Replace Your Salary by Investing - Ben Nash - E-Book

Replace Your Salary by Investing E-Book

Ben Nash

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Beschreibung

Discover the best investment options for growing your wealth faster, and start living the life you really want In Replace Your Salary by Investing, financial advisor and money geek Ben Nash delivers a start-to-finish game plan to get more out of your money. You'll learn practical, real-world strategies, skipping the money jargon in favour of actionable principles you can apply immediately to invest more and grow your wealth. Whether you find yourself in a situation where you're not investing as much as you'd like, you're making a good income but don't have much to show for it, you're paying too much tax, or you're feeling like you're never going to achieve financial independence... Ben shows you ways to realise a lifestyle you can enjoy today, while planning for and creating the future you want for tomorrow. * Build up your money muscle and form money habits that will benefit you for life * Understand how to invest strategically with property, shares, crypto, and superannuation * Cut your tax bill so you can use more of your income to invest and get ahead For anyone who wants to find their financial security sooner, Replace Your Salary by Investing is the hands-on, step-by-step guide that will help you take control and get more out of the money you have today.

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Veröffentlichungsjahr: 2023

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Table of Contents

Cover

Title Page

Copyright

Dedication

About the author

Introduction

CHAPTER 1: Build your money muscle

Money is a muscle

How to build your money muscle

Money success — myth vs reality

Urgent vs important

Money stages

The building blocks to getting there

Financial wellbeing

Money psychology

CHAPTER 2: Become a savings superstar

Saving challenges

What a budget isn't

Importance of a system

Build the last budget you'll ever need

CHAPTER 3: Invest to replace your salary

How much do you need to replace your salary by investing?

Underestimate long term, overestimate short term

Formulate your investment strategy

Franking credits are your friend

Types of investments

How much should you invest

CHAPTER 4: Buy property like a pro

Property vs shares

The power of leverage

Investing with equity

How equity release works

You don't need 10 properties

How much does it cost to own an investment property?

Buying your dream home can make you seriously poor

Property risk and how to manage it

Cashflow risk

How to structure your mortgage

Three property mistakes to avoid

Who helps you with property?

CHAPTER 5: Crypto, bro?

How much risk do you need?

Where people go wrong with cryptocurrency and digital assets

What is cryptocurrency?

What are the risks with buying cryptocurrency?

Where cryptocurrency fits in a smart investment portfolio

How to manage risk if you buy cryptocurrency and digital assets

CHAPTER 6: Sort your super

Super is a tax structure

Super won't be your first investing strategy

You have full control over your super investments

Super contributions are tax deductible

‘Catch-up’ concessional contributions

After-tax contributions

Different types of superannuation funds

How to choose a super fund

Don't set and forget

CHAPTER 7: Get tax smart

Your after-tax return is all that matters

You only get one tax rate

Marginal tax rates

Value of deductions increases with your income

Tax rates are different for different entities

Tax planning across family units is valuable

My five most effective tax-saving strategies

Franked dividend share investing

Debt recycling

Superannuation contributions

Borrowing to buy shares

Negative gearing

Maximise your deductions and tax return

Who helps with your tax planning?

CHAPTER 8: Your game plan

A typical replace your salary journey

Choose your wealth-building weapons

Fear > inaction > missed opportunities

How to crunch your numbers

CHAPTER 9: DIY, get help or procrastinate

Early momentum compounds into serious dollars

DIY, get help, get good help or delay

Where is the actual benefit in financial advice

Types of financial advice

Which financial adviser will make you the most money

How to choose an adviser

Your next steps

You have to build good habits

Saving and spending is your foundation

Investing is your fuel on the journey

Property is a winning strategy

Crypto can make you money, but you don't need it

Super is your friend (but not your only friend)

