Is your money being lazy?
I speak to thousands of people every year about their finances and investment strategies and seldom do I find anyone who doesn’t have lazy money lying around. Now what do I mean by lazy money? It is money in your life, which is not performing well for you or is just being wasted through inefficient systems or structures, and I see it all the time.
One of your keys to creating wealth is to get your lazy money and turn it into working money and that really means your money working for you, rather than you working for your money. Most people exchange their time for money by just turning up to work and getting paid for the number of physical hours they actually put in. This is why we love to invest, quality investments gets our money out there and working for us without us having to be actively doing something on a daily basis.
Here are 6 key types of lazy money I often see from property investors and some tips on how you can get the whip out and get it working for you, and working hard:
TIP 1: Money in bank accounts.
Remember that lazy money is any money which is sitting somewhere but could be put to better use elsewhere. The number of people I find who just have money sitting in bank accounts earning them 0.5% or something like that is incredible. Why not have that cash sitting in your offset account at least where it is saving you interest which you would otherwise be paying. Better have your money in yourbackpocket than in the banks.
TIP 2: Untapped equity.
When was the last time you reviewed your portfolio and the value of your assets? You might have some equity sitting in there, which could be put to better use by investing. This should be a standard practise for you every 6-12 months, just doing a check in with your portfolio; you can do this via your broker or ask your bank to get a valuationdone.
TIP 3: Inefficient loan structures.
Do you know if you should pay principal and interest or interest only for your situation? Should you fix or keep your loan variable? Are you using your offset account effectively? Are you achieving the lowest interest rate possible while maintaining the flexibility you need? Do you have a debt reduction strategy for your home?
Honestly when was the last time you got an investment finance specialist review your portfolio? You should be doing this every 6 months and remember I said “a specialist in arranging finance for investors”, not just any broker or bank; there is a difference, believe me.
TIP 4: Negotiate everything.
Are you getting the best rate for your property management, for your insurances, for your health insurances, for your home utilities, for your interest rates from banks etc. etc. I bet if you looked around your home and reviewed and negotiated everything you might just take for granted as ‘what is’, you could find a lot of money you are just throwing away right now. I often see people come up with an additional $200-$2000 of extra cash in their lives every month, just by doing this.
TIP 5: Unclaimed Tax Deductions.
Although I will never advise anyone to invest purely for tax reasons (making a loss for the sake of making a loss and getting a deduction for it is madness), it can however be a handy benefit of a quality portfolio and a consideration when setting an investment strategy to minimise the amount of tax we pay. Many people look forward to receiving their yearly tax refund as a forced savings plan. Sounds good doesn’t it? But it is so inefficient and such lazy money. Ask yourself while your money is sitting at the Tax Office waiting for you to claim it back once a year, how much interest are you earning from it? A big fat zero is right. Did you know you can potentially claim that money back into your pay packet on a weekly, fortnightly or monthly basis? That way you can get this lazy money working for you also.
TIP 6: Superannuation.
Now don’t even get me started on this. I won’t say much about the performance of the average superfund in Australia over the last 10 years, but let’s just say it has been quite pitiful. Is this better left in the hands of the major Superfund providers? Or do you think you could invest it in a better way and take much better care of your future? I will leave that question up to you to answer and of course I better put my disclaimer in: “This is not financial advice, make sure you seek the services of a qualified advisor”.
Don’t put up with lazy money in your life, it is the sure fire way to staying broke, whereas if you actively get your money working for you rather than you working your money, then financial freedom all of a sudden becomes closer and closer. Get that whip cracking!