Most people are caught up in more. They want more, buy more, want to have more and they lose sight of the power of less. If you give a monkey a banana when it’s hungry, it’s ecstatic and gobbles it up. If you give it another banana it’s ecstatic again, even though it’s already full from the first. If you then take that second banana away from it, it will be furious. It doesn’t need that second banana now, but it wants it. Humans are much the same: we want many, many things we don’t need.

There’s a great book by William B Irvine called A Guide to the Good Life: The Ancient Art of Stoic Joy, which teaches the wisdom of the ancient Greek philosophy of Stoicism. I love it because it teaches many great principles and daily practices. One that stands out is the power of ‘negative thinking’, a technique practised in meditation where you think constantly about losing valuable possessions, and of loved ones dying. The ancient Greeks lived in abundance and easily got lost in the constant desire for more, so they practised the idea of losing everything to keep them grateful and humble. It worked incredibly well.

In his book, Irvine writes, ‘The easiest way for us to gain happiness is to learn to want the things we already have’. There’s power in having less and, even more importantly, in being happy with less. I live a minimalist life because I’m happier with less — it keeps my mind clear. I have a simple wardrobe, and I don’t spend a lot of money on clothes. I wear recycled fabrics and recycle my wardrobe regularly (at OTG we run charity programs where we give sports gear to communities in need in Western Australia). My home is minimalist and uncluttered. It’s about going to bed feeling clear, and waking up feeling clear. I ensure we have a clean workplace at OTG, I don’t overpack when I travel and I don’t buy more groceries than I need. I always make my bed the moment I get up, and I don’t leave things lying around. If we’re too busy to clean the apartment, we get our cleaner in because the cost is totally worth it for clearer headspace.

The challenge people have is that when they earn more, they spend more because their focus is on having more rather than appreciating what they already have. Advertising doesn’t help, convincing people to hand over their hard-earned cash for things they don’t need. Phones are crowded with apps, inboxes are full of clutter and rubbish, cupboards are overflowing, houses are cluttered and garages are a mess!

The goal is to be happy with a basic, simple, cheap and uncluttered life. I was living off roughly $30 000 a year for the first two years of OTG. In fact, my tax return in my first year of business shows my income was $25 400, and my tax return for my second year was $32 000. And I was happy! I loved what I was doing; I was working to my purpose. I was building my vision. Life was good. I didn’t need a lot.

Analyse what you need to survive, fundamentally, and then throw in a few nice-to-haves. Then get rid of the rest, donating it all to charities. Being minimalist doesn’t mean you don’t have anything nice. It means being conscious about what you have, what you actually need and what you really love, and getting rid of the rest. I own two mountain bikes and a road bike because I love cycling, and I have a great surfboard because I love surfing. They’re my nice-to-haves, and I only purchased them when I could easily afford them. Don’t buy things you won’t use, and get great usage out of the things you do buy. Remember: most of the things that are important in life don’t cost much money.

Sacrifice

For the first four years of OTG I sacrificed earning decent money. I sacrificed holidays, overseas travel, buying property, buying a car, buying clothes, going out for drinks or dinner with mates, going to music festivals and relaxing on weekends. I was focused on what I was building because my purpose was bigger than myself. I saw my business as being very important for people, providing work for Australian staff and for contractors and factory workers overseas, making customers really happy and changing an industry. We invested all our earnings back into OTG. Everything I have earned since has been icing on the cake. I appreciate it, and I don’t take it for granted.

Money money money

In his book The Richest Man in Babylon, George S Clason says, ‘Plan your budget in that way, that money will be enough for necessary needs, pleasure and worthy of desire, but the costs do not exceed nine-tenths of the income’. People often meet their income with their expenses, but treating money that way keeps people struggling. Clason’s book is one of the best books on money management. I highly recommend reading it if what I share in this section is new to you.

