Investmentproperty's Blog

I am pleased to announce that my son has set up a new website for me to display my original Australian oil paintings that are for sale. These can all be bought using secure Paypal and will be delivered anywhere in the world. These original 100% hand painted oil paintings are priced well below the normal gallery prices, as they are sold direct, avoiding the hefty art gallery commissions. Please visit my new virtual art gallery at http://www.gallery-of-oil-pai...

Hello to everyone who has been supporting my blog. I am happy to announce the release of my latest book entitled "Christian Investing and Money Management". It is published through Lulu.com and distributed internationally by Ingram and in Australia by myself. You can also find more details on my webpage at http://investmentproperty book... I have been getting some very positive feedback from readers and have several magazines who will be doing reviews on it in the next couple of months. This book fills the gap for works on Christian Investment that are applicable to the Australian property market and taxation system, but most of the principles can also be easily adapted to other countries. It covers areas including budgeting, goal setting, compounding interest, using other people’s money to help build wealth and much more. It is the culmination of over eight years research, interviews and personal experience. This book examines the area of Christian Stewardship and how this relates to careful money management, budgeting and investing. The ISBN is 978-1-4303-0428-9 Thank you again for all your support. Regards Debra Lohrere Author of books on Property investment and Christian prophecy http://investmentproperty book...

The looming hardship that will be faced by many of the baby boomers once they retire could well affect women a lot harder than men. The likelihood of the government being able to afford any sort of reasonable amount of pension is very slim, simply because of the magnitude of the number of people who will be retirees, compared to the working population. The Australian government has realised this, and that is why they introduced the compulsory employer paid superannuation scheme and are even now beginning to give financial incentives to Self-funded retirees. They are also now encouraging people to work well beyond the 65 year barrier. Most people have never sat down and even considered the ramifications of why the compulsory super was introduced and for many of us it is a matter of too little too late. Even for the young women in our society – who have a full working life ahead of them, they still cannot rest assured of a comfortable retirement. Why is this? It is because that unfortunately even with contributions at the current level of less than 10%, someone on an average wage who works continually for 30 years, is still going to find themselves trying to survive on an income equivalent to less than $20,000,00 per annum in today’s dollars. You will notice that I said continually working for 30 years. This is another reason why women are particularly disadvantaged, firstly because they often have to take up to ten years leave from the workforce to raise children, secondly because women in general earn less than their male counterparts and thirdly because an enormous proportion of the women in Australia, will never have received any previous superannuation contributions, prior to the compulsory superannuation being introduced, and will therefore not have had contributions made over their entire working life so far, giving them even less to fall back on by the time they retire. Many women may previously not have thought of lack of superannuation contributions as being a problem, as their husbands may have been contributing to super since they first began work. Unfortunately though with the high number of divorces in this country, it is unwise to rely on the fact that your partner’s superannuation will be there for you in your retirement years and even if a large proportion is awarded in a settlement – that it will be sufficient to sustain a comfortable retirement for any length of time. All of these factors are why women now more than ever, need to begin taking action to build up a source of ongoing income, that will grow to such an extent, as to be able to provide a secure and happy future for themselves and their children. It needs to be a source of income that is unrelated to physical work…that is an income that is generated from income producing assets – and not from our personal efforts. One of the best sources of creating this ongoing income stream is to begin building an investment portfolio property, also aptly paraphrases as bricks and mortar. We need to start collecting income producing assets now, so that they will have time to grow and develop so that we will be financially independent for our retirement years. Property is one of the best types of income producing assets, mainly because through gearing, which is borrowing other peoples money to supplement our own, we are able to control assets of a far greater value, and benefit from the growth on the overall value, including the borrowed portion, in contrast to only benefiting from the growth on the small portion of our own money contributed. For example, if you have $10,000.00 invested at 7% compounding, then in ten years it will grow to around $20,000.00. If on the other hand you have used that $10,000.00 as 5% deposit on a $200,000.00 property, which grows in value by 7% per year, then after ten years the property would have grown in value to nearly $400,000.00 giving you a profit of almost $190,000.00 instead of a profit of $10,000.00 had you just invested your own money. After 30 years your money alone would have grown to just over $76,000.00 and the geared property would have grown to more than $1.5 million. This example of course has not taken into account the initial purchasing costs involved to secure the investment property, nor has it taken into account the rental income that you would also be receiving….I have simply used it to demonstrate that the more assets that you can get working for you, the better off you will be. Debra Lohrere is the author of Creating Financial Security through Property Investment http://www.lulu.com/content/1... and How to Research Investment Properties http://www.equilibriumbooks.c... Please visit her website at http://www.investmentproperty...

