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THE SNOW BALL EFFECT OF DIETARY HABITS

Most of us know what in our diets we are eating that is not good for us. We know that chocolate isn’t healthy, or sugary sodas or butter to name a few examples. But we eat these things anyway under the assumption that they are a “sometimes” food. These foods may start off as a rare treat or an infrequent palate satisfier, but in time things start to get out of control and dangerous.

I read an article recently about NASAs asteroid redirect mission. One of their principles is that the sooner you can pick these things up the better. If the asteroid isn’t detected until its very close to earth, it will require a lot of thrust or other extreme measures to divert it on a safe path before smacking into our planet and destroying life as we know it. But if we pick it up early, the amount of thrust required to prevent it from hitting earth could be the equivalent of a friendly nudge.

Like the asteroid getting a small nudge a significant distance from earth, the same can be true for those unhealthy habits you have adopted. Let’s look at a likely example; Sally is a health conscious, reasonably active young woman. Every Saturday night she treats herself with a reward for being so disciplined during the week by ordering a Pizza and devouring the entire thing.

After not too long, she treats herself to a Pizza on Friday and Saturday nights, because why not, she’s in good shape and deserves it. During the week however she finds herself picking up a chocolate bar for her morning tea break. She never use to have sugar in her coffee but decides one small teaspoon cant hurt.

In 30 years time, Sally is over weight, has difficulty breathing just walking down the hallway, and her cardiovascular system is a ticking time bomb. But what does her diet look like now? Do you think she is still eating well except for her two pizzas a week, candy bar a day, and one teaspoon of sugar in her coffee. No, her diet is as unrecognisable as her now multiple chin, oily, unattractive face.

Those few nudges in the wrong direction 30 years ago initially looked like innocent, harmless treats, but they have snowballed and are the reason sally is going to die in the next couple of years while sitting at the table spreading an inch of butter onto her bread roll.

There is more going on here than just “bad habits” of course. There is also the chemical dependencies we can develop to things like sugar and salt. Its almost a losing battle when you look at the way the nutritional world has evolved. I never said it was going to be easy, but if you leave the asteroid heading toward its destination for too long, it will take a momentous amount of force to divert it off on a safe path. So one small nudge at a time, stop that thing from ending your life. Not tomorrow or next week, but now.

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To play the game of monopoly you have to role the dice. You can't just sit there, look at the board and expect to win.

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NEWB

So I thought I would address the elephant in the room and answer the question of; why I am writing these articles, who the f*@k am I, and what makes me a qualified person to be writing about this stuff.

First of all, the reason I am doing this is for mostly selfish reasons. I like writing and I like finance, so it’s a good way to combine the two and gives me something to do. Even if only one person benefits from it, that will make it worth it.

About four coming up close to five years ago I started on a journey of buying a house. Naturally what proceeded was an interesting evolution of Internet content searches on the subject of money.

I started off watching documentaries like “the four horseman’ and the general topic of what caused the financial collapse during different periods of time. As a result my outlook started off really negative and foreboding, like the world was coming to an end. This ushered me toward looking into buying gold, silver, and other similar assets.

Luckily I didn’t actually make any of these types of investments, mostly because I found it too hard to part with my hard earned cash. But I was almost sucked in… almost. I actually went and visited the national mint to learn more about purchasing gold and silver, but as I said I didn’t.

It made me realise that I had a lot more to learn and not everything you hear or read online is firstly; correct, and secondly; suited to everyone.

With the bad advice also came the great advice. I learnt a few real gems which made a huge difference to my current situation. Such as Automatic Millionaire, Millionaire Next Door, The Neurophycology of Self-Discipline and The Richest Man in Babylon to name a few. I’d hate to think where I would be today if I hadn’t discovered those.

I guess the point is that I have waded through a lot of information over the last four to five years and think I have a pretty good handle on it, at least for my situation.

