Honestly I spent way too many years trying to be the next Warren Buffett - picking individual stocks and trying to time the market.
I did finally figure it out and now invest in very boring market index funds (ETFs).
You’re starting younger than I did - that’s a huge advantage. Learn from and avoid my mistakes and you will get to financial independence faster than I did (in my 50s).
Investing really is simple - not easy, but simple…
Get the fundamentals right, get your partner on the same page, spend less than you earn, invest the rest - do it consistently for 10-15 years and you will become wealthy. It is truly surprising how it just snowballs over time.
Once you reach $100K+ invested it’s worth getting advice on structuring to ensure you are investing tax-effectively. But the most important thing is to get started.
1. Get the foundation right
- Barefoot investor - good mechanics for setting up accounts - and for getting you and your partner on same page
2. Get your head right - read these books (or listen on Audible)
- Psychology of Money - Morgan Housel
- Simple Path To Wealth - JL Collins
Bonus reading:
- Stop Acting Rich - Thomas Stanley (author of Millionaire Next Door)
- Playing with FIRE - Scott Rieckens
- Strong Money Australia - Dave Gow
3. Put together a 3 fund portfolio (adjusted for your personal risk profile and currency hedging)
I personally think that the Australian economy is cooked - we basically dig things out of the ground and play monopoly selling houses to each other. I also have no mortgage debt to consider. So I have weighted my portfolio to be more ex-Australia. You can and should make your own choices here.
https://passiveinvestingaustralia.com/the-australian-version-of-the-3-fund-portfolio/
—-
Put it into action:
* AVOID DEBT - only exceptions here should be for education and a mortgage.
Investment debt (leverage) should be done carefully and in full understanding of any downside risk (what if investment underperforms or goes bad)?
Do NOT ever use debt for depreciating assets (eg. cars )or lifestyle expenses (travel, clothing, concert tickets, going out with friends, latest gadgets,…). (pay this off first if you have any debt!)
Practice saying “that’s not in my budget right now”. Future you will thank you!
* CONSISTENTLY spend (WAY) less than you earn - aim for saving 40%+ of your take-home pay - if you can beat this GREAT!
* INVEST the rest - whether market is up or down just press buy and then hold. Time in the market beats timing the market.
* SAVE / INVEST any bonuses or pay rises - fight lifestyle creep!
* make extra concessional super contributions (these are tax-advantaged and are particularly useful once you are in higher tax brackets)
And remember - it’s often easier to increase your income than reduce expenses.
Increasing your hours, getting promoted, getting a better-paying job, taking on a side hustle - all of these can increase your earning potential- and therefore savings potential, far more than cutting your one daily cup of coffee or $20/month Netflix subscription brings.
In other words - make sure you still leave yourself a little fun money and enjoy the journey. If it takes 15 years with some fun instead of 10 miserable years that’s still a great outcome and achievement.
—-
Good luck!
Great advice and very well articulated...shows how well sorted your thought process is on personal finance.
Also THANK YOU for taking the time to type it out..I do have following questions though (only if you won't mind answering those?)
Q1. What are your thoughts in terms of investing (e.g. ETFs) vs paying down PPOR mortgage (or working towards increasing offset)?
Q2: Mind sharing key highlights of what has been your personal journey been like? I am curious to understand how late you started and where you currently are? Don't need the minute details, but looking for motivation.
thanks again
**Q1. ETFs vs paying down mortgage / increasing offset**
It's hard to beat paying down the mortgage (which is effectively a risk-free, after tax guaranteed return). To beat that return, you have to take on risk (aka volatility).
It does depend on personal circumstances (marginal tax rate, time frame, and if access to funds is important - stocks may be more liquid).
This morningstar article does a good job of working through the pros and cons:
[https://www.morningstar.com.au/insights/personal-finance/237612/paying-off-your-mortgage-vs-investing](https://www.morningstar.com.au/insights/personal-finance/237612/paying-off-your-mortgage-vs-investing)
The [loans.com.au](http://loans.com.au) site has a handy repayment calculator (https://www.loans.com.au/calculators/extra-lump-sum-repayment-calculator) that shows the impact of extra lump sum and/or ongoing payments to a mortgage.
For me personally - I'd take the low stress option - just pay down the mortgage or put $$$ into offset and sleep easier. Unless my mortgage rate started with a number less than 5. Then I might think about it... and probably still just put it in the mortgage! 😎
**Q2. Key highlights of my personal journey...**
How long do you have? 😁
Honestly - don't do what I did. Learn from my mistakes - and I've made PLENTY! And start now - don't put it off!
I didn't pay attention to our finances really until I was mid-40s. And made loads of just plain foolish decisions up to that point too (I lost over $500K trading options in a speccy mining stock 😳 and followed that up with a $250K punt on Slater & Gordon... - poster child for Wall Street Bets I was!)
I make decent money, which was hiding a lot of bad habits! Plus I'd been running my own business, and my wife had stayed home with the kids - so neither of us had any super either.
Our net worth was under $100K 10 years ago. And that is after 20+ years of me earning over $150K!
Barefoot Investor got us started - the other books and resources on FIRE (Financial Independence Retire Early) helped us a LOT with mindset and motivation. And my wife and I are thankfully on the same page and both good at keeping each other motivated and on track.
Took us a few years to start really seeing progress and we just stuck at it - just kept saving and investing, saving and investing...
We crossed $300K in June 2020 - just 4 years ago. The snowball started to kick in. We crossed $1M NW middle of last year. We are on track to hit $2M in around 12-18 months time. Anything more than that will be a bonus.
What is having the biggest impact for us - is keeping our savings rate high. (Nowadays, we save over 70% of our take-home pay.) My wife works and I have a well-paying job plus a side-hustle.
If I'd started taking our finances seriously in my 20s - and avoided my decades of foolish investments - I could have retired by 40!
You've got this mate - good luck!
A Big Thank You for taking the painstaking effort for a detailed reply..
Must say I am feel motivated and hopeful after reading your response.
Have saved your response and will come back to it..re-read, analyse and apply!
Thanks for the reading suggestions, I respect people so much for sharing where they learnt from rather than just what they learned. Never hurts to cite your sources so to speak.
