This post is based on an interview we conducted with AJ in September 2018.
Real Money Talk is our series where we interview Australians from all walks of life about their personal finances. The views expressed are those of the interviewees, based on their experiences with money, and as such are not necessarily representative of Spaceship's views.
AJ has a clear and unwavering focus when it comes to managing his wealth.
He tells Spaceship about how his successful property investments have aided his family’s wealth, but he is under no illusion how time, patience and discipline are the key factors to getting ahead.
Over to AJ:
How old are you?
32 years old
Do you have kids?
Yes, a five-year-old boy who likes to sit next to his dad on the household MacBook Air aimlessly typing into Excel to ‘help the family save money’. What a legend.
Where do you live?
I live in Wahroonga (suburb of Sydney, NSW).
This is my ‘forever home’ I would say, after doing quite well exiting the Chatswood (NSW) property market a few years ago. We’ve sacrificed location convenience to be in a suburb surrounded by incredible schools and a great community.
What is your current net worth?
I religiously track my net worth using a Net Worth Calculator I developed myself. It simply lists my assets minus my liabilities so I can track my true financial position.
While I prefer to keep my net worth confidential, I can state that I have paid off 40% of my mortgage and actively invest in both my superannuation and the share market.
What is your net worth made up of (stocks, real estate, businesses, home, superannuation, etc.) and any debt that offsets part of these?
My net worth is made up of equity in my current home, Superannuation and investments in ETFs (exchange traded funds) and stocks.
I was rather fortunate to have purchased my first property in Chatswood ahead of the influx of foreign investors, helping me more than double my initial purchase price prior to selling and buying my new family home in Wahroonga.
I also leverage my online businesses and their earnings to fund my investing goals and lifestyle needs (while still working a nine-to-five day job as well).
I have very few debts, beyond my mortgage and a few car loans (which are soon to be paid off, which I am very excited about given it will release a heap of cash flow for me to then invest into the share market).
What is your job?
I have three jobs in life:
- Working full time in a corporate role at a financial services firm.
- Working night times and weekends to blog at Savings Guide.
- Being a dad, husband and son to my beautiful family.
What is your annual income?
Family annual income is something I don’t speak about often. I can state it’s somewhere between $100,000 and $300,000 to be nice and vague.
What was your starting salary and how did it grow from there?
My starting salary was $41,900 including superannuation. I spent a number of years leveraging my experience to move between companies to increase my title, experience and salary.
I found that moving between new jobs every few years helped me increase my salary rapidly.
In recent years, I’ve found a job I enjoy and a salary I’m happy with, meaning I have opted to progress my career internally.
What advice do you have for people who want to earn more money?
Be wise with the money you already have. If you can’t find a way to optimise your expenses and save money, even on a low salary, you will never be able to do so on a big salary.
I also suggest people spend time on two key aspects if they wish to earn more: becoming worldly and wise (know a little bit about everything) and always be the nicest version of yourself.
Look for ways to help people, contribute and show passion in all that you do work wise.
How is your work-life balance?
Good, though something that requires constant attention. Like most, I feel that I never have enough hours in the day, though I think this is because I am motivated person who wants to achieve as much as possible.
I’ve become reliant upon my calendar and scheduling time every day for the things that matter to me.
Do you have income sources outside of your career? If so, how much do you earn from each and how did you develop them?
Yes, I run numerous websites, of which Savings Guide is the primary one. I have a passion for blogging and helping people, making a website about saving money the ideal outlet for me.
The earnings from Savings Guide can vary; it all depends how much effort I put in on a monthly basis to write new content, interact with subscribers and always be hunting down information that my readers will love.
Savings Guide earnings are around 30% of my current salary, making it a decent portion of additional money.
How much do you spend per year?
Right now, I have every dollar I earn allocated to something that matters to me. I have a strict budget, mainly setup to help me stay organised, that I adhere to monthly. I would say I spend about $20,000 a year on discretionary purchases that are not fixed or budgeted for expenses.
What are your main expenses?
In order of magnitude they would be
- Car loans and running costs
- Food and groceries
Do you have a budget?
Yes, I utilise a detailed budget spreadsheet I built myself to forecast and track my expenses and cash flow. I then use Pocketbook to analyse my credit card spending whenever I start to lose my way with my budget. This helps me bucket up my purchases into categories to further try and reduce in the following months.
What is your savings rate? And how has it changed over time?
I save around 20% of my income. Prior to apps like Spaceship Voyager, I would save my money until I had a lump sum and then invest it in a significant portion of shares. These days I tend to make regular and smaller purchases using the Spaceship Voyager app and a few Vanguard ETFs.
What is your favourite thing to spend money on?
Consumer technology. I love gadgets, computers, technology and things that can either help me make more money or optimise my lifestyle to have more free time.
How do you invest?
I look to find investments that get my broad exposure to a range of assets and returns. For instance:
I invest in Vanguard ETFs and Spaceship Voyager managed funds. This gives me exposure to more progressive and future thinking businesses.
I contribute extra to my superannuation on a monthly basis (a set and forget way to ensure I use the power of compounding returns to my advantage).
I also make higher than required repayments to my mortgage. I set the repayment to be around $200 more than I need to pay in order to reduce my loan term.
