Getting Started [Archive] - Somersoft Property Investment Forums

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15-07-2001, 01:13 PM

From: Mike .

Analysis Paralysis! Help!?
From: Michael Croft
Date: 24 Jan 2001
Time: 08:21:14

Hi all, hope you can help as I just can't let go of this one.

Here's the scenario; young exec. 30 something, earning reasonable money (60k), spending 5% more than income, wife (at home) 2.2 kids, mortgage of 150k on 350k home, no other debts other than credit cards, has some super and making the minimum contributions. Both realise that they are going backwards.

I've introduced him to the concepts of IP's with intention of helping them out of the rat race, sent them both off to any and every seminar that comes to town as education (with instructions not to do anything without talking to me first!). I've lent them my extensive collection of books, videos, magazines, spread sheets, etc. on investing in IP's and other areas. Given them pep talks and encouragement. Played Cashflow 101 with them, even lent them the game. Shown them this forum but they don't visit. Introduced them to brokers, bankers, and others. Even shown them case by case examples of how I've done it just to prove how easy/realistic it is.

The net result is .......... nothing, zip, zero?! Yes it has all been taken seriously and studied but they won't move/ take action. This has been going on for about a year now. I haven't been able to change there mind set. You know the old "you can lead a horse to water but you can't make it drink".

I suppose I'm hoping someone has had a similar experience, but with a break through and I'd like to know how you did it.

Why can't I forget about it and consign them to the financial scrap heap of life and move on?? Because they are family!!

Regards, Michael

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15-07-2001, 01:15 PM

Reply: 1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Manny
Date: 24 Jan 2001
Time: 12:39:11

How about getting them to invest $1000 in a managed fund & arrange through the fund so that $100 goes out of his pay packet & into this fund (there are many managed funds out there that offer great return on investment, kills any bank account)... this would be the start & as they see their capital/$$$ grow, it may be all the encouragement they need to take the next step to purchase an IP...

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15-07-2001, 01:17 PM

Reply: 1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Mike
Date: 24 Jan 2001
Time: 11:30:06

Hi Michael,

You certainly have a dilemma on your hands and I suspect that you have already succeeded by planting a seed that may bear fruit eventually. As with IP's, growth requires time. I started investing in IP's at the age 40 and I believe others have started much later and still benefited.

I suspect their current procrastination may be sourced in your snapshot of them: "young exec. 30 something, spending 5% more than income". Underline the words, "young" and "spending". In the book: "The Millionaire Next Door" by Stanley and Danko, there are seven attributes of wealth creators. I'll just mention three that are applicable here: 1. They live well below their means, 2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth, 3. They believe that financial independence is more important than displaying high social status. Does this young couple fit this profile? The authors of the book conclude that: "Building wealth takes discipline, sacrifice, and hard work. Do you really want to become financially independent? Are you and your family willing to reorient your lifestyle to achieve this goal? Many will likely conclude they are not."

Interesting, isn't it, that Australia has one of the largest home ownership rates in the world, but few people are willing to do anything with their built-up equity. I also have relatives not working their equity.

My advice is now that you've planted that seed, just let them know that when they are ready, your door is always open. In the meantime, there are plenty of people on this forum who are trying to get out of the rat race and need the support of selfless people like yourself and others.

Regards, Mike

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15-07-2001, 01:18 PM

Reply: 1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Toula
Date: 24 Jan 2001
Time: 10:05:29

Michael,

I suppose all you can do is try - which you've done more than just try by the looks of it.

We have just purchased our first IP and have not benefited from fist hand experience except our own mistakes already only 3 months into our first purchase (other than researching media and forums like this). This post won't help you help them but knowing you're on this forum sure helps me! (even if we're not family)

Goodluck with them and your ventures.

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15-07-2001, 01:20 PM

Reply: 1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: KeithE
Date: 25 Jan 2001
Time: 00:02:48

Hi Michael

Try bringing them to the next Cashflow function, to meet the average aussies that are making a go of it and building their wealth through IP's. I attended my first one on the weekend and what a great pleasure it was to meet like minded people, it was good to put names to faces. The enthusiasm and knowledge gained from talking to everybody is enough to to make anybody join in with IP wealth creation.