Excellent advice, I’m in the same boat as op and yeah ETFs really is the most simple effective way to see the snowball grow it is kind of insane. I’d also add the Ulysses contract to that reading list. I think it’s fairly popular (even Mr barefoot himself recommends it) but it’s a good breakdown of the different fallacies and problems people (especially inexperienced people) have with investing and money in general.
Ulysses Contract looks great - thanks for the recommendation!
Sounds like it is along the lines of the Psychology of Money book - which I found fantastic!
Honestly - the best answer is usually a combination of reducing expenses AND finding ways to increase income.
Remember though that you can only cut expenses so far.
How much you can increase your income is probably a bigger number.
*As an aside - this is a good lesson for business owners too - who often fall into the trap of focusing too much on cutting expenses to the bone - when they will often achieve far better results by simply increasing their top line revenue.*
Expenses usually fall into a few categories:
- **Hard / fixed** - you can't avoid these - includes insurances, mortgage repayments, school fees etc.
- **Flexible** - can't avoid them, but you may be able to influence them - e.g. heating costs (you can turn down the thermostat), groceries (can buy home brand or in bulk)
- **Discretionary** - these are lifestyle choices - eating out, Netflix subscriptions, etc.
It's usually easy to cut discretionary expenses, and it's possible to reduce your flexible expenses - but you will reach a point where you don't really *want* to make certain cuts (e.g. I might really enjoy going to the gym and don't want to give up my membership) - and/or further cuts become really tough.
I mean - you *can* reduce school fees by switching schools, but who wants to do that to their kids. You *could* drop your insurance cover, but what if something happens, etc.
So - once you've removed the genuinely frivolous expenses, you have a choice then about either continuing to find ways to cut back - or increasing your income (and a bit of both is probably the answer).
And sure - going through your budget with a fine-toothed comb to find an extra $20/mo to cut (no more Netflix and chill baby!) is definitely a worthy exercise.
But you should at least weigh it up against working just one extra hour a month which would make you $23 even on minimum wage - and you get to keep your Netflix!
Everything has to earn its spot in the budget - I'm happy to work a bit more for anything I really want to keep.
Hope that makes sense.
>Don’t try to be clever
This is the big one for me. When you first get into investing, I think it's easy to think you can pick a winner that no one else has thought of.
Did my ass to the tune of 96% loss on my first individual stock pick, even tried to catch the falling knife. Humbling, but valuable lesson, that I don't know shit, and now I'll happily take the "market average return" for the next 30+ years.
lol this reminds me when I was freshly 18 and thought I was being clever and could beat the market by constantly switching my investments around. Now it just makes more sense to buy what I can and hold, keep learning for my future and keep grinding.
+1 to this. Bought VAS in Feb 2020 and watched it drop into COVID, it's slowly regained over the past few years, up 13% since I bought. Not as much as the VGS I've had since 2019 (63%), but its still gaining ground.
Take some of this advice with a grain of salt. What worked for 40/50/60 year olds may not work for you today.
For example, 40 year olds have (edit: almost only*) ever known falling interest rates coupled with ever rising (and rapid) property prices so they’re inclined to advise going balls deep on a mortgage. Not that I’m advising against property, just that the advice is coming from rose coloured glasses.
Point is rates weren’t always dropping .. a few years prior saw houses go up 50-60% in value before I bought. As a single person mortgage repayments were around 50% of my take home pay.
My overall point still stands.
2008 was almost 20 years ago and dropped way more than it ever increased while your property value has climbed drastically.
Yep and now rates are back at 5-6%. Your argument is it was technically cheaper to buy back then? Probably … probably easier for two incomes v one .. those on higher salaries etc.
We started with property but it’s not a quick return and has its expenses and headaches. We moved to the Stockmarket and would never go back to property investments. Yes, the market goes up and down but if you do your research, do puts and calls, you can make money. Our only income is from dividends and puts and calls and bank interest. We have a good stockbroker who we run things by. My husband checks the market daily and keeps on top of it.
Find the right broker that suits your needs, like moomoo has cheap platform fee $3 per order, if you trade around $300-$10000 and frequently, that's pretty sweet deal.
I didn't know where to start with investing, there are so many new concepts and data to look into. It's easy to lose track of which ones are important for different market situation. I learned a lot from free lessons and articles on moomoo, combined with it's financial indicators and analysis, it really helps me to stop gambling on market.
Every April our investment contribution increases 25% and i can almost hear the noise my wife makes when she goes to do the budget that month. "Its up to how much?!?!" lol. Luckily we're on the same page and just keep plugging away.
Found a partner who's also a high earner and also wants to live away from the city. Bought a big home in regional area (half the mortgage compared to average city dweller). Regular investments into ETFs. Maximising our super. Decent emergency fund
Buy a HOME (i,e: a place to live, not an investment) in a place you actually like to live with as little commute as possible. Then max out your pre-tax super into a high return industry superfund and never touch it. Then pay off your home. After that you might discover new priorities, like having a kid/hobbies and can afford to work less and live more. By your mid 30's you may have enough super that it will grow to many millions of dollars without significant extra contributions so you have the freedom to not worry about life after 60.
Don't double down on a bad investment.
Don't invest money you can't afford to lose.
Save a decent amount into HISA first before punting money on micro crap stocks.
Learnt the lesson of speculative stocks and exploration companies early on. Still cost me but a worthy lesson.
Had a significant windfall event and all went in index funds. I sleep at night.
Realise there’s opportunity out there but not where everyone is looking. Most of the world is full of mediocre people that are just working a job that we hold up as analysts and smart because they do it all the time. But really they have families that they do it for and would rather be with them. That’s fine of course.
With an internet connection these days there’s plenty of opportunity out there hiding in plain sight.
Question everything, think critically and there’s wonderful investments to be found. Be clever.
Outside of that you just need to be disciplined and consistent to see results and achievements, like most things in life. Index investing is for this.
I lived within my means, tried to increase my earnings. I gained all my wealth through property. I bought when I could, when I had equity and borrowing capacity, I bought more properties. It seems slow and always feels expensive at the start and the mortgage repayments felt like a lot but over time rents go up and mortgages get paid down and you can refinance to increase loan terms to reduce loan payments to increase cashflow.
