WEBVTT - Three financial secret weapons 0:00:01.560 --> 0:00:03.840 Welcome to How Do They Afford That, The podcast that 0:00:03.880 --> 0:00:07.440 peaks into the financial lives of everyday Australians. I'm Michael Thompson. 0:00:07.440 --> 0:00:09.280 I'm an author and the co host of the podcast 0:00:09.280 --> 0:00:12.280 Fear and Greed business news. As always, I'm with Canna Campbell, 0:00:12.360 --> 0:00:15.640 financial planner and founder of Sugar Mama TV, the financial 0:00:15.640 --> 0:00:19.840 literacy platform covering YouTube and podcast, books, Instagram threads, TikTok 0:00:19.840 --> 0:00:21.040 and more. Hello Canna. 0:00:21.160 --> 0:00:21.520 Hello. 0:00:22.840 --> 0:00:26.680 Over the last few years of doing this podcast, you 0:00:26.840 --> 0:00:31.680 have mentioned a bunch of things that can have a 0:00:31.840 --> 0:00:36.640 really kind of significant impact on your financial freedom and 0:00:36.640 --> 0:00:40.879 your financial future, things that probably haven't almost an outsized impact, 0:00:40.960 --> 0:00:45.440 like bigger than you would expect right on the potential 0:00:45.479 --> 0:00:50.199 few to have financial freedom into the future. But in 0:00:50.240 --> 0:00:53.559 some cases they might be things that you overlook. They 0:00:53.640 --> 0:00:57.120 might be things that you ignore, perhaps intentionally because you 0:00:57.160 --> 0:00:58.920 think it might be too hard, or that you don't 0:00:59.000 --> 0:01:01.279 realize just how important it could be and how much 0:01:01.320 --> 0:01:06.360 of a difference it could make. So today that was 0:01:06.400 --> 0:01:09.080 a big pause, was it? I was building the dramatic tension. 0:01:09.440 --> 0:01:12.720 I wanted to put together a list of your top 0:01:13.120 --> 0:01:19.200 three financial secret weapons, the things that people may not 0:01:19.360 --> 0:01:23.000 realize that just by making a few simple changes, you're 0:01:23.000 --> 0:01:25.560 going to actually have a massive, massive benefit on your 0:01:25.600 --> 0:01:29.640 finances into the future. Are you up for that? 0:01:29.959 --> 0:01:34.759 I am, because it sounds like a very efficient effective discussion. 0:01:35.000 --> 0:01:37.119 It will be, It certainly will be. Before we get 0:01:37.160 --> 0:01:39.479 into the efficient and effective discussion, just need to mention 0:01:39.560 --> 0:01:41.880 that everything we talk about is always general in nature. 0:01:41.959 --> 0:01:45.600 They have a personal investment, strategic or product advice purely 0:01:45.680 --> 0:01:48.280 for financial education purposes only. And if you hear something 0:01:48.280 --> 0:01:50.400 that you think, actually, maybe that works for me, then 0:01:50.440 --> 0:01:54.280 you should seek some professional advice to get some advice 0:01:54.360 --> 0:02:02.120 that is specifically relevant to you. Number one pound interest. 0:02:02.680 --> 0:02:06.120 I made that sound quite kind of dramatic. Dramatic, right, 0:02:06.400 --> 0:02:09.040 But this is one thing that you have mentioned this 0:02:09.120 --> 0:02:11.760 so many times in the past, just about the long 0:02:12.000 --> 0:02:13.680 term effect that it can have. 0:02:13.960 --> 0:02:17.040 What is it first, So, it's when your money is 0:02:17.120 --> 0:02:21.680 working for you because you're earning interest upon interest, and 0:02:21.919 --> 0:02:25.760 over time, it can actually help you accumulate a large 0:02:25.760 --> 0:02:28.440 amount of money where your money has built that money 0:02:28.480 --> 0:02:31.120 for you, rather than you having to always contribute. 