I gave a couple of ideas before we went on break about ways that you can start to think about planning for your future. What’s your desire level? What’s your vision for your future? Hopefully you’ve been doing some planning as well.
Over this holiday I’ve been reading a book. I always try and read as many books as I can when I’ve got some downtime. I read a book by an author named Ray Nelson Nash. The book is called “Becoming Your Own Banker.” It’s the book I just got on Kindle. That’s my iPad. I read all my books on there.
Some of the concepts that he explains in there don’t actually work for the Australian marketplace, where he talks about using insurance companies in America to grow wealth. That’s not necessarily what I’m talking about today.
One of the things that I learned about in this book is the fact that what people do is they get themselves into basically a debt crisis which they can hardly climb out of. One of the statistics is that the average person is essentially paying 34 percent of their after tax dollars in interest. That’s interest on credit cards, interest on paying off cars, interest on your homes, and whatever else you might be paying off or what you borrow money for.
The whole concept of what he says is that instead of starting from wanting instant gratification, for example, you want that nicer car now and paying through the nose for it and paying an interest amount, if you can try and put away a certain amount of money.
This is the hard thing. Most people can’t do this. For three or four years to get on top of that process. What he explains is that you have a company, for example, this is how I would use it in Australia, and you’d put money into that company. Then what would happen in three or four years’ time is if you wanted to buy that car, for example, then you’d borrow the money from that company.
What happens is you have to pay the money back to that company. It’s not some sort of dodgy loan. It’s not something where you’re trying to get out of paying taxes or anything like that. If you pay the proper market value of interest, let’s say it’s seven or eight percent for a vehicle loan, what you essentially do is you pay the money back to that company that you own.
The seven or eight percent, instead of going to a finance company which is gone forever, you can actually use that money, paying it back to the company that you borrow it from. The hard part for most people is delaying that whole process of wanting it now.
But if you’re setting yourself up for the future long term, and that’s what we recommend that you do, you start to think about, “How can I get out of this interest cycle that I’m in?” That’s one of the biggest killers. 34 percent of your after tax dollars is paying interest on all sorts of stuff.
If you actually think about if you could use that money to grow your wealth, to put it into your Supra, or just to put it into another savings that you can use depending on your age bracket, that’s really what we want to try and do.
Most people think success is all about buying doodads and buying stuff. It’s not really all about that. Success is all about creating enough income for you to have passive income later. If you create enough income then you can live off that income later.
This is one of the things also that Ray Nelson Nash talks about, forgetting the word retirement and thinking about passive income cycle. Rather than retiring, it’s moving across a circle where you’ve got passive income to live on. That’s truly what most people are looking for. That’s the freedom that we all want that would set us free.
Try and think differently about how you look at money, how you’re spending your money, where you’re spending interest, and can you eliminate some of that interest and delay that gratification for the long term. I definitely recommend reading that book.
As I said, some of the principles won’t work for Australia, but it really does give you a different insight into thinking differently. I encourage you to do that. Read the book. Please, leave your comments if you’ve already heard about that author or you’ve got any ideas. Please share with us. Until next time, bye for now.