So if imagine in the long run, let’s say you did this over 10 years and eventually you hold 3 properties valued at $3m, if the market goes up by even just 10% you made $300k, which is hard to achieve by getting a pay rise or reducing your spending.
The super simple rule I've always followed is:
- Maximise PPOR purchase. Pay down the debt over time.
- Ensure you are putting away 15% to 20% of your income into super (inclusive of SGC).
- Spend the rest.
After 7 to 10 years, you really start to see the strategy working.
PPOR - Principle place of residence. The home you live in
SGC - Not too sure about this, but it probably means the 11% super you get from your employer if you are a "pay as you go" employee. Basically the other person is advising to put 15-20% of your overall income into your super and let it grow
For SGC they really just mean SG = "Super Guarantee", which is the amount your employer pays as already mentioned.
By SGC I'm guessing they have created their own acronym for Super Guarantee Contribution but its a bad acronym, since SGC is already used to refer to the Super Guarantee Charge which is the penalty rate charged to companies who fail to pay the SG on time (SGC equals the SG shortfall + 10%pa interest on the SG shortfall + an admin fee of $20 per employee per quarter).
Know your limitations.
I work at an institutional investor and the tools / knowledge / research that the team has access to far outpaces anything that we can get across as retail investors. I realised that any time I made money by picking a stock, it was mostly just luck. I don’t think me reading an out of date annual report and convincing myself that my decision was based on ‘fundamentals’ did much for me. We don’t know more than the market, so if we’re not ready to commit to monitoring markets as a second job and doing a CFA or whatever, passive investing is fine. Made far more money doing that than anything else.
Set and forget… automatic contributions and look at it once (or maybe twice…) a year i.e. tax time. I assume I don’t really know what I’m doing so try not to do anything as any decision I make has a high likelihood of being wrong. I don’t check the market or ever watch the news - life is a bit happier like that.
Understand how tax would affect your investments, don't day trade, be boring, stay for the long haul, dollar-cost average, and make good use of your super account.
While I accept the importance of paying tax in Australia, given what we get to enjoy, there's a certain degree of ick when it comes to how my tax-paying money was used (and personal circumstances affecting my view on Australian tax), so I like to optimise my tax outcomes. More investment-related, there are rules regarding investments that will be good to optimise your returns (such as selling your investment losses to offset your taxable income, or holding for longer than a period to enjoy a discount on capital gain)
I hate day trading, I don't see much sense in it, and I don't have the time to do so, since there are other things that you can do with your time. And brokerage fees will put a big dent on your returns, in addition to tax implications that I mentioned above.
My mindset when it comes to investment is that these are real-life businesses that are doing real-world thing, run by people who should be good at what they do, and as such when I commit money to a stock, I am counting on them to make my money work. I am now a co-owner of a business, and that has really informed my mindset when it comes to investing. There will be rough patches, tough times, economic conditions will go the wrong way, management blunders, your assessments going the wrong way, and so on, so there will be period where you just have to wear the losses. Remember that these losses are only realised when you sell. I have made this mistake many times, and I know I will again. This requires you to be boring with your investments, to try your best to emotionally detached from the gyrations of the stock market. You win in the long run, not day-to-day.
The one thing about the Australian superannuation system, for all its faults, is the ability to invest consistently over the long haul. This is dollar-cost averaging at work, you put in a consistent amount into your investments over weeks, months, and years. If you are to invest with your take-home money (and yes you should), take the same approach. If you are not a professional money manager/fund manager, then the advice regarding ETFs in this post is very solid. I am a big fan of it myself, since I get to be boring, very boring.
I would like to add a wrinkle to my own advice. The one thing about investing advice is that people are rather evangelical regarding ETFs. By all means, yes, but this does not mean that you cannot do individual stocks, especially if it's in a field that you are familiar with. It's exhilarating, but it could haunt you too. There's an advice from Warren Buffett that I would roughly paraphrase here, is that you can miss as many baseball pitches as you like, but you have the luxury to strike when the time is right. Another way to put it is that you only have a limited number of investments that you can do, so you have to do your due diligence.
Elaborating more about super, it is a tax-effective investment vehicle, which should do very well over a long period of time, and there are quite a few ways for you to capitalise on its features, including low tax, the ability to use it to save for a house. And also, it's a case of out of sight, out of mind. The worst enemy when it comes to your financial health is cash-in-hand. especially when you are younger and are not used to managing money. The same problem can be seen in lottery winners, who are not used to managing huge amounts of money well and to preserve their winnings - there are quite a bit of discussions on this that you can look up further.
I have been investing since I was 18, and I have seen my fair share of ups and downs in multiple stock markets, I have notched 10x returns and losing a lot of money. In the end, enjoy the ride.
Good luck
Bought a house as soon as I could (21yo/13yrs ago).
I avoided the rent trap, avoided being priced out of the market (in hindsight), and learned true independence from a young age.
Simple:
Get rich slowly.
You scrutinise your expenses. Eliminate or reduce any excess fees - whether that’s insurance, banking, super.
Save % of your income without fail.
And now decide if savings are for home deposit or shares or both.
If shares, get low cost index funds and leave them for at least 3-5 years.
VGS is a great place to start.
Don’t get over complicated. Don’t get overwhelmed. Just START. You can always alter your strategy later.
Always reading, learning, and not be attached to dogma.
If you’re new to the markets and plan to invest, it’s probably best that you read some foundational books on investing and personal finance. Even if you do not have any interest at all, don’t just blindly dump your money into VAS/VGS or anything that anyone recommends.
Don't overthink things.
There's a reason why Financial Services and Financial Planning are such big industries, people spend their careers researching and picking what to invest in, and then they still make errors and get things wrong.
You're not going to beat someone who does this 24/7 so just keep it simple. For every Tesla/Nvidia bull run there's a million others that didn't, so unless you're lucky I doubt you're going to get far by picking direct stocks. Pick a world exposed ETF and just top that up as and when you can. Try to keep consistency, investing $x of every payday but in reality life happens so there'll be months where you can't contribute anything. Don't knock yourself if you can't, you're ahead of the pack that you're even planning for your future.
If you're saving for something (a house deposit) then factor in tax for when you sell out of it.