0:02:31.520 --> 0:02:34.440 So it's the power of time, isn't it. Yeah, It's 0:02:34.560 --> 0:02:36.919 like that time really is one of the greatest assets 0:02:36.919 --> 0:02:39.040 that you have. Is just why it's so valuable to 0:02:39.080 --> 0:02:42.200 get into it early, because of this power of earning 0:02:42.280 --> 0:02:44.720 interest on interest on interest on interest, and it just 0:02:44.840 --> 0:02:47.240 keeps ongoing and you learn about like it is one 0:02:47.280 --> 0:02:49.560 of the things that I remember in the ten learning 0:02:49.600 --> 0:02:53.560 how to calculate compound interest. Are we mostly talking about 0:02:53.560 --> 0:02:54.760 superannuation here? 0:02:55.480 --> 0:02:58.480 No? It can be. No, Like super is just one 0:02:58.919 --> 0:03:02.480 area of our life. So compounding interest applies to any 0:03:02.560 --> 0:03:05.440 major long term investment, whether it be you know, super 0:03:06.160 --> 0:03:09.320 online interest, to high interest, your savings account, a managed fund, 0:03:09.800 --> 0:03:13.239 even dipit in paying shares. And if you say ten 0:03:13.280 --> 0:03:16.600 thousand dollars at eight percent per annum net and you 0:03:16.840 --> 0:03:20.560 lift it untouched in thirty years, that would be worth 0:03:20.720 --> 0:03:23.440 just over one hundred thousand dollars. And that's without you 0:03:23.480 --> 0:03:24.720 having to add a single cent. 0:03:25.080 --> 0:03:26.960 And that's without doing anything. 0:03:26.960 --> 0:03:28.640 Just letting it sit there untouched. 0:03:28.840 --> 0:03:31.320 Yeah, because all of a sudden, after that first year, 0:03:31.919 --> 0:03:37.400 your ten thousand dollars is suddenly worth ten thousand, eight 0:03:37.480 --> 0:03:40.320 hundred dollars correct, And then the following year it is 0:03:40.360 --> 0:03:44.320 worth ten thousand, eight hundred plus a new eight percent, 0:03:44.360 --> 0:03:46.600 and it just keeps on going. Did you see could 0:03:46.680 --> 0:03:47.880 you see the panic on. 0:03:47.840 --> 0:03:49.560 My face like a calculator. 0:03:49.640 --> 0:03:51.440 I don't have my calculator that I was using in 0:03:51.520 --> 0:03:55.120 year ten and I am at risk here two were there? 0:03:55.160 --> 0:03:56.360 You supported me? So thank you. 0:03:56.360 --> 0:03:57.080 I've got your back. 0:03:58.000 --> 0:04:01.320 That's the long term impact, isn't it? The fact that 0:04:01.120 --> 0:04:04.560 and that, as you say, is if you are not 0:04:04.600 --> 0:04:05.600 adding anything to. 0:04:05.520 --> 0:04:07.360 It, you can do so much more when you do 0:04:07.560 --> 0:04:10.000 regularly contribute, even if it's only a small amount. 0:04:10.280 --> 0:04:13.520 Okay, So that's why it matters. That's the long term impact. Right, 0:04:15.000 --> 0:04:20.000 The earlier you start, the better it is going to be. 0:04:20.360 --> 0:04:22.919 Right, correct, You've got the benefit of time. 0:04:23.480 --> 0:04:25.080 Is there a point to which it's too late? 0:04:25.279 --> 0:04:27.880 It's never too late, ever, never, ever, So even if 0:04:27.920 --> 0:04:29.800 you're starting in your forties and fifties, you can still 0:04:29.839 --> 0:04:32.800 make a massive difference. And a great example is you know, 0:04:32.880 --> 0:04:35.880 fifty year old investing five hundred dollars per month, again 0:04:35.960 --> 0:04:38.320 it's a a net return of eight percent per annum. 0:04:38.560 --> 0:04:40.800 You can still build an extra one hundred and seventy 0:04:40.800 --> 0:04:43.360 five thousand dollars within fifteen years. 0:04:43.680 --> 0:04:47.400 Really, okay, Can I just talk to you then about 0:04:47.400 --> 0:04:51.520 how practically this would work? Is that that you could 0:04:51.600 --> 0:04:55.559 talk to your financial advisor about it and just say, look, 0:04:55.600 --> 0:05:01.320 this is I want to make sure that my superannuation 0:05:02.000 --> 0:05:04.000 is going to be working for me, and that you're 0:05:04.040 --> 0:05:06.679 making sure that you are adding to your super because 0:05:06.720 --> 0:05:08.760 I know that you said this isn't just superannuation. But 0:05:10.080 --> 0:05:12.440 in most cases a financial advisor isn't probably going to 0:05:12.480 --> 0:05:14.040 tell you just to put it all into a bank 0:05:14.040 --> 0:05:16.720 account necessarily that's just earning interest. They might say to hey, 0:05:16.800 --> 0:05:18.719 let's look at how we can kind of maximize the 0:05:18.720 --> 0:05:21.719 power of your superannuation and do some additional contributions that 0:05:21.800 --> 0:05:22.720 kind of thing, right. 