KeithE

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15-07-2001, 01:23 PM

Reply: 1.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael Croft
Date: 25 Jan 2001
Time: 07:36:57

Thanks Keith, I did try to bring them along but the excusitis came out ............ maybe next time. Michael

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15-07-2001, 01:24 PM

Reply: 1.1.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Mike
Date: 25 Jan 2001
Time: 12:30:21

Hi Michael,

Speaking of "excusitis", here is a tid-bit from Jan Somers' Story by Story (page41):

"A survey recently asked people their attitudes towards investment. The reason was government concern that too few people were investing for their future. The most common responses in the age groups were:

18-24 Too early to start investing. Will do it later.

25-44 Too busy with kids and mortgages. Will do it later.

45 & over Too late to invest.

The fact is, it is never too late to start investing. And with the old age pension as we know it under increasing pressure, anything you do at any age will make you significantly better off than having done nothing at all."

Regards, Mike

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15-07-2001, 01:27 PM

Reply: 2 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Robert
Date: 24 Jan 2001
Time: 11:59:04

G'day Michael

Firstly I have to say the following may sound like a plug but actually isn't... (make of it what you will)

The Wife has a book out called "The Wifes Budget Book", I am actually in the process of starting this style of budget after buying the book. It gave both myself and my partner a real shock to see how much we really earn and how much is spent of lifes luxuries. As we are high income earners we are fortunate to be able to cut back, the first place that got cut back for us was alcohol (damn)...

But I digress, the book has helped my partner and I see a clearer direction for our financial/budgetry future. You may want to talk to The Wife a bit more about it.

Cheers, Robert

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15-07-2001, 01:29 PM

Reply: 2.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael Croft
Date: 24 Jan 2001
Time: 12:34:04

Hi Robert,

I saw TW's budget book at the Cashflow Canberra day, I confess!! I dismissed it as just another budgeting system, variations on a theme of the ones I already have. I'll apologise to TW when next I see her and buy a copy as I'm sure it won't be ordinary. Regards, Michael

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15-07-2001, 01:31 PM

Reply: 2.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Robert
Date: 24 Jan 2001
Time: 12:42:44

Hi Michael

Wow, bet you never thought a topic like you posted was going to receive so much attention so quickly.

It's good to see everyone wanting to get out of the rat race acknowledges the fact that it has to be done with a budget, even if it only for disciplinary reason.

Robert

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15-07-2001, 01:32 PM

Reply: 2.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Gee Cee
Date: 25 Jan 2001
Time: 21:02:33

I have worked hard since 1979.

Now I can afford a few drinks to reduce the stress of being Mr MUM and you say reduce $$ on drrriiinkies.

Robert I know what you mean. I have friends that earn around $80k each. They have old cars a minimal mortgage on a small home yet never have any money.

Talk to them about setting up a budget and their comment.

We both have degrees why do we need a budget.

Gee Cee

P.S. I bet TW still budgets for a slab or 2 a week. Although she is more than likely into the Ruskies now days.

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15-07-2001, 01:34 PM

Reply: 2.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Robert
Date: 26 Jan 2001
Time: 11:48:44

G'day Mr MUM

I wasn't a fan of cutting the budget on alcohol either, I was nearly in tears....

But I cut it from $60pw down to $30. SO I do allow myself a slab every week. Though thanks to GST a slab now cost $30.... I couldn't cut it out completely, though I could cut it to a more realistic amount.

Robert

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15-07-2001, 01:37 PM

Reply: 3 
From: Mike .

Re: Analysis Paralysis! Help!?
From: The Wife
Date: 24 Jan 2001
Time: 10:39:42

Hiya Michael,

You won't believe how many times that same scenario has happened to me!

I can tell you what worked for me.