So who am I then. I joined the Army as a medic straight from school, deployed to Afghanistan and before I left I was working as a trained special operations medic; specialising as a CBRNe rescue medic. I did seven years full time service. “I asked who you are Sam, not what you did for work”. While in the Army I managed to save ok amounts of money, but always ended up spending it on cars and other big purchases. In cash though mind you, I never had to borrow money even when I spent 24k on a car when I was younger. “I asked who you are Sam, not about your past”. Since leaving the Army I did some travel and after being ruthlessly dumped by my partner realised that I wasn’t thinking about the future enough. So I made the decision to change things financially. “I asked who you are Sam, not what you want to do”. (If you haven’t seen Anger Management, you will not get that reference).

I have no financial training or qualifications, and only know what I do from personal discovery and experience.

So I guess you would think I’m not the best person to take advice from. I would think the same thing. I think what I do have to offer though is maybe a lot of motivation, and possibly a different perspective on things. I’ve found the more stories and experiences I read about from blogs or videos or books, the more I learn, and can either attempt to repeat those actions, or avoid the mistakes.

So that’s a little bit about me anyway and my limited formal education on the subject, but decent amount of experience. I have a current net worth of about quarter of a million which I have accumulated over the last four to five years and I am 29 years old. My goal is that coveted one million dollar mark, which I hope to reach as quickly as possible.

I’m hoping to keep this writing thing up, because at the moment I am really enjoying putting my thoughts down on paper, rather than having them burn a hole in my head.

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YOU HAVE A BIG DECISION TO MAKE

There have been a couple financial decisions I’ve made that have made all the difference in my life. Looking back, each of these decisions have been turning points. When I made them at the time I didn’t realise they were such crucial changes, it’s only in hindsight that I can see the importance of them. I would like to share some of those with you.

The first would be joining the Army at 18 years old straight from school. I could write an entire article on this alone, probably several even, but for the purpose of this, the reason it was such a great decision is because it helped me learn the importance of discipline and hard work. More specifically, and without realising it at the time the biggest lesson I took away from it was that nothing is going to be just given to you and also that life is not easy. If you want something, you are going to have to work hard for it.

The second big decision ironically was deciding to leave the Army. After 7 years service, including a deployment to Afghanistan, I made the decision not to stagnate in the same career my entire life and broaden my horizons.

One thing I noticed and became more and more aware of as time passed, was the old sergeant majors, who had been in the Army for decades. Some of them were really awesome and inspiring guys. But most were tired, grumpy and cynical. You could literally sense that they hated what they were doing and took it out on those around them, particularly those in the lower ranks. Maybe it was jealousy. They were jealous of these young guys and girls wishing they could start over again, I don’t know exactly but what I did know was that I didn’t want to end up like that.

The third biggest decision was deciding I wanted to buy a house. It was kind of weird the way this motivation came about. Previously I didn’t really care or want to buy a house, and couldn’t really see the appeal. But after a rather traumatic breakup with a woman who was obsessed with settling down and having kids, I inherited the same drive.

While we were together she would constantly talk about how awesome it was going to be, and how happy we would be when we had our own place, settled down and had kids. I started picturing and imagining the same thing. Slowly over time I adopted the same mentality on something I previously didn’t care about or didn’t even think about.

I think after she broke up with me, maybe as a way of proving to myself that I was worth being with. Because at that time I felt like no one ever would. The tunnel vision of trauma can often cause you to think illogically, and I don’t still think that way. But the obsession stuck and a few years later here I am writing blogs about the topic of finance. I am so glad that she broke up with me, including all of the trauma that went with it because it caused a massive shift in my short sighted way of living life.

The fourth biggest decision was making my savings automatic. I started a new job, and slowly had to start working my way up the career ladder again. After a year or two of saving, the momentum was going well. But it wasn’t until I made a decent amount of my pay come straight out and into a savings account that I started making real headway toward my goal. I learned to make do with the lesser amount of pay I was getting because it was being re-routed into my savings account before I even knew of it’s existence.

