Category: Financial

CategoriesActionFinancialPropertyReframe your thoughts

What’s Your Number? Flow Versus Pot.

Posted on March 2, 2020

Have you ever played a game with your friends, where you discuss how much money you would need to retire? What size of pot would you have to have accumulated?

I remember one time playing this game about 15 years ago, and a friend decided that he would need £15 million. With this you could buy a fine home, some nice cars and a place in the country for weekend getaways. With the remaining £8 million, you could invest it for some cashflow to pay for the food, financing, and fun. Invested at 5%, you could gross £400,000 per year. This would make most people pleased.

Strangely, that little bit of friendly, whistful thinking was what many people would call their estate, or retirement, planning.

The one significant challenge most people found in this friendly game, was that it would take the majority of people far to many long years of work to amass that level of savings in a pot.

So maybe look at it another way. What level of cashflow could you live on and be happy? £1,000 per month? £8,000? £27,000? £376,000 per month? £3 million per month or more? It may be easier for many people to find a lower level of cashflow income, of several thousand pounds per month, coming from some investments (Dividend stocks, bonds, property, royalties, etc), than to work, save and build a large pot.

Could you do a side hustle, online perhaps, that, over the next three years, you could build up from £100 cashflowing income per month to say £5,000? If that money could be generated by a more passive income, imagine your free time too.

So how much would you need to earn, as a bare minimum, on a monthly basis? How could you start trying to make this extra income? Think about it. Do some research. Change your life!

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CategoriesFinancialObserveReframe your thoughts

Money Mindset

Posted on February 12, 2020

It is fascinating to observe how differently people engage with the topic of money. As with most things, it is a learned behaviour, usually from parents, extended family, family friends and primary school.

As with other habits and patterns of thinking, a person, with a little curiosity, an open mind and a growth mindset, can change their views and relationship with money to improve all things money related in their life.

They will, of course, have to do their own pushups on this one. Though there are loads of useful resources to help with a money mindset transformation. T Harv Eker and Jen Sincero have good and enjoyable books on the topic to get people started.

My challenge to you today is to think about your money mantras for a few minutes. Figure out your earliest memory of those mantras, as well as who said them or reinforced them, and then consider how they might just be impacting your life. Hint: It may not be in a good way.

Here are a few common phrases to get you started:

  1. Money is bad (it is not good or bad, it’s just a thing),
  2. Money is the root of all evil (Is it? Or is it just a medium of exchange? Is your paycheck evil? Besides, the phrase is often misquoted from 1Timothy 6:10 For the love of money is the root of all kinds of evil. – Here it seems to be referring to greed or avarice – one of the seven deadly sins – whereby greed is an intense and selfish desire.
  3. We can’t afford it (Try asking, ‘How could we afford it, or something similar?’ – It’s much more empowering)
  4. Rich people are jerks (or crooks). (Now some may be, and some won’t be. There’s no point being richist. Is your commentary based on a sample size of one? Are you just parroting what the journalist/paper wants you to think?

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CategoriesFinancialThink About It

Investment Returns v Time

Posted on January 18, 2020

I find it fascinating that there are so many different ways to calculate financial returns. Some people look at returns differently.

From gross yield to infinite returns, IRR, ROCE, ROE, ROI etc.

ROI, or Return On Investment, comes up often, especially in property conversations, which is something we spend a fair bit of time having.

But very few people discuss ROTI, or Return On Time Invested.

You might consider time when you start a new job and wonder, is this worth my time. Your salary and benefits would be your return on your time invested at a job. Though, if you were told the job would be 35 hours a week and you regularly work 70 hours, your ROTI would be half what you thought it would be.

If you are an entrepreneur, your ROTI can be a little discouraging in the first couple of years as you might work very long hours while planting the seeds for your business, and not getting much back in return.

As you don’t know how much time you’ll have in this life, before it’s all over, and you can’t get any more of it, you are best to allocate or spend every minute wisely.

By the way, your returns don’t have to be measured strictly in financial terms when measuring ROTI. The returns you get might be the joy of spending great moments with your family, spouse, kids, parents, friends, etc.

So when you consider your financial return on investment, also consider your ROTI. What you may have to give up in time, to achieve certain returns, may not make the investment worthwhile.

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