Cars, mates and good advice
Christmas is literally around the corner and just after that we all start to talk New Years resolutions. I thought I'd take the time to share one of mine from a couple of years back. I almost bought a car very recently. I've never owned a brand new car, I've driven a car worth less than $2000 for the past 7 years and figured now is a great time to go out and get one. Business is good and I'm sick of parking around the corner from clients houses so they don't see what I drive. Some people gawk at the idea of driving such a horrible car but stick with me and you'll see what this car has done for me.
This is where the mates part of the title comes in. I have two really good ones. One I call when I want encouragement for a terrible idea and one I call when I'm on the fence about something. When I'm feeling really brave I'll call my wife. On the fence mate had teeth removed the day I needed him so old mate irresponsible got a call. He was ready to go to the dealership within half a second. I got off the phone to him, ready to call my wife and say this is what I'm thinking what do you think when it hit me, this car does not fit any of my goals at all. Make sure you get good advice, everybody has an opinion and you should absorb as much as you can but filter what suits you and your plans.
When I was about 26 I made a list of 4 things I wanted to achieve by the time I was 30. One was fitness based, two had financial connotations behind them and the forth was a personal/family goal. Because younger me had the foresight to think long term about what it would be that I would be most proud of when I turn 30 I was able to straighten myself out before making a decision which would steer me in the path against what I want. Truth be told though I am going to buy that car but I've set conditions around buying it. I need to hit a milestone in the business and once I hit it the business will actually make more so that's how I'm able to justify the expense.
One of the goals is to buy a house. I'm like a lot of people and I see the value in owning property. A house with no debt on it is passive income that I don't need to work for. The income will fund what I hope will be an early retirement. The plan is for a portfolio of property and to get there I can't just get lucky, careful planning needs to take place and precise execution otherwise it won't work.
I said earlier I'd explain what that car was aside from being a complete embarrassment at times. That car is a budding property portfolio, a business and a little bit of financial freedom. None of this is to blow my own trumpet but I do think it is important to show this. When my wife and I bought our first house we had to buy a unit because that's all our incomes would allow. It was a great unit and we loved it. Then we had kids and needed an extra bedroom so we needed a house and again we were tight on funds as incomes were restrictive but we were able to sell our unit which had increased in value and acted as a deposit. We got to buy a house. Then Sydney house prices went a little berserk. We used the rise in house prices to access funds for another house deposit. At this point in time we had a couple of decisions. Do we buy our dream home, do we upgrade that stupid car or do we buy an investment property? We went down the investment property path and got some great advice along the way about structuring debt, how to find the right location and how to keep building on our asset base.
Because we had no personal loans, we had a good amount of cash because we didn't spend a large amount on a car (and we got very lucky with house prices) we were able to turn a unit into 2 houses, a granny flat and a business. One personal loan at any point in this story and we wouldn't have been able to afford any of our mortgages just because of the way banks assess debt levels or start the business.
I'm not hear to preach anything to anyone but I can not suggest strongly enough planning what you want your life to look like in 5 years time, then break that down to 2 years time, 1 year, 6 months etc. If you want something, go hard and get it. I've still got a long way to go to get where I want and no doubt I'll trip up many more times a long the way, it's about getting back up and getting back headed in the right direction.