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Confirmation Bias

Check the transcript of the video here:

Hi, I am Imran Amjad, senior financial adviser at Veurr Financial Planning. Today, I will be explaining Confirmation Bias and sharing a story with you of a client of mine who got stuck in his own confirmation bias. So, what is Confirmation Bias? It’s a behaviour where someone develops a preconceived belief towards a certain theory or perhaps an investment strategy. They tend to ignore any counter arguments. They may also seek a professional to confirm this bias so they can continue on their preconceived path.

Now, about my client, Harry. A few years ago during one of our reviews, he brought in a chart showing property growth for the last 20 years and said, ‘I am going to buy a townhouse, the value will grow exponentially, isn’t that a great idea?’

I said, ‘Harry, the information may be correct, but I know the goals that we agreed upon and I understand well, for instance, your: current liabilities, income, cash flow and long-term goals. ‘This isn’t for you, yet.’ No, no, no, he says, in my community circle, everyone has 2 or 3 properties. And he said his brother was getting one as well, so he didn’t want to miss out.

I said, ‘Harry, I don’t know about them but I know your circumstances. ‘Have you considered: What if you lose a tenant for 6 months? What are the maintenance costs? What happens if interest rates rise?’

He searches and shows me another article on his phone, suggesting interest rates will stay lower for a decade at least. Yet this was current information only – as we have seen recently, financial landscapes change, and sometimes they change very quickly. Reluctantly, Harry promised to think about it more before doing anything.

On our next review, Harry seemed a bit distressed. He went ahead and bought the townhouse with his maximum borrowing capacity. During the pandemic, his tenant could not pay the rent for 3 months. Agent, tenant and maintenance costs had crept up since then. I asked him, ‘Harry, what happened to our discussion? You were going to think about it.’ Harry said he didn’t want to be left out of the property boom.

This time, Harry has brought more information with him that suggested property prices would increase post-pandemic with low vacancy rates predicted. I reminded Harry: ‘Regardless of these predictions, your income hasn’t changed, you have increased your liabilities and your long-term wealth creation is at stake.’

A few months later, Harry calls and sounds anxious.

Without heeding my advice, he had gone ahead with a ‘home and land package’ this time. He made a deposit just before the interest rates started to hike. Property prices came down and the future repayments doubled in a matter of a few months with reduced borrowing capacity.

He faced uphill struggles even on the current loans. He lost the preconceived growth even before the property was built. As his Confirmation Bias was shattering, he was struggling to comprehend his situation.

This scenario shows how some people can get carried away under their Confirmation Bias. My role as an adviser is not only to guide my client towards their financial freedom but also educate them along the way in making better decisions that are free of confirmation bias. Avoid disastrous results. Take a balanced view with expert advice.

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Product versus Goals Based Advice

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Hello. I’m Maciej Stanek, Senior Financial Adviser and Director at Véurr. There seems to be a disconnect between what clients understand financial advisers can help them with and what advisers actually do. Our aim is to help you achieve your goals with the right mix of products and advice. Let me explain. I recently had a discussion with a potential new client. This client had $80,000 in a bank account, which had not been touched for many years, and she decided it was time to invest it. The client wanted to know what to invest her money in. So I asked what she was hoping to achieve. She said, ‘I just want to know what to invest in to get the best return.’

My response was, ‘Why? What will be the purpose of the money when you get that return?’ The client response? ‘I don’t know. I just want to know what will go up the most.’ For contrast, let’s compare this conversation to one someone might have with their GP. A patient walks into the doctor’s office with a huge lump on the side of their neck and says to the doctor, ‘Doc, can you give me the best painkiller as my neck hurts?’ Doctor’s response is: ‘Why do you want a painkiller? Perhaps we should run some tests and figure out why your neck hurts? Then we can deal with the problem rather than just treating the symptoms.’

As you can appreciate, the doctor would not just prescribe painkillers – the doctor’s ‘product’ in this case. They would investigate why the patient has a lump on their neck and recommend the appropriate treatment to help the patient get better. It’s about the goal of getting better, not necessarily choosing a particular product. It’s the same with financial decisions. I can tell you that every investment is a product and different products have different characteristics.