 When people look at investing, there are three main areas to choose from; shares, property or cash deposited in interest bearing accounts. Why has property proved to be the most effective choice?

In Australia and many other places around the world, over the past 50 years property has averaged 10% p.a. compound growth. (Carefully selected properties have averaged even greater returns). Not forgetting that investment properties also generate an income from rent.
 
Median priced property in Australia have averaged growing at 2 – 4% p.a. higher than inflation, making it a very solid investment.
 
One of the most effective way to build riches is to accumulate a portfolio of investment properties (over the space of 7 to10 years) and then let the power of Compound Interest work to your benefit.
 
The main reason that property can be utilised more effectively than shares as an investment, is due to the added benefit of being able to highly leverage an investment property.
 
Leveraging is where you use a small portion of your own money along with a large portion of someone else’s money (a bank loan) to secure an investment of a far greater value than you could have, using only you own money.
 
If you invested $10,000 directly into shares that were growing at 10%, then in 7.2 years they would be worth around $20,000. On the other hand if you had used that $10,000.00 as 5% deposit on a $200,000.00 property and borrowed the remaining 95% plus establishment costs. If this also grew at 10% then in 7.2 years your investment would be worth $400,000.00. Meaning that by leveraging your investment you have gained an additional $190,000.00.

 

 Compounding has an even greater power, the longer it is allowed to work. With the above example, if you were looking at a 21.6 year period, then the results are quite staggering. The un leveraged shares would be worth $80,000 and the property $1,600,000, a differential of $1,520,000.
 
It is possible to borrow 100% of the purchase price of a property plus expenses by securing the deposit against your own home, so that you don’t need a cash deposit.

Isn't going into debt a bad thing?

There are two types of Debt. Good Debt is where you borrow funds to secure a capitally appreciating, income-producing asset. Bad Debt is where you borrow to buy a capitally depreciating, non-income producing item such as a car, boat or holiday.
 
There are many different strategies for property investing, which suit different people depending on their current income or financial position. A combination of using Good Debt to buy property and then allowing Compounding to do its work – seems to be one of the most effective way of creating wealth. But this is definitely not a “Get rich quick scheme”, on the contrary it is a “Get rich slowly” scheme which works most effectively over a 10 to 20 year period. It takes patience and perseverance, but after having spoken to dozens of other property investors, many of whom have become multi millionaires within the space of 10 to 15 years, I am certain that it is worthwhile.

Debra Lohrere is the author of Creating Financial Security through Property Investment  and   How to Research Investment Properties.

In Australia & elsewhere over the past 50 years property has averaged 10% growth per annum.

The time that it will take for a property to double in value can be calculated using the Rule of 72.

This rule says that 72 divided by the compounding growth rate equals the number of years it will take to double in value.

This means that as a property increases at a rate of 10% that every 7.2 years the property doubles in value.

Therefore if you purchase a $250,000 investment property and hold it for 21.6 years, it will then be worth $2,000,000 (increase of $1,750,000) so you will have averaged $83,333.33 per annum profit!

Well researched properties can give even greater returns.

This example has not taken into account the effect of inflation, however it is easy to see that hardly any other investment could match the power that gearing into property can have.

If you purchased a $250,000 property using a 10% deposit and allowed 5% of the property value for purchasing and legal expenses, then you would be investing $37500.

Had you invested this same amount of money in another investment, without using the power of gearing (that can fairly safely be used with property, but is risky with many other investments like shares, due to the volatility of the share market, and the possibility of loosing all invested funds should a company you invest in go bankrupt) then in 21.6 years your investment would have grown to $300,000, an increase of $262,500, giving you an average annual profit of $12,500.