Money intrinsically has no value. It’s what you do with that money that has value. You can’t eat money, or drive money, but you can use money to buy food, and to buy a car or to pay for public transport. To manage money effectively, keep it simple. One rule that’s good to follow is to save 10 per cent of your income every pay cheque — have 10 per cent automatically transferred into a savings account. Another good rule is to measure your debit and credit every day. Keep track of all money coming in, and all money going out. Know exactly what you’re doing with your money, and how your bank account is looking — every day. Make sure you’re spending on the right things.

It’s important to map this out in alignment with your career goals. For example, let’s say that in one year you want to get a $10 000 pay rise. How do you do that? For a $10 000 pay rise you may need to be more educated in X topic, so that you can argue you’re providing a stronger ROI to your boss. Or, show your boss that with a 10 per cent pay rise you’re going to increase your productivity and effort by 30 per cent, and measure it to show them how you’ll do it. What’s important is to show your boss how the pay rise will deliver results for the company. Another way to negotiate a pay rise is to look for alternative roles, or employers.

Let’s say that in one year you want to have $5000 to invest in the stock market. How do you get there? You need to put $417 a month into savings, which means you need to save $96 a week, and to do that you need to sacrifice something else. What do you really need each week, and what can you sacrifice so you can save $96? Keep in mind that it’s often the little, consistent sacrifices that add up to the big savings.

There are some great apps that help you budget your money better and save more. My personal favourites for budgeting are My Budget and Money Brilliant. The best app I’ve found for tracking expenses is Wally, and the best app for painless saving is Acorns (now named Raiz). Check them out!

Keep your financial plan simple, and keep it in sight. I have a 10-year business plan on one page that sits right next to my desk, and as the background on my iPhone and my iPad. I see it every day. I also have a calendar request at 8 am every day reminding me of the date I’m going to have a billion-dollar company.

Every six months, or earlier, revisit your budget. Have it in front of you. Any money that you can save can be invested. Investments will build long-term cash flow through dividends, and will build equity. Today, if I have spare money I will either invest it and earn something out of it, or I’ll give it away in a way that teaches and empowers someone. For example, if I give $1000 to people I know in Fiji or Western Australia, it makes a big difference to their lives. Make sure you get an ROI out of everything you do, whether it’s a financial ROI, or helping someone. At OTG we have supported over 15 charities, and we give social grants every quarter to help individuals or communities who are raising money for a cause, or who need funding to get a local sports team off the ground so there is somewhere positive for youth to go.

There’s nothing wrong with being a tight-arse

Being a tight-arse is rare nowadays, but it’s an essential financial skill to learn. A 2018 financial planner would call the younger generation the ‘smashed avo on toast’ group. We live in a world based so much more on convenience now than net equity. To increase your savings you need to 1) look at how you can increase your income and 2) look at how you can decrease your spending. Being a tight-arse means you’re spending less and saving more — it’s fantastic! It’s a method you shouldn’t stop, and the earlier you get into it, the better you’ll be long term. The journey of an entrepreneur can be up and down, and overnight you can become a millionaire, but it’s so important to stay consistent as we’ve seen too many highs and lows with successful founders and executives.

For OTG to be able to exhibit at expos in the first few years, we had to maximise our cash to afford the booth, so I slept in my car before the expo, never bought a drink at the evening events and would run to a local food court to find a cheap meal rather than spend $20 on lunch at the expo. It was so worth it.

To be a tight-arse you need to first get in touch with your current spending habits. In a note on your phone, or using one of the apps I suggest earlier, write down every time you spend $1 or more, for a month. Every single time. Yes, it’ll take discipline. Do you want to live an extraordinary life? Because it takes work! At the end of each week, review your spending to see where your money is going. Then imagine you suddenly had half the income you have today — how would you make it work? Where can you sacrifice? Where can you be smart about saving a few dollars? If you’re about to go out with friends, ask them how much what you’re doing will cost, and explain that you won’t spend any more than X. Make it clear, and put it back on the other person.

When was the last time you practised the art of being a tight-arse?