Some products are suitable for what you want to achieve, and some are not. If we can establish a realistic financial goal, then I can help you choose the most suitable products to get there. In the case of the original client with the $80,000, I suggested we needed to think about her goals differently.

For instance, how much money does she need to be financially free? How much does a comfortable lifestyle cost? Once we have this baseline, we can figure out what combination of assets and products can help her meet the cost of her comfortable lifestyle. The next step is the timeframe. Say she wants to achieve this goal in 20 years, then we can work backwards to figure out: her starting situation, what she’s willing to regularly contribute to help achieve her goal what is the minimum required annual return on her capital to get her there.

Only once we’ve established these projections can we talk about which products are more suitable for the individual to help them achieve these goals. For instance, some clients have no interest in shares. Some only feel stress-free when they have their money in a property so they can drive past and see it. Some clients have no interest in excessive debt and they want to build up their wealth through regular contributions from their cash flow. Some clients have a tax problem if they choose the wrong product, while others will compromise on potential entitlements if they elect to invest in a way that just saves them tax.

It is only when an individual’s goals and circumstances are understood that products should be discussed. They help achieve the goal. They are not the goal itself.

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What is an LVR?

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Hello. I’m Maciej Stanek, Senior Financial Adviser and Director at Véurr. Today I’m explaining the loan to value ratio, or what’s called L V R for short. This term is used to describe the size of a loan as a percentage of the underlying asset that the loan is for.

It is commonly used when talking about loans on properties. The best way to explain this is by way of example.

If a property is worth $500,000 and a lender offers a loan of $400,000, $400,000 divided by $500,000 is 80%. So, the LVR on this scenario is 80%. In my opinion, this is a relatively high LVR, but I’ll explain the risks of a high LVR later.

There are two ways to reduce the LVR. The most common is by making regular repayments on the loan. If a loan gets paid down from $400,000 to say $250,000, and assuming the house value remains the same at $500,000, then $250,000 divided by $500,000 is 50%. So, the LVR in this scenario is 50%.

If a properly actually increases in value from, say, $500,000 to $1 million, and the loan remains the same, $400,000 divided by $1 million is 40%. So, the LVR of this scenario is 40%.

Both these scenarios are good for wealth creation. What if the opposite occurs? What if the property falls in value instead of increasing?

Take the same initial example, but instead of a property going up from $500,000 to $1 million, it instead falls from $500,000 to $400,000.

Now the debt is $400,000, and the underlying asset is $400,000. $400,000 divided by $400,000 gives an LVR of 100%.

And if by any chance the property fell even further in value and the loan remained the same, the LVR would exceed 100%.

This is a wealth destruction scenario, and if the individual in this scenario cannot make loan repayments, then the lender will confiscate and sell the underlying asset to recover as many funds as they can from the money that was lent.

Any unrecovered funds would still be the borrower’s responsibility. This is a scenario where the individual is now left with a loan obligation and no asset for their troubles.

It is a situation that I try and help all of my clients avoid as it is extremely difficult to recover from. Calculate your own LVR and get in touch for expert financial advice.

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Bad Debt and Good Debt

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Hi. I’m Maciej Stanek, Senior Financial Adviser and Director at Véurr. Bad debt is the focus of today’s discussion. Bad debt is simply borrowing money to receive goods or services, that once acquired, cannot be recovered to clear that debt.

An example of this would be to pay for a haircut or a holiday on a credit card. Once the service of getting the haircut has been provided, you cannot reverse that action. If this haircut was paid for by a credit card, which are borrowed funds, then you have to obtain funds to pay back that debt to the credit card company.

Similarly, if you take a holiday, pay for plane tickets, accommodation, and mojitos while using a credit card or a personal loan, then once you return from that holiday, you have to obtain funds to pay back the debt you incurred – you cannot un-fly in the plane or un-stay in the hotel!