This means that you would have lost out on $70,833 per annum in profit.

It has been estimated that over 95% of the world’s millionaires have made money through investing in property. It has also been said that the best way to become successful it to find someone who is, and copy what they have done. With this in mind, once you are aware of the huge potential that property investment has for creating wealth, and have decided that you would like to follow this course of action, how do you know where do you start?

The most important thing you can do is become informed. Learn how to research the property market, so that you will be able to purchase properties that will not only give a good rental yield, but they will also return the best capital growth possible. Read as many investment books as you can. Read auto-biographies of successful people. Learn what they did right, and even more importantly what they did wrong, so that you won’t make the same mistakes. Speak to people who have succeeded in doing what it is that you want to do. The more you learn, the easier it will be to recognise a good investment.

Find out about Negative, Neutral and Positive gearing – and why gearing is such an invaluable tool, which will enable you to build up a wealth base in accelerated time, compared to if you only invested your own hard earned dollars. Once you have educated yourself and understand why investing in property is such a powerful tool, you will be able to embark on the road to financial security. In Australia, and many other countries less than 5% of the population reach retirement able to support themselves, without government or family assistance. If you want to be one of the elect who are self sufficient at retirement, then now is the best time to start striving toward financial security.

"Creating Financial Security through Property Investment" explains how to Set Goals, take control of your finances and embark on the road to independent wealth by investing in residential Real Estate. Available at http://www.lulu.com/content/1...

We would all like to think of ourselves enjoying the good things in life, not having to stress about finances, and not having to be concerned about growing old, poor.

But if we are currently living from pay cheque to pay cheque, never seeming to get ahead or having any savings, how do we change things? Where do we start in our quest for financial security?

The best thing we can do, is sit down, take a deep breath and contemplate the differences between the haves and the have nots, the achievers and the laymen. What is it that the successful and wealthy do, that is different to us? What are the principles that they utilise to create wealth?

Once we find out the principles that others who have created financial security have used, it seems that then the only step left would be for us to try and duplicate the process.

Following is a list of some of the wealth building principles that I have discovered in my study of and conversations with successful people.

These concepts have been utilised extensively by those who have already created enormous wealth.

1. Use the power of Compounding Interest/Growth.

John D. Rockerfeller once described compounding interest as the “Eighth Wonder of the World”. Compounding is also referred to as Rate & Time because the longer the time, and the higher the growth rate, the greater the effects of compounding become.

Compounding works by letting any interest earned get added to the initial investment, and then the next lot of interest is calculated on the sum of the two, and so on. Interest is earned on interest. This gives the effect of exponentially increasing the value of an investment. One of easiest ways to calculate how compounding interest works with different rates of return is to become familiar with the Rule of 72.

This rule states that “The number of years that it will take for your money to double is 72 divided by the interest (growth) rate”. Therefore if you have $1,000.00 invested at 10% interest, then the number of years that it will take for your money to double to $2000.00 is 7.2. 72 divided by 10 = 7.2

2. Use the tried and true method of investing in residential real estate.

Statistics show that over 98% of the world’s millionaires have made their money through property. It should really not come as a surprise, because everyone needs a place to live, and generally at least one third of the population are renting.

Property is a necessity, so it can never go out of fashion. As the population increases, so does the need for housing. The laws of supply and demand therefore will ensure that prices keep rising. Banks consider property to be one of the most secure investments and because of this they will loan you a high percentage of the value. This leads to the next principle.

3. Using Other Peoples Money or Gearing is a tool used extensively by the wealthy.

Why is using Other People’s Money so important? The reason is that it is possible to use “leverage”, also known as “gearing” to obtain a greater result, than you could have obtained using only your own contributions.

