny * Minimise and manage risk, rather than trying fruitlessly to eliminate it * Take advantage of the miracle of compound growth and watch your investment portfolio flourish * Stop working hard and start working smart, letting your money do much of the work for you Perfect for millennials, adults with children, and those nearing retirement aiming for financial control and stability, Bulletproof Investing will also earn a place in the libraries of anyone hoping to gain a firmer grasp of their financial reality and investment portfolio.

Leseprobe

Table of Contents

COVER

TITLE PAGE

COPYRIGHT

DEDICATION

INTRODUCTION

PART I: GROWING PAINS

CHAPTER 1: Losing my best mate

Finding clarity amid grief

CHAPTER 2: Lessons in life and money

My first encounter with financial stress

CHAPTER 3: Learning from the best: Uncle John

A timely career change

CHAPTER 4: Mindset: the game changer

Change your outlook, change your life

CHAPTER 5: The power of mentorship

Tapping into the right side of the brain

Finding my ‘why’

Mind mapping

CHAPTER 6: Riding a financial rollercoaster

The beginning of the end

CHAPTER 7: Financial control: the basics

Life-changing lessons

CHAPTER 8: How to spend less than you earn

CHAPTER 9: Keep cash as your king

Regaining control

CHAPTER 10: Work smart, not hard

It's simple, but not easy

The heart, the head and the hands

PART II: THE BULLETPROOF APPROACH

CHAPTER 11: Buying in

There’s only truth in numbers

The value is in the land

CHAPTER 12: Getting started

Lender's mortgage insurance

Government grants

My first property

CHAPTER 13: Cash flow: the oxygen of investing

Managing cash flow

Negative gearing

CHAPTER 14: Compound growth: the Eighth Wonder of the World

Compound growth and property

CHAPTER 15: Turning up the volume

Borrowing 90 per cent

Borrowing 80 per cent

Time is your best friend

CHAPTER 16: Assembling a team

Mentor

Banker/broker

Property manager

Accountant

CHAPTER 17: Little habits, big results

Wake up early

Make the first hour of the day yours

Get your heart going

Get enough sleep

Practise gratitude and humility

Visualise

Spend time with like-minded people

Be a reader, be a leader

Turn off

CHAPTER 18: Making the best of the worst

Previous crises

Focusing on the facts

The insight

Population growth and supply

Affordability

What's the lesson?

CHAPTER 19: Ready, set, go!

APPENDIX: FAQS

What if I lose my job or my income reduces?

What if I can't get a tenant for my property?

What if interest rates increase?

What if my loans go to principal and interest?

Is it realistic for property to increase in value like it has in the past?

What if my tenant leaves suddenly or damages the property?

Won't the banks stop lending me money at some point?

What if the government abolishes negative gearing?

What are holding costs?

Shouldn't I be diversifying?

INDEX

END USER LICENSE AGREEMENT

List of Tables

Chapter 11

Table 11.1: median house prices in the main capital cities over the past 40 y...

Table 11.2: comparing the cost of a block of land per square metre

Table 11.3: value of properties purchased by my parents

Table 11.4: land value of properties purchased by my parents

Chapter 12

Table 12.1: net position using good debt

Table 12.2: your investment amount assuming 80% LVR

Table 12.3: your investment amount assuming 90% LVR

Table 12.4: return on investment (ROI) at 90% LVR

Table 12.5: return on investment (ROI) at 80% LVR

Table 12.6: return on investment (ROI) without leverage

Table 12.7: return on investment (ROI) at 90% LVR and 50% growth

Table 12.8: return on investment (ROI) at 80% LVR and 50% growth

Table 12.9: my investment contribution before government incentives

Table 12.10: my investment contribution with government incentives

Table 12.11: my investment contribution with John's investment

Table 12.12: before repaying John

Table 12.13: after repaying John

Chapter 13

Table 13.1: your investment amount — land only (80% LVR)

Table 13.2: return on investment (ROI) — land only

Table 13.3: cash flow — land only at 80% LVR

Table 13.4: return on investment (ROI) — house and land only

Table 13.5: cash flow — house and land at 80% LVR

Table 13.6: cost of holding a property (without depreciation)