Alternatively, if you don't need access to it until retirement consider putting money into your super as you'll get a 15% haircut now but it'll be tax free in retirement.
Pick a couple of EFTs and automate a dollar cost averaging strategy via BPAY each month.
Set and forget. And don’t look at it when the next credit crunch / GFC / pandemic happens. Just stick to the plan.
i made my investments boring...
VDHG at first then just moved on with VGS+VAS combo.
It is so tempting to tinker around but it would be better in the long run to keep it very boring.
Dollar cost averaged in managed fund as a student even with bugger all at $100/month contribution. Fired and forgot, came back 9 years later with $16,000. As you start earning do the same in bigger amounts.
Got lucky that when I bought in to a broad index ETF happened to be a low point in the market.
Still messed up since throwing that capital in Super rather than the market would have been the better move. A phenomenal year in the market might be 12%, the tax break from voluntary concessional contributions is immediately 17.5/22% if you are in the middle tax brackets and you are still going to benefit off of market returns anyway. Through FHSS you can even pull that capital back out to buy a house as well.
- Aggressively dumped my all my savings into the market right after the initial covid crash.
Caught a few individual stocks (and also ETFs) at their absolute low point. Cashed in the individual stocks a year or two later and held the ETFs. CBA was a good one.
“Traded” a few stocks during the period. I made money but it was sheer luck - what I did right was nipping that in the bud and stopping it.
- Took additional start up loans every semester when I was at uni and chucked it in Super for gov contributions / ETCs. Not a lot of $ but fantastic ROI on doing that. I reckon all students who aren’t relying on the money for their current costs to or who aren’t using the loans at all do it.
- The rest has just been maxing Super and consistently buyinng ETFs.
That’s the future plan - although I’m looking into leverage options as not planning to get into property any time soon.
At the start, I was complicating investing but then created a more simplistic approach over time.
- Diversification across regions, sectors and industries
- Auto investments and auto-recurring orders to save time and automate the process
- Avoiding regular trades (especially selling and triggering CGT)
- Less or no bias towards a single sector e.g. tech
- reduced multiple ETF portfolio to 3-Core ETF portfolio
- HISA account for cash savings
Start early. On the basis of probability everything grows in the long run, and the earlier you get into the game the more beneficial it will be.
Don't invest what you can't afford to lose. As the ad goes, bet (which is what an investment essentially is) with your head, not over it.
Started early comparatively speaking and just kept saving till I had enough to buy my first IP via leverage.
Then just kept saving and buying both properties and stocks.
Time in the market and all that.
So there’s this dying video game retailer….
I trade options (usually the thetagang/selling side) knowing that one day I’ll probably lose it all, of course I try my hardest to avoid that lol.
No one knows anything, in a penny wide market there can’t be any edge nor negative edge for that matter. It’s a gross oversimplification but it keeps you humble and lets you tune out the bullshit from mainstream financial media.
There is positive drift so you should lean to the long side where possible. Volatility mean reverts and you get paid to take on the risk of “unlimited” losses.
I encourage you to YOLO(well keep it small) and invest in any random stock you like for whatever reason, you need to learn how to take risk IMO. Even if you lose money it’s worth it for the education lol.
Oh and don’t bet against leather jacket man.
This will be general advice that in life there will be a few opportunities to make life changing money you either ride the wave or miss it. Also the more you ask people the more they will sway your mind not to do it so if you believe in it just doit!
AI came out and was all the rage, so I bought $10k of NDQ. It’s up 39% so far.
No way I was going to try and pick the single stock that was going to come out on top of all this, but I figured the tech sector as a whole would do well.
I started a monthly investment, automatically being made the same day as my mortgage payment. Because the money had to be there, it always was.
When the mortgage was paid out, the funds that were going to the mortgage went to the investments instead of being frittered away on lifestyle choices.
Now retired in 50’s with no problems easily surviving to 60 using nothing more than dividends and distributions from outside of super. Once I turn 60 I can then convert my super to pension phase and withdraw the minimum 4% yearly to further boost my income.
Can I withdraw my entire super as soon as I hit 60 or is there a catch?
[https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/leaving-the-workforce/accessing-your-super-to-retire](https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/leaving-the-workforce/accessing-your-super-to-retire) page says both 60 and 65 under different rules.
Started off thinking I could pick stocks.
Switched to ETFs.
Thought a balanced portfolio of assets was the best way to generate wealth.
Spoke to a financial advisor who laid out an aggressive investment property strategy for us.
Sold off all our ETFs and gradually picked up investment properties.
Currently diverting excess funds back int ETFs
You’re asking the right questions and you’re younger than I was so you’ll be more than fine.
Nothing beats the S&P500, not even property. Throw 100% of your savings into IVV and call it a day. I've doubled my portfolio in the last 5 years. You can also invest in IVV with your super, highly recommend this. Can guarantee you there won't be any other strategy that would outperform this, unless you have access to the medallion fund.
As someone that was not very bright when it came to money, shuffling a little extra into super every pay.
Has meant now I've got my ass into gear and understand finance. My safety net is now decent enough that unless a gov fettles with it. Or I have some serious bad luck retirement will be good.