Borrowing money in this way means you can pay for goods and services today. Yet future you has a responsibility for paying for those goods and services in the future. This becomes dangerous if today’s you goes overboard with the level of funds borrowed and future you cannot possibly obtain the funds required to pay for all of the borrowed funds of today’s you. There is also nothing to salvage and sell to pay back to the lender.

Bad debts also include loans on assets that depreciate in value. The most common asset in this category is a car.

You might get a car loan of $50,000 for a brand-new car, but as soon as you drive around in that car, the resale value drops below that $50,000 price tag you paid.

If you then sell the car, you may find that the price you get for the sale is less than the outstanding level of debt. In this instance, you have no car, but you still have debt. Even worse. What if you crash your car and it is uninsured or underinsured? You have no car and an even greater level of debt.

That all being said, not all loans are bad debts. If the resale value of the asset you buy using debt holds its value or increases in value, debt can be used to increase your wealth much more significantly than you would be able to do so on your own.

A house has historically been example of this. If you ask someone who purchased the house 20 or 30 years ago what they paid for it, they will most likely tell you a price which is significantly lower than the value of that same house if sold today. They probably took out a loan to buy that house equivalent to the value at the time of purchase.

So, in their instance, worst case scenario, if they had to sell the house to pay off their loan, the higher value of the house would clear the loan and they would be left with some extra cash.

Another example of a good debt can be explained as follows. What if I borrow $100 from my friend Jack and I tell him that I will pay him $5 interest every year that I owe him money? We do this for an undisclosed period of time until I have the original a hundred dollars to pay him back.

Now, if I do this for one year, I would owe Jack $5 in interest and I’d still owe him the a hundred dollars borrowed.

Now, let’s say I go to Jill and I say, ‘Hey Jill, I’ll lend you a hundred bucks if you give me $10 for every single year that you owe me that money.’

Now, if Jill agrees to this, she will have to pay me $10 every single year that she owes me money. And if I take the interest that I collect from Jill, the $10, and I pay back Jack his $5, I’m making a $5 profit on the difference.

Now if I did this for 10 years, I would get $5 profit every year for 10 years, resulting in $50. And I didn’t need to use any of my own money to do so.

This is an overly simplified version of what banks do when they offer interest on term deposits. They use the money from those term deposits to then lend money at higher interest rates to people who are borrowing for things like a house, a car, or the credit card purchases we spoke about earlier.

I hope this shows you that not all debt is bad, but if you’re unsure whether to take on a particular debt, it’s prudent to have a financial advisor guide you so you use debts to your advantage.

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Defined Benefits Schemes

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Hi, I am Imran Amjad, senior financial adviser at Veurr Financial Planning. Today, I will share with you the power of Defined Benefit Schemes (as shown on screen) and how they can provide a comfortable retirement.

I’ll also share an example of a situation where I helped my clients achieve their desired outcome using my knowledge of these schemes – I know them back to front and upside down!

I have vivid memories of meeting Steve and Bec. Steve was in the CSS defined benefit scheme. He was told by his employer that he had been made redundant. Steve and Bec had no idea how to cope with the situation. They had never seen a financial adviser and did not understand the defined benefit scheme.

Here they were sitting in front of me in extreme stress and as soon as I asked how I could help them, Bec was in tears and Steve dropped his head in his hands. Long story short, I got them talking about the outcome they wanted from this situation.

They wanted to achieve two things: pay off their mortgage balance and live comfortably. Bec also told me through tears that since they got together 30 years ago, they had a dream of travelling around Australia as grey nomads. They never had the chance with other liabilities and she felt now there was no possibility.

As an expert adviser on the CSS scheme, I understand the incentives that come with a redundancy in that scheme and how to maximise those benefits. I told them to leave their stress with me and go home. I would contact them in a few days with the strategies to achieve their desired outcomes.

A few days later, they were sitting in front of me again. Based on my expertise, I was able to explain how they could: pay off their mortgage in full and be debt free and have a guaranteed income indexed for life. And as a bonus, I was also able to: set up an account to invest a significant lump sum to cover any ad hoc needs they might have in retirement.