Table 13.7: cost of holding a property (with depreciation)

Chapter 14

Table 14.1: equity position — one property, year 3 (90% LVR)

Table 14.2: available equity — one property, year 3 (90% LVR)

Table 14.3: equity position — two properties, year 3 (90% LVR)

Chapter 15

Table 15.1: equity position — two properties, year 5 (90% LVR)

Table 15.2: available equity — two properties, year 5 (90% LVR)

Table 15.3: equity position — four properties, year 5 (90% LVR)

Table 15.4: equity position — four properties, year 10 (90% LVR)

Table 15.5: equity position — four properties, year 10 (80% LVR)

Table 15.6: equity position — four properties, year 20 (90% LVR)

Table 15.7: equity position — four properties, year 20 (80% LVR)

Guide

Cover Page

Table of Contents

Begin Reading

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BULLETPROOF INVESTING

GAINING FINANCIAL CONTROL IN UNCERTAIN TIMES

JAMES FITZGERALD

First published in 2021 by John Wiley & Sons Australia, Ltd

42 McDougall St, Milton Qld 4064

Office also in Melbourne

Typeset in Sabon LT Std 11pt/14pt

© John Wiley & Sons Australia, Ltd 2021

The moral rights of the author have been asserted

ISBN: 978-0-730-39455-6

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover design by Wiley

Author photo supplied by author

Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.

To my parents; my best mate, Dad, and the strongest woman I know, Mum.

INTRODUCTION

Spoiler alert: this is not a book about a self-made millionaire who knows the secret to turning $200 into $100 million. It's a cautionary tale about gaining and keeping financial control. I also want to sound a warning to anyone who equates money with success and believes their financial wellbeing or otherwise defines them as a person. By sharing a collection of personal stories and experiences, I'm determined to start an important but at times uncomfortable money conversation as we enter this post-pandemic economic frontier.

I've had the great fortune of learning what you need to do to never again have to worry about money. The best news is you can start with nothing. I don't have all the answers, but I have valuable insight from my own unique journey, which has been both fortunate and fraught.

Today, I'm in complete control of my personal finances. I sleep like a baby and I'm optimistic about the future. By sharing my experiences and the knowledge and skills I've gained along the way I hope I can help you learn how to find and keep financial control too.

I'm not a theorist. I'm in my early thirties and my wife and I own our own home as well as five investment properties, putting us in the top fraction of a percentage of all Australians. However, I started with nothing — in fact, less than nothing. I don't come from money; you'll read that my parents have been broke three times. Perhaps more importantly, 10 years ago my personal finances were out of control. I had to learn how to build my wealth and, before that, get my finances under control. All the while discovering a way to do it when I'm naturally conservative and cautious, and saw ‘debt’ and ‘risk’ as four-letter words.

Where there's a money shortage, there's very often anxiety. Most of us have experienced it — for some it's fleeting, passing in the space of a few hours; for others it's more persistent, if not permanent. Perhaps you can't get to sleep or back to sleep. Or it arrives courtesy of a school or university exam, a meeting at work, an unexpected bill or an awkward social encounter. Very few of us are immune to those anxious feelings, which can be overwhelming, all-consuming and above all else exhausting!

Personal finance is cited as the single biggest cause of stress for one in two Australians. In 2018, the CBA released a study that revealed one in three Australians spent more than they earned each month, one in two had insufficient savings to handle a temporary loss of income and one in three would not be able to find $500 for an emergency.

MLC (owned by Australia's fourth biggest bank, National Australia Bank) also produced data in 2016 suggesting half of all working Australians live payday to payday. These numbers are cause for concern and, no doubt, have been exacerbated by the global pandemic that sent Australia, the lucky country, into recession.

Additionally, the 2017–18 ABS Australian National Health Survey concluded that one in five (20 per cent of) Australians — approximately 4.8 million people — experience some form of mental illness in their lifetime. That number has increased from 17.5 per cent in 2014–15. Research by the same group in 2009 found 45 per cent of Australians would experience a mental illness at some point in their lifetime. It cited anxiety as our biggest mental health challenge, with 13 per cent of Australians experiencing an anxiety-related condition, up from 11 per cent in 2014–15.

