But wait... there's less!

The Ulysses Contract doesn't sound like a book about investing. The subtitle "How to never worry about the share market again" is what grabbed my attention. The book is mostly about the mindset and strategy of investing in shares. The obscure title refers to Greek mythology, the temptation of the siren songs, and the measures Ulysses took to keep his ship and crew safe - including being tied to the mast of the ship, to hold himself to his own plan. In the book, Michael Kemp outlines the temptations (siren songs) in the share market, gives some solid guiding principles (the mast) that investors can secure themselves to, and outlines his idea of a Ulysses contract for investing. The temptations include spending too much on consumer items (it's hard to invest if we spend all our income) doing what everyone else is doing (when the crowd is selling, it might be the best time to buy) expert predictions (not worth that much, and can be wrong as much as right) market-timing, ...

For the first time ever I'm reviewing a novel. Latte Factor is a short story  - around 120 pages - and is equal parts of inspirational story and financial education. The combination of the two is quite rare, and done quite nicely. The story is about Zoey Daniels, associate editor for a travel magazine. Although she's never been outside the USA  - "a travel editor who's never travelled". She struggles with money and is considering a higher-paying job at the company her friend Jessica works for. The job would provide more income, but would also be more stressful and demanding. She already has a nightmare about being on an increasingly-fast treadmill that she struggles to stay on. Her current boss Barbara - aware only of the money situation - suggests she talk to Henry at the coffee shop. This peculiar suggestion is where Zoey's life begins to turn a corner. Spoiler Alert Being a book of fiction, I don't want to spoil the story for you. It's a book you ca...

One of the most well-known board games can also be a great way to learn about money and investing - according to this book. Perhaps one way to teach kids (and maybe ourselves) about finance is to play a board game. In so many ways, the game parallels our own financial life - and we can practice financial decision-making without losing any real money. Is monopoly like life? Yes and no. We manage our cash, negotiate, make deals, make choices, go through tough times, make investments, pay tax and reap rewards. To do well we have to make investments. It's very hard to win just by collecting $200 each time you pass go. There are rules, and wise moves. The better we know them, the better we do. However, in real life, you can win without forcing others into bankruptcy. Principles that work in the game and life Diversify. You might have hotels on the two most expensive properties on the board, but if no-one lands on them, you still might lose. Investments have a price and a value. They are...

This book is not for everyone - but can be immensely valuable for those who are meant to read it. If you're thinking you'll reach zero a lot earlier than that, then I'd recommend starting with  Your Money or Your Life . Otherwise, here is what I learnt from Die with Zero  and my personal reaction. Many people in the middle class (and above) retire with heaps of money. Then they spend some of the investment earnings, while their capital continues to grow - even into their 80s and 90s. Their last day is possibly the wealthiest they've ever been. What's wrong with that? That might sound good. Why wouldn't we want ever-increasing wealth? The answer is in the book's subtitle "Getting all you can from your money and your life". There's no prize for being the richest person in the cemetery. Bill figures that if someone dies at 90 with 4 million dollars, that they either missed out on doing things with that money, or spent way too much time working - f...

What do Snoopy and the Peanuts gang have to do with decluttering? It's a typical example of parting with things we no longer need. In doing so we're making money, saving money and bringing joy to the lives of others. Peanuts While I still enjoy the Peanuts characters, comics and movies, I wasn't really using these Linus and Lucy figures. They were sitting in a shoe box (along with Schroeder and Snoopy). Schroeder and his piano now serve as a bookend on our bookcase . But for Linus and Lucy I decided they'd be more loved by someone else. The other day a Peanuts-loving parent bought them for her (and her kids) to enjoy. Another success is increasing the joy in the world. Numbers I love stats, so I keep a record of our sales. Together, these two Peanuts figures were the 598th sale my wife and I have made. This particular sale because the $8 took our combined sales to $4,500 (over several years). I've double checked with my tax accountant and this is tax-free income. :...

You don't have win the lottery or receive a big inheritance. Money magazine interviewed seven people who are getting financial independence on fairly average salaries. "They are followers of the popular personal finance FIRE movement (financial independence retire early)"  who are saving rigorously, investing sensibly and enjoying a modest lifestyle. The article describes the FIRE movement as "the opposite of working flat-out through-out your life, piling on debt, living beyond your means and consuming voraciously." "While most Australians rely on drip-feeding their ... retirement account FIREs are aggressively saving much more outside super." So who are these people doing it so well? Kate is 22, aiming to retire at 40. Pat (32) is on track to retire at 35. Dave retired at 28 having left school in year 11 Leo  (34) and Alisha (32) will retire this year on 90k/year Serina  (48) retired at 46 with a family on 60-70k/year Jason  (48) is nearly at his 9...