The fifth biggest decision was making a way too impulsive purchase of an apartment off the plans. It was only the third place I had gone and looked at, and I knew very little about anything in the real estate world. But my instincts were right, and the opportunity was a great find. I wish I could tell people I knew exactly what I was doing and it was a well informed, intelligent decision. But that couldn’t be further from the truth. It worked out, but could easily not have.

Alternatively, if I delayed that purchase it would have not been there the next day. So I was glad I had put myself in a position that I could make the most of a great opportunity. I still can’t believe I made such an ill informed impulse decision on a half a million dollar purchase, how does that even happen?

I wonder what will be my next big financial decision. I’m sure when I make it I won’t know it’s significance until later, but as long as they keep happening that’s the important thing.

Keep making big decision and where possible make well informed ones, but not at expense of your instincts. Try not to get stuck doing the same thing for too long either, especially if that same thing isn’t getting you closer toward living the life you want. It’s interesting to reflect on past decisions. Initially things may not have turned out well and you thought it was a terrible choice. But then in 5, 10 or more years later they may reveal themselves to be the best decisions of your life.

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5 posts!

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DONT BE INTIMIDATED BY TIME

I think one of the main things that puts people off about saving money and their finances in general is the shear length of time it takes to make any progress.

Let’s be honest most people are not going to become rich overnight, or even in a few short years. For most of us it is going to take a long time, and doing it the old fashioned way by saving money.

If anyone has ever sat down and worked out how long it takes to save any significant amount of money, especially compared to property prices, you would be forgiven for thinking its a waste of time and effort.

Let’s look at a simple example. Most people are paid fortnightly where I live, so we will use this frequency. Let’s say I’m on a moderate wage of 60k a year. After tax and paying into a retirement account, that’s about $1600 in the bank.

Most people would be doing pretty good to save about 30% of that, which is $480. That’s a respectable amount to be saving each fortnight, and one would expect at least this amount if the goal was to buy a house.

Now let’s compare that amount to the average house price from my part of the world. You really can’t buy much for 500k other than a one bedroom apartment. But let’s assume you are single and this arrangement is suitable. For a 20% deposit (mandatory for most banks these days except under certain circumstances), you would be looking at a deposit of $100k. I’d like to point out that on an income of 60k, and a 80% LVR on a 500k house, it would leave you with a surplus of about only $800 a fortnight. Things would be tight let’s put it that way. But we will continue with the example.

If you were saving $480 a fortnight, or $12,480 a year, it would take about 7-8 years to get to enough to afford the deposit on a 500k property. That’s a long time! That is also a long time to “sacrifice” $480 each pay.

Without actually sitting down and working these details out, I think most people instinctively know that it takes far too long and hence don’t even bother.

So we have worked out some of the math, in regards to time and money. But there is more to this than just math equations. There is the personal side to it too, with emotions, motivation, personal circumstances may change, relationships may end, cars that shouldn’t may get purchased and next thing you know we are looking at 10 years or more to put that amount of money aside.

But there is also a possible positive spin to that equation too. Let’s say your personal situation improves, and you are able to save more money, or you run into some money, or move closer to work and sell your car. Maybe you increase your savings rate to 40% instead of 30%. All of a sudden those months and years start getting stripped away.

Whatever may happen, whether negative or positive, that time is still going to pass. 8 years is still 8 years. 20 years is still 20 years. The important thing is deciding what you are going to do NOW so when that time passes you will be in a better financial position.

Similarly if you think you can just leave your finances until later on in life, 8 years will still be 8 years when you are 20 or 40 or 60. Just because you will be older and wiser, doesn’t mean you can skip that time equation. The only way of getting time on your side is by starting now. Make time an ally not an enemy.

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The best time to plant a tree was 20 years ago. The second best time is now.

Ancient Chinese Proverb

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HOW DO YOU EAT AN ELEPHANT?