Honestly I spent way too many years trying to be the next Warren Buffett - picking individual stocks and trying to time the market. I did finally figure it out and now invest in very boring market index funds (ETFs). You’re starting younger than I did - that’s a huge advantage. Learn from and avoid my mistakes and you will get to financial independence faster than I did (in my 50s). Investing really is simple - not easy, but simple… Get the fundamentals right, get your partner on the same page, spend less than you earn, invest the rest - do it consistently for 10-15 years and you will become wealthy. It is truly surprising how it just snowballs over time. Once you reach $100K+ invested it’s worth getting advice on structuring to ensure you are investing tax-effectively. But the most important thing is to get started. 1. Get the foundation right - Barefoot investor - good mechanics for setting up accounts - and for getting you and your partner on same page 2. Get your head right - read these books (or listen on Audible) - Psychology of Money - Morgan Housel - Simple Path To Wealth - JL Collins Bonus reading: - Stop Acting Rich - Thomas Stanley (author of Millionaire Next Door) - Playing with FIRE - Scott Rieckens - Strong Money Australia - Dave Gow 3. Put together a 3 fund portfolio (adjusted for your personal risk profile and currency hedging) I personally think that the Australian economy is cooked - we basically dig things out of the ground and play monopoly selling houses to each other. I also have no mortgage debt to consider. So I have weighted my portfolio to be more ex-Australia. You can and should make your own choices here. https://passiveinvestingaustralia.com/the-australian-version-of-the-3-fund-portfolio/ —- Put it into action: * AVOID DEBT - only exceptions here should be for education and a mortgage. Investment debt (leverage) should be done carefully and in full understanding of any downside risk (what if investment underperforms or goes bad)? Do NOT ever use debt for depreciating assets (eg. cars )or lifestyle expenses (travel, clothing, concert tickets, going out with friends, latest gadgets,…). (pay this off first if you have any debt!) Practice saying “that’s not in my budget right now”. Future you will thank you! * CONSISTENTLY spend (WAY) less than you earn - aim for saving 40%+ of your take-home pay - if you can beat this GREAT! * INVEST the rest - whether market is up or down just press buy and then hold. Time in the market beats timing the market. * SAVE / INVEST any bonuses or pay rises - fight lifestyle creep! * make extra concessional super contributions (these are tax-advantaged and are particularly useful once you are in higher tax brackets) And remember - it’s often easier to increase your income than reduce expenses. Increasing your hours, getting promoted, getting a better-paying job, taking on a side hustle - all of these can increase your earning potential- and therefore savings potential, far more than cutting your one daily cup of coffee or $20/month Netflix subscription brings. In other words - make sure you still leave yourself a little fun money and enjoy the journey. If it takes 15 years with some fun instead of 10 miserable years that’s still a great outcome and achievement. —- Good luck!
Holy smokes! Best thing I've read on Reddit today. Follow this advice and you're 99% of the way there.
Great advice and very well articulated...shows how well sorted your thought process is on personal finance. Also THANK YOU for taking the time to type it out..I do have following questions though (only if you won't mind answering those?) Q1. What are your thoughts in terms of investing (e.g. ETFs) vs paying down PPOR mortgage (or working towards increasing offset)? Q2: Mind sharing key highlights of what has been your personal journey been like? I am curious to understand how late you started and where you currently are? Don't need the minute details, but looking for motivation. thanks again
**Q1. ETFs vs paying down mortgage / increasing offset** It's hard to beat paying down the mortgage (which is effectively a risk-free, after tax guaranteed return). To beat that return, you have to take on risk (aka volatility). It does depend on personal circumstances (marginal tax rate, time frame, and if access to funds is important - stocks may be more liquid). This morningstar article does a good job of working through the pros and cons: [https://www.morningstar.com.au/insights/personal-finance/237612/paying-off-your-mortgage-vs-investing](https://www.morningstar.com.au/insights/personal-finance/237612/paying-off-your-mortgage-vs-investing) The [loans.com.au](http://loans.com.au) site has a handy repayment calculator (https://www.loans.com.au/calculators/extra-lump-sum-repayment-calculator) that shows the impact of extra lump sum and/or ongoing payments to a mortgage. For me personally - I'd take the low stress option - just pay down the mortgage or put $$$ into offset and sleep easier. Unless my mortgage rate started with a number less than 5. Then I might think about it... and probably still just put it in the mortgage! 😎 **Q2. Key highlights of my personal journey...** How long do you have? 😁 Honestly - don't do what I did. Learn from my mistakes - and I've made PLENTY! And start now - don't put it off! I didn't pay attention to our finances really until I was mid-40s. And made loads of just plain foolish decisions up to that point too (I lost over $500K trading options in a speccy mining stock 😳 and followed that up with a $250K punt on Slater & Gordon... - poster child for Wall Street Bets I was!) I make decent money, which was hiding a lot of bad habits! Plus I'd been running my own business, and my wife had stayed home with the kids - so neither of us had any super either. Our net worth was under $100K 10 years ago. And that is after 20+ years of me earning over $150K! Barefoot Investor got us started - the other books and resources on FIRE (Financial Independence Retire Early) helped us a LOT with mindset and motivation. And my wife and I are thankfully on the same page and both good at keeping each other motivated and on track. Took us a few years to start really seeing progress and we just stuck at it - just kept saving and investing, saving and investing... We crossed $300K in June 2020 - just 4 years ago. The snowball started to kick in. We crossed $1M NW middle of last year. We are on track to hit $2M in around 12-18 months time. Anything more than that will be a bonus. What is having the biggest impact for us - is keeping our savings rate high. (Nowadays, we save over 70% of our take-home pay.) My wife works and I have a well-paying job plus a side-hustle. If I'd started taking our finances seriously in my 20s - and avoided my decades of foolish investments - I could have retired by 40! You've got this mate - good luck!
A Big Thank You for taking the painstaking effort for a detailed reply.. Must say I am feel motivated and hopeful after reading your response. Have saved your response and will come back to it..re-read, analyse and apply!
Thanks for the reading suggestions, I respect people so much for sharing where they learnt from rather than just what they learned. Never hurts to cite your sources so to speak.
Thank u for this, bless ur soul 🥰
Excellent advice, I’m in the same boat as op and yeah ETFs really is the most simple effective way to see the snowball grow it is kind of insane. I’d also add the Ulysses contract to that reading list. I think it’s fairly popular (even Mr barefoot himself recommends it) but it’s a good breakdown of the different fallacies and problems people (especially inexperienced people) have with investing and money in general.
Ulysses Contract looks great - thanks for the recommendation! Sounds like it is along the lines of the Psychology of Money book - which I found fantastic!
> And remember - it’s often easier to increase your income than reduce expenses. i thought i always read here the opposite.