A few weeks later, Steve calls me. He says, ‘Imran, we found a camper and 4×4 on the coast at a dealership, costing this much. Can we afford it?’ I said to Steve that I’d call him back in 10 minutes. Knowing about their dream, I had considered this in their financial plan already. I checked the figures and called him back. I said, ‘Steve, go for it.’ I explained that his income is there for life. They are debt free. It’s time to live their 30-year-old dream.

Two weeks later, there is a knock on my front window in the office. Moving the blinds, I see Steve and Bec with big smiles on their faces and he waves to me to come out. I go to the front and there is a brand new 4×4 pulling a massive campervan. With tears in his eyes, Steve says, ‘Mate, you made it happen.’ But this time these were tears of joy.

So, if you have a defined benefit scheme, let me help you achieve your goals and you could be my next success story!

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Wealth Creation Habits – D.The Gambler

Wealth Creation Habits – D.The Gambler

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Hi. My name is Marciej Stanek, Financial Advisor at Veurr. In our series on Wealth Creation Habits, I explain the graph and the meanings of each of the lines in the video on wealth destruction, so I urge you to watch that one first. This video will cover the habit that leads to line D. Line D shows net worth or wealth that is rapidly increasing only to fall off a cliff and collapse after a period of time. I’ve seen this scenario play out in many ways in my life as an advisor. Every time, this was due to a lack of risk assessment and a lack of patience on behalf of that individual whose wealth was on this trajectory. You’ll find this is the complete opposite mentality to someone who is a perpetual saver. Line C. When these wealth effects are created by liquid assets like a dot-com boom, or in the years prior to the global financial crisis, or more recently in cryptocurrencies, the habit that is reflected reminds me of the habits of a gambler.

I’ll use an extreme example to explain this. At times, people come to see me because I think deep down they’re aware that what they are doing is not quite right. It might seem too good to be true. They want me to convince them that their subconscious is wrong. They are looking for an answer that will suit their confirmation bias. One individual told me about his cryptocurrency journey. He started investing in cryptocurrency in 2017 when the prices were still quite low. He had about $30,000 initially from an inheritance, and decided it would be a good idea to go all in on one particular cryptocurrency. He was lucky enough for this cryptocurrency to go up in value about 10 times. He then started adding more money to it, taking money out of his home loan, and convincing family members to put their money towards it as it was the best investment, in his opinion.

By the way, when I questioned him on his risk assessment, he shrugged his shoulders and said he didn’t know, but he thought he’ll be fine as this cryptocurrency would never stop going up in value. At this point, the value of this individual’s crypto investments with all the additional funds he had pulled against his house and from multiple family members was worth about 1.2 million. This was mid 2021. My consideration of risk reward led me to ask him whether he would consider selling half of his investment as he could not only clear his mortgage, but he could pull out all the capital he had put into the investment while still having $600,000 in investment to keep growing if his predictions came true. Like the gambler, he said no, and he would keep holding it until it doubles and doubles again, at which point he may consider clearing his mortgage. Recently, cryptocurrency fell about 75% and his investment is worth less than the total he put into it.

A second example, which is less extreme, but definitely much more common relates to investment problem. We’ve had a 40 year period of overall falling interest rates. As interest rates came down, banks were willing to lend more and more money to individuals that was possible at previously higher interest rates. This meant that people were armed with bank approved loans, and could go out and buy properties at higher prices or even push up the prices of properties that would’ve been lower when interest rates were higher. This cycle of ever increasing property prices gave individuals access to equity on their existing investment properties, which could be used to leverage into the next property. As this cycle of ever falling interest rates continued, people were willing to borrow more and more, and buy at higher and higher prices. There were others who experienced FOMO and would stretch themselves so they didn’t miss out.

I spoke to one individual a few years ago who was financially stretched as a result of the mortgage on his loan. Luckily for him, interest rates fell, and he had some financial breathing space. He was also soon thereafter lucky enough to be promoted at work and his income almost doubled in a very short space of time. When he spoke to me, he really wanted to buy an investment property. I told him that the load to value ratio on his own home was quite high and it would be a high risk strategy, especially if interest rates went back up. I explained that it would be more prudent for him to put money towards an offset account against his existing loan to build a protective buffer in case interest rates went up, or he had a large expense that he did not account for.