0:05:22.839 --> 0:05:25.240 Exactly, and also looking at well, you know what strategies 0:05:25.400 --> 0:05:28.440 are available, like such as the co contribution scheme, what 0:05:28.480 --> 0:05:31.400 that might also help to ensure that even more money 0:05:31.760 --> 0:05:35.360 is going into whether it be your superannuation for example, and. 0:05:35.320 --> 0:05:37.760 So using super as the as the example. And here, 0:05:37.800 --> 0:05:42.120 so you've got this lump sum which is earning interest 0:05:42.160 --> 0:05:45.960 on itself, you are then adding more to it every 0:05:46.000 --> 0:05:48.880 single year, and so you are not just earning kind 0:05:48.920 --> 0:05:50.880 of interest on that that that principal amount, you are 0:05:50.880 --> 0:05:53.520 then earning it on the additional repayments or sorry, the 0:05:53.560 --> 0:05:56.480 additional payments and edition contributions into it, and it's just 0:05:56.520 --> 0:05:57.480 getting bigger and bigger. 0:05:57.640 --> 0:05:59.760 Yes, you've got to make sure obviously it's invested in 0:05:59.800 --> 0:06:01.479 all alignment to your risk profile. 0:06:02.520 --> 0:06:04.960 Do you think people overlook that? Do you think they're 0:06:05.040 --> 0:06:10.600 just I remember about ten years ago, sitting down and 0:06:10.640 --> 0:06:16.600 figuring out just doing a very basic calculation, going, oh, 0:06:16.880 --> 0:06:20.800 I really like watching my superannuation going up. I think, 0:06:20.920 --> 0:06:24.080 and these are my contributions I'm making. If I was 0:06:24.120 --> 0:06:27.839 to not make any additional contributions from now until the 0:06:28.360 --> 0:06:31.480 until I retire, how much would that would that be worth? 0:06:31.560 --> 0:06:34.599 And I just did it on a calculator. I took 0:06:35.080 --> 0:06:36.720 the amount that was in my souper at the time, 0:06:37.120 --> 0:06:38.960 and I just took it as being I think it 0:06:39.000 --> 0:06:41.760 was like say six percent or seven percent, and so 0:06:41.839 --> 0:06:45.080 I just did times one point zero six and then 0:06:45.120 --> 0:06:48.640 I was hit equals equals, equals, equals equals equals, and 0:06:48.720 --> 0:06:51.320 just each one of those was another year. And it 0:06:51.360 --> 0:06:54.200 was the most fun I've ever had with a calculator, 0:06:54.400 --> 0:06:55.960 just watching it go up and up and up and 0:06:56.000 --> 0:06:58.039 up and up, and I'm like, that's compound interest right there. 0:06:58.200 --> 0:07:00.800 It's so empowering, isn't it. Yeah, that is why I 0:07:00.920 --> 0:07:02.080 call super sexy. 0:07:02.839 --> 0:07:05.240 Have I ever sounded more dull than just then? 0:07:05.839 --> 0:07:09.320 But can I take your dullness to a new level please? 0:07:10.000 --> 0:07:12.160 So if you'd really like to get amongst it, you 0:07:12.200 --> 0:07:14.320 can jump on the sugar on my website, and I 0:07:14.360 --> 0:07:19.320 have all these free calculators, including a superannuation calculator that 0:07:19.400 --> 0:07:23.360 can show you what your superannuation could potentially be worth 0:07:23.880 --> 0:07:26.840 if you do nothing, and if you do a super 0:07:26.880 --> 0:07:31.080 contribution strategy like sorry sacrificing, you can actually see it grow. 0:07:31.400 --> 0:07:34.800 But I have also, this is really important, got the 0:07:34.920 --> 0:07:37.720 impact of inflation. So you can see what the actual 0:07:37.960 --> 0:07:39.560 you know, say comes up with five million dollars, You'll 0:07:39.560 --> 0:07:41.960 see what that five million dollars is the equivalent of today. 0:07:42.040 --> 0:07:43.840 So it helps put things into perspective. 0:07:44.000 --> 0:07:47.240 Okay, God, we are boring, aren't we? When you have 0:07:47.320 --> 0:07:49.280 just said if you really want to get amongst it, 0:07:49.440 --> 0:07:52.600 go and check out my calculators, and I actually thought, 0:07:53.280 --> 0:07:54.640 oh that sounds all right. 