In 2014 the Australian Institute of Health and Welfare reported that 54 per cent of people who experience a mental health challenge do not seek help. A 2013 study by the University of Southampton in the UK, cited in the journal Clinical Psychology Review, found that individuals with depression and anxiety were three times more likely to be in debt. Other research has made a clear link between debt and suicide.

Our online lives don't help matters. Of the 54 per cent of Australians experiencing anxiety, a significant number also have some form of gambling habit, a trend accentuated by smart-phone applications and the easy access to online gambling. Other people turn to alcohol, or prescription or illicit drugs, in a bid to self-medicate and ease the pain of their financial ailments.

That's why now, more than ever, we need to have awkward but honest conversations about money. Lives depend on it.

My own father, my best mate, endured a 30-plus-year battle with anxiety, fuelled by the oft parlous state of his personal finances. I've witnessed first-hand the vicious cycle — the coping mechanism cocktail — that is gambling, drugs and alcohol and experienced the tragic, senseless consequences. Dad's financial angst was exacerbated by the fact that his sense of self-worth was heavily linked to (if not driven by) his financial success.

This is in stark contrast to my professional mentor — who just happens to be my dad's brother — who has, since his early days in business, strived to establish and maintain financial control. I don't believe you inherit a Midas touch. My dad and my Uncle John grew up in the same loving household with the same level of opportunity and support, and the same trials and tribulations. It seems to me that, in the hand we're dealt in the game of life, the wild cards in the deck are how we derive our self-worth, how we deal with stress and anxiety, and how we measure personal success.

New York Times bestselling author Maria Konnikova, in her book The Biggest Bluff, tells of her amazing 12-month transformation from psychologist to professional poker player. Something she wrote really resonated with me: ‘Show people the data or risk charts all you want but it won't change their behaviour, decisions or perception of risk. What will, is going through an event themselves or knowing someone who has.'

I realised early on that if you want to avoid the perils of anxiety associated with money, you need to explore the habits of those who have their finances under control.

For more than a decade I've had the great fortune of being mentored by my uncle, John L. Fitzgerald. As mentors go, I'm incredibly fortunate. Significantly, John attributes a large part of his success to the exceptional mentors who guided him through his career and life journey. He talks about these mentors in his book, 7 Steps to Wealth, now in its eighth reprint and considered Australia's number one book on real estate investment.

What you learn from successful people is the importance of mindset and habits and how to apply this framework to your own circumstances. I say, with humility, that I haven't worried about money for more than 10 years. I don't expect to have to worry about it for the rest of my life because my property portfolio will earn me $125 000 to $250 000 per year over time. No doubt there will be challenges, but money won't be among them.

By reading this book and heeding the advice in it, you're putting yourself in a position to follow suit. You don't need to be driven by wealth; everybody has their own priorities. What I'm endorsing very strongly is the mental freedom that comes with being financially secure.

Regardless of your motivation, what you'll achieve is control. However, that's only half the story. The real foundation of success comes from keeping control. Stories abound of people who receive a mindboggling lotto windfall or a multimillion-dollar inheritance, only to squander it in a matter of years. To grow and retain wealth you need the knowledge, skills and habits I'm about to share with you.

Maintaining mental health and emotional wellbeing is fast becoming one of the new millennium's most urgent challenges. It was already a pressing issue before COVID-19 but the global pandemic has intensified the malaise, rattling the emotional, mental and financial wellbeing of people from all walks of life.

Money and personal finances should not be among the reasons someone might experience anxiety. As reluctant as many may be to admit it, money is 100 per cent within our control. With the right tools and knowledge, I believe gaining and keeping financial control is something anyone can achieve.

As we enter this new and challenging post-COVID-19 phase, my ‘why’ — that is, my purpose and mission — has become crystal clear. I want to use what I know to help remove personal finances from the growing list of worries that keep Australians awake at night and anxious.

