Author: Jeff Sawtell
In my life before becoming a mortgage broker I worked as an investment banker in Sydney. I was a fresh faced 20-year old kid, I had much less forehead and much more hair than I do today and armed with a cheap vinyl briefcase and an even cheaper pin stripe suit I was ready to make my mark. Reflecting on that time I really thought I had the world figured out, that was of course until I read a book that I can only describe as a game changer.
Working your way up the ladder in investment banking required absolute dedication, it was at times a war of attrition. Those who progressed up the ladder typically did so by showing their dedication to the cause - being first in and last to leave tended to have greater influence on promotion than results ever did. Achieving success was simply going to require a nose-to-the-grindstone type approach, and after 30-40 years of hard work and dedicated service as a valued employee I would get to retire fat, rich and happy.
As a young guy with a thirst for success I knew no different, I looked at the senior partners with their expensive tailored suits and flashy sports cars, and knew that if I followed the script and put in the hours, I too could have all of the same spoils one day in the future. It was only after being introduced to the book “Rich Dad, Poor Dad” by renowned millionaire-maker and author Robert Kiyosaki that my life would take a different path, almost immediately.
Through Kiyosaki’s book I then discovered new strategies for accumulating wealth and achieving success; strategies that didn’t require 14-hour days and 6-day weeks – the very approach that had driven me to a 6-cups-per-day caffeine addiction. Something that resonated with me immediately was the concept of using ‘other people’s money’ (aka OPM) to accumulate your own wealth. At the time it was a concept that was as foreign to me as turmeric lattes and kimchi.
As Kiyosaki had mapped out, the concept of using OPM for personal wealth creation involved borrowing money from other people in order to invest in assets which would produce income and grow in value - assets that would contribute to your wealth independent of the input of your own time. As I grasped the concept, I began to look at how I could apply this in my own life.
Despite only earning a modest wage in my early years as an investment banker I had managed to squirrel away enough money to purchase a home in the Sutherland Shire, at the time an affordable location 45 minutes South of the Sydney CBD. Knowing that the property I had purchased some 3 years prior had grown significantly in value, I decided to try out Kiyosaki’s strategy and picked up the phone to speak to the manager of my local bank (something you could still do in those days).
Despite my initial nerves and feeling completely intimidated, I was amazed to receive the nod of approval from the bank manager. Utilising the increase in value of the property as security (also known as equity) the bank agreed to lend me sufficient funds to purchase my first investment property – a property that I could ultimately rent to tenants, who would pay the rent I would use to cover the ongoing costs of servicing the loan.
And whilst my first investment property was not about to replace my income any time soon, it was an asset that would increase in value over time - helping to grow my wealth whether I was working, holidaying with family, or investing time to launch a great mortgage broking business in Newcastle! The feeling you have when you realise you are using other people’s money to grow your wealth is something I’ll never forget.
For me it’s sad to see that despite my best attempts to share what I had learnt, many of my former workmates are still following the same path that I too had previously seen as the right one. They are stuck in a pattern Kiyosaki describes as ‘the rat race’, the pattern of “get up, go to work, pay bills; get up, go to work, pay bills.” And despite earning more money as a result of climbing the corporate ladder, they remain trapped in the cycle as a result of the increase in their spending and failure to invest in things that will grow their wealth independent of their time.
If I was to summarise the key takeaway from the book in 1 sentence it would be “Learn to have money work hard for you, and your life will be easier and happier.” This takeaway has been a real game changer not only for me personally but also for many of my clients.
In my next article I’ll share with you a real-life example of how we were able to help clients Matt and Kristy utilise the ‘other people’s money’ strategy to fund the purchase of their first investment property. Stay tuned!
If you are thinking about utilising the equity in your own home to fund your next investment, speak to the experienced team at Fortuity Lending who can show you how. Book here or call to make an enquiry.