0:07:55.040 --> 0:07:57.680 And it's free if anyone can access it. 0:07:57.880 --> 0:08:00.920 Music to my ears. Okay, that's compound interest. That's number 0:08:01.000 --> 0:08:05.720 one your first financial secret weapon. One of three. We 0:08:05.840 --> 0:08:11.880 have two more to go. Number two mortgage repayments. So 0:08:12.040 --> 0:08:16.640 this one right, With interest rates obviously can go up, 0:08:16.720 --> 0:08:19.720 they can go down, and with it go your mortgage 0:08:19.760 --> 0:08:25.520 repayments alongside that, Just how important is it? And I 0:08:25.560 --> 0:08:27.040 know the answer to this, but I'm going to ask 0:08:27.080 --> 0:08:29.840 you anyway, just how important is that if you can 0:08:30.520 --> 0:08:34.439 to keep your mortgage repayments the same when interest rates 0:08:34.480 --> 0:08:36.000 go down, it. 0:08:36.000 --> 0:08:39.520 Is incredibly important. It means that your mortgage is being 0:08:39.559 --> 0:08:42.840 paid off faster, which could potentially save you tens of 0:08:42.880 --> 0:08:45.920 thousands of dollars in interest over time, but it could 0:08:45.920 --> 0:08:49.880 actually help build almost like a safety buffer for future 0:08:50.280 --> 0:08:55.040 rate hikes. So yeah, rate hikes. So again, there are 0:08:55.080 --> 0:08:57.400 free kkllers on sugar my website. You can actually see 0:08:57.440 --> 0:09:00.160 exactly how much time and money you'll save. When I 0:09:00.200 --> 0:09:03.440 say tens of thousands of dollars, I'm being serious. In fact, 0:09:03.480 --> 0:09:06.400 it could actually be over one hundred thousand dollars in interest. 0:09:06.800 --> 0:09:10.600 But here's a little little catch with interest rate cuts, 0:09:11.240 --> 0:09:17.280 not all banks necessarily automatically reduce your repayments. Some do, 0:09:17.480 --> 0:09:20.680 some don't. So some people will find that with interest 0:09:20.760 --> 0:09:22.880 rate cuts their mortgage your payments have naturally gone down, 0:09:23.000 --> 0:09:25.080 But not all banks do that for you, So sometimes 0:09:25.120 --> 0:09:27.720 you need to go and manually increase it back up 0:09:27.760 --> 0:09:29.600 to what you were previously paying. If you're someone who 0:09:29.679 --> 0:09:33.000 wants to try and keep maintain their mortgage re payment. 0:09:32.920 --> 0:09:34.480 That was going to be my next question for you, 0:09:34.559 --> 0:09:37.960 kind of whether banks or your lender, whether they make 0:09:38.000 --> 0:09:39.480 it easy to do this. And I know that with 0:09:39.520 --> 0:09:44.360 my bank that I have my homelan with, I receive 0:09:44.440 --> 0:09:48.520 a notification saying, look, interest rates have gone down, we 0:09:48.679 --> 0:09:52.840 have reduced the minimum weekly payment that you need to 0:09:52.880 --> 0:09:56.600 be making. However, we will leave your repayment at the 0:09:56.640 --> 0:09:59.559 same amount that you are currently paying unless you otherwise 0:09:59.600 --> 0:10:03.280 tell us. And that's perfect. That's great because it just 0:10:03.360 --> 0:10:06.800 kind of pushes you, by a default, into a better 0:10:06.880 --> 0:10:09.440 financial situation further down the track. 0:10:09.520 --> 0:10:11.240 It's so interesting to say it because I feel like 0:10:11.520 --> 0:10:13.640 for a lot of people, they if they're not aware 0:10:13.640 --> 0:10:16.959 of this, they run into the lifestyle creep where their 0:10:17.360 --> 0:10:19.800 mortgage repayments come down and now they've got saine extra, 0:10:20.160 --> 0:10:23.120 you know, one hundred dollars per month to spend, and 0:10:23.320 --> 0:10:26.800 not knowing that the bank have dropped it automatically, they 0:10:26.840 --> 0:10:28.880 then spend that one hundred dollars per month when really, 0:10:28.960 --> 0:10:31.199 if they could afford to maintain it. That would be 0:10:31.240 --> 0:10:33.439 so much better for them financially over the long run 0:10:33.480 --> 0:10:36.280 because they could be saving serious time and money. 