If I offered you a $1,000 for an hour’s work, would you say yes? And if I told you someone would be stealing a $1,000 of yours this year and that would end up being a $32,000 loss over 35 years of your working life, which could end up being a $256,000 loss if you live retired for 21 years after that, would you take action to avoid this?
Yes, I know I’m looking for the most sensational take on a valuable lesson about how we are our own worst enemy when it comes to building and not losing wealth. But hell, I have to grab the attention of normal people before it’s too late!
Let’s start with the easiest case to argue: if I offered you a $1,000 for an hour’s work, would you do it? Most rational people would say “yes”. Then they’d ask: what do I have to do?
The task would be to simply list all the financial products I buy, find out what I’m paying and see whether I can get them at a cheaper rate. Or can I get say bank deposits, super funds or managed funds that have a better history of bigger returns?
And if I was so busy that I couldn’t spare the hour, I bet, if I wasn’t Peter Switzer but instead a normal busy person who hadn’t done a forensic personal investigation into all my financial products, I bet I could easily save $1,000 in a year, so paying someone to find out what I should do would make perfect sense.
And if that makes sense, then why wouldn’t you hire yourself to do exactly that?
How do I know you could save a $1,000 plus a year by doing an hour’s work? Well, last week I was asked to go on the Today programme to explain how people could improve their saving and one of my suggestions was about making sure you had the best financial products.
There were well-known credit cards at 21% and then there was the ME Frank credit card at 11.2%. So if people had $10,000 worth of credit card debt and they found and switched to the cheapest card, their interest bill would be cut by $1,000 a year.
I bet Budget Direct insurance premiums are cheaper than the policies many of us have kept for years. And I bet there are cheaper health insurance and home loan products out there, if people simply looked.
Anyone who hasn’t twisted the arm of their bank or asked a mortgage broker to find them a cheaper loan could be paying 4% but online there are loans under 3%. Chasing the 1% cheaper rate of interest on a $500,000 loan brings the interest bill down from $359,347 to $258,887! We’re talking about a $100,000 over 30 years, or $3,000 a year!
Is it madness to be financially chaotic and lazy?
But it’s not only a saving issue. By not doing this $1,000 an hour job, you could be giving up $256,000!
How do I arrive at that figure? Stick with me on this.
Let’s say you read this when you’re 25 and have 35 years of work to live. You do the work and find $1,000 and you invest it in an exchange traded fund for the S&P/ASX 200 Index. You could put it into IOZ, STW or VAS or A200.
History shows these pay about 10% per annum over a decade so your money doubles every seven years.
That means after seven years $1,000 becomes $2,000. After 14 years it’s $4,000. In 21 years, it’s $8,000. In 28 years it’s $16,000 and in 35 years it’s $32,000.
And in retirement, you let it roll so after seven more years, it’s $64,000. And then it’s $138,000 and after seven more years, it’s $256,000!
That $1,000 job has become a goldmine but you’ll never ever see it unless you get off your butt and do your financial homework.
OK, I know I left the tax bill off this little piece of mathematical bliss but it still will be a fantastic pay-off, especially if you invest the money through super.
I know negative ‘bastards’ will try to find fault with my very valuable lesson but these people are simply bitter, twisted losers, who have no idea how to stimulate and motivate people to lift their lives.
Willie Nelson, a guy who turned around his musical life later in life, once gave us a great tip: "When I started counting my blessings, my whole life turned around."
If you count what you’re paying out and make sure you opt for the best financial products you can find, you’ll be blessed with future riches!
One final tip. If you haven’t got time then get your kids to do the homework for you and give them a cut. It would be a great lesson that they might never forget. You just might ensure that they’re money-smart and they might never have to bite you for a loan!