Your after-tax investment return is all that matters

You need a game plan

Financial advice will help you get there faster

The wrap of wraps

Index

End User License Agreement

List of Tables

Chapter 2

Table 2.1 Spending and savings planning

Chapter 3

Table 3.1 Long-term investment returns by investment type

Chapter 4

Table 4.1 Returns on property vs shares

Table 4.2 Borrowing with property equity

Table 4.3 Growing your assets with multiple properties

Table 4.4 Property growth

Chapter 5

Table 5.1 Returns on shares vs cryptocurrency

Chapter 6

Table 6.1 Personal vs superannuation tax rates

Table 6.2 After-tax growth on super vs non-super investments

Table 6.3 Upside of extra super contributions

Chapter 7

Table 7.1 Australian marginal tax brackets and rates

Table 7.2 Tax rates across different tax entities

Table 7.3 Taxing investment income

Table 7.4 Tax planning across a family group

Table 7.5 Debt recycling in action 1

Table 7.6 Debt recycling in action 2

List of Illustrations

Chapter 2

Figure 2.1 The Pivot automated saving system

Chapter 3

Figure 3.1 Defensive vs growth investments

Figure 3.2 Share investments timeline

Figure 3.3 Diversification in practice

Figure 3.4 Small vs large company risk (volatility)

Figure 3.5 Active investing funds

Figure 3.6 ASX200 (top 200 Australian shares)

Figure 3.7 Passive index investment funds

Guide

Cover

Title Page

Copyright

Dedication

About the author

Introduction

Table of Contents

Begin Reading

Your next steps

Index

End User License Agreement

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Making money is hard … but Ben Nash makes it so much easier. His approach to investing is just so sensible. Replacing your salary means independence. Achieve that and your financial stress fades. It can literally change your life forever.

— David ‘Kochie’ Koch, Australia's original Money Nerd and Chairman, Pinstripe Media

When Ben comes on The Morning Show, we know he's going to demystify the normally confusing and overwhelming world of finance. He cuts through all the hysteria and hype with easily understood language and solutions, which is the approach he takes in Replace Your Salary by Investing — a must read for anyone looking to be smarter with their money.

— Larry Emdur, host of The Chase Australia and co-host of The Morning Show Australia

So inspiring and helpful! Great game plan. Ben's expertise is clear, but his writing is even clearer. Highly recommended.

— Derek Sivers, Entrepreneur, Investor, Author

Most people spend their lives craving true financial freedom. Ben’s book will show you how to start (and keep!) investing … so you can stop dreaming about it and start living it!

— Jessica Brady, Financial Adviser and Speaker

The world of personal finance and investing can be confusing and overwhelming, which creates a big barrier to people doing what they need to do to take control of their money. In Replace Your Salary by Investing, Ben breaks down the barriers and explains the building blocks of money and investing in a way that's easy to understand and easy to action, helping readers to move forward with confidence.

— Brendan Malone, CEO, Raiz Invest

Financial independence will be a defining theme of the next century. Replace Your Salary by Investing gives you the plan to get there faster and easier through simple, practical tips and hacks that actually work. Ben cuts through the noise around money that's often overwhelming to deliver clear, actionable steps to take you from where you are to where you want to be. This book is a must read for anyone looking to level up their money game.

— Nick Nicolaides, Co-founder, Pearler

In Replace Your Salary by Investing, Ben breaks down complex topics into practical, step-by-step tips that are easy for readers to understand and easy to action. Ben avoids the common jargon and confusing terminology that can be overwhelming to help people build confidence around the most innovative next steps to move forward with their money. Highly recommended for anyone looking to make their money work harder and simplify important investing fundamentals.

— Clint Newton, CEO, Rugby League Players' Association

 

First published in 2023 by John Wiley & Sons Australia, LtdLevel 4, 600 Bourke St, Melbourne, Victoria 3000, Australia

© John Wiley & Sons Australia, Ltd 2023

The moral rights of the author have been asserted

ISBN: 978-1-394-17665-6

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 Alex Ross Creative

DisclaimerThe material in this publication is of the nature of general comment and general advice only. It is not personal advice as it does not take into account the reader's personal circumstances, needs and objectives. 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.

 

This book is dedicated to my three favourite (and best performing)investments, Yang, Margot, and Olivia.

About the author

If you're not familiar with me or Pivot Wealth, you might be wondering who I am and why I'm the best person to help you replace your salary by investing.