Not everyone is so fortunate as to have an Uncle John. Which is why I'm motivated to share what I've learned.

Importantly, although my financial freedom has come in the form of property investments, the information in this book can be applied to any asset class. My aim is to provide a solution for investing in general, not just investing in property.

I've divided the book into two parts. Part I focuses on my life up to now and in particular my financial journey. Through my story, you'll get a taste of the mental freedom that comes with feeling financially secure. I'll tell you how I dealt with pain points such as spending more than you earn, as well as how I found a mentor and identified my purpose.

Part II is where I delve into the ‘how-to’ of controlling your financial destiny. I'll teach you about the nuts and bolts of investing your money and maximising your potential: the best tools to use, how to manage risk, and how to learn the habits of thinking and discipline that only the top 1 per cent of successful people know.

Sprinkled throughout the book you'll find:

bulletproof tips

. These are takeaways and action items that I deem to be essential.

case studies

. These are experiences of real-life people I've met over the years — people I've helped and in the process learned from and been inspired by.

I hope I can help you, too, to be inspired to begin your journey towards bulletproof financial freedom and control by reading this book.

PART IGROWING PAINS

Part I of this book is about gaining control of your personal finances, and the consequences of failing to do so. I share my own experience as well as other experiences that are personal and important to me.

At the end of this part, you will have heard the cautionary tales and warning sounds I set out to share. You'll also be armed with a method and mindset that will allow you to take (or take back) control of your personal finances.

CHAPTER 1Losing my best mate

I lost my dad, my best mate, in March 2019. He was just 59 years old. He died tragically and unexpectedly when he was hit by a train in suburban Melbourne. The impact killed him instantly. Dad's death is by far and away the hardest and most traumatic experience I have ever had to deal with.

My father was an ebullient character who lived life to the full. He was optimistic, generous and energetic — the life of every party. But not even those closest to him — my mum, his partner (Mum and Dad had separated at this point), his brothers and sisters, his own children — knew of his personal challenges until the end.

Despite having solid, well-paying jobs for most of his career, Dad never quite reached the point of being in control of his money. Financial independence continually eluded him and, such was his anxiety around money that, for 30 years straight, he took tablets nightly just to get to sleep.

Dad and Mum lived a rollercoaster lifestyle, often devoid of financial stability. There were gambling debts, two failed businesses, a Part 10 insolvency and two bankruptcies interspersed with periods of financial success and solidarity. They owned their home on four separate occasions but, eventually, the ongoing absence of certainty and order took its toll.

Dad moved out of our family home when my parents separated at the end of 2006, just as I was entering my final year of high school. I lived with Mum and my two sisters until I graduated, but there was never any doubt that I would find my way back to Dad, at least part time. The following year, I started spending a few nights a week at his house and before long, I had moved in permanently.

They were the best few years of my life, the two of us bunking down together in a unit in Broadbeach on the Gold Coast. We would cook each other meals during the week and spend big chunks of the weekend together, often watching the St Kilda AFL game or sharing a beer after I had played a game of footy. Then we would go our separate ways — I to nightclubs with my mates and he to a bar with a few friends — but there was a very special bond between us.

In 2011, I moved to Brisbane, while Dad went south to explore business opportunities in Melbourne. As much as we were a long way apart geographically, rarely did a day go by that I didn't speak with him on the phone for half an hour or more. He was my best mate, confidant, chief motivational officer and number one fan. I was the same for him.

Then, early in the morning on Sunday, 31 March 2019, my life was turned upside down. I had been staying in Dad's two-bedroom apartment in the heart of Melbourne with my then partner, now wife, Hannah. We had enjoyed a fantastic day on the Friday at the wedding of good friends before bouncing back at the ‘recovery’ in a pub in Richmond the following day.

I had to get back to Queensland on the Sunday, but Hannah was planning to stay at Dad's place again that night and work in Melbourne on Monday. Dad must have told me three times that weekend how happy and proud he was that Hannah felt comfortable enough to stay without me. He assured me that he and his partner Maree would look after her. Maree would prepare one of her famous roast dinners!