It's been about 10 years since I've owned a car. My wife doesn't own one either. "You must save a lot in petrol" That's one of the frequent reactions when someone discovers we don't own a car. "Of course, but it's just the tip of the iceberg" is the usual theme of my reply. Many people I've talked to just aren't fully aware of the real cost of owning a car. Or even that there are six different costs of owning a car. Six? Really? Yes. Occasionally a work colleague or friend will boast their car only costs $X per week. Of course it turns out only some factors have been counted. Sometimes it's just petrol alone. To some people, that feels like the only cost they pay each week. Why does this matter? You might be questioning the need for a second car in the household (or even having one at all). Or you might just be choosing which car to get next. Either way, to make an informed decision we need proper information. So let's look at...

Will we be OK in old age? How much will we have? One of the great things about living in Australia is superannuation. Our employers are required to pay into an investment account for our retirement. In recent times, my wife and I have been in several conversations with friends who are wondering (or worried) if their balance will be enough. That's what inspired this article. Great question It's a great question to ask, especially around the age of 35 to 40. At that point, old age is less of a distant abstract concept. It's becoming a medium-term reality. At 35 the number of years of living off super is possibly more than half of your remaining years. At 40 you may consider yourself about half way through your working life. Looking at your balance, it's easy to think that twice that balance may not be enough.  Read on, because I have good news for you. It's better than you might think As I've mentioned in earlier posts, compound growth means the investment grows f...

Here's a superquick way to work out how much money your investments might make. No need for fancy exponential maths . Just simple division and some doubling. Maybe you can even do it it your head. The rule of 72 Years to double = 72 / growth rate That's it. Pretty simple. Just 72 divided by a number. Working out the double-time So a 2% investment would take 36 years to double in value. (72 divided by 2) At 6% it would take 12 years, and at 8% it would take 9 years. How many doubles? Let's say someone is investing $50k for 36 years. At 2% , it would double once. Result $100k . At 6% , it would double three times. (36 years divided by 12 years). Three doubles means it becomes 100k, 200k, then $400k . At 8% , it would double four times. (36 years divided by 9 years). Four doubles means it becomes 100k, 200k, 400k, then $800k . This is astounding I was stunned when I first came across this. I probably still am. It's amazing to think that moving from 2% to 6% changes things ...

Compound Interest. Described by Albert Einstein as the 8th wonder of the world. Many people don't fully grasp its power and miss out on the magic. Here's a quick example For 30 days, would you rather (A) get $100 per day, or (B) get 1 cent doubled every day (ie. 2 cents on day two, 4 cents on day three, 8 cents on day four). Quickly. What's your immediate answer? On intuition, lots of people go for Option A. Why? Because $100 sounds so much more than 1 cent. How do they compare? Do the maths, and Option B wins by miles. By Day 15, the 1 cent per day has grown to $163.84 per day. Over the first 18 days, Option B accumulates $2621.43 (compared to $1800 for Option A). It just snowballs from there. By the final days, Option B is getting millions per day and ends up with a total of $10.7 million. Meanwhile the total for Option A is just $3,000 ($100 x 30 days). (Sidenote: Even if Option A was $100,000 per day, option B would still win.) Life in slow motion Investing can be much ...

I write about investing, because it's a key part of life. Spending less and investing means an automatic income. An automatic income means we can work less (if we choose) and definitely stress less. But where to invest? What to invest in? Many people expect their money to be invested responsibly and ethically - rather than making money through things like cigarettes, weapons, casinos, adult entertainment, environmental destruction, and pollution from fossil fuels. Those are all things we could probably do with less of. So how do we invest to get good returns - and to have a positive effect on the world? Here are some sources I've seen: Ethical Investing in Australia At Frugality and Freedom , Michelle has done a fair bit of research into Ethical Investing in Australia . For herself, she's chosen Bank Australia for banking, Australian Ethical for superannuation, and two exchange-traded funds ( FAIR and ETHI ) for her share investing outside of super. She also gives detail...

Which is more important? Our money or our life? So why do we trade away so much of our life? Vicki Robin's classic book takes an in-depth look at how we can have a better relationship with money. Here are some of my highlights, though there's so much more great value in the book. I found it so inspirational after reading the foreword and the first chapter. While the backbone of the book is a 9-step plan, there are two concepts that really stand out - even if you never start the plan. One is the idea of "life energy" and our "real hourly wage". The other is the point of enough. Life Energy What is money? Vicki Robin comes to the conclusion that it is a form of life energy. It might sound a bit new-age, but it's like the old business saying "time is money". We exchange our time, and our physical and mental energy to get this thing called money. So when we use it we are effectively spending our life. The exchange rate Spending money is almost like...