Unfortunately, he never became my client and he ignored my advice. He found a bank that was willing to lend him money for an apartment in a new construction. His total debt increased by about 70% and his loan to value ratio was at extreme levels. He finalized the new property purchase just before interest rates started rising again. I believe the value of both his property is now equal to the total debt, and he is again struggling with debt repayments. As you can see, there are many different financial habits that certainly don’t lead to financial freedom. Line E represents the wealth trajectory of somebody who is managing all of their bad habits wealth. There is no video that can be produced to reflect how to achieve line. That’s where an ongoing relationship with a financial advisor can keep you on track. The first step is recognizing and reflecting on your own habits. Stay tuned for future Veurr videos on the strategies you can use to make smarter decisions and better wealth creation habits.

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Wealth Creation Habits – C.Perpetual Saving

Wealth Creation Habits – C.Perpetual Saving

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Hi. My name is Maciej Stanek, financial advisor at Véurr. In our series on wealth creation habits, today I will discuss the habit that leads to line C. This line represents the perpetual saver, someone who is afraid to invest or spend. Before I get started, watch the previous videos to understand the graph meanings and what line A and B represent. Line C shows the impact on your wealth if you possess the savings habit. More accurately, for every $10 you earn, you spend nine and save $1. For this particular chart, it is assumed that this $1 is not invested, nor is it earning any interest in a bank account.

People who have this habit have to keep working to grow their wealth. They need other habits to achieve financial freedom. Let me tell you about a client who I worked with early on in my career. This client was a retired doctor in his late sixties. After a long career as a doctor, earning significantly more cash than the majority of Australians, he retired with only two assets, a debt free house, and $1.6 million in the bank account. At this point, most people are probably thinking that this is a really good outcome, yet I felt sorry for this man.

You see, he never invested any money throughout his career. Not only did he not invest in growth assets, but he did not invest in living. His whole life, he worked and he saved. Even with his above average income, he did not go on holidays or even eat nice meals. When I spoke to him, he told me that he’s frugal, predominantly eating baked beans, spaghetti, and bread. He didn’t eat steak, as he said, it cost too much money. He saved this way very early on in his life to buy his first house without needing to borrow money, which was not all bad, as when he was young, interest rates on property loans were in the double digits.

Once he purchased this house, he saved for that possible situation where he may not be able to afford to buy food if he couldn’t work. And therefore focused all his energy on building an emergency fund. He did that until the day he retired. Once he retired, he could not bring himself to spend any of it due to his lifelong saving habit. So he let the money earn interest in an interest-bearing account and lived a life which never cost more than the interest that he earned. This habit is more conducive to wealth creation than that outlined by line A or the financial treadmill outlined by line B. But the psychological ceiling and the fear of losing a single dollar did not create a scenario where this man was financially free.

I’ll also add that this habit is similar for those who only focus on paying off a house. They would also likely be represented by this perpetual saver scenario. These days, it’s unheard of for people to save for a house and purchase without any debt. So the perpetual saving is replaced by excess contributions into a home loan to clear the debt faster. I’m not saying that this habit or strategy is all bad. I reiterate that it is better than having habit A or B. I also agree that having a roof over your head debt free is part of the foundation of being financially free. But it is only the foundation. It is not the whole story.

I also believe that using a combination of wealth creation strategies throughout your life will increase the probability of financial freedom. That’s where a financial advisor can help.

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Wealth Creation Habits – B.The Treadmill

Wealth Creation Habits – B.The Treadmill

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Hi. My name is Maciej Stanek, Senior Financial Advisor at Véurr. In our series on wealth creation habits, today I will discuss the habit that leads to line B. I covered what the vertical, horizontal, and diagonal lines represent in the video on wealth destruction, so if you miss that, go back and watch it first.