At 3 am on Sunday I was jarred from a deep sleep by the sound of Dad's doorbell ringing. I hauled myself out of bed and answered the intercom, surprised to see a police officer on the security monitor. Once the officer had confirmed who I was, he asked me to come downstairs; he had something to tell me. The moment I set foot on the landing, the officer hit me with the news.

‘I'm sorry, James, but your father David passed away earlier this morning,’ the police sergeant told me without fanfare.

What? What? I couldn't believe what I was hearing. I was in such a state of shock, I didn't even think to ask the officer how Dad had died. I dropped to my knees, head in hands. I sat. I lay down. I got up. I sat down again. I was trying to process what I had been told, but none of it made any sense.

It would come to light that there was CCTV footage of Dad leaving the pub at 10.30 pm. His body was found just after midnight between the Burnley and Heyington train stations in Melbourne's eastern suburbs. He had been hit by a train. As far as they could tell he had been walking on the railway tracks. That was all they knew at that point. The Victorian forensics team was investigating.

I had a thousand unanswered questions swirling around in my head. What on earth was he doing out there? In the eastern suburbs? That was the opposite direction from where he should have been headed after leaving the pub. How did he even get onto the train tracks? Did he leave the pub with anyone? Was he murdered? Was it suicide? Dark thoughts started popping into my head.

The rest of the morning was a blur. Shortly after receiving the news, I made my way to my cousin Joel's house (he lived a couple of minutes away from Dad). My aunts, uncles and cousins from Melbourne joined me there. Then it suddenly dawned on me: I had to call my sister Simone — who also lived in Melbourne — and break the heart-wrenching news to her. I remember freezing at the thought of that conversation. How do you tell your sister such devastating news? The kind that takes you from being in total control to complete chaos in a split second. It was even worse when she answered the phone.

‘Monie, it's Dad — he's passed away. We're at Joel's house. You need to get here now,’ I told her, stuttering and stammering.

Simone was instantly hysterical.

‘Dead? But he can't be. He's got to walk me down the aisle in November,’ she sobbed.

Her response was simply heart-breaking. Both of my sisters would be denied that simple pleasure, that moment when a proud father gives away his daughter at the altar to the man she loves. And their children would never get to meet their grandpa. All the significant milestones, the treasured relationships, lost forever.

I started crying uncontrollably.

I went on to call Dad's partner, Maree (she was away for the weekend and due to fly back into Melbourne that afternoon), then my mum and my other sister Bridget, and eventually some of Dad's closest mates. My uncle Jimmy would call all of Dad's brothers and sisters. These were among the most horrible phone conversations either of us would ever have.

Finding clarity amid grief

In the days and weeks that followed, I had time to contemplate the full gravity of Dad's death. One of the reasons for the outpouring of grief stemmed from the sort of person he was. He was a connector, a social conduit who brought together so many different individuals and groups. Dad was the catalyst for countless friendships up and down the east coast of Australia. He had a unique ability to stay in touch with people and took a keen interest in what was going on in their lives. He was passionate, positive and optimistic — the kind of person people gravitate towards.

At the time of his death, plans for his sixtieth birthday party were all but complete. There had been spirited arguments between him and my sisters about the swelling of the guest list. Dad's counter argument was as consistent as it was predictable.

‘But I like them and want to share a beer with them. So, they have to be on the list,’ he would say.

Grief is different for everyone and it doesn't discriminate. I'm also not convinced it ever goes away. Initially, it is overwhelming and consumes your thoughts. You wake up in the morning in pain and you go to bed at night in a similar state. During those darkest early days, I was very fortunate to have the support of two close friends — Dayne and Ethan — both of whom had lost their fathers and experienced what I was now going through. Dayne in particular gave me some very helpful advice.

‘The only person who truly knows what you're feeling right now is you,’ he told me. ‘You'll get through it, and trust me, it does get easier with time. You just need to take it one day at a time.’

He also reassured me it was okay to feel sad.

‘Don't feel ashamed, embarrassed or guilty that you feel sad. Tell people how you're feeling,’ he insisted.