I have recently bought an apartment. Not that big of a deal really, especially compared to some of the millionaires and the like online writing similar blogs. But I’d like to share my story with those who may be interested anyway.

I started saving slowly and gingerly about five years ago specifically for a house. The belief at the time was that; on a single income, it’s not possible.

I decided to look ahead and figured eventually I would be able to save enough to afford it, even if it took me two decades.

I kept chipping away at it, month after month, year after year. I slowly learned ways to either reduce my expenses or increase my savings. Lessons I couldn’t have learned without the actual experience of going through those challenges.

Even after a few years of sacrifice and hard work, it all felt rather hopeless with the continued increase in house prices. The market was rising faster than my ability to save. The goal posts were moving.

But I continued to learn new tricks and techniques to over come the challenges. I kept surprising myself how much I was still learning on a relatively simple concept like saving money. But the more I learnt, the more I realised how complex a seemingly simple concept like saving money really is.

The more challenges that got in my way, the more I learned, evolved and adapted, and the more money I saved.

One thing I also noticed is the snow ball effect. In the beginning your savings seem to increase very slowly and it seems like it will take forever to get anywhere, infact it almost seems pointless. But the momentum really does increase with your accumulated wealth. Each time you figure out ways to either reduce your expenses or increase the amount you save, you push things along gradually more each time, until you look back and can’t believe how far you’ve come.

I am now the proud owner of a one bedroom + study apartment which I bought off-plan, and is due to be completed by April next year.

The journey has taught me several important life lessons. The first is that “everyone” is wrong. You can’t look at a population as a whole, and draw conclusions about the outcome for a particular individual. Nor can that individual draw conclusions about their outcome based on those in a similar population or demographic.

Specifically I’m talking about those trying to save money for a house on a moderate to low income.

The second lesson: how do you eat an elephant? One bite at a time.

(By the way, the eating an elephant thing is just a saying and in no way do I mean elephants should be consumed as food or otherwise)

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BRAINCHILD

If you couldn’t give any money to your children, but you could give them a strategy for financial success, what would it be? My strategy would involve two simple steps.

1. Figure out where your money is going, and work out ways to reduce or remove expenses.

When I was a couple years into saving for a house. I sat down one day, bought up my bank statement online and just went through it. I looked at what I was spending my money on, and how much a fortnight I was using. I thought I had been so diligent, saving so well with my automatic payments coming straight from my pay into a separate savings account. I was on top of it, I was all over it, but what I noticed made me realise, no matter how on to it you think you are, you will miss things.

I had signed up to Netflix maybe a year prior, and never really used it. I had completely stopped using it at least a couple months prior. But I was still paying the monthly subscription fees. I had completely forgotten about it. Made me realise that if I (boarder line obsessed with my finances) can miss something like that, how many other people are missing similar expenses that they aren’t even using anymore.

After that happened, I made a point of every month, going through my bank statement and looking, just looking, where my money was going. I actually noticed another subscription come out a couple months later. I thought I’d cancelled it, I’m still rather sure I had cancelled it… It was a three monthly subscription fee that would have been easy to miss due to the infrequent payments. I removed that expense aswell which only took a couple of minutes. This one was my Xbox subscription. I wasn’t using it anymore because I’d made the change to PlayStation.

Together, between the Netflix and Xbox subscriptions, I was effectively giving away, flushing down the toilet, burning, or whatever analogy you want to use, about $240 a year. I don’t care who you are, wasting $240 is not a great feeling no matter how you try to justify it.

Once you have some idea of where your money is going, systematically come up with solutions to get rid of, or reduce them. One at a time.

My most recent expense removal involved my transport costs. I previously owned a car. I decided to sell it and bought a motorbike instead. I had worked out the fuel efficiency was much better using a motorcycle and therefore would reduce my transport costs. It has certainly been less comfortable, but has saved me a lot of money over the last couple of years.