I'm a financial adviser and the founder of Pivot Wealth, a money management company that helps people invest smarter to create a life not limited by money. I'm deeply passionate about helping people make better money choices so they can live a better life.

Through my work I draw on my practical experience to simplify the often overwhelming area of money by distilling complex tactics and strategies into simple, practical, actionable steps. I'm also a speaker, podcaster, writer, TikTok'er, financial educator, a regular writer for News.com.au, and author of the book Get Unstuck.

My content is authentic, practical, to the point, and jargon-free to drive rapid implementation and rapid results.

Unlike the majority of financial advisers in Australia, I've chosen to focus on people in their 30s and 40s still building their wealth towards financial independence. Also in contrast to traditional financial advice, my work has a strong focus on lifestyle alongside money outcomes, something I feel is crucial to drive a money plan that will actually work for you.

I'm a finance geek at heart and have studied extensively in the area of finance including two Master's degrees and my undergraduate study, alongside a number of specific financial advice professional qualifications. That being said, it's primarily from my practical experience that the concepts in this book are drawn.

Both myself and Pivot Wealth have been formally recognised, named as part of the Financial Standard Top 50 most Influential Financial Advisers in Australia for six consecutive years, the Independent Financial Adviser Industry Thought Leader of the Year, Innovator of the Year (twice), Association of Financial Advisers Excellence in Education Award, Best Client Servicing Financial Adviser in Australia, Best Client Servicing Financial Advice Firm, Marketing Program of the Year, and Pivot Wealth has been listed as part of the Australian Financial Review's 100 Fastest Growing Companies in Australia. We have also been recognised as award finalists for Wellness Program of the Year, Self Licensed Firm of the Year, Digital Advice Strategy of the Year, Women's Community Program of the Year, SME Employer of the Year, and part of the AFR Boss Best Places to Work.

I've partnered with leading organisations to deliver financial education content, including working with the National Rugby League (NRL) to create and deliver their financial education program for all professional male and female NRL players. In addition, we've delivered content for the Australian Government, Newscorp, Glaxosmith Kleine, WeWork, Pearler, SelfWealth, Raiz Invest, VoltBank, Work-Shop, and Publicis Media, among others.

In addition to my work at Pivot, I'm a co-founder of Ensombl, Australia's biggest community of financial advisers dedicated to driving the positive evolution of financial advice in Australia and around the world.

Having advised and coached over a thousand people directly through one-on-one financial advice, worked indirectly with thousands more, and presented to over 100  000 people through live events, I've found what really works (and what doesn't).

When you have a solid understanding of what's really possible you become empowered to confidently make the smartest money choices. The feeling of being empowered, the relief that comes from knowing your money is sorted, and the elimination of money stress is something I passionately believe every person should have and something I feel very privileged to help people achieve.

Introduction

When I finished high school, the world of money was a complete unknown to me. I'd never heard of financial planning. I'd never set up a budget. I knew nothing about investments. In fact, I didn't even know anyone who worked in finance.

A few years later my nan gave me a book that opened my eyes to the world of personal finance and investing. I was immediately hooked.

In the two decades since, I've been on a mission to learn as much as I possibly can about investing and how to be successful with money.

Initially, this was driven by a largely selfish motivation to pick up as many tips, tricks and hacks as I could to help me on my own money journey. I wanted to do well financially so I could create the freedom to live my own ideal lifestyle. On discovering financial advising as a career path, I was immediately drawn in by the fact that my job allowed me to help other people do the same.

I've had the opportunity to help thousands of people with their money. I can't claim to have ‘seen it all’, because I'm still constantly being surprised, but I have seen a lot.

I'm a pretty curious kind of guy, and I'm always looking out for any hacks that can give me or our clients at Pivot Wealth an advantage. When I talk to people about their money I pay close attention, and I've noticed patterns. Whenever I talk to someone who has done exceptionally well with their money, I'm keen to learn how they got there. As Tony Robbins put it, ‘success leaves clues’, and there are things that successful people do differently.