In this chart line B shows the impact on your wealth if you have a habit of spending everything that you earn. Clients with this habit tend to describe their financial situation, saying things like, “I never seem to get ahead.” Or, “Even when I tried to save money, something came up and I used that money to pay for that unexpected expense.” Or, “I really needed to buy a $300 juice maker so I can save money on buying juices each week.”

This habit is quite obvious to someone like me who helps people achieve financial freedom every day but goes unnoticed by the person with the actual habit, and in many instances, it is never picked up and therefore never addressed. I’m going to pause here to give you an opportunity to think about your cash flow and ask yourself, am I on a financial treadmill?

Coming back to the rich, get richer and the poor get poorer excuse we give ourselves, I’ll again challenge this statement by sharing a story of a friend of mine. He is currently in his mid 40s and owns multiple properties, one of which is even debt free. He also has shares, savings and other assets. It may surprise you that he was a machine operator at a factory when he left school, and he worked in that role before he changed to being an entry level administration officer.

I tell you these details as he never had a high payroll. He is also the child of immigrant parents who came to Australia when he was young. He had no wealth to help him build from either. He married young and wanted to buy a house, so he put in extra work in the factory and set aside as much money as he could each year to build a good deposit for this house.

Within a few years, he had saved $50,000 at the exact same factory and the same period there was another person who had the same skills, same pay, and almost the same work hours. The second person liked to drive around in the newest car and go to the local pub on the weekends. He would generally take a loan for the car and commit to repayments for the required period only to buy another new car when the first one was paid off and again, recommit to repayments on this next vehicle.

These two were friends and would talk often. The second man often complained that he lived from paycheck to paycheck and the job didn’t pay him enough for what he did. Meanwhile, my friend had saved a deposit, purchased and then paid off his house only because his habits for managing money were so different. After working in the factory for over a decade, my friend left with an accumulation of some wealth while the second man still had nothing more than the car that he still owed money on.

At this point, I would suggest that if you feel that the second individual is you, it’s time to A, look at your credit cards and your bank statements. B, list all of your expenses so that you know exactly what they are and how much they take away from your income each month. If I was you, I would prioritize the expenses and start to eliminate the expenses that you consider are your lowest priority, or at least try to minimize them. If this bad habit relates to you, you can work on fixing it and moving to an individual who is represented by line C in the next video.

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Wealth Creation Habits – A.Wealth Destruction

Wealth Creation Habits – A.Wealth Destruction

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Hi. My name is Maciej Stanek, Financial Advisor at Veurr. In this series on wealth creation habits, I will discuss the habit that leads to wealth destruction as shown by line A. Before I get into that, I want to explain how we are measuring wealth accumulation, or in this example, wealth destruction. You can see that the vertical line measures overall wealth. The horizontal line measures time. The diagonal line moves from the intersection of wealth and time on the bottom left-hand corner in the right direction. Therefore, the diagonal line represents the individual’s wealth over time. You may have also noticed that there are no numbers on the vertical, horizontal, or diagonal line, as the chart can apply to anybody with any amount of wealth at any point in time. I purposely didn’t choose a 25 year old who has too much credit card debt and whose total income is not enough to even pay the interest on their credit cards, nor a 65 year old who has a reverse mortgage on their home, yet still has to draw down equity to pay their living expenses.

Yet the chart can apply to both of these examples. The diagonal line represents any individual who has a habit of spending more money than they are earning. In a mathematical representation, this could be shown that for every $10 earned, 11 is spent and that no matter the amount of wealth you possess, it will decline over time and if you replicate this over and over, it will result in line A that you can see here. In the introduction video of this topic of wealth habits, I stated that the rich get richer and the poor get poorer, not because of the money they have, but due to their money habits. There is an example of a very wealthy Australian whose father was worth over 6.5 billion when he passed away. His father passed on all of his wealth, including successful business assets to his son. Fifteen years later, his son’s wealth is about 5.7 billion. You’d assume that if the rich always get richer, the sum will be worth over 6.5 billion, 15 years on.