The word leverage comes from “lever”. As you know a small amount of force applied on one end of a lever, can produce force far greater than what was initially exerted. A lever has the effect of multiplying the power exerted. In the case of investing, it is referred to as leveraging when you use just a small portion of your own money, say 10% deposit on a $300,000.00 house, and borrow (leverage) the rest, in this case 90%. The capital growth that you benefit from is then calculated on the full $300,000.00, not just the $30,000.00 that you personally contributed, having the effect of multiplying your capital gain.

Gearing allows you to purchase a far more expensive property than you could if you were using only your own money. Controlling assets of a higher value means that compounding growth has more to work on, and therefore your net worth will increase much quicker.

Gearing allows you to build an investment portfolio more quickly than would otherwise be possible.

4. Learn to Set Goals

Most self made, successful business people and investors have achieved their success by planning to do so. They have set goals for themselves and achieved them. They invest time in reading and learning about wealth creation and are happy to learn from other people’s mistakes and experiences, as well as their own. They set goals, and realise that they will be far better able to achieve them if they familiarise themselves with the ways in which other people acted and the things that others have done to succeed.

Wealthy people create wealth by carefully utilising the income that they have available to them to their best advantage. They know that working harder and longer hours is not the way to achieve financial freedom, instead they have to utilise what they have, and make it grow. Having a goal enables you to focus your energies on devising ways to achieve it.

When someone makes a decision and begins focusing on achieving a specific goal (and even better in a specific period of time), the powerful subconscious mind goes to work and begins playing with ideas and developing strategies of various ways to bring about the successful completion of the goal. When you set yourself a goal both your conscious and subconscious start working on it and begin to develop an action plan. You will begin asking yourself questions about what needs to be done to enable you to reach your goal. Many find themselves coming up with amazing ideas and solutions to problems or obstacles that have been in the way of achieving their goal.

The subconscious is an extremely powerful tool. The more often you remind yourself of your goal, the more your mind will work on ways for you to achieve it. Some people find answers come to them when they are asleep and dreaming. Have you ever noticed that there is no correlation between being wealthy and having a high IQ or a university degree? If there were, every doctor and university graduate would be wealthy, and as statistics show, most of them end up in the same situation as 95% of the population.

Setting Goals helps you to focus your energy on developing workable strategies. Setting long term goals helps you look at the big picture. Once you can see the big picture, you can develop small sub goals. Sub goals are small simple goals that can be followed one step at a time. When you progressively achieve your sub goals, you will get closer and closer to your major goals. Goals are simply plans to succeed. It is said that if you “Fail to plan, then you plan to fail”.

Goals help you keep motivated. Progressively achieving your goals can lead to a wonderful feeling of fulfilment.

5. Learn how to Budget.

 Budgeting does not have to be tedious. All you need to do is to work out: What your incomings are. What your regular outgoings are and then make sure that all of your other expenditure is less than the amount remaining. This will allow you to start saving and investing. Budgeting puts you in control of your finances.

6. Learn about investing – in particular about property investing.

Learn to research the property market, so that you will be able to purchase properties that will not only give a good rental yield, but they will also return the best capital growth possible. Read investment books. Read auto-biographies of successful people. Speak to people who have succeeded in doing what it is that you want to do.

The more you learn, the easier it will be to recognise a good investment. Find out about Negative, Neutral and Positive gearing – and why gearing is an invaluable tool, which will enable you to build up a wealth base in accelerated time, compared to if you only invested your own hard earned dollars. Once you have educated yourself and understand why investing in property is such a powerful tool, you will be able to embark on the road to financial security.

In Australia, and many other countries less than 5% of the population reach retirement able to support themselves, without government or family assistance. If you want to be one of them, then now is the best time to start striving toward financial security.

Debra Lohrere is the author of several books on property investment, creating financial security, goal setting and the power of compounding. Please visit her homepage http://www.investmentproperty... or storefront at http://www.lulu.com/DebraLohr...

Baby boomers face a bleak financial future. This all too common line seems to be finally sinking in, as many of the baby boomer generation are beginning to take a proactive approach to their retirement planning. As well as increasing personal superannuation contributions, many have begun to look at direct investing in both the share market and property markets. Unfortunately many of the property marketeering companies operating in Australia have sought to take advantage of this, and have targeted their marketing campaigns at them.