Recently I’ve been looking at my household expenses and how I can further reduce them in order to free up cash flow and use that money elsewhere. For instance, I analysed my electricity bills (which are incredibly high) and realised that by replacing my 20-year-old reverse cycle air conditioner, I would have to outlay around $10,000 but would see a return of around 9% per year in savings.
What has been your best investment?
The best investment to date has been my property purchase in Chatswood. I didn’t buy it as an investment at the time but looking back I was rather motivated and forward thinking for someone in their early 20s and the punt paid off.
In second place would be my investment in my website Savings Guide (a blog teaching you how to save money). I started the website in 2006 and funnily enough, it absolutely boomed a few years later when the GFC hit and the world began to realise that saving money is just as important (if not more important) than earning money.
I laugh sometimes because it’s the most hedged business in the world to operate; in good economic times it makes money and in bad economic times it makes even MORE money.
What has been your worst investment?
A few years prior to 2008 (when the GFC hit) I invested my life savings of $21,000 into the share market. I was relatively new to investing (and young!) and made purchases based on the wisdom of previous generations: “Invest in solid companies that have been around forever” was the mantra I followed.
As a result, I purchased shares in Coca Cola, Suncorp, Westpac and the next ‘Macquarie Bank’ named Babcock & Brown. While the shares in Coke, Suncorp and Westpac went okay (albeit, I got spooked and sold too early), the shares in Babcock and Brown went bust. The entire company dissolved and with it my $11,000 I’d invested. I was absolutely mortified.
What’s been your overall return?
Not sure, though a few years back my accountant was doing my tax return and bluntly stated “Why do you invest in shares? You seem to buy high and sell low. You need to stop doing this.”
I realised I was panic selling and not taking a long-term view. Since then I started to delve deeply into index funds and ETFs, reading wisdom from the likes of Warren Buffet which has totally changed my outlook on investing (for the better).
How often do you look at your investments and returns?
I know I shouldn’t, though I check my investments multiple times a day. Not because I am thinking of selling, but because I think I actually quite enjoy seeing my money building and set aside. Visualising my savings and investments makes me happy for some strange reason. It’s the feeling of ‘progress’ or that I am ‘building’ something that feels unreal.
How are you building wealth?
Avoiding debt. Paying my mortgage off rapidly. Investing in managed funds. Growing my earnings at work by adding value to the business. Growing my earnings on my website by helping Australians save money.
What are your main roadblocks? And how are you addressing them?
Spending money. As much as I live and breathe budgeting, saving, and personal finance, it doesn’t change the fact I am human and often have bad months of overspending. A few months of overspending can really hurt your wealth creation plans for years to come.
Do you have a target net worth you want?
I don’t focus on a number; instead I focus on my lifestyle desires. I want to retire by the time I am 45.
When did you make your first significant behavioural shift towards wealth building?
I’ve always been pretty into making money and building wealth, even from an early age. I think the penny fully dropped five years ago upon hearing the news I was going to become a dad. I realised that this whole money thing wasn’t just about me anymore.
If you could start again, what would you do differently?
I would have avoided individual shares and focused on managed funds. I’d still have the money I lost today and it would probably have grown 5-10x.
I would also have reduced my spending between the ages of 18-25. I spent a lot of my money going out, eating bad food, drinking alcohol, smoking and buying things I didn’t need.
All of these vices were fun at the time, though looking back I could have really done some magical things to both my finances and health had I of invested that money.
I also would have been wiser with the money my websites earned. For a while, earnings were through the roof (due to brokering syndication deals with Yahoo! and Bigpond), yet the money I made I invested back into the business but not in the most useful ways. I bought new PCs and hired writers to focus on quantity, not quality, in turn hurting my longer-term returns.
What mistakes have you made along the way that others can learn from?
If you had to give advice to Spaceship readers about how to build wealth, what would it be?
Be consistent with everything you do in life. From building wealth to losing weight; self-discipline and sticking to a plan is the key to it all. When others give up, keep going. I’ve learnt that the very moment something seems too hard is the exact moment you are starting to see results and need to push onwards.
What do you want to do in your retirement?
I’d love to spend 50% of the year in interesting places. I’ve often pondered the concept of chasing Summer all over the world and using retirement as a way to never experience Winter again.
I also like the idea of spending a portion of my time in cheaper countries, soaking in the culture while also extending the money that I have, ala Thailand or other parts of South East Asia.
Do you have any worries about retirement? If so, how are you planning to address them?
Not having enough money. I am addressing this by contributing extra to my super, watching my spending and investing as rapidly as possible into ETFs and Spaceship.
How are you learning about building wealth? Is it from family, books, forced to learn as wealth grew, etc.?
I listen to Audiobooks (often at 1.5x speeds to help accomplish more ‘reads’ per month). I also grew up in a household where talking about money was a regular topic; we were all so open and motivated to get ahead it gave me a real leg up in understanding wealth creation early.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I support a child via World Vision and donate around $100 every month. I decided to do this for a few reasons; firstly, as a father of a four-year-old, the thought of someone else so young and vulnerable in the world going without basic needs quite upset me. I figured sponsoring a child is the least I could do to help someone else.
Secondly, I am a big believer in karma and getting back what you put out into the world.