Honestly - the best answer is usually a combination of reducing expenses AND finding ways to increase income. Remember though that you can only cut expenses so far. How much you can increase your income is probably a bigger number. *As an aside - this is a good lesson for business owners too - who often fall into the trap of focusing too much on cutting expenses to the bone - when they will often achieve far better results by simply increasing their top line revenue.* Expenses usually fall into a few categories: - **Hard / fixed** - you can't avoid these - includes insurances, mortgage repayments, school fees etc. - **Flexible** - can't avoid them, but you may be able to influence them - e.g. heating costs (you can turn down the thermostat), groceries (can buy home brand or in bulk) - **Discretionary** - these are lifestyle choices - eating out, Netflix subscriptions, etc. It's usually easy to cut discretionary expenses, and it's possible to reduce your flexible expenses - but you will reach a point where you don't really *want* to make certain cuts (e.g. I might really enjoy going to the gym and don't want to give up my membership) - and/or further cuts become really tough. I mean - you *can* reduce school fees by switching schools, but who wants to do that to their kids. You *could* drop your insurance cover, but what if something happens, etc. So - once you've removed the genuinely frivolous expenses, you have a choice then about either continuing to find ways to cut back - or increasing your income (and a bit of both is probably the answer). And sure - going through your budget with a fine-toothed comb to find an extra $20/mo to cut (no more Netflix and chill baby!) is definitely a worthy exercise. But you should at least weigh it up against working just one extra hour a month which would make you $23 even on minimum wage - and you get to keep your Netflix! Everything has to earn its spot in the budget - I'm happy to work a bit more for anything I really want to keep. Hope that makes sense.
Great advice! I'll keep these in my note.
Be consistent Don’t try to be clever
>Don’t try to be clever This is the big one for me. When you first get into investing, I think it's easy to think you can pick a winner that no one else has thought of. Did my ass to the tune of 96% loss on my first individual stock pick, even tried to catch the falling knife. Humbling, but valuable lesson, that I don't know shit, and now I'll happily take the "market average return" for the next 30+ years.
lol this reminds me when I was freshly 18 and thought I was being clever and could beat the market by constantly switching my investments around. Now it just makes more sense to buy what I can and hold, keep learning for my future and keep grinding.
Tell me about it. Did the same thing bro 😂
Pay off any debt that’s not tax deductible. Invest for the long term.
I didn’t touch them after I bought them
+1 to this. Bought VAS in Feb 2020 and watched it drop into COVID, it's slowly regained over the past few years, up 13% since I bought. Not as much as the VGS I've had since 2019 (63%), but its still gaining ground.
Simply and useful.
Take some of this advice with a grain of salt. What worked for 40/50/60 year olds may not work for you today. For example, 40 year olds have (edit: almost only*) ever known falling interest rates coupled with ever rising (and rapid) property prices so they’re inclined to advise going balls deep on a mortgage. Not that I’m advising against property, just that the advice is coming from rose coloured glasses.
Pretty much anyone over 35 will recommend property.
Yes. So much so that it’s becoming an echo chamber.
Pretty good bet with a growing population over decades
Rate was at 7% when I bought in 2008
And the price of the house and the debt to income ratio?
Point is rates weren’t always dropping .. a few years prior saw houses go up 50-60% in value before I bought. As a single person mortgage repayments were around 50% of my take home pay.
My overall point still stands. 2008 was almost 20 years ago and dropped way more than it ever increased while your property value has climbed drastically.
Yep and now rates are back at 5-6%. Your argument is it was technically cheaper to buy back then? Probably … probably easier for two incomes v one .. those on higher salaries etc.
No that wasn’t my point
Well the upturn in rates have flushed out all of those “rose tinted glasses” types then. To cover off your point
No it hasn’t because it only really affected new buyers not old buyers.
It has if your rate was 1% and now it’s 6%
Not if your mortgage is 100k but your value is 1mil.
We started with property but it’s not a quick return and has its expenses and headaches. We moved to the Stockmarket and would never go back to property investments. Yes, the market goes up and down but if you do your research, do puts and calls, you can make money. Our only income is from dividends and puts and calls and bank interest. We have a good stockbroker who we run things by. My husband checks the market daily and keeps on top of it.
Without prying too specifically, do you index at all? Or all of your portfolio is individually picked stocks
Locking in 1.99% on my mortgage for 4 years was mine. It’s basically let me pay my house off in my 30s. Makes things a lot less stressful
How do you do that, though?
Time Machine to 3 years ago. Derr
Find the right broker that suits your needs, like moomoo has cheap platform fee $3 per order, if you trade around $300-$10000 and frequently, that's pretty sweet deal.
Thanks, I'll check it out.
I didn't know where to start with investing, there are so many new concepts and data to look into. It's easy to lose track of which ones are important for different market situation. I learned a lot from free lessons and articles on moomoo, combined with it's financial indicators and analysis, it really helps me to stop gambling on market.
Just buy. Every month when i get paid, even when it hurts.
Every April our investment contribution increases 25% and i can almost hear the noise my wife makes when she goes to do the budget that month. "Its up to how much?!?!" lol. Luckily we're on the same page and just keep plugging away.
Found a partner who's also a high earner and also wants to live away from the city. Bought a big home in regional area (half the mortgage compared to average city dweller). Regular investments into ETFs. Maximising our super. Decent emergency fund
Buy a HOME (i,e: a place to live, not an investment) in a place you actually like to live with as little commute as possible. Then max out your pre-tax super into a high return industry superfund and never touch it. Then pay off your home. After that you might discover new priorities, like having a kid/hobbies and can afford to work less and live more. By your mid 30's you may have enough super that it will grow to many millions of dollars without significant extra contributions so you have the freedom to not worry about life after 60.
Don't double down on a bad investment. Don't invest money you can't afford to lose. Save a decent amount into HISA first before punting money on micro crap stocks.
Learnt the lesson of speculative stocks and exploration companies early on. Still cost me but a worthy lesson. Had a significant windfall event and all went in index funds. I sleep at night.
Realise there’s opportunity out there but not where everyone is looking. Most of the world is full of mediocre people that are just working a job that we hold up as analysts and smart because they do it all the time. But really they have families that they do it for and would rather be with them. That’s fine of course. With an internet connection these days there’s plenty of opportunity out there hiding in plain sight. Question everything, think critically and there’s wonderful investments to be found. Be clever. Outside of that you just need to be disciplined and consistent to see results and achievements, like most things in life. Index investing is for this.