Two tiered marketing, where property companies sell investment properties (often off the plan) to interstate buyers, who are unaware of the current genuine market climate at highly inflated prices often $30,000.00 to $50,000.00 above true market value, have been rife in Australia for several years. The companies have a highly organised and professional approach, beginning with a free seminar that highlights the advantages of property investment and then offers a free assessment with one of their representatives to see what their current financial position will allow them to afford. After the initial pre-approval for finance process is complete they are offered free, or highly subsidised air fares to view interstate properties. The condition being that if they don’t purchase they will have to foot the bill for the air fares. On arrival the first stop is to visit the finance broker to confirm how much they can borrow, followed by an intensive tour of properties in their price range. The day concludes with another trip back to the office, where they are encouraged to sign the dotted line and purchase the property on that day. High pressure sales tactics are employed throughout.

The book “How to Research Investment Properties” by Debra Lohrere aims to educate people about how to carry out their own assessment of properties, so that they will be able to recognise the difference between a good buy and a highly inflated proposition. It begins with a brief introduction of the amazing potential that property investment has for creating substantial wealth and providing for a financially secure future. It discussed what type of property should be sought after and the various features that are desirable to make a property both easy to rent, and give it the potential for the greatest capital gains.

It discusses the varying price ranges of property - low end, median priced and high end properties and explains the advantages of each.

It covers the topic of Positive, Neutral and Negative gearing with an explanation of how these can all effectively be used. It gives examples of different investment strategies that will suit different investors, depending on their current financial situation and comfort levels.

This book aims to give all the information required, to prevent would be investors being deceived into purchasing overpriced properties. The most important advise that anyone can ever give in relation to investing in anything, is to "Do your homework first". Research and knowledge are the keys that enable people to make intelligent, well informed decisions. This manual aims to give people to information they require to do this.

Debra Lohrere is an author of several books on property investment and how to create financial security. Please visit http://www.investmentproperty... or her storefront at http://www.lulu.com/DebraLohr...

It is vitally important in this current day and age for all of us to begin taking control of our financial situation and start planning for our future, and the futures of our children. We can no longer rely on the government to hand out an aged pension once we retire. We cannot take for granted that at the end of our working life we will be taken care of financially. The world population is ageing, due to the baby boomer generation, and within 30 years there will be so many retired people, compared to the number of working age people, that it will be economically impossible for the government to afford to provide any reasonable source of monetary assistance for the elderly. The Australian government has realised this, and that is why they introduced the compulsory employer paid superannuation scheme and are even now beginning to give financial incentives to Self-Funded retirees. Most of us have never sat down and even considered the ramifications of why the compulsory super was introduced and for many of us it is a matter of too little too late. Even for the young women in our society – who have a full working life ahead of them, they still cannot rest assured of a comfortable retirement. Why is this? It is because that unfortunately even with contributions at the current level of less than 10%, someone on an average wage who works continually for 30 years, is still going to find themselves trying to survive on an income equivalent to less than $20,000,00 per annum in today’s dollars. You will notice that I said continually working for 30 years. This is another reason why women are particularly disadvantaged. Firstly because they often have to take up to ten years leave from the workforce to raise children, secondly because women in general earn less than their male counterparts and thirdly because an enormous proportion of the women in Australia, for example, will never have received any superannuation contributions, prior to the compulsory superannuation being introduced, and will therefore not have had contributions made over their entire working life so far, giving them even less to fall back on by the time they retire. Many women may previously not have thought of lack of superannuation contributions as being a problem, as their husbands may have been contributing to super since they first began work. Unfortunately though with the high number of divorces in this country, it is unwise to rely on the fact that your partner’s superannuation will be there for you in your retirement years and even if a large proportion is awarded in a settlement – that it will be sufficient to sustain a comfortable retirement for any length of time. All of these factors are why women now more than ever, need to begin taking action to build up a source of ongoing income, that will grow to such an extent, as to be able to provide a secure and happy future for themselves and their children. It needs to be a source of income that is unrelated to physical work…that is an income that is generated from income producing assets – and not from our personal efforts. One of the best sources of creating this ongoing income stream is to begin building an investment property portfolio, also aptly paraphrased as bricks and mortar. We need to start investing in income producing assets now, so that they will have time to grow and develop so that we will be financially independent for our retirement years. The most important concept to grasp in relation to building wealth for retirement and for creating finances that can be directed toward charities, or helping out your family is that of Compound interest. In mathematical terms 72 divided by Compound Interest Rate of Return = Years for Money to Double in Value. Therefore if you have $1,000.00 invested at 10% interest, then the number of years that it will take for your money to double to $2,000.00 is 7.2. It will quadruple in 14.4 years and be worth 8 times as much in just over 21 years. If your money is invested at 7% interest, then it will take approximately ten years to double in value. If it is invested at 5% it will double in just over fourteen years. The two most important aspects of compounding are one: rate and two: time. The higher the rate and the longer the time something is left to compound, the greater the final result will be. This is why the sooner we start investing, the better. Debra Lohrere is the author of several books on property investment, creating financial security, goal setting and the power of compounding. Please visit her homepage http://www.investmentproperty... or storefront at http://www.lulu.com/DebraLohr...