Things have changed recently though, and with the continued increase in motorcyclist deaths, and therefore increase in government spending, the price of motorcycle registration has skyrocketed. The increase is mostly ACC levis and has made it no longer financially viable for a diligent saver like myself. Infact, the cost of using a car vs motorcycle is basically the same now, and in some cases, especially with new model vehicles, cars are actually cheaper.

One morning my boss was late to work. He sent the team an email saying his train had broken down. I didn’t realise he caught the train, why does he catch the train, he has a really flash V8 commodore?! When he got into work, I asked him about it. He told me that we can use public transport for free if we show our work ID. He said that because his car is a V8 he likes catching the train during peak hours when he will be sitting stationary in traffic for long periods of time. I had no idea. Why didn’t someone tell me about public transport being free for our company sooner!

I had never really used public transport before, I caught the bus occasionally in high school, and hadn’t been on a train much except while traveling overseas. But the idea of reducing my transport costs significantly made me decide that I was going to make the change. I did a trial week, where I tried not to use my motorbike at all. It took abit of figuring out to begin with, organising the schedules for the different train hops and staying at my brothers on the days the trains or buses don’t operate during my start or finished times because I do shift work. But it worked and it wasn’t overly stressful or difficult and is saving me a significant amount of money.

I was spending about $30 a week on petrol, and about $420 on annual motorcycle registration. Plus conservatively about $150 on a warrant of fitness and any maintenance per year. That works out to be $2130 a year. Once again not a fleeting amount. Just because you have reduced your expenses in one area, it doesn’t mean there aren’t better solutions, so remember to keep revisiting those areas and looking for better ways to improve on the changes you have already implemented.

Through the identification and elimination of unneeded expenses, true saving can begin and continue.

As another, not recommended example, I noticed another expense that was worth looking into for a possible reduction. This expense involved my health insurance plan. I don’t recommend anyone downgrade their health insurance, it could be a tragic mistake. There were a few reasons I decided to go ahead with it though. The first is that I am still young and have been fortunate enough to have never suffered from any illness or long term injury, I am a vegan, and am physically active. Statistically speaking, I am at very low risk of needing to use my health insurance, especially to the level I was insured at. I didn’t get rid of my health cover completely though, I just downgraded it, and I am still covered by ACC for any accidents or injuries. I changed from the comprehensive cover to the surgical plan with a voluntary $500 excess. Basically I have insured myself against the sorts of things that are going to cost five figures or more to treat, rather than getting subsidised doctors visits which I will never use, at least not until I am over 50 in any real frequent amount. And realistically I’ll probably be closer to 65-70 if I manage to remain vegan. Statically speaking vegans age healthily.

This small change is saving me $520 a year. I even stopped going to the hairdresser, and am using clippers on myself now instead. Which is saving me $20-$25 about every month. A total of about $240 a year. Add up the reduction of the few expenses I have covered, and that’s a total of over $3000 per year.

Analyse your expenses, and use problem solving to figure out better ways. Sometimes you have to use your imagination, or advice from others. Often when you have figured it out, it becomes so obvious in your own head, you wonder why you hadn’t thought of it before. It can be frustrating spotting these expenses sometimes and then looking back at how much money you have lost over time.

2. Set up automatic savings. Start off small, adapt and slowly increase the amount.

When I first started saving money for a house, every payday I enjoyed moving my money around and seeing how much I had left-over to put into my savings account. Sometimes it was impressive and a decent amount of money. Other times, especially if I had spent abit of money over the previous two weeks, it wasn’t quite as much. But it was enjoyable nonetheless and gave me motivation to spend less during the weeks leading up to the next payday.

I felt like I had a good system going, I was saving money, and a good amount too. That’s got to be a better system than most. But I was wrong, there was a better way which I learnt about 2 years in. I learnt about a concept called “pay yourself first” taught by a guy named David Bach, author of the successful book “the automatic millionaire”. He tells people to do the opposite to what I had been doing. Rather than paying your rent or your bills or whatever else first, pay into your savings first, and make it automatic. That way you will make do with what you have left.