On the flip side, whenever I talk to someone who is really struggling with their money or is in financial trouble, I take the time to uncover and understand where things went wrong. In this way I've found the common mistakes people make that lead to trouble.

It's the things I've learned from this practical experience that I want to share in this book. I'll help you to learn from other people's mistakes so you can avoid making them yourself. And you'll hear about the principles and strategies that people doing well with their money have applied, and what they do to maintain their success.

Financial security, independence, freedom — a lot of different terms are used to signify success with money. For me, it comes down to replacing your salary, and investing is how you get there.

When your investments are sufficient to replace your ideal salary, you no longer need to work for an income to fund the lifestyle you want. Importantly, this frees up your time, which is the driver of true freedom.

When you don't have to work, you may still choose to work. I love what I do, and it doesn't matter how much money I have, I'll still want to work on interesting things where I feel like I can be productive and help people.

The key is that you're then working out of choice. If you want to take six months off to travel, do charity work or help out a family member, you can choose to do so. I think everyone should have this freedom. And my experience has shown me that it is within your reach too, if you go about it the right way. I'm going to show you exactly how.

In the pages that follow I'll guide you, step by step, through exactly what you need to know to replace your salary by investing. I'll cover the building blocks of your finances, how to set up a solid financial foundation, and how to invest effectively and grow your wealth through shares, property, crypto and super. And we'll examine how you can be smarter with your tax and set up a rock-solid game plan to maximise your money and get ahead faster.

If you're new to money, it can seem overwhelming. But it shouldn't be, because the reality is that the principles of money success are simple. You need to spend less than you earn so you can save more. You need to invest consistently, and you need to use the rules to your advantage so you can optimise your results.

But just because it's simple, it doesn't mean it's easy.

There's a lot of psychology that impacts what you do with your money — how you manage it, how you spend it, how you invest it and how you plan with it. To create true money success, you need not only to know the principles of money success, but to manage your money so you can consistently follow them.

As with anything important, consistency is key. You should build good habits and tactics that will actually work for you. You have to manage your money in a way that drives an ongoing focus on what's working and what's not, so you can refine your approach and strategy over time. And you need to avoid drifting off track and making mistakes that lead to setbacks.

There are no shortcuts to money success.

Even winning Powerball or scoring a big inheritance won't do it. Sure, this will boost your financial position quickly, but if you don't have the right approach to lasting money success this boost will be short-lived, and ultimately you'll end up back in the purgatory of money mediocrity. This is why so many people who come into significant money aren't able to make it last.

To create sustainable, long-lasting, real money success, you need to get ‘good at money’. You need to know enough to make good money choices, to know not only how to choose good investments but how to choose the right investments for you.

There are many different ways to be right with money, but there's only one right way for you. The right money moves for you depend on you — on where you're at now, how you want your situation to play out over time, what's important to you, and how you feel about different risks and trade-offs.

There's no ‘one right way’ to be successful with money that will work for everyone, but there is a right approach to making money and investing decisions.

You first need to understand the (not so basic) basics of different money and investing options, how these options work, their benefits and trade-offs, and how they might work for you. From there, you need to integrate them into your lifestyle today and how you want your lifestyle to change over time, making sure they fit and that your risks are well managed.

These elements and this process is what I'll unpack for you in the pages that follow. I won't ruin the surprise, but let me tell you the results are worth it.

When you get your approach right, you'll be able to confidently make financial decisions and investments that will deliver the financial outcomes you want, and fit the lifestyle you want to live. With your risks managed you won't get caught short. And importantly, you'll be clear on where you're headed with your money and on the results you should expect over time.

I hope you're as excited to learn as I am to share.

One final word of warning before we get started. There's always a good reason to not take action. Perhaps you have a holiday coming up, or a child finishing school or day care, or you're waiting for your next pay rise. There can be any number of compelling reasons why you feel it might be better to put off your next steps with money.

I'm not going to sugarcoat it. Money success and replacing your salary by investing does mean making some sacrifices. You need to save and invest today money that you could otherwise be spending on things that make you feel really good today. But those moments are short-lived, and if you're constantly chasing maximum short-term satisfaction, you're sabotaging your long-term success and happiness.