Friend currency

Another great way to be smart with your spending is to find people who can help you for free to do things that you would normally have to pay for. I call it ‘friend currency’. As I’ve said, it’s really worthwhile making the effort to meet many people in a broad range of fields, and to see who you genuinely click with and become friends with. You can then find a win–win situation where you can help them for free with something they need, and they can help you, removing the need for a financial transaction. Everyone wins.

For example, you may have a good friend who is a tradie and who agrees to do a small renovation for you where you only pay for materials, and because you’re great at finance, in return you help them do a proper budget for their business and manage their cash flow better, easing their financial stress. That way they’re getting value in their business, and you’re getting equity in your home. It’s a great contra for both parties.

Debt: the good and the bad

There are two kinds of debt: good debt and bad debt. Many Millennials are far too comfortable with the idea of being in debt, making building wealth for themselves so much harder. If you want to do well financially don’t ever get into debt for depreciating assets or experiences. Only ever buy clothes, furniture, cars, holidays, tickets to music festivals and so on when you have the money available, and when after the purchase you can still meet your saving targets.

In general, there are two times when going into debt is a good idea: when you’re building a business, and when you’re buying a property. By borrowing more than you have you’re leveraging yourself for growth, meaning you’re borrowing money to buy the potential of earning more than you’ve borrowed (either through your business doing well, or through capital growth/rental returns on a property). How much is smart to borrow depends on your personal situation, and it’s best to get financial advice from experts and mentors who have successfully done what you want to do.

What is good debt?

Good debt is when you use money to make money. As author Sol Luckman said: ‘It takes money to make money’. You can use good debt to generate an income and to increase your net worth. Let’s look at some examples of good debt.

BORROWING FOR SHARES IN YOUR OWN BUSINESS (OWNING A SMALL/GROWTH BUSINESS)

The best way to earn money without having to answer to a boss is to start your own business. An added benefit is that depending on how hard you’re willing to work you can earn as much as you want. And if you’re successful, you may be able to sell your business for a tidy profit down the track.

In the early stages, you have two choices: debt to the bank or debt to yourself. (Later on there is a third choice: debt to shareholders). The more you can be in debt to yourself, the better. Many people mistakenly think they need to have a lot of capital to get their business off the ground, but they forget that ‘capital’ is another word for ‘debt’. Launching your business with a huge amount of debt is not a good strategy. Instead, look at what you can do with what you personally have, so you’re only in debt to yourself. How far could you take the company on your own? It’s much better doing more with less, and being really smart about your business spending.

Borrowing, and therefore using other people’s money (OPM) to grow your business, is a smart decision when you have the right execution behind it, which takes learning and experience, and usually works out best when your business is somewhat established. Today I can make myself and my shareholders extremely wealthy using other people’s money because I’ve learned how. Four years ago I had no idea how to do that. I’m so glad I took the journey on my own, being indebted to myself first, before using OPM. Now I am a far more compelling case to wealthy people because I got myself so far. They can see I know what I’m doing. Use OPM when you know how to. It’s not a bad thing making other people wealthy, but be aware that it will come with pressure.

BORROWING TO BUY PROPERTY

There are several ways of making money through real estate. One way is to buy a house, live in it for a few years while adding value through renovations, and then sell it for a profit. You could also generate an income from the property by either taking in a boarder or renting out the house and living somewhere else. It’s a great way to have a cash flow for future projects while building your equity base. 

The most common way to use OPM is when buying property. Buying with a 10 per cent or 20 per cent deposit, and borrowing the rest, leverages the small amount of wealth you have today for potential capital growth over the next number of years. Though property is usually seen as an appreciating asset, it’s important to be very careful what property you buy — a lot of people have been burned, believing that property prices would go up without realising there was an oversupply of properties in that area. They then find they have to sell their property five years later for the same amount they bought it for, or less. They not only lost money spent on buying, maintenance and selling costs, they also lost what that money could have earned them over those five years.

