I declare the downturn to be over

I wonder…if together we all declared “I’ve had enough! The downturn is over. From now the economy and markets are growing;” could we create a self-fulfilling prophecy?

Yes? You think we could?

Great, then join me now in making the declaration and spread the word to your friends, family and everyone you know. Blog it, tweet it and share links to those declarations in the comments below.

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Legal note: This is not a recommendation to buy long, sell short or hug your co-workers. Just spread the positive vibe man.

Cop a dose of Harden Up

If you allow the nightly news to permeate your conscience your Money Mindset will be having a tough time right now. It is important to take a step back to observe what is happening and look for alternate perspectives and opportunities. “Be greedy when others are fearful…” says Warren Buffet (and has done for decades.)

Michael Pascoe wrote an interesting article titled “Cop a dose of Harden Up”, which provides an alternate perspective. Read the article here. (Sydney Morning Herald; November 14, 2008)

Have you really been doing it tough? Or, by being led by your fear and letting opportunities pass you by are you ensuring that you will be doing it tough in the future?

If you want to be a millionaire don’t follow your mates

According to the latest World Wealth Report by Merrill Lynch and Capgemini, there are approximately 172,000 Australians who are millionaires. (The definition of millionaire is in US dollar terms and excludes your own home and other lifestyle assets.)

This is a very low figure given that most people, if asked, would say that they want to be millionaires. The figures is so low that it means that only 1.07% of adult Australians actually are at their goal. (Based on ABS population data at June 2007.)

So if you want to become a millionaire don’t benchmark your wealth creation activity based on what those around you are doing. Chances are that following them will lead you to a destination other than becoming a millionaire.

If you want to become a millionaire find some smarter friends to also hang around with – ones that expand your thinking and horizons. And if you have to (and you probably will), pay to hang around with smarter people who have achieved the goal; i.e. a mentor.

Keep it simple to ride out market emotions

In his latest article, Robin Bowerman of Vanguard Investments Australia suggests: “There is one clear lesson investors can learn from the recent sharemarket turmoil – the smart way to invest is to keep things simple.”

It is an excellent article that discusses behavioural finance and draws on research from Steve Utkus, the head of Vanguard’s US Centre for Retirement Research. You can read the full article here. Be sure to read the closing paragraphs suggesting strategies for guarding against overconfidence.

You can also watch an interview with Steve Utkus here. If you are already familiar with the context of behavioural finance then I recommend you skip to question 7 in the video.

Delusion lets smokers breathe easy

MOST Australian smokers are in denial about their habit.

A survey by the Cancer Council Victoria reveals that 60 per cent of smokers cling to “self-exempting beliefs” that smoking-related diseases such as heart and lung cancer are caused by air pollution or genetics.

Tamara Davis, The Weekend Australian, December 29, 2007

Self-exempting beliefs don’t just apply to smokers and are not limited to our health habits. The article headline could easily be changed to “Delusion lets us spend easy”

A non-smoker probably reads the above quote with disbelief. With all of the advertising over the recent decades how could anyone still think that smoking and lung cancer are not linked?

So, as we enter 2008 ask yourself if you have any self-exempting beliefs that are negatively impacting on your wealth.

For example:

I’m young so don’t need to start saving and investing for my retirement.

I invest in residential property so can ignore my superannuation.

I’m fighting fit, drive and live carefully so don’t need insurance because it’ll never happen to me.

A wonderful gift of financial literacy for your children

Book Cover Last Saturday a terrific book was released here in Australia, it’s called “R for Richlife” by Julie Davey. Julie describes it as “a book for kids about how to manage money and how to manage without it.”

It may be written with children in mind but both my wife and I agree that adults can eaily learn from it too. The book includes delightful illustrations by Julie that help to engage your children in the message and to make it memorable.

I love the book and highly recommend it as a gift for your children and for the children of your family and friends. (That’s what I have done, but I have to whisper as they are getting it for Christmas this year.) You can buy it online from Julie’s website which is: www.aforattitude.com

Give the gift of financial literacy – it’s like giving someone a division one winning lotto ticket.