The first automatic payment each fortnight I set up, which was coming straight out of my pay was $500. I started small because I wasn’t sure if the idea was going to work, and was worried I would go into overdraft or something similar when my phone fees were withdrawn or other bills. If I had money left over after paying for all those things, I still transferred it into my savings. But I noticed something beginning to happen over the next few months; I made do with what I had. Having $500 less in my bank account started to feel normal, and I got use to it. After a few months I increased the amount to $800 a fortnight. The first couple of pays felt a little uncomfortable, but eventually I got use to that amount too and it felt normal. I didn’t miss the $800 and even wondered why I needed it in the first place.

My automatic savings are now at $1000 a fortnight, and I feel like I have plenty of money for my expenses, food, and extra spending money. This single change in the way I was saving made all the difference. I adapted to the new amount of expendable income, and after not long it even became normal. Simple, but hugely effective.

I try to tell people that you don’t need to save huge amounts. You can literally start with $5 automatically coming out of your pay each fortnight. Get use to the concept, and having $5 less, and when you feel ready and comfortable increase it to $10. Hopefully a few years down the track you can increase it gradually to maybe $100 a fortnight. You will be amazed at the feeling of wondering how you even needed that money in the first place.

1. Figure out where your money is going, and work out strategies to reduce or remove expenses and,

2. Set up automatic savings. Start off small, adapt and slowly increase the amount.

That is the strategy I would pass on to my kids, and believe it would be even more valuable than if I could give them money. The saying “give a man a fish and feed him for a day, but teach him to fish and feed him for a lifetime” comes to mind.

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The ominous bus of the empty handed

What if you get hit by a bus tomorrow, and you have all that money and never got to spend it.

This is a common question I get asked when the conversation occasionally changes to money. Although I don’t often find myself discussing money with people much. I guess due to the odd societal aversion to the topic.

I was asked this exact question recently on a first date. Because I am aware of different peoples discomfort with the subject of money, I didn’t turn to the subject myself, rather it was stumbled on, much to my amazement when the question of living arrangements came up.

I explained that I owned my own apartment. It is in a nice area, known to have high property prices. The conversation then turned quickly to how I had managed it, at a relatively young age and on a single income.

I explained to her that I have been making sacrifices in lots of different areas of my life, and as an example told her that I had caught the train to meet her just to save money on petrol.

I know what you are thinking. Maybe not the best tactic to tell a woman that you are tight with your money on a first date. However I disagree with that assumption for two main reasons. The first is that I would like to find a partner who has similar values and isn’t going to jeopardise my goals, and the second is that I have become a long term, rather than short term strategist.

Not alluding to the fact I am a tight wad in the short term may work; I may get to sleep with her after a series of expensive meet ups. But long term if we have similar values and goals, it is more likely to work out. So better to be honest from the outset, without boasting or being arrogant about it.

This long term approach I have found works well for more than just money and relationships. It seems to work well in lots of different areas of life. Another very important area of life that is often overlooked but also works well with a long term strategy approach, is health. Eating healthy and exercising will give you more years to wait for that ominous bus.

So what did I say in response to the question. I had already lived a number of years with that exact mentality of spending my money because ‘life’s too short’ and for some reason I never got hit by a bus.

I replied to her question with this: spending all your money, and putting yourself in financial hardship IS the 'bus’.

Wanting to go out with nothing left in your bank account is not a success driven mindset. If you want to do well at life, you have to play the long game. And sure, terrible things happen and peoples’ lives are cut short. Often those outcomes are unavoidable and/or uncontrollable. So why let one uncontrollable unknown negatively effect a controllable known. The controllable known being; if you save and invest for the long term you are securing your future.

I still haven’t been hit by a bus. In twenty years if that bus has still not come, I am going to have a happy successful life because I wasn’t afraid of it.