The other issue with property is that people borrow the maximum amount the bank will give them to buy the most expensive house ‘they can afford’. It can be a disaster waiting to happen. What if you’re retrenched and take three months to find another job? What if interest rates go up and your monthly mortgage repayments therefore increase? Suddenly your mortgage, which was already spreading you thin, tips you over the edge and you can’t afford the monthly repayments. It becomes awful and stressful; you may end up being forced to sell; and it’s totally unnecessary. You want to buy a property comfortably, with savings on the side after the purchase.

Before you buy a property, research whether you can utilise government grants or stamp duty concessions — for example, the First Home Owner Grant. Then, it’s a race to see if you can pay it off. A tip from a millionaire friend of mine was ‘never have debt on a non-deductible asset’ (that is, your place of residence).

What is bad debt?

While even ‘good debt’ can turn bad if the business or property doesn’t grow as planned, bad debt is anything you buy that won’t go up in value or generate an income, so you shouldn’t go into debt to buy it. Bad debt includes items such as:

• cars. Cars, especially new ones, are expensive, so don’t add to the cost by borrowing money to buy a car. Avoid bad debt by buying a cheap, reliable, second-hand car that you can pay for in full on the day of purchase.
• credit cards. These are one of the worst types of bad debt because of their extremely high interest rates. Interest rates charged are almost always way higher than the rates on consumer loans. It’s a good idea to avoid credit card debt, no matter what.
• unnecessary consumables. These include clothes, and other goods and services. I’m not saying you can never buy yourself a new piece of clothing, go out for a meal or go on a holiday, but you never want to go into debt for nonessential purchases. If you’re ever tempted to buy a consumable or experience using a credit card, make sure you can pay it off within the interest-free period.

Investing

There are many options to choose from if you’re looking to invest, such as stocks, bonds, commodities, futures and metals, and alternative investments. In general, short-term investing is used for generating an income, and long-term investing is for generating wealth. You can also invest in start-ups, though these are high risk, and it’s best you have a lot of experience in business so you can make a good judgement of which start-ups might go big. If a start-up you invest in does go big, the reward is huge — you could retire off it! I’ve had investors become millionaires out of investing in me, and I’ve seen them invest in other now-successful companies that they have retired off. To invest in startups you need to be able to tolerate risk, and be able to stomach losing your money on a rough average of 9/10, because it might only be only 1/10 that pays off.

Investing often comes down to time: the more time you have your money invested for, the bigger your returns. Every six months that go by without investing is money you’re throwing away. Be a tight-arse so you can save money to start investing! Maybe don’t spend that $6000 on a second trip to Europe, and instead invest in your future. There are many Millennials who have spent so much money on travel in their 20s that they’re crying poor as they approach 30. Yes, those adventures were fun and worth it, but you’ve also just thrown away 10 years of opportunity where your money could have been working for you, earning you more money.

The Australian Dream used to be to go to university, get a decent job, buy your own home, pay off the mortgage slowly, and then retire off the growth of the family home and your pension. But in many ways this dream has changed because 1) property is not the only effective way to grow future net worth, and 2) the pension is no longer enough to live off today, so by the time we Millennials retire, I can guarantee it won’t be enough, particularly when you look at the population replacement statistics for Australia.

Where are you now? Where do you want to be? How do you get there … and what do you need?

One of the things I’ve learnt in building wealth in my business and personal life is identifying fundamentally where you are NOW. No bullshit. No glossy crap. Just identify exactly where you stand. Once you can do that, you’ve made the massive steps towards where you can or want to go.

Then it’s about setting where you want to be, and by when. What I’ve found really important is putting dates to things. Often my staff will laugh at my calendar notifications; I actually make sure my key goals or targets have a reminder and due date … otherwise, what’s the point?

Using the guide that follows — for me it started on the back of a paper towel with the help of a business mentor, who founded a now $5 billion business called The North Face — I was shown that it’s important to identify where the startup WAS. Where we wanted to BE. What we thought we needed to DO and HOW, and WHAT was required. This was when I first decided to sky-rocket the business and raise capital.

Now I use this chart to simplify business plans and goal lists, and even take it to my team for personal development. So, see my example on the following pages, and why don’t you have a go yourself?

You can also download the chart from onthegosports.com.au/book