0:10:36.520 --> 0:10:39.000 Yeah, and the time part of that is interesting because 0:10:39.040 --> 0:10:40.800 it is not just the fact that you could save 0:10:40.880 --> 0:10:43.760 tens of thousands of dollars. You can be mortgage free 0:10:44.559 --> 0:10:46.040 a few years earlier, oh. 0:10:46.000 --> 0:10:48.679 Like you know, four years, So on a five hundred 0:10:48.679 --> 0:10:51.640 thousand dollars mortgage at six percent, if you can keep 0:10:51.640 --> 0:10:54.280 your repayments that the same after a one percent inter 0:10:54.360 --> 0:10:57.520 straight cut, you could save over seventy thousand dollars in 0:10:57.600 --> 0:11:01.040 interest and reduce your loan term from thirty years to 0:11:01.160 --> 0:11:04.480 twenty six years. Imagine being mortgage free four years earlier 0:11:04.480 --> 0:11:05.080 in life. 0:11:05.640 --> 0:11:08.240 That's actually four years of financial freedom. 0:11:08.360 --> 0:11:10.640 Yeah, that's money that you can use to invest, you 0:11:10.640 --> 0:11:13.840 can use to have an earlier retire four years earlier. 0:11:13.840 --> 0:11:17.240 Even like it gives you so many more choices, which 0:11:17.280 --> 0:11:21.240 is really what financial freedom is really about, time and choice. 0:11:21.440 --> 0:11:25.360 Okay, as a financial secret weapon. Do you think that 0:11:25.360 --> 0:11:28.959 that again, not enough people know about the power of this, 0:11:29.480 --> 0:11:32.000 that that just this little change, because we are talking 0:11:32.000 --> 0:11:35.000 today about little things that you can do, little changes 0:11:35.040 --> 0:11:38.280 that you can make that just by keeping your repayments 0:11:39.320 --> 0:11:42.360 up when rates are cut if you can afford to 0:11:42.360 --> 0:11:45.280 do so, and even then further, if you can afford 0:11:45.360 --> 0:11:48.160 to do pay a little bit more off on top 0:11:48.200 --> 0:11:52.000 of that. Just the massive, massive effect that has long. 0:11:51.880 --> 0:11:54.800 Term, absolutely, and this is the power of almost reverse 0:11:54.840 --> 0:11:57.319 compounding interest. So the biggest and best impact you can 0:11:57.400 --> 0:12:00.320 make in saving the most amount of time and money 0:12:00.320 --> 0:12:02.040 with the smallest amount of money's actually in the first 0:12:02.040 --> 0:12:04.439 couple of years of taking out your home loan. So 0:12:04.480 --> 0:12:06.360 you want to jump on this and see what you 0:12:06.400 --> 0:12:10.040 can do sooner rather than later. But again, there are 0:12:10.120 --> 0:12:12.720 free calculators everywhere to show you this, and again the 0:12:12.720 --> 0:12:15.319 Sugar Mamma website has these there for you where you 0:12:15.360 --> 0:12:18.560 can plug in all your information your loan, the interest 0:12:18.600 --> 0:12:21.240 rate you're paying, how far into your homelan, and what 0:12:21.280 --> 0:12:23.640 you can You can play around with the variables and go, well, 0:12:23.720 --> 0:12:25.600 what if I put an extra twenty dollars per month 0:12:26.120 --> 0:12:28.200 or an extra two hundred dollars per month, You will 0:12:28.200 --> 0:12:32.160 be blown away And it is a great source of motivation. 0:12:32.520 --> 0:12:34.880 And paying a little bit extra doesn't mean that the 0:12:34.920 --> 0:12:37.600 money is actually kind of lost to you as well, 0:12:37.640 --> 0:12:41.439 because of the power of redraw facilities and offset accounts 0:12:41.480 --> 0:12:43.680 as well, depending on your arrangement that you have with 0:12:43.720 --> 0:12:44.080 your bank. 0:12:44.280 --> 0:12:47.000 Yes, so more would you? I get asked this question 0:12:47.040 --> 0:12:48.960 all the time. The difference between the two. They have 0:12:49.040 --> 0:12:52.240 the same effects. So a redraw facility is money that 0:12:52.280 --> 0:12:54.680 you put on your home loan, but if you need to, 0:12:54.760 --> 0:12:56.560 you can take it back out. So say I have 0:12:56.559 --> 0:12:59.120 a five hundred thousand dollars home loan, I make extra payments, 0:12:59.280 --> 0:13:01.720 builds up in there, and they say twenty five thousand. 