Putting off taking serious action with your money now simply means you're going to have to do more later. You'll have to sacrifice more in the future, saving and investing more to arrive at the same position. Or worse, you'll have to make sacrifices around where you'll end up.

There's work to be done, but the juice is worth the squeeze.

When you go through the process of taking control of your money, there's an immediate shift. You gain clarity on what you're working towards and confidence on your next steps, and any stress around money is reduced.

Every single person I've ever helped has told me they wish they had started sooner. But here's the thing: if the best time to take action was 10 years ago, the second-best time is today.

Happy reading.

CHAPTER 1Build your money muscle

Money isn't easy.

There, I said it. You knew it. I knew it. But not a lot of people talk about it. And because we don't talk about money, it's easy to fall into the trap of thinking everyone else has it more together than you do.

They don't.

There's so much confusion out there when it comes to money. In Australia there are thousands of different investment options and service providers, banking solutions, crypto investment opportunities, super funds — the list goes on. Figuring out which options are best is hard.

Then, even if you manage to work through these options, you need to create a smart money plan that fits with the many specific variations of your lifestyle into the future.

So yeah, money can be tricky. But the good news is that you don't need to be an expert from day 1.

If your aim is to achieve serious money success, by the time you get to the finish line you will need to have a lot of money knowledge and skills. But you don't need those skills to get started. The main building block of money success is investing, and you'll need some knowledge to get started, but you won't need to know it all.

For example, if you were to invest just $5000 in the next year, this money would grow to be worth $248 022 in 40 years' time based on the long-term Australian share market return of 9.8 per cent. You can see from this example the upside of getting started early, and the real cost of not taking action.

The fact that $5k invested this year will grow to almost a quarter of a million dollars over time shows that the downside of not investing is huge. For every single year you delay getting started, you're costing yourself six figures in lost wealth you'll never get back. You'll then need to play catch-up in the future, sacrificing more to arrive at the same position or having to compromise on your goals.

Imagining you need to be a money or investing expert before you get started often leads to the feeling of overwhelm, which in turn can result in getting stuck in the inaction trap.

Money is a muscle

Money is a muscle you build over time. As with any muscle exercise, you start with the basics, and as you grow and develop you get more complex and nuanced in your approach.

I do a lot of financial advice and education work with professional athletes, and through this work I've come to realise there's a lot of crossover between being an elite athlete and being elite with your money.

When you first start playing sport as a kid, you don't jump straight into a high-performance plan, a conditioning framework and all the other training routines a professional athlete does day in and day out. Instead, you focus on the basics. You do some running to get your physical fitness up. You do basic drills to help with your coordination. You take up exercises to build your strength and speed, maybe some push-ups or sprints. Then you rinse and repeat, building these skills. Regularly. For years. Over time you add more techniques and tactics to your training routines to raise your game.

When you watch an elite athlete perform, they make it look so easy. But what you don't see is the countless hours of practice over years, often decades. It's in this practice that skills are formed, honed and perfected.

Fast forward to the future, when you're crushing it with your money. You have all the skills you need, because you have put in the necessary practice to build your money muscle. And now you are making it look effortless.

But you're not there yet. Early on in your journey you just need to take the next step. You need to flex your money muscle to build it just a little so you can take on the next exercise, the next variation, to make the progress you're aiming for today.

Once you've achieved that you'll have learned some lessons and built some skills that will make whatever comes next easier. You can then set your next target and pursue that goal until you get there. At that point you'll have learned some more and added new skills to your tool kit, which in turn will help you move further forward.

You can see where this is going … 

If you let it, thinking you need to be an expert from the start will prevent you from getting started. It will thwart any progress, blocking you from learning and growing your money muscle. Ultimately, it will stop you from building your money momentum.

How to build your money muscle

There are three things you need to do to build any muscle, including your money muscle.

First, you need a goal, something to aim for. In the early stages, you'll want it to be something relatively simple that you can achieve within the next 12 or, ideally, six months.