Having a goal enables you to focus your energies on devising ways to achieve it. When someone makes a decision and begins focusing on achieving a specific goal (and even better in a specific period of time), the powerful subconscious mind goes to work and begins playing with ideas and developing strategies of various ways to bring about the successful completion of the goal. When you set yourself a goal both your conscious and subconscious start working on it and begin to develop an action plan. You will find you begin asking yourself questions about what needs to be done to enable you to reach your goal. You may find yourselves coming up with amazing ideas and solutions to problems or obstacles that have been in the way of achieving your goal. Solutions and ideas that you are surprised you ever thought of may start popping into your mind. Our subconscious is an extremely powerful tool. The more often you remind yourself of your goal, the more your mind will work on ways for you to achieve it. Some people find answers come to them when they are asleep and dreaming. Have you ever noticed that there is no correlation between being wealthy and having a high IQ or a university degree? If there were, every doctor and university graduate would be wealthy, and as statistics show, most of them end up in the same situation as 95% of the population. The main thing that the majority of independently wealthy people have in common is that they have set goals for themselves and achieved them. They invest time in reading and learning about wealth creation and are happy to learn from other people’s mistakes and experiences, as well as their own. They set goals, and realise that they will be far better able to achieve them if they familiarise themselves with the ways in which other people acted and the things that others have done to succeed. Wealthy people create wealth by carefully utilising the income that they have available to them to their best advantage. They know that working harder and longer hours is not the way to achieve financial freedom, instead they have to utilise what they have, and make it grow. Setting Goals. When you begin to work out your goals you need to make them as specific as possible. A vague idea or generalization like “I want to buy investment properties and become wealthy” is not enough. You need to be much more detailed. “I want to own my first investment property within six months. I will save for the legal and bank fees, and borrow 100% of the value of the property. I will find an extremely well priced, three bedroom brick veneer house that is close to schools and shopping centres. It will be either brand new or less than ten years old. It will be structurally sound, and require a minimal amount of maintenance. I will find a good agent to manage it, who has a lot of experience and will find me a good tenant.” This is a specific goal, and you could add a lot more to it. Because your goal is specific your mind immediately begins to ask questions such as “How much money will I need for the fees and charges? How much does that relate to if I break it down on a weekly basis? Will I have to look at my current expenses to see where I need to cut back so as to make up the difference for the amount I need to save?” Specific goals help you to create specific, realistic action plans and as the old saying goes, “If you fail to plan, you plan to fail”. You will find that if you write down your goals on a piece of paper, and put it in a prominent position, so that you will read it often, your subconscious as well as your conscious mind will start asking questions and coming up with answers, and you will find that you have already begun to take the necessary steps to achieving your goal. It is helpful to have a series of goals, ranging from daily, weekly, monthly, yearly, ten yearly and thirty to forty yearly. You can always refine and change your goals as time goes on and situations change. You may find that it is easier to start at the 40-year mark, and then work backwards. Try to work out what steps would be needed to achieve your 40-year goal, and spread them out over the different time spans, to what you would need to achieve to end up with the final result. Try to make your goals realistic and achievable. Do not set a goal that is too hard. Set lots of small, easily achievable goals and work step by step to achieve your road to success. Stay positive. Believe in yourself and your abilities to succeed, even if other people patronise you or try to put you off, or tell you there is no point. Setting and achieving goals help you to create a stronger character. It is always helpful to remember that our brain cannot entertain both positive and negative thoughts at the same time. If you stay positive you will dispel negative thought patterns. Even if you come across little obstacles that get in the way of your goals, don’t give up. Focus on finding a solution, rather than focussing on the problem – utilise a positive response. Focussing on finding solutions enables you to put your brain to work, to find ways around things. If you just see an obstacle as a problem and just accept that life has dealt you a blow, and let it stop you in your tracks, then you will never learn and grow. Remember that children learn to walk by falling over. Focus on the long-term achievements that you want to fulfil, and it will be easier to overcome your problems. Debra Lohrere is the author of several books on property investment, creating financial security, goal setting and the power of compounding. Please visit her homepage http://www.investmentproperty... or storefront at http://www.lulu.com/DebraLohr...