This book is often recommended. The author sees shares as safer than term deposits, prefers low dividends and isn't keen on property. I was keen to read it. Here are my highlights: Two tips Spend less than you earn. Borrow less than you can afford. Those two tips alone would help so many people. Assets and liabilities What we often call assets are really liabilities (they cost us to maintain). Houses, cars, boats can be liabilities - useful for "status or position in the pecking order" . He uses the example of a retiree with $3 million in assets. A million dollar house, a million dollar boat and two $500k cars. They sound wealthy but how will they buy food, let alone pay the ongoing costs of all those items. By contrast, assets bring in an income. Attitude to shares He says the sharemarket is our friend, and "provided it is treated with respect, it creates appropriate wealth for all those who use it sensibly. However if we approach it as a gambler, we need to be prep...

Why do so many go mainstream? Once you discover the benefits of an alternate lifestyle (for want of a better phrase) it's hard to see why more people haven't taken it up. Whether it's minimalism, part-time work, frugality, financial independence or eco-friendly living; at some point we ask ourselves why so many people live the mainstream lifestyle. "Why do people own so much stuff?" we might wonder, "Surely they must realise how little joy they get from those items.". "Why do people (and companies) insist on working 40 hours a week rather than 30?" "Why do people spend practically all their income, rather than investing for a passive income that could last forever?" "Why do people drive so much when there are healthier, more affordable and eco-friendly ways to travel?" The wisdom of Solomon I recently read about the conformity experiments of Solomon Asch. He gave people simple multiple choice questions and record...

Could investing $13,000 be better than investing $70,000? In this case, the answer seems to be yes. In Making Money Made Simple , Noel Whittaker compares two hypothetical investors: Person 1: Invests $ 1,000 a year from age 18-30. Person 2: Invests $ 2,000 a year from age 30-65. You might think that person 2 would be better off, but here's how it goes (in chart form): Person 1 stops investing at 30, but their investment keeps growing. At that point, person 1's yearly growth is more than person 2's yearly contribution. That's why person 2 never catches up. Person 1 ends up about $ 150,000 ahead, despite investing about one-fifth of what the person 2 invested. What if growth isn't so good? These calculations assume 10% growth. What if it isn't that high? Fair point. I've run the numbers at lower rates of growth. At 9%, person 1 is still better off. At 8% it's close, and person 2 comes out slightly ahead. But that's not really the poin...

Author Noel Whittaker says two things are needed to be wealthy. Knowledge of what to do and the discipline to do it. He gives you plenty of the first in his book Making Money Made Simple . This book covers a broad range of topics; saving psychology, loans, insurance, real estate the stock market, tax, superannuation, inheritance, and more. It's a cross between a mini-wikipedia of finance with medium-length articles on different topics; and a journal of helpful money advice that an older (money-smart relative) might give. Here are some of my highlights (though far, far more was covered). The 7 things that make the difference Only 8% of people make it financially, says Noel - meaning they can retire on a liveable income. Why not more people? He list 7 "drawbacks" that prevent a lot of us from achieving better. Lack of knowledge Lack of foresight "Must have it now" mentality Borrowing for things that lose value (eg cars) No goals and no plan Confusin...

People in the superannuation industry will say you need millions to retire. But it doesn't have to be that way. The Barefoot method If you've got millions in retirement good for you. But if not there's another way as outlined in book the Barefoot Investor . It's quite an effective strategy especially for those of who have had low income, variable income, or who are retiring early. The idea is, by 67, to get your superannuation balance close to the maximum you can have before it starts reducing your pension. Assuming you don't have other significant investments, at this point you can get the full age pension, plus some handy superannuation income. (Barefoot Investor also suggests some very-part-time work to boost it even more.) How much are we talking? Depending on your situation, you could get 50% more than the age pension. For instance (as of June 2020) a single homeowner gets $22,375 age pension. At 67 a super balance of $225,000 would provide additional i...

If you're on a low-to-middle income, the Australian government will give you up to $500 co-contribution towards your retirement. Here's how to get it. Check your eligibility. What counts as "low-to-middle income"? Right now, people earning under $39,837 can get up to the full $500. People earning up to $54,837 can get at least part of it. There's some other technical eligibility rules , including that you are 70 or younger, have lodged your tax return (to verify your income) and that 10% of your income comes from employment or running a business. Not sure why that last rule exists, but it does. Oh, and here's the one that stops most people from getting their free money... Start saving yourself There's a reason it's called co- contribution. To get the money you have to put some of your own money into your superannuation. Some people don't like doing this. But really it's just giving money to your future self. It doesn't includ...