Money doesn’t discriminate; it doesn’t care who you are or where you come from. No matter what you did yesterday, today begins anew and you have the same rights and opportunities as everyone else to become wealthy.
Yet the sad reality is that the majority of Australians will never achieve financial freedom. On the other hand, a small group of Australian property investors are becoming very wealthy.
Today I’d like to explore the common myths about money that hold many people back from achieving their financial goals.
Myth #1: It takes money to make money
Despite what some people believe, it doesn’t really take a lot of money to make money.
Many Australians have untapped equity in their homes that they can use as seed capital for investments, while others will have to learn the discipline of saving to get some start-up capital. Then all they need to do is invest in high growth investments such as residential real estate and use the magic of compounding leverage and time to grow their asset base.
You don’t need a fortune to begin making your first million; you just need to commit to making a start and stick with it.
Myth #2: I don’t make enough money Everyone makes enough money to become an investor. The truth is most people don’t have an income problem, they have a spending problem.
Look at your current wage and ask yourself; how much am I likely to earn over my lifetime? For most of us, the answer will probably be over a couple of million dollars. The problem is most of us spend as much as we earn. You’ve got to start living within your means, paying yourself first, saving a deposit for a property and investing in order to break your current pattern.
Myth #3: My job and superannuation will take care of my financial future
If you accept my definition of financial freedom as having enough passive income to finance the lifestyle you desire, without having to work, you will never achieve this through your job or superannuation. Instead you will need to take control of your financial future by investing.
Even if you try to save 5 or 10% of your income as many financial planners suggest, you’ll find it won’t give you a big enough nest egg to fund your retirement.
Myth #4: I’m not smart enough
In our country, everybody has the ability and opportunity to become rich. Successful people come from different backgrounds and while some have university degrees, others never finished high school.
To reassure you that an education doesn’t equal a financial fortune, here are a few multimillionaires who never graduated from college: Bill Gates (Microsoft), Michael Dell (Dell Computers) and Steve Jobs (Apple). The truth is you can do whatever you want; not being smart enough is just another excuse.
Myth #5: Investing is complicated
Developing your own financial freedom is only as complicated as you make it. Sure, gaining the knowledge to become financially independent is challenging, but many new things seem more difficult than they are until you develop an understanding of them.
Investing is no different.
Now it’s easier than ever before to learn the fundamentals of wealth creation, with limitless tools available in today’s high tech, info-laden world. The key is to learn from the right people – those who’ve already achieved what you want to achieve. The process is also simplified when you select an investment niche such as residential property investment and develop specialist knowledge in that area.
Myth #6: Investing is risky
The dictionary definition of “invest” is: “To commit (money or capital) in order to gain a financial return.” The word “risk” doesn’t even get a look in.
However, many people speculate when they think they are investing – they buy a property in a secondary location or off the plan “hoping” it will increase in value. Speculation is risky.
On the other hand, finding a property with an element of scarcity so it will always be in strong demand, in an area that has always outperformed the averages and buying it below its intrinsic value, is a proven investment strategy that minimises your risk.
Myth #7: You have to know how to time the investment markets
It’s often said that timing is everything when investing, but that’s not really the case.
Sure, timing matters – you don’t want to buy property at the peak of the boom – but successful investors find that timing isn’t really that important. Have you noticed how some investors do well in good times and do just as well in bad times, while others do poorly in good times and even worse in bad times?
The truth is, successful investors know how to create wealth at any point in the property cycle while unsuccessful investors manage to lose money at the same stages of the cycle. This suggests to me that it’s not our external world that determines whether we make money; it’s something inside us – our mindset.
Myth #8: The rich are lucky
The truth is that success in wealth creation is no more about luck than is success in anything else in life. To become wealthy, you have to be in control of your finances and not count on good fortune.
When you have a proven investment system or strategy, luck becomes unnecessary.
As a child I used to play Monopoly. Sometimes I won, sometimes I lost.
As an adult I’ve played Monopoly a couple of times with some financially intelligent people and I realise now that, contrary to what I thought when I was young, it’s not a game of luck.
Good players know the right spots on the board to get the best return on their investments. They know how to acquire and control the best “monopolies” in order to collect the highest rents.
They’ve learned to negotiate and find ways to make great deals. They’ve learned how to take the luck out of Monopoly and consistently win big as a result.
To me, this sounds a whole lot like the real world of investing. You need to learn how to take the luck out of wealth creation and instead develop smart strategies to get ahead. First you need to learn how to play the game, and then you need to know how to win the game.
Myth #9: To become rich you must diversify
Wrong! Yet that’s what most financial planners suggest isn’t it? Diversification leads to an average outcome. I’ve found that successful investors don’t diversify – they cultivate the skills required to make better, smarter investing decisions and specialise in one niche.
Myth #10: Paying off your house provides security
This is one of the old myths many of us learned from our parents, who probably learned it from their parents. But it doesn’t make sense in the new financial era.
The problem here is that once you’ve paid off your house, you end up with idle equity sitting under your roof doing nothing; equity you could use as a deposit to buy an investment property and grow your wealth.
Myth #11: All the good investments are taken
That’s not true – opportunities are always out there – in every market. Sometimes there are a lot and sometimes there aren’t. Some are obvious and others are opportunities you create by understanding investment markets. Sure, all of yesterday’s deals have been taken, but tomorrow’s deals have not. Someone will snap them up. Why shouldn’t it be you?
Myth #12: If you want to do it right, you have to do it yourself
There’s no such thing as a self-made millionaire. All successful property investors have a good team of professional advisors and supportive mentors around them.
That doesn’t mean you should hand over full responsibility for your wealth creation to others. But the rich recognise that they can’t be an expert in all aspects of wealth creation, so they find a team of experts they can lead in order to help them achieve their goals.
Myth #13: I’ve done everything wrong! It’s too late
It’s never too late to learn how to invest or to overcome your mistakes. There are many success stories of people who conquered all sorts of adversity, or started investing later in life and ended up achieving financial freedom.
In fact, Ray Croc was over 50 years old when he built his very first fast food outlet. You might have heard of it – it’s called McDonald’s.
Myth #14: Debt is bad
Most Australians believe debt is a dirty word, but not all debt is bad. Savvy property investors know how to use good debt to buy appreciating assets.
Myth # 15: It doesn’t matter what I want – I just can’t do it
Subscribing to this myth is almost a guarantee of failure, because our beliefs and perceptions become our reality. Some people who’ve had a few failed attempts “learn” that wealth is beyond their control and they can’t affect the outcome.
They remain in a cycle of victimisation all their lives.
This is one of the reasons why the rich get richer – they believe they are in control of their destiny. You must also believe you’re in control and act as if you’re in control.
Then pretty soon you’ll be surprised by the results you achieve. Invariably, the more success you have, the more your thoughts about what you can and can’t control will alter for the better. Yes – you can do it!
There’s no way money can know who’s in control of it, what their qualifications are, what ambitions they have or what they’re going to do with it. Money is there to be used and spent, saved and invested. It can’t judge whether you’re worthy or not.
Now that you understand some of the myths that have held so many people back, the good news is you can do things differently. Choose to change your beliefs to produce outrageous results and reach every goal you set.
Michael Yardney is a director of Metropole Property Strategists, a company which creates wealth for its clients through independent, unbiased property advice and advocacy.
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Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