What makes you think you’ll be a millionaire one day?

Less than five percent of Australians are millionaires, yet it seem that most of us want to be. What makes you think that you’ll be one of the minority? What makes you different to 95% of Australians?

In a client meeting this morning something was said that reminded me how our nature is to measure ourselves against our observations of the experiences of those around us. I was also reminded how those observations influences our choices and behaviours.

For example, if it seems that most people can afford a plasma TV or the latest iPod then I guess we can allocate money to those purchases too. Or, if it seems that no-one we know has started planning and saving for their retirement then we don’t need to bother either.

But are the people we know around us really an appropriate role model for our financial behaviours?

Many of us seem to dream of being millionaires and wealthy enough to afford whatever we want. (It is no wonder that lotteries are booming.) However, most people never actually achieve this level of financial freedom.

Data released this morning by the Australian Bureau of Statistics demonstrates that less than five percent of Australians have net wealth in the millions. This has barely changed since the last data release despite the booming economic conditions over the past five years.

(I define Net Wealth to be the sum of your investment assets less the sum of all of your liabilities. It is your Net Wealth that creates your financial independence, not your net worth.)

So, if you too dream of becoming a millionaire with abundant choice and financial freedom what are you doing differently than most other people?

What different (rare) mindset and behaviours do you have that will place you among the 5%?

If you are benchmarking your progress against those you know around you, are they leading you to a future where you miss your personal lifestyle goals?

Can you find new benchmarks and role models that will lead you to be a member of the 1 in 20 financial elite?

The key ingredient to wealth

Imagine for a minute that you’re on a ship sailing the seas; perhaps a cruise along the Alaskan coastline. The ship hits an iceberg, starts taking on water and the Captain announces “abandon ship – everyone to the life boats”. Traditionally, who are the first to be saved?

The women and children.

But why the children? They probably have very little knowledge and skills, will panic and once they get on the life boat will make life hell for all the other survivors by whinging the whole time. (Yes, I am a parent.)

So, why save the children?

Because they are the future. The embodiment of massive potential.

You were once a new born baby with massive potential for future greatness. Ask your parents what they were thinking when they first held you in their arms.

What Happens?

Why don’t so many people achieve their stated dreams?

According to the great achievers the key ingredient to wealth is our minds. And conversely the greatest obstacle to wealth is ourselves.

What happens is…life happens, and the choices we make in interpreting each life event. The choices create positive and negative beliefs about success, achievement, wealth, and what it means to be “rich”. The negative beliefs become blockages to achieving the level of financial success we desire.

Just walk into any good book store and there is ample information about how to get rich. You can easily discover what to do and how to do it. So why aren’t more people really wealthy?

…well the excuses are endless. But they all boil down to the same thing – they made choices away from wealth rather than towards it. And most of our choices have a large emotional undercurrent.

To get wealthy the most important thing to master is your own mind and your own emotions.

An Example

Conceptually most of us understand that we can achieve higher investment returns and greater wealth by investing in more growth oriented investments, compared with investing in income oriented investments. So if you want to get richer you would invest maximum amounts in growth investments.

However research shows that most people cannot emotionally handle the short-term volatility of growth oriented investments. They are more comfortable having at least 30% of their long-term investments in defensive assets.

In other words, most people are allowing their short-term emotions to compromise their long-term wealth creation potential.

Does that sound like it could be you?

You can still achieve what you want

Do you still feel that you have the potential to achieve greatness? To achieve whatever you dream. To be as wealthy as you desire and to use that wealth to live the life you desire. Do you still believe it?

I believe you do have massive potential, no matter what age you now are.

As well as learning about the details of investment strategies and products, invest in learning about yourself. That will have the greatest return-on-investment. And you will reap the rewards in many diverse ways, including wealth.

P.S. Thanks to Colin James for sharing the sinking ship story.