0:13:02.640 --> 0:13:05.520 I'm only being charged on the interest on four hundred 0:13:05.520 --> 0:13:07.839 and seventy five thousand instead of five hundred because it's 0:13:07.880 --> 0:13:10.199 in the redraw facility, and if I need to access it, 0:13:10.200 --> 0:13:12.360 it's the redraal facility switched on. I can get it 0:13:12.440 --> 0:13:14.480 back out. And this is why I say to people 0:13:14.480 --> 0:13:17.760 who have your emergency money sitting in a redrawor an 0:13:17.760 --> 0:13:21.120 offset account rather than a separate online savings account. An 0:13:21.160 --> 0:13:24.800 offset account works in the same way. So financially they're 0:13:24.840 --> 0:13:27.760 not any better than each other, just different people, different needs. 0:13:28.000 --> 0:13:30.160 So if I have twenty five thousand dollars sitting in 0:13:30.200 --> 0:13:33.040 an offset account such as my emergency money, and I 0:13:33.080 --> 0:13:35.319 have a five hundred thousand dollar homeland, same principle, I'm 0:13:35.320 --> 0:13:38.400 being charged interest on four hundred and seventy five thousand 0:13:38.480 --> 0:13:41.560 rather than five hundred thousand. And again, you can find 0:13:41.720 --> 0:13:46.120 offset and redoor facility calculators online which will show you 0:13:46.160 --> 0:13:48.200 exactly how much you can really save. 0:13:49.080 --> 0:13:54.800 Okay, that is two financial secret weapons compounding interest, mortgage repayments. 0:13:56.080 --> 0:13:58.440 We have a great one coming up as number three, 0:13:59.160 --> 0:14:00.840 but I'm not going to tell you what it is yet. 0:14:00.880 --> 0:14:03.040 We're going to take a very quick break and come 0:14:03.080 --> 0:14:12.880 back with the third financial secret weapon. Can We are 0:14:12.880 --> 0:14:16.480 putting together a list today of three financial secret weapons. 0:14:16.520 --> 0:14:19.720 These are things that so far they've been things that 0:14:19.760 --> 0:14:23.160 you can just make small changes and it will have 0:14:23.520 --> 0:14:28.280 a massive effect on your financial future and financial freedom. 0:14:29.560 --> 0:14:33.400 Number three on the list is one that you have 0:14:33.560 --> 0:14:37.960 talked about quite a bit, but it feels as though 0:14:39.240 --> 0:14:44.840 not enough people know about the potential here for passive income. 0:14:46.040 --> 0:14:46.760 Take us through it. 0:14:47.360 --> 0:14:50.800 So I like to call passive income money that you 0:14:50.960 --> 0:14:54.680 earn whilst you sleep at night. It is not about 0:14:54.800 --> 0:14:58.920 making complicated investment decisions, trading online, jumping in and out 0:14:58.920 --> 0:15:03.520 of stocks. It is not about selling a program or tupperware. 0:15:04.760 --> 0:15:08.240 It is not about you know, having to pitch something. 0:15:08.440 --> 0:15:09.960 It literally is you could go to sleep for a 0:15:10.040 --> 0:15:12.840 year and wake up and your money is working for you. 0:15:13.640 --> 0:15:17.640 Examples of passive income are earning rent off an investment property, 0:15:18.320 --> 0:15:20.800 earning dividends from shares, which is my favorite source of 0:15:20.800 --> 0:15:25.640 passive income, even earning interest from bonds or savings accounts. 0:15:25.760 --> 0:15:29.480 You haven't physically done anything to earn that money. It 0:15:29.560 --> 0:15:31.480 is your money working for you. Haven't have to go 0:15:31.720 --> 0:15:33.360 to work but on a suit. It's in front of 0:15:33.400 --> 0:15:37.960 a computer screen, touch something, sell something. It's the key 0:15:38.040 --> 0:15:41.640 to financial freedom. The more passive income we have, the 0:15:41.680 --> 0:15:43.400 better our financial wellbeing. 