It could be something like building a certain amount of money in your emergency savings account, paying off that annoying credit card debt, or starting a share or investment portfolio.

The important thing here is that this goal is clear and your progress measurable. Specifically, you want to know whether or not you've achieved it. So a target such as ‘doing better’ or ‘saving more’ isn't as good as ‘saving $1000’ or ‘reducing your debt by $1000’.

Next, you need to know what your next step is to make it happen. It's good to have great ideas and great plans for your money, but ideas without action are meaningless and ideas alone won't get you the results you want.

At this point you don't want to be overwhelmed by all the steps you have to take, you just want to be clear on the very next step. Then, once you take that step, you can refocus on what's next, and before you know it you'll be building momentum.

These first two steps are the biggest drivers of your initial action, but how well you do step 3 will dictate how much success you actually achieve. The third step is to check in on the progress you're making on your plan, and whether or not you're on track.

The importance of tracking your progress

If you're a high achiever, you may have noticed a tendency to focus on the things you want but don't yet have. It may be a certain amount in your savings or investments, an asset target, a property goal or a certain level of investment income.

If you're not yet exactly where you want to be, you focus heavily on the work you have left to do. In one way this is a good thing, because when you really want something you're more likely to work at it. But if you don't take the time to acknowledge and celebrate the progress you've made to get to where you are right now, you can find yourself feeling stressed as you fall short of where you want to be.

Instead of focusing on what's coming up, measure backwards: look at the progress you've made over the past month, three months, year, five years. You'll most likely be pleasantly surprised.

If buying this book is your first big positive step with money for a while, celebrate that. If you've been focused on your money for some time, look at the wins you've had over the recent past and celebrate them. We can park this thought for now, but know that celebrating your wins is an important way to drive your motivation moving forward.

As you implement the learnings from this book and make more progress with your money, you should schedule time to look back and acknowledge your money wins. This will help you see that the work you're putting in is worth it, and keep your motivation levels high as you move forward.

If when looking back you realise you're not entirely on track, that's not ideal, but it's also okay. Money plans don't work for three main reasons: you've done something wrong, there was something wrong with your plan, or something that was out of your control impacted your results. You'll want to figure out which one of these factors applies so you can address it. Once you do, you'll be clear on what you need to do to drive your forward momentum.

Is your current strategy the best one for you?

Three factors that will change over time can impact whether you're still doing the very best thing you can with your money.

First, what's going on with your money. Over time your income, spending and savings will change. You'll have some investments that perform really well and others that don't, and different financial opportunities will crop up.

The second factor that impacts your money strategy is what you want and what's important to you. This will include things like where you want to live, where you want to take your career and work, your family lifestyle, when and where you want to ‘retire’, and the people and causes you want to support.

As your wants change, you should be looking to your money strategy to make as many of them happen for you as possible.

The third element is what's going on in the world, notably in the financial and investment markets. How is the share market is performing? What's happening in the property market? How are interest rates tracking? What's going on in the economy and what does this mean for the outlook on investments.

As each of these three areas shifts and changes over time (and change they will), you need to check in on what you're doing with your money to make sure you stay on the front foot and are still making the right decisions and taking maximum advantage of your current financial position.

Money success — myth vs reality

Most people think that choosing good investments is the key to money success. Making good investments is important, but it's only a small part of what you need for real success.

Being truly successful with money is about investing the right amount at the right time. It's about optimising for tax. You want to use the right amount of leverage. You need a good debt strategy. You also need to have the right approach to your saving and day-to-day money management.

You must manage risk well and have a plan that never sees you forced to sell good investments at the wrong time. You need to have good goals and targets, and to keep yourself motivated to get there. In this way you build your confidence and avoid money stress.

Sure, choosing good investments is important, but it's less than half of what you need to get right to achieve your financial potential.

Urgent vs important

Success with money unfortunately isn't something that will just happen on its own. Money is important, but it's rarely urgent.

It's easy enough to not make the time today for your money without too much of an impact today. Just like skipping a session at the gym, treating yourself to a third helping of dessert, or not taking the time to do that bit of research or study to develop your professional skills or career, there's no immediate, earth-shattering impact.