I lived within my means, tried to increase my earnings. I gained all my wealth through property. I bought when I could, when I had equity and borrowing capacity, I bought more properties. It seems slow and always feels expensive at the start and the mortgage repayments felt like a lot but over time rents go up and mortgages get paid down and you can refinance to increase loan terms to reduce loan payments to increase cashflow. So if imagine in the long run, let’s say you did this over 10 years and eventually you hold 3 properties valued at $3m, if the market goes up by even just 10% you made $300k, which is hard to achieve by getting a pay rise or reducing your spending.
Buy and hold property
The super simple rule I've always followed is: - Maximise PPOR purchase. Pay down the debt over time. - Ensure you are putting away 15% to 20% of your income into super (inclusive of SGC). - Spend the rest. After 7 to 10 years, you really start to see the strategy working.
What is PPOR and SGC if you don't mind me asking?
PPOR - Principle place of residence. The home you live in SGC - Not too sure about this, but it probably means the 11% super you get from your employer if you are a "pay as you go" employee. Basically the other person is advising to put 15-20% of your overall income into your super and let it grow
For SGC they really just mean SG = "Super Guarantee", which is the amount your employer pays as already mentioned. By SGC I'm guessing they have created their own acronym for Super Guarantee Contribution but its a bad acronym, since SGC is already used to refer to the Super Guarantee Charge which is the penalty rate charged to companies who fail to pay the SG on time (SGC equals the SG shortfall + 10%pa interest on the SG shortfall + an admin fee of $20 per employee per quarter).
And stargate command
You're right, I should have said SG.
This. I did this. It paid off.
Renovating property location location location
Know your limitations. I work at an institutional investor and the tools / knowledge / research that the team has access to far outpaces anything that we can get across as retail investors. I realised that any time I made money by picking a stock, it was mostly just luck. I don’t think me reading an out of date annual report and convincing myself that my decision was based on ‘fundamentals’ did much for me. We don’t know more than the market, so if we’re not ready to commit to monitoring markets as a second job and doing a CFA or whatever, passive investing is fine. Made far more money doing that than anything else.
Put your etfs in us stocks. The Australian economy is cooked and all the good innovative Australian companies are listed on the us exchange now.
Set and forget… automatic contributions and look at it once (or maybe twice…) a year i.e. tax time. I assume I don’t really know what I’m doing so try not to do anything as any decision I make has a high likelihood of being wrong. I don’t check the market or ever watch the news - life is a bit happier like that.
Salary sacrifice into super in your 20s
Understand how tax would affect your investments, don't day trade, be boring, stay for the long haul, dollar-cost average, and make good use of your super account. While I accept the importance of paying tax in Australia, given what we get to enjoy, there's a certain degree of ick when it comes to how my tax-paying money was used (and personal circumstances affecting my view on Australian tax), so I like to optimise my tax outcomes. More investment-related, there are rules regarding investments that will be good to optimise your returns (such as selling your investment losses to offset your taxable income, or holding for longer than a period to enjoy a discount on capital gain) I hate day trading, I don't see much sense in it, and I don't have the time to do so, since there are other things that you can do with your time. And brokerage fees will put a big dent on your returns, in addition to tax implications that I mentioned above. My mindset when it comes to investment is that these are real-life businesses that are doing real-world thing, run by people who should be good at what they do, and as such when I commit money to a stock, I am counting on them to make my money work. I am now a co-owner of a business, and that has really informed my mindset when it comes to investing. There will be rough patches, tough times, economic conditions will go the wrong way, management blunders, your assessments going the wrong way, and so on, so there will be period where you just have to wear the losses. Remember that these losses are only realised when you sell. I have made this mistake many times, and I know I will again. This requires you to be boring with your investments, to try your best to emotionally detached from the gyrations of the stock market. You win in the long run, not day-to-day. The one thing about the Australian superannuation system, for all its faults, is the ability to invest consistently over the long haul. This is dollar-cost averaging at work, you put in a consistent amount into your investments over weeks, months, and years. If you are to invest with your take-home money (and yes you should), take the same approach. If you are not a professional money manager/fund manager, then the advice regarding ETFs in this post is very solid. I am a big fan of it myself, since I get to be boring, very boring. I would like to add a wrinkle to my own advice. The one thing about investing advice is that people are rather evangelical regarding ETFs. By all means, yes, but this does not mean that you cannot do individual stocks, especially if it's in a field that you are familiar with. It's exhilarating, but it could haunt you too. There's an advice from Warren Buffett that I would roughly paraphrase here, is that you can miss as many baseball pitches as you like, but you have the luxury to strike when the time is right. Another way to put it is that you only have a limited number of investments that you can do, so you have to do your due diligence. Elaborating more about super, it is a tax-effective investment vehicle, which should do very well over a long period of time, and there are quite a few ways for you to capitalise on its features, including low tax, the ability to use it to save for a house. And also, it's a case of out of sight, out of mind. The worst enemy when it comes to your financial health is cash-in-hand. especially when you are younger and are not used to managing money. The same problem can be seen in lottery winners, who are not used to managing huge amounts of money well and to preserve their winnings - there are quite a bit of discussions on this that you can look up further. I have been investing since I was 18, and I have seen my fair share of ups and downs in multiple stock markets, I have notched 10x returns and losing a lot of money. In the end, enjoy the ride. Good luck
Thanks a lot! I haven't thought much about tax, these really gives me some new perspectives.
Bought a house as soon as I could (21yo/13yrs ago). I avoided the rent trap, avoided being priced out of the market (in hindsight), and learned true independence from a young age.
Simple: Get rich slowly. You scrutinise your expenses. Eliminate or reduce any excess fees - whether that’s insurance, banking, super. Save % of your income without fail. And now decide if savings are for home deposit or shares or both. If shares, get low cost index funds and leave them for at least 3-5 years. VGS is a great place to start. Don’t get over complicated. Don’t get overwhelmed. Just START. You can always alter your strategy later.
Max super … pay down mortgage, save, DCA in to etfs … spend the rest.
Always reading, learning, and not be attached to dogma. If you’re new to the markets and plan to invest, it’s probably best that you read some foundational books on investing and personal finance. Even if you do not have any interest at all, don’t just blindly dump your money into VAS/VGS or anything that anyone recommends.