0:15:43.600 --> 0:15:47.120 Really is, do you need to talk to a financial 0:15:47.160 --> 0:15:50.880 planner about this? Feels like the basis of a conversation 0:15:51.400 --> 0:15:53.920 that when you sit down with a financial planner for 0:15:53.960 --> 0:15:56.840 the first time and you're going through your goals, that 0:15:57.120 --> 0:15:59.480 perhaps not enough people are actually putting this down as 0:15:59.520 --> 0:16:01.600 one of their goals, that hey, I would love to 0:16:01.680 --> 0:16:04.120 have passive income. I would love to be earning money 0:16:04.160 --> 0:16:04.960 while I sleep. 0:16:05.800 --> 0:16:09.200 I have done other podcasts on Sugarmum's fireplay about isn't 0:16:10.000 --> 0:16:11.720 when people will get stuck as to what can they 0:16:11.720 --> 0:16:14.720 have as a financial goal Obviously your goal should excite 0:16:14.760 --> 0:16:18.120 you and empower you. But a great goal everyone should 0:16:18.160 --> 0:16:21.960 have is a goal for passive income. And ideally you 0:16:22.000 --> 0:16:24.120 want to build up enough passive income that covers your 0:16:24.160 --> 0:16:27.920 living expenses, so you don't work by force, you work 0:16:27.960 --> 0:16:28.680 by choice. 0:16:30.720 --> 0:16:35.440 Where does it come from? Passive income almost feels like 0:16:35.480 --> 0:16:39.480 the end result here that you've got to build up 0:16:39.520 --> 0:16:42.560 to it through some smart decisions early on, whether it 0:16:42.680 --> 0:16:45.320 is about buying an investment property or whether it is 0:16:45.360 --> 0:16:50.359 about building an investment portfolio shares that are paying dividends 0:16:50.440 --> 0:16:52.840 and that you're able to earn money off those. It 0:16:52.920 --> 0:16:56.080 kind of feels like it's the end result rather than 0:16:56.120 --> 0:16:58.200 the way to get to it. How do you get 0:16:58.240 --> 0:17:02.440 to it? That's probably big question to answer in one episode, 0:17:02.480 --> 0:17:04.960 But how do you get there? What's the kind of 0:17:05.000 --> 0:17:07.600 where does this money come from? To build this? Well? 0:17:07.600 --> 0:17:09.560 There are lots of different strategies and look, you know, 0:17:09.600 --> 0:17:12.560 for people who don't have the ability to start necessarily 0:17:12.560 --> 0:17:15.560 investing today, what I would recommend they do is turn 0:17:15.600 --> 0:17:18.040 their attention to their superannuation because that is essentially an 0:17:18.040 --> 0:17:21.119 investment portfolio is just locked away. That is the passive 0:17:21.160 --> 0:17:24.520 income that's going to fund your retirement, So make sure 0:17:24.720 --> 0:17:28.480 it's invested correctly, make sure it's invested to your risk profile. 0:17:28.480 --> 0:17:30.320 You've got some goals behind it, and you understand how 0:17:30.359 --> 0:17:32.800 it works, the nuts and bolts, and what you need 0:17:32.840 --> 0:17:35.840 to do to help it grow. And you know, superannuation 0:17:36.000 --> 0:17:38.880 is just one facet of financial freedom. You know, when 0:17:38.920 --> 0:17:40.560 you're in a stage in your life where you can 0:17:40.560 --> 0:17:42.760 look at investing, it is a great idea to sort 0:17:42.800 --> 0:17:45.960 of have two strategies going in place, but again, speak 0:17:46.000 --> 0:17:48.240 to a financial planner because one may be more efficient 0:17:48.280 --> 0:17:50.120 than the other depending on where you are in your 0:17:50.520 --> 0:17:53.320 life cycle and cash flow and so forth. 0:17:53.960 --> 0:17:57.359 Do you see people that are and you have worked 0:17:57.359 --> 0:17:59.920 with a lot of clients over a long period of time, 0:18:00.359 --> 0:18:02.120 do you see people where they get to a point 0:18:02.119 --> 0:18:05.960 where they are able to live off passive income. Absolutely, 0:18:06.200 --> 0:18:09.320 because that to me feels like an incredible goal. 0:18:09.880 --> 0:18:12.800 Yes, and it is. I can't tell you what it's 0:18:12.880 --> 0:18:14.960 like to see it and be part of that journey 0:18:15.000 --> 0:18:18.159 and what should get to that point where clients