They are spending more than they earn, and they know it, until they get that under control, everything else will only be "something everyone can do cause they don't have the same debt problem we do"

I always give them a tight budget, and I check it with them every month.

Simple, but it works?

Hope that helps.

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15-07-2001, 01:39 PM

Reply: 3.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael Croft
Date: 24 Jan 2001
Time: 11:03:27

Hi TW,

Yeah, you're probably right (of course you are!). I offered help with a budget earlier on but got the "it's too invasive" type messages. So backed off and just gave them budgeting type manuals ......... maybe tis time to try again. Thanks, Michael

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15-07-2001, 01:40 PM

Reply: 3.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Gary
Date: 24 Jan 2001
Time: 10:57:46

I'd back that up. Get them on a budget that forces them to save money into a bank account somewhere. Once they realise they can save money, it makes it much easier to go to the next step and start investing money.

Gary

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15-07-2001, 01:44 PM

Reply: 4 
From: Mike .

Re: Analysis Paralysis! Help!?
From: skorpio
Date: 24 Jan 2001
Time: 09:36:47

I think it is the fear of debt that is stopping these people and the combining factor of no motivation to improve their lives. It sounds like they are quite happy to be in the rat race and I think you have been generous enough to flood their minds with knowledge. The fact that they have not acted upon your advice/information only goes to show that they are part of the majority that do not want to be financially intelligent/independent.

We have tried to spread the word with our friends also but to no avail. They either say it is not the right time or they just say "gee your lucky". Luck as you know has nothing to do with it.

We have now given up on our friends and family and do not discuss this topic anymore. We had to get out of our comfort zone and go into the unknown(we had no one like you Michael to teach us the ropes.)

Your friends and family are lucky to have you, but they just to not realise it at the moment. Everyone takes their own path in life. Let them Be and do not force the issue anymore.

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15-07-2001, 01:46 PM

Reply: 4.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael Croft
Date: 24 Jan 2001
Time: 10:28:11

I know you're right - just let go and it will happen. The point is though they are not happy with their lot, so muggins here thought that he would help. I don't like failing at anything and there is an answer out there somewhere!?? Thanks, Michael

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15-07-2001, 01:49 PM

Reply: 4.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Alston
Date: 24 Jan 2001
Time: 12:18:36

Michael

Perhaps another approach may help. I have a similar (actually almost identical) situation with a close family member. This is what I am doing and why.

I believe that getting debt under control and controlling spending is a personal decision that only they can make. It appears that they have made it clear that they are not REALLY ready to do this. Only they can make this happen

However, in the mean time, you may be able to get them to build a parachute. Forget IPs at this stage (ouch, that hurts to say) as they take too much effort and personal attitude. If you can get them to set up an AIP using a good value focused mutual fund and get the payments automatically deducted from their account (some employers will even allow this type of contribution as a payroll deduction) and the distributions automatically reinvested, then over time they will build themselves a parachute. They will need about $1000 to start and $100 per month. If they must, put this on their credit card. You may even need to fill the forms in for them, whatever it takes.

This will not stop them spend income +10%, but they should adjust to a slightly lower income. In the mean time, at least they will be building something. Seeing this asset build may also help them decide to take the other steps. When they finally decide to turn around, if at all, then at least they will have something.

The next step is probably the hardest for you. BACK OFF, it is their life and their call.

Good Luck

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15-07-2001, 01:51 PM

Reply: 4.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Sim'
Date: 24 Jan 2001
Time: 11:13:15

If they are truly not happy with their lot, then you need to keep up the encouragement...

... but be careful with information overload. It can get too overwhelming when you spend too much time reading about "how to make it rich", and not enough time doing it.

My opinion is this:

1. They need their OWN motivation... you cannot motivate them no matter what !

2. They need to have goals, start with something small and achievable, but make sure they set bigger, long term goals.

3. They absolutely MUST get their (consumer) debt under control. Even before they start looking at investing, even before they look at saving, they must be able to BUDGET and stick to it !! That said, they don't have to wait until they're debt free to continue on to the next step, but they must be making positive progress.