Mindless eating, mindless investing

I have written before about the importance of our money mindset in creating wealth. From our mindset comes our beliefs, thoughts and feelings which drive our behaviours.

Gareth Abley, Senior Asset Consultant at MLC Implemented Consulting has written this interesting article which includes an examination of the links between our eating behaviours and our financial behaviours. Read the article.

(The article appears to be inspired by the observations of James Montier in reading Brian Wansink’s book called “Mindless Eating“)

I could give up drinking coffee, if I wanted to

Today the Australian Government’s Financial Literacy Foundation released the findings of research into the financial literacy of Australians. The results are a real eye opener. I was very surprised to read that most Australians are confident in their ability to manage their money and create wealth. I was not surprised to read that for most people this self-confidence does not translate into action. (View the research report.)

Controlling your cash flow is fundamental to creating wealth. You need to save money by spending less than you earn. Creating and sticking to a budget is one tool to assist you in understanding your capacity to save, and in helping you to consistently save.

According to the research 88% of Australians are confident in their ability to save, and an even higher 90% say they have the ability and understanding to budget day to day finances.

This ability has not translated to action with only 62% of Australians saving regularly and an even lower 48% using a budget to control spending. It seems that almost half of Australians (43%) spend first then save the leftovers, if there are any.

It appears that it is not knowledge that is holding people back from great wealth, but action is the true obstacle.

If you are struggling with motivation to consistently save then one way to start is with small, easy steps to an achievable goal. The experience then helps you build motivation for greater saving and snowballs from there.

Here is a suggestion to help you:

  • Set up a high interest savings account that is separate to your daily transaction account
  • Arrange for an automatic transfer of at least 3% of your gross income into that account each pay period. (If you already do this then increase it by 3%)
  • Do that for one full year without touching the money.
  • Spend the year learning as much as you can about how to utilise the savings at the end of the year to build your net assets. (If you have not done so already then a great start is to subscribe for my free educational newsletter.)

You don’t have to be smart to be rich

One money mindset that I come across is the belief that “I’m not smart enough to do that”. It is a major limiting belief that has wide ranging negative consequences for wealth creation.

If you relate to that belief then here’s some good news for you. Research on over 7,000 Americans has demonstrated that there is no correlation between your level of intelligence (as measured by IQ) and the level of your wealth. Read more about the research here.

You are smart enough to understand all the major elements of money management and to use that knowledge to create enough wealth for a very comfortable life.

But are you perhaps too smart? The research study notes that high intelligence does not necessarily mean greater wealth. To quote the study author, Jay Zagorsky: “Professors tend to be very smart people; but if you look at university parking lots, you don’t see a lot of Rolls Royces, Porsches or other very expensive cars. Instead you see a lot of old, low-value vehicles.”

Wealth creation takes wisdom – applying good judgement to the knowledge that you do have to create positive action.

You have what it takes to get rich. But resist the temptation to get too smart by complicating things to the point of ineffective action. The “basic”, simple and easy strategies often provide a much bigger benefit than any of the sexier, more complex and more time consuming strategies.

Is your money mindset robbing you of riches?

Have you ever wondered why some people seem to have most of the wealth and continue to acquire more, but you don’t appear to be getting ahead so quickly? If so, it could be your money mindset.

In this interview on the TV show Wake Up! WA I reveal how your beliefs, values and thoughts about money act as obstacles to you acquiring greater prosperity and wealth.  I also share what to do about it.

Video reproduced courtesy of Ego Creative Media.

What thoughts do you have that potentially rob you of riches? Please let me know by leaving a comment below.

What is the best investment?

One of the most common and frequent questions I am asked is:

“Matt, what is the best investment?”

In the media this question is often covered by delving into some analysis of the current state of the markets. In my opinion that is an incorrect and incomplete approach. So my jaw dropped on Saturday when I read an article in a mainstream newspaper that correctly answered this question. The article was by Marcus Padley and appeared in The West Australian (4th August 2007, page 66).