couldn't 0:18:18.200 --> 0:18:21.239 even spend all the income that they were earning, and 0:18:21.280 --> 0:18:25.400 so their wealth just continued and continues today to keep 0:18:25.440 --> 0:18:27.919 growing because they just they can't possibly spend all the 0:18:27.920 --> 0:18:32.159 income that they've built over time through sticking to a strategy, 0:18:32.480 --> 0:18:36.720 getting advice, following advice, listening to advice, applying it, and 0:18:36.920 --> 0:18:40.520 not getting caught in market fluctuations and emotional knee jerk 0:18:40.560 --> 0:18:43.040 reactions decisions. They've let it do its thing, you know, 0:18:43.119 --> 0:18:47.360 let compounding interests work for them, and those people look 0:18:47.480 --> 0:18:52.960 so much happier and you know, enjoying incredible lifestyles. 0:18:52.960 --> 0:18:56.600 Now, it's worth probably pointing out that all of those 0:18:56.600 --> 0:19:00.680 components that you mentioned, kind of investment properties, building share 0:19:00.720 --> 0:19:03.720 portfolios and things, we've done separate episodes on all of those. 0:19:03.800 --> 0:19:06.399 So if you go back through the back catalog of 0:19:06.560 --> 0:19:08.760 episodes of How Today Afford that you will find kind 0:19:08.800 --> 0:19:11.239 of guides to each of those elements. But you kind 0:19:11.240 --> 0:19:14.600 of put it together and the potential of having passive income, 0:19:14.720 --> 0:19:17.800 earning money while you sleep, and that one day that 0:19:17.840 --> 0:19:21.120 could even be enough to be your primary source of income. 0:19:21.880 --> 0:19:24.200 Wow, but also can be a legacy as well. 0:19:24.680 --> 0:19:24.920 True. 0:19:24.920 --> 0:19:27.639 You know, if you're safe for simplicity, you have an 0:19:27.680 --> 0:19:29.800 investment portfolio pays you one hundred thousand dollars a year 0:19:29.840 --> 0:19:32.679 and you only need eighty to live off. You know, 0:19:32.680 --> 0:19:34.720 there's it's obviously a surplus that can continue to grow. 0:19:34.760 --> 0:19:37.600 But also when you pass on, you might want to 0:19:37.640 --> 0:19:40.119 donate that to a charity, and that gives a charity 0:19:40.119 --> 0:19:41.520 one hundred thousand dollars a year. 0:19:42.040 --> 0:19:44.520 And that can continue to be the case, rather than 0:19:44.600 --> 0:19:47.439 just donating a sum of money that you are actually 0:19:47.440 --> 0:19:48.879 helping to set them up as well. 0:19:48.960 --> 0:19:53.400 Exactly so, and I'm going to completely contradict myself. You 0:19:53.440 --> 0:19:57.480 can skip the passive income story if you want. I 0:19:57.520 --> 0:20:00.760 don't recommend it, but you know, so I need to 0:20:00.800 --> 0:20:04.359 obviously be completely open about other options because passive income 0:20:04.400 --> 0:20:07.280 doesn't appeal to some people. You know, there is a 0:20:07.320 --> 0:20:10.320 component of the fire community that's very much built focused 0:20:10.359 --> 0:20:14.560 on building up a lump sum and in drawing it 0:20:14.600 --> 0:20:17.359 down over a period of years. 0:20:17.440 --> 0:20:20.399 So fire is financial independence retire really. 0:20:20.680 --> 0:20:24.119 So I've seen strategies with people who've saved and you know, 0:20:24.200 --> 0:20:27.240 built up say an investment portfolio, not sorry, a lot 0:20:27.320 --> 0:20:30.000 some amount of money, say a million dollars, and they 0:20:30.040 --> 0:20:32.359 just draw fifty thousand dollars a year to live off. 0:20:33.600 --> 0:20:37.160 Now that is not passive income. They're eating into the capital. 0:20:37.280 --> 0:20:40.680 The concerns and the dangers with this is with inflation 0:20:41.000 --> 0:20:45.040 over a ten twenty year period, can see that million 0:20:45.040 --> 0:20:48.040 dollars erode away very very quickly. And then what do 0:20:48.119 --> 0:20:50.480 you do when that money runs out? You're back to 0:20:50.520 --> 0:20:53.320 square one again. If you can have even a small 0:20:53.359 --> 0:20:56.159