4. Once debt is minimised, they must start paying themselves first... that is simply put aside money for saving, investing and tithing before they spend any money on living. That forces the budget into play, and helps them make great progress towards a more financially free future.

If they can reach this level of paying themselves first through some sort of Automatic Investment Plan (AIP) with consumer debt well and truly under control then I think they have achieved something wonderful, and you should be proud of them !

My advice... don't pester them to spend more money on advanced investment seminars... they need to walk before they can run.

There are two books I can thoroughly recommend to people in their position...

Rich Dad, Poor Dad; Robert Kiyosaki

Although US based, I think this is a wonderful story of learning financial common sense that applies everywhere.

Australias Money Secrets of the Rich; John Burley

This book has some excellent introductory chapters and is specifically tailored to Australia, with many, many references to Australian institutions and services that can help people reach their goals. It has some excellent information about reducing debt levels and the concept of paying yourself first.

Hope this helps ;-)

Sim'

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15-07-2001, 01:52 PM

Reply: 4.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael Croft
Date: 24 Jan 2001
Time: 11:24:08

Thanx

Since they came to me about a year ago I made the assumption that they were ready and I went in all guns blazing!! I'm nothing if not enthusiastic about converts. Yes I realised it was a mistake and I backed of a lot adopting the 'softly softly catchee monkey' approach. Regards Michael

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15-07-2001, 01:57 PM

Reply: 4.1.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Jeremy
Date: 24 Jan 2001
Time: 20:03:02

Michael, Michael, Michael, Many a time the same road travelled! I achieved one notable success (and that was because I recognised that the subject WAS jealous, therefore to be as good you had to do this...), many jealousies and now say NOTHING.

You seem like me, I was like a born again christian with this stuff - especially when it *really* started to work. All you will achieve is to sound like you think you are better than them.

Look, people like success, but especially with 'close' friends you cannot be seen to be more successful than they. Be especially careful at work! People on this forum will appreciate what you are trying to do, you will appear like a religious/Amway salesman if not VERY careful.

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15-07-2001, 01:59 PM

Reply: 4.1.1.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: NigelW
Date: 24 Jan 2001
Time: 18:25:09

I agree with all the comments that an early step must be to get the budget in order. More must come in than goes out. Simple. Get them to do this in an automatic way so that they never see the money - as has been suggested above.

BUT Step 1 must be for you to find their personal motivation. They must have a powerful "WHY" before they can really tackle the "WHAT" & "HOW".

This may all sound a bit manipulative but its with good intentions.

Maybe "secure your children's future" is the button you need to push? OR the "You could retire a bit earlier and do the travelling you wanted..." (got to be careful with this one as it may in fact push them to borrow to travel *massive no-no!*)

MAYBE it could just be pure old fashioned GREED - get rich safely and in a reasonable time.

Remember sell the "sizzle" not the steak. [This is probably harder to do than it seems because I suspect that like most people on the road to riches you're living well below your means so you can't point to yourself and say "this lifestyle could be yours"...]

In any event - good luck. I'm ever so slowly doing the same thing with my family. Just remember if you can get them wanting it badly enough they'll break those 10-20 year habits - but it won't happen all at once.

Cheers N.

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15-07-2001, 02:01 PM

Reply: 4.1.1.1.1.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Gee Cee MOTIVATION
Date: 25 Jan 2001
Time: 21:17:41

I have always been motivated. Yeah I used to buy the kids at schools push bikes. Give them a quick paint and sell them off. This went to cars then property.

Some people just are not motivated.

They will sit whinging & complaining about everything and say they will do it one day.

But if they are just not motivated it can all seem to much.

Sad thing is that success breads success. After you have done it you get more confident. You learn from your mistakes and you move upward.

If you never get out of that chair you will learn and do nothing.

Gee Cee

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15-07-2001, 02:03 PM

Reply: 5 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Anna
Date: 24 Jan 2001
Time: 11:11:59

Michael

Been there done that!

