Wealth Creation Habits – D.The Gambler

Wealth Creation Habits – D.The Gambler

Check the transcript of the video here:

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

Check the transcript of the video here:

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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Meet Imran Amjad

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Imran is a trusted financial adviser, having provided quality advice to hundreds of clients since 2008, with positive reviews on adviserratings.com.au.

Hi, I’m Imran Amjad from Veurr Financial Planning, based in Canberra, servicing my clients all over Australia, from the Gold Coast to Adelaide, Darwin to Hobart, and Sydney to Perth. You can also see my credentials on the LinkedIn.

While technology now removes geographical barriers, having a trusted financial adviser working with you removes all the other hurdles on your journey to financial freedom. I engage with my clients discussing all sorts of things. For example, life experiences, families, retirement, including the grandchildren. By learning a great deal about you, this in returns helps me identify what is important to you.

For example, a chat with a client earlier in my career gave me a nudge as well. I discovered the importance of goals, both for financial and personal fulfillment. The client and I found that traveling was closer to our heart, and that conversation inspired me to pursue my goal as a globetrotter. That led to a new distinct approach to financial planning based on goal setting. I specialize in setting goals with my clients, especially earlier in their working lives. I strengthen these with strategic financial advice and regular monitoring. Ticking off these goals on the journey to financial freedom brings exceptional joy to my clients and myself. While this remains the focus of my approach to financial planning, I also have expertise in Australia-wide Defined Benefits Schemes, intergenerational financial advice, investment management, your wealth creation, and risk protection.

My strategic advice has brought peace of mind to many. My philosophy in financial planning is simple, yet distinguished: tailor solutions for your individual circumstances. Let me guide you and protect your wealth while you tick off the goals on your bucket list. I look forward to meeting you.

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Meet Maciej Stanek

Meet Maciej Stanek

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Hello, I’m Maciej Stanek, senior Financial Advisor and Director at Veurr. I’ve had more than 15 years experience in the finance industry. Today, I’d like to tell you a little bit about what we believe in at Veurr.

What does Veurr mean? The name Veurr is derived from Old Norse and it means protector and guide. This is our mission, to protect and guide you, and it means a lot to me as it is linked to my own personal values. I want you, my clients to feel confident and safe that I will be looking after your financial security while also providing education to help you achieve financial freedom. This mindset is different from what I experienced early on in my career. Let me share a little bit about that experience. When I first started in financial planning, I worked for one of the major banks. A typical conversation between a bank client and myself would be, “How are you mam, sir? What would you like to achieve when you finish working?” We would talk about their goals and their aspirations, travel, spare time, what dream cars they wanted to have. Everyone would be quite excited by this part of the conversation. And we would then write a big list of all the different things they wanted and figure out the cost of this type of post-working lifestyle.

Then I’d ask my client to share with me what they had done so far. For instance, “How much have you accumulated in income producing asset? Have you cleared all of your debts? Do you own your own home?”

All of these factors come into play to help somebody live a comfortable retirement lifestyle. And when I worked in the banking system, we would target a lot of clients who were nearing retirement, so maybe five, 10 years from that dream date. In a lot of instances, they had not been educated throughout their lives on how best to manage their money. They had not been guided, they had not been protected, they had not been told of other potential strategies they could be using to help them achieve their goal. There was usually a disconnect between what was achievable within the timeframe before retirement and what they actually could achieve. I left the bank and ended up working for a super fund and found that they treated their clients exactly the same way.

Now, for me personally, that does not gel with who I am. And why I do this? I really want to help people. And to me, the greatest satisfaction I can achieve from a job well done is when my client turns on and says, “You know what? Because of all the advice, because of the guidance, because of your help along the way, I actually got there.”

So, we really wanted to create a service where we have these conversations a lot sooner than age 50 or 55. That’s the mission of Veurr. Managing cash flow, saving, small investments, because we believe that with the right guidance, with our help, you can achieve financial freedom, especially if you know what that means for you and you’re clear about your goals. This is in line with my values and this is what I would like to share with every single one of my clients. Thank you.

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How to book a meeting

Make a booking

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Hi, I am Maciej.

And I’m Imran. We are experienced financial advisors at Véurr, and we are based in Canberra. With Véurr, you can get quality financial advice without the geographical barriers. Meeting with an advisor is easy. No matter where you are in Australia.

You simply click a few links to book your time, and you’ll be online and talking to us before you know it.

So how do we deliver financial advice services to our clients around Australia?

We live in a digital world and time is precious. Yet everyone still needs quality financial advice to make informed decisions. From your first point of contact online to meeting with us face-to-face, via your device, from your home office, or even your car. The process has been designed to make your life as easy as possible. Here’s how it works. Make a booking on our website. Pay the consultation fee. Receive your meeting invite via your digital link. Make sure your internet connection doesn’t let you down, and attend the meeting online. To get the most out of our meeting, try to collect the following information, an outline of your goals, a recent super statement, an estimate of your assets, an estimate of your debts, your current personal insurances, such as life, total payment disability, income protection, and trauma. If you have it. A summary of your cash flow, which includes your income and expenses. Without this information, you won’t get the best outcome from this meeting.

Here is what to expect from our first digital meeting.

We’ll work with you to: one, understand your needs and circumstances.

Two, focus on the areas of your financial advice where we can help.

Three, define your goals.

Four, develop a game plan to achieve your goals.

And five, explain ongoing services if required. Preparing your statement of advice can take around four to six weeks, depending on the complexity of the advice and the research needed. We do the work in the background while you get on with your life. It’s simple, straightforward, and proven. If you’re interested in getting your finances organized in the simplest way possible, it’s time to contact Véurr.

Click the link on screen to book your initial meeting with our financial advisors.

Let Véurr be your guide and protector every step of the way.

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