What these people were missing was education and obviously any ability to delay gratification!
Told you it was important!
Certainly, a first sensible decision would be to eliminate any debt and satisfy some basic needs – perhaps the car needs replacing or a home? But none of them seem to have an inkling that they could invest the winnings and live off the interest or rent earned and retain their capital. What they lack is an investor mindset – immediate gratification is driving them, not financial discipline or long term goals. They could make the winnings work for them for a long, long time with just a little restraint and planning.
Think of the good those winnings could do for generations to come or charitable organizations?!
Opportunity doesn’t necessarily equal success, but it can.
According to Steven Covey, author of The 7 Habits of Effective People, the number one habit is Be Proactive – make decisions to improve your life through the things you can change.
Abundance isn’t finite, there are opportunities for ordinary Australians to create wealth but you need to know about them and be prepared to act on them! It really comes down to knowledge and attitude.
That attitude is the ‘ INVESTOR MINDSET’.
1.The decisions you make need to be of the head and not the heart! They need to be made after due diligence and based on the balance of evidence.
2. When it comes to property investing, too many focus on their ‘own backyard’.
Australia is a big place and as we will see later, there is no one property market as such, rather a collection of markets, some growing, some stalling, and then within those there is different demand for different types of property.
These variations are a result of the fact that supply and demand for housing is a function of a wide variety of economic drivers that can vary from one state to another, one town to another and one house type to another. The best location and type of property is the one that stacks up dispassionately, based on the figures and suits your circumstances and goals.
3. You don’t need to be looking over the back fence either. Good property management is crucial, particularly as your portfolio grows. Managing the property is the property manager’s job, you do your job and they do theirs. Property management fees are tax deductible as a cost of ownership too.
4. Similarly, the design and decor is not something the investor should overly concern themselves with. Too many people imagine themselves living in the property. While it’s important to have designs that meet demographic changes and demands, investment product is built with the tenant in mind. What appeals to the tenant market is what is important.
The same goes for the inclusions in a property. Is it worth spending thousands to upgrade a property’s interior for rental? Some things are common practice and expected, such as air conditioning, stone bench tops, hard floors in high traffic areas etc., but any quality offering will include those things – complete turn key means that the tenant simply needs to move in their furniture and start living – the investment is ‘remote control’.
Going beyond that is something that can be done as part of an exit strategy, many years down the track if necessary. Don’t pay additional interest on an upgraded inclusions list for 20 years, rather spend the dollars when it’s needed (remember the ‘time value of money’)
5. The property is an investment vehicle – an opportunity to generate income, build wealth for the future and reduce your tax burden now.
6. Time in the market is more important than timing. Some people wait so long for the right time that they never make a decision – suffering “paralysis by analysis”. No activity in life is risk free or opportunity cost free but it is a matter of prioritizing your goals and then making a plan to achieve them and sticking to it.
7. Understand that psychology plays a significant part in most people’s decision making. The ‘herd mentality’ can lead investors to come in and out of the market because that’s what others are doing. Instinct is what makes us run at the site of a lion, it’s logic that should override impulse and make investment decisions.
“Be fearful when others are greedy.
Be greedy when others are fearful.” Warren Buffett
8. The media too is responsible for a great deal of fear and confusion. Bad news sells, sensationalism sells. Investors need to ignore the doomsayers, they come and go. Lack of consumer confidence, fueled by the media, the crowd and sometimes their own family and friends (often those who have ever invested in anything) can often bring to fruition what the fear peddlers predict.
9. Successful investors gather a talent bank of support – investment property advisor, accountant, broker, financial planner, insurer, property manager – all experts, trained and qualified in their own specialty.
10. Understand that market corrections are inevitable – panic is not an option. Business cycles are to be expected. Sometimes they are a result of macroeconomic policy by government via Fiscal Policy (the Budget) or Monetary Policy (interest rate manipulation by RBA), or even exogenous factors, outside of our control, such as a decline in commodity prices paid by our Asian trading partners.
Property markets go through cycles and periods of correction too. Rapid appreciation in prices is often followed by a softening in demand and a tightening of credit conditions. It is important to be prepared for these and to stay the course. Remember it is the trend that is important.
11. Patience is a virtue! Property is not a get rich quick scheme.
12. Most importantly, Investors have the mindset that life rewards action, not inaction.