I have the same situation with a close relative although I just told her that if she ever needed help getting out of her rut I could help. And I said that she did not need to budget - this delighted her as she works out these painful budgets that never work and that she cheats on. She came to me about a 9 months ago and I set up a plan for her. All going well for a few months when she just went out on a crazy spending spree.

Came to me recently and said that she knew it worked and wanted to begin again. Told me that since we last worked on the plan she has not gathered any more debt...which is a miracle for her. She also started to talk to me about money shows she had listened to, properties she had inspected. She has been quietly making a mind shift that is only obvious to her.

I guess the moral of my story is that I showed her that I had the water and that she could come to drink whenever she wants. No judgments made. No budgets planned. A simple plan that doesn't ask her to be some-one else or give up the things she loves.

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15-07-2001, 02:05 PM

Reply: 5.1 
From: Mike .

Re: Analysis Paralysis! FUNNY (little sad, but FUNNY)
From: Jeremy (again)
Date: 24 Jan 2001
Time: 20:21:18

Had to add this. Friend of mine early 40's ( he has CC debt equal to value of one of my properties - in Syd!) zero assets - except the two (financed) BMW's and Bose sound system. His girlfriend went home and asked him for bridge toll money for way home. Reply 'But we worked out you were only spending $50 today - go the other way home!' She 'But ho much have you spent today' referring to the $1150 digital camera just purchased. He 'No we didn't work out a budget for me, I haven't broken mine!'

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15-07-2001, 02:07 PM

Reply: 5.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Adam
Date: 24 Jan 2001
Time: 11:52:09

I have a great idea to help them start investing. Tell them you know of a secret way of making millions of dollars out of Ostrich eggs, and or feathers, or that you are buying a used gold or opal mine that more than likely hides Lassiter's lost gold reef. Hey presto by the next day you will have a check for at least 10000 dollars. Invest that 10000 dollars in real estate they will be amazed by the returns, and you need never tell them what is really earning their money. Regards Adam

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15-07-2001, 02:08 PM

Reply: 5.1.1.1 
From: Mike .

Re: Analysis Paralysis! Help!?
From: Michael
Date: 01 Feb 2001
Time: 17:08:53

Sorry for the delay, I've been on holidays and am now catching up.

Michael you have my sympathies, my parents are just like that :( and its cost my a sum (trying to pay their debts off) but the mentality isn't there. There's is some light, it looks like they are sorting themselves out (after 10 yrs of trying).

But enough about that, a few years ago I attended a seminar by Brad Sugars called Wealth Academy 101 and one of the many things I got out of it was a simple budget. The idea behind it was people get more encourage to continue something if they see results quickly.

People may or may know of this one, but I'll explain it here anyway. It may be of some use to people.

Lets say a family has the following list of debt and repayments;

Mortgage $150,000 $1050pm 143 payments Car #1 $ 20,000 $ 400pm 50 payments Car #2 $ 15,000 $ 250pm 60 payments Charge Card $ 5,000 $ 70pm 71 payments Credit Card $ 3,000 $ 100pm 30 payments -------- ----- total $193,000 $1870pm

(rough figures remember people)

Ok, so our couple here have a total of $1870 they pay each month.

Ok here we go;

Step 1:

Increase the total monthly payment by 10% (the couple have to find this from somewhere else, say reduce a few luxuries, 10% isn't too much to ask)

10% of $1870 = $187

Step 2:

Instead of increase each repayment by 10%, we add this 10% increase to the debt with the lease number of repayments which is Credit Card with 30 repayments.

$100 + $187 = $287pm

Step 3:

As the rest of the debts are being paid off as normal, Credit Card is being paid off quicker, showing a visible result. Once it is paid off you ad this payment amount to the debt with the next lowest number of repayments.

Car #1 with 50 repayments (less the number taken while credit card was being repaid)

$400 + $287 (previous credit card repayment) = $687

Step 4:

Repeat Step 3 until all is paid off.

This system doesn't target interest rates, it just focuses on getting quick visible result for psychological reasons. I think its nice and neat.

Michael