In his article Padley notes: “The best long-term investment of all is in your own business, your own career, your own development, your own intellect. Far better you invest in that than any equity investment.”

The best investment ever is in yourself. Invest in learning new skills and talents that could earn you higher income. Invest in personal development to better use the tool of your mind to guide your spending and risk assessment decisions. Both of those investments have a long-term exponential reward to your life and wealth.

Padley’s statement is more correct than traditional answers in the media because it considers the larger context of wealth creation.

International author and speaker Anthony Robbins once said: “Successful people ask better questions, and as a result, they get better answers.”

Contextually, anyone who believes that the original question above is a good question would benefit by investing in themselves to learn better wealth creation questions to ask. That will be one key to their success.

Stay tuned, as over time I will reveal better questions to ask yourself and your advisers.

The key ingredient to wealth

Hi

Imagine for a minute that you’re on a ship sailing the seas; perhaps a cruise along the Alaskan coastline. The ship hits an iceberg, starts taking on water and the Captain announces “abandon ship – everyone to the life boats”. Traditionally, who are the first to be saved?

The women and children.

But why the children? They probably have very little knowledge and skills, will panic and once they get on the life boat will make life hell for all the other survivors by whinging the whole time. (Yes, I am a parent.)

So, why save the children?

Because they are the future. The embodiment of massive potential.

Matt, you were once a new born baby with massive potential for future greatness. Ask your parents what they were thinking when they first held you in their arms.

What Happens?

Why don’t so many people achieve their stated dreams?

According to the great achievers the key ingredient to wealth is our minds. And conversely the greatest obstacle to wealth is ourselves.

What happens is…life happens, and the choices we make in interpreting each life event. The choices create positive and negative beliefs about success, achievement, wealth, and what it means to be “rich”. The negative beliefs become blockages to achieving the level of financial success we desire.

Just walk into any good book store and there is ample information about how to get rich. You can easily discover what to do and how to do it. So why aren’t more people really wealthy?

…well the excuses are endless. But they all boil down to the same thing – they made choices away from wealth rather than towards it. And most of our choices have a large emotional undercurrent.

To get wealthy the most important thing to master is your own mind and your own emotions.

An Example

Conceptually most of us understand that we can achieve higher investment returns and greater wealth by investing in more growth oriented investments, compared with investing in income oriented investments. So if you want to get richer you would invest maximum amounts in growth investments.

However research shows that most people cannot emotionally handle the short-term volatility of growth oriented investments. They are more comfortable having at least 30% of their long-term investments in defensive assets.

In other words, most people are allowing their short-term emotions to compromise their long-term wealth creation potential.

Does that sound like it could be you, Matt?

You can still achieve what you want

Do you still feel that you have the potential to achieve greatness? To achieve whatever you dream. To be as wealthy as you desire and to use that wealth to live the life you desire. Do you still believe it, Matt?

I believe you do have massive potential, no matter what age you now are.

As well as learning about the details of investment strategies and products, invest in learning about yourself. That will have the greatest return-on-investment. And you will reap the rewards in many diverse ways, including wealth.

– END ARTICLE –


Workshop: 100% Yes! for Financial Success

Would you like to take the next step in wiping out your obstacles to creating wealth? If so, this workshop is for you.

Two years ago I attended a terrific workshop called “100% Yes!” run by internationally renowned psychologist Steve Wells. I learnt some powerful techniques for dealing with emotional stresses and beliefs in all areas of my life. And the best thing is that they achieve very rapid results.

Steve and I both know the important role of positive and negative beliefs in wealth creation so we have teamed up to bring you the workshop “100% Yes! for Financial Success”.

In the workshop you will learn powerful techniques for identifying and dealing with your negative beliefs around money that are obstacles in your wealth creation journey. Plus you’ll also learn some simple and powerful financial steps you can take to ensure financial peace of mind.

The workshop will be held in Perth in September, and the early-bird deal closes on 17th August – so get in quick.

Visit the workshop web page to learn more.