To find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest. Now before you start to think….”well I don’t have any excess left…if I was earning more money….then I would have some free”. Let me dispel this myth…and tell you that it is a known and excepted fact that the amount of money that people earn has little if any bearing on whether or not they have an excess left to invest. The only way to create an excess it to spend less than you earn, instead of spending all that you earn. Even doctors and lawyers, who earn well over $100,000.00 per year, often end up at retirement with little more Net Worth than factory or office workers. Net Worth is calculated by deducting the value of all the liabilities or loans you have from the income-producing assets owned to give you the net value of your income-producing assets.

Why aren’t high-income earners retiring wealthy? Why don’t they end up with a greater Net Worth than someone on a low income? It is quite simple. Human nature seems to dictate that whatever anyone earns….they spend….some even spend more than they earn and charge it on their credit card. The higher your income grows…the more you spend and the only way to get out of this cycle is to realise that it is happening, and make a concerted effort to reverse this habit….and to begin reducing your expenditures so that you can free up money to invest.

The best way to do this, is to try the 10/90 plan. This plan simply means that as soon as you receive your pay….you put aside 10% of it for investment….and then use the other 90% to live off of. Put aside the 10%, and then pay all the bills and do the grocery shopping….and then after that whatever is left over you can spend. Most people do it the wrong way around…they pay the bills, do the shopping and spend what is left over, never leaving any left to save or invest. By taking the investment money out first you will alleviate the temptation to spend it. The road to wealth is not determined by how much you earn, but by how you utilise the income you have and how much you save and invest. You need to take control of your finances.

One of the best ways to start having more control over your money is to find out where it has all been going, and then amend your spending habits to allow you to live within the 10/90 plan. If you write down a list of your monthly net income, then in another column write down a list of the essential items that you have to spend money on. You should be able to work out an average for telephone, gas, electricity, insurances and rates, from your previous bills. Work out an average of how much is spent on grocery shopping and petrol. If there are any other necessary utilities include them as well. Then deduct the second column from the first – and this will give you the maximum potential savings for each month. It can be quite startling how high this figure can be and make you wonder where all the extra money went.

Another good learning experience is to simply write down for a fortnight every dollar spent and write next to it what it was for. You will soon find that there are a lot of unnecessary expenses, often caused by impulse buying, where you have spent money on items that you neither needed or really wanted, and could easily have gone without. When you can begin to recognise these areas, and start to consider whether or not you are spending your money wisely, before you hand it over, then you will be beginning to take control over your money and are well on the way to embarking on your investment journey, which will enable you to have a financially secure future for you and your children.

Debra Lohrere is the author of several books on property investment, creating financial security, goal setting and the power of compounding. Please visit her homepage http://www.investmentproperty... or storefront at http://www.lulu.com/DebraLohr...