But if you repeat these behaviours every day for years, things will start to decline. The decline will be slow at first, but if you let it reach a tipping point, things can deteriorate rapidly. Making the time to keep your money moving forward is something that's easy to put off for a tomorrow that never seems to come around.

On the flip side, once you start taking action you start building momentum. You start building habits and behaviours that drive results. These results then drive your motivation to keep going, and take your results to the next level.

There are interesting parallels between being money fit and being physically fit. Your past choices around your diet and exercise routines dictate your current level of physical fitness and health. It's easy to get out of shape, because inactivity and poor eating habits can make you feel good, at least temporarily. Making the time to work out is harder than skipping your workout for a Netflix and chill session, with some extra calories thrown in for good measure.

These poor habits lead to your not being as on top of your diet and exercise as you know you should be, and your physical fitness suffers as a result. Let this pattern set in, and it's easy to get way out of shape.

No matter where you're at, though, it's possible to turn things around. Once you decide to make your physical health a priority and start putting in the work to make it happen, you'll drive results.

Build new habits and behaviours that have a positive impact on your health, and you'll start making progress. It might seem slow at first, but it's there. Then with focus, and compounding over time, you start moving closer to where you want to be.

Keep this going and you'll eventually achieve your goals. Then you can start to think about your next level of goals, which may be beyond what you'd previously thought was even possible.

It's the same with money.

If you're already doing okay, giving this time and attention will take things to the next level. If you're a little out of shape, you need to rebuild habits and behaviours that will get things back on track.

Just as with your physical health, there are no shortcuts to money success. The financial equivalent of a fad diet or tummy tuck might deliver some quick results, but if you don't have the right foundation, approach, habits and behaviours, any benefits will be short-lived. You simply can't shortcut your way to real, long-term money success.

Money stages

Everyone's situation is unique, but there are some key stages we all go through with money.

Of course, it's common for people to progress through some stages without thinking too much about their approach to money or without taking their money success too seriously. If this happens, you can push through some of the stages without much thought or focus.

Here I'm more interested in what will happen with your money once you make a commitment to taking a serious approach to your progress and financial success.

Building wealth

The first stage of your journey to replacing your salary by investing is all about building your investments and wealth. How much wealth you build will be dictated by how much income you can generate from your investments and your lifestyle, so this stage is critical.

How soon you get on this path and how fast you progress along it will determine how far you can go, so give yourself some snaps for picking up this book and starting on your journey.

Winding back on your salary

On your journey to replacing your salary through investing, you'll reach a critical inflection point. This is the point at which you'll be able to start reducing your salary and relying more on the income generated by your investments.

Some people choose to push through this point, continuing to focus on earning employment income and building more wealth faster to get to the point of financial freedom sooner. The ‘right’ approach will depend on you, your personal goals and lifestyle, your career and what's really important to you.

Financial freedom

For me, once you have enough investments behind you to generate your ideal salary without your needing to work, you've reached nirvana. At this point you may decide to continue working, but this will be out of choice, not necessity. You may opt to take extended leave to pursue a passion or help causes important to you or your family.

The key here is choice.

The building blocks to getting there

There are some key building blocks that will get you through these stages, and knowing what they are ahead of time will help you feel more confident in the path you're taking.

Saving

The first stage is all about your savings and day-to-day money management. You want to set up your money so you're able to spend the money you want on your lifestyle today and save at a rate you're happy with. At this stage you also need to create a money management system and approach to make saving easy.

Being tactical with your saving and spending is crucial to all later stages of your money management. Nailing this step sooner will accelerate your progress.

Investing

Getting good at investing is important for long-term money success. Particularly in Australia, where we have a compulsory superannuation system, most people are already investing, but they do so without much knowledge or thought, letting their employer or super fund dictate the strategy.

Investing through shares (or more likely managed funds, ETFs or micro-investing) will help you build serious wealth over time, and small changes made early will have a massive impact in the future.

Chapter 3, on investing, describes how to get started investing and set up your investments for success.

Property and leverage