Maybe he does not possess the appropriate habits, regardless of the privileged position that money put him in. I can also share an example of a couple I met very early on in my financial planning career. This couple were diplomats from a European country. They were paid $200,000 income per annum between them. Their residential costs were paid for by the embassy. This included rent, electricity, and insurance. On top of that, their residents was cleaned at no cost to them and they could eat most of the time at the expense of many of the hosts they interacted with as part of their position. They also informed me that they were allowed to import a Mercedes-Benz from Europe and avoid all the taxes you and I have to pay on a similar vehicle when we purchase it. So much so that when they sold this car two years later, they would make more on the secondhand sale than it cost them to buy the car in the first place.

With all this in mind, do you want to know why they came to have a meeting with a financial advisor in the first place? It is because they’d reached a limit of $200,000 on their credit card and the bank would not increase their limit any further. When I suggested that they start using their above average income to start paying down the debt, they refuse to acknowledge that their spending habits were a problem. They were quite angry that I would not help them obtain more debt to cover their existing debt and obviously never became my clients. The reasons need to be identified and addressed. Bad debts will be covered in another video, but lack of respect for money is most visible when an individual exchanges money for some item or service, which brings them no utility or benefit. Oftentimes, the thought process behind an exchange of this nature is it was only two bucks, it was only 10 bucks or was only $50 or it was on sale.

That same money could have been used more wisely if it was respected. This habit is better addressed when an individual has little to no wealth. If they address the habit and their wealth increases, they start to value money more due to the effort it took to acquire and build. When an individual has these habits with a large pool of wealth to start off with, it could destroy much of that wealth in the learning process. Beating this habit is easier for some than others. In my experience, the people who you surround yourself with contribute to overcoming this habit. If your family and peers are middle class citizens, you behave similarly with money to what they do, and if your family and peers are wealthy with respect for money, you’ll share their habits and become wealthy, coming back to the statement, the rich get richer and the poor get poorer. Whatever is referring to the fact that if your family and your peers have habits that lead to poverty, you know no other way.

If you relate to what I’m saying, then you need to start to put together a budget outlining your income and expense. Start putting together a strategy to shake this bad habit and improve how you obtain and retain money. I personally believe that everyone in Australia is able to achieve financial freedom if they want to, but this bad habit needs to be eliminated first.

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Wealth Creation Habits – Introduction

Wealth Creation Habits – Introduction

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Hi, my name is Maciej Stanek, financial advisor at Veurr. In this series of videos about wealth creation habits, I will illustrate how your repetitive habits impact your wealth creation again and again.

Before we delve into challenging your thinking, I have a question for you. Have you ever heard someone say, The rich get richer and the poor get poorer?” If you have, you may just think to yourself that because you’re not rich, you cannot be. In my opinion, the person making this statement was actually implying that the rich are getting richer at the expense of the poor getting poorer. I will explain in the following videos why I don’t believe this statement to be true.

Now, there are many instances why the rich prey on the poor to increase their own wealth, but I also question, what are the rich doing to get richer that the poor can learn from? I’ll show you that it’s not money on its own that grows wealth. It’s the habits of the individual managing that money to grow wealth, or in some examples, lose wealth. The chart of the five potential trajectories for one’s wealth is shown here. It’s based on the habits of how an individual manages their wealth. Line A, B, C, D show habits that can be improved. While line E shows the wealth trajectory of someone who understands which habits are detrimental to their wealth creation and has learned how to nurture the habits that lead to financial freedom.

To really be wealthy, you first need to acknowledge that wealth is a privilege. It is a skill to both obtain and retain wealth. So if you want to learn these skills, you first need to respect money, then understand which habits you have that stop you from being financially free. Only when you acquire this knowledge can you learn to understand what you need to change about yourself and be willing to make that change. If you start believing statements like, “I don’t need to be rich to be happy,” or “I want to live for today because tomorrow I could be hit by bus,” then you haven’t fulfilled the respect for money portion of this exercise and you will not be able to achieve financial freedom. If you’re willing to challenge yourself, watch the next four videos and maybe learn something new about money and about yourself.

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