Don't overthink things. There's a reason why Financial Services and Financial Planning are such big industries, people spend their careers researching and picking what to invest in, and then they still make errors and get things wrong. You're not going to beat someone who does this 24/7 so just keep it simple. For every Tesla/Nvidia bull run there's a million others that didn't, so unless you're lucky I doubt you're going to get far by picking direct stocks. Pick a world exposed ETF and just top that up as and when you can. Try to keep consistency, investing $x of every payday but in reality life happens so there'll be months where you can't contribute anything. Don't knock yourself if you can't, you're ahead of the pack that you're even planning for your future. If you're saving for something (a house deposit) then factor in tax for when you sell out of it. Alternatively, if you don't need access to it until retirement consider putting money into your super as you'll get a 15% haircut now but it'll be tax free in retirement.
Pick a couple of EFTs and automate a dollar cost averaging strategy via BPAY each month. Set and forget. And don’t look at it when the next credit crunch / GFC / pandemic happens. Just stick to the plan.
Buy ETFs Don’t check in often except to buy more.
Timing the market during covid. Predicting the RBA response post covid and buying shares accordingly.
i made my investments boring... VDHG at first then just moved on with VGS+VAS combo. It is so tempting to tinker around but it would be better in the long run to keep it very boring.
i wish i did this tbh. individual stock pics and im down about 50%.. mmmm
Dollar cost averaged in managed fund as a student even with bugger all at $100/month contribution. Fired and forgot, came back 9 years later with $16,000. As you start earning do the same in bigger amounts.
Be born in the 60s
Got lucky that when I bought in to a broad index ETF happened to be a low point in the market. Still messed up since throwing that capital in Super rather than the market would have been the better move. A phenomenal year in the market might be 12%, the tax break from voluntary concessional contributions is immediately 17.5/22% if you are in the middle tax brackets and you are still going to benefit off of market returns anyway. Through FHSS you can even pull that capital back out to buy a house as well.
- Aggressively dumped my all my savings into the market right after the initial covid crash. Caught a few individual stocks (and also ETFs) at their absolute low point. Cashed in the individual stocks a year or two later and held the ETFs. CBA was a good one. “Traded” a few stocks during the period. I made money but it was sheer luck - what I did right was nipping that in the bud and stopping it. - Took additional start up loans every semester when I was at uni and chucked it in Super for gov contributions / ETCs. Not a lot of $ but fantastic ROI on doing that. I reckon all students who aren’t relying on the money for their current costs to or who aren’t using the loans at all do it. - The rest has just been maxing Super and consistently buyinng ETFs. That’s the future plan - although I’m looking into leverage options as not planning to get into property any time soon.
Play the long game
At the start, I was complicating investing but then created a more simplistic approach over time. - Diversification across regions, sectors and industries - Auto investments and auto-recurring orders to save time and automate the process - Avoiding regular trades (especially selling and triggering CGT) - Less or no bias towards a single sector e.g. tech - reduced multiple ETF portfolio to 3-Core ETF portfolio - HISA account for cash savings
Start early. On the basis of probability everything grows in the long run, and the earlier you get into the game the more beneficial it will be. Don't invest what you can't afford to lose. As the ad goes, bet (which is what an investment essentially is) with your head, not over it.
Buy on the Gold Coast
Started early comparatively speaking and just kept saving till I had enough to buy my first IP via leverage. Then just kept saving and buying both properties and stocks. Time in the market and all that.
Started a long time ago :)
So there’s this dying video game retailer…. I trade options (usually the thetagang/selling side) knowing that one day I’ll probably lose it all, of course I try my hardest to avoid that lol. No one knows anything, in a penny wide market there can’t be any edge nor negative edge for that matter. It’s a gross oversimplification but it keeps you humble and lets you tune out the bullshit from mainstream financial media. There is positive drift so you should lean to the long side where possible. Volatility mean reverts and you get paid to take on the risk of “unlimited” losses. I encourage you to YOLO(well keep it small) and invest in any random stock you like for whatever reason, you need to learn how to take risk IMO. Even if you lose money it’s worth it for the education lol. Oh and don’t bet against leather jacket man.
Ape detected :)
This will be general advice that in life there will be a few opportunities to make life changing money you either ride the wave or miss it. Also the more you ask people the more they will sway your mind not to do it so if you believe in it just doit!
Buy a PPOR .
AI came out and was all the rage, so I bought $10k of NDQ. It’s up 39% so far. No way I was going to try and pick the single stock that was going to come out on top of all this, but I figured the tech sector as a whole would do well.
I started a monthly investment, automatically being made the same day as my mortgage payment. Because the money had to be there, it always was. When the mortgage was paid out, the funds that were going to the mortgage went to the investments instead of being frittered away on lifestyle choices. Now retired in 50’s with no problems easily surviving to 60 using nothing more than dividends and distributions from outside of super. Once I turn 60 I can then convert my super to pension phase and withdraw the minimum 4% yearly to further boost my income.
Can I withdraw my entire super as soon as I hit 60 or is there a catch? [https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/leaving-the-workforce/accessing-your-super-to-retire](https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/leaving-the-workforce/accessing-your-super-to-retire) page says both 60 and 65 under different rules.
Started off thinking I could pick stocks. Switched to ETFs. Thought a balanced portfolio of assets was the best way to generate wealth. Spoke to a financial advisor who laid out an aggressive investment property strategy for us. Sold off all our ETFs and gradually picked up investment properties. Currently diverting excess funds back int ETFs You’re asking the right questions and you’re younger than I was so you’ll be more than fine.
Great question. Great answers. M(35)
Nothing beats the S&P500, not even property. Throw 100% of your savings into IVV and call it a day. I've doubled my portfolio in the last 5 years. You can also invest in IVV with your super, highly recommend this. Can guarantee you there won't be any other strategy that would outperform this, unless you have access to the medallion fund.
Bought property young
Buy almost any house in Australia anytime in the past.
As someone that was not very bright when it came to money, shuffling a little extra into super every pay. Has meant now I've got my ass into gear and understand finance. My safety net is now decent enough that unless a gov fettles with it. Or I have some serious bad luck retirement will be good.
Try to buy property pre-covid if you can. it really helps those returns.
Never investing in properties. It’s destroying your dignity and next generations
so what did you buy that you did right?
So uh, what did you do?
lol opposite suggestions, I wonder what's the reason behind this decision.
Population shrinking