My understanding of money

Money is a useful tool that can be used to get you where you want to go. I understand it when people say it isn’t everything and it really isn’t. Nevertheless if I don’t find a way of generating more money and improving my cashflow, I won’t be able to do the things I love and the byproduct of this is me reverting back to the old dark cloud who has negative emotions surrounding money and work.

What I love above all else is spending quality time with my family. If I continue my down my current career path (focusing only on work) I will end up working 6-7 days at home or working away for long periods. This is something a lot of us contractors face but I have had my fill.

I don’t mind work that much, but I have got to a point in my life where work must be on my terms. Not a loose hope or thinking it might happen one day if I get a big win on the lottery or the football bets (chasing the pot at the end of the rainbow).

My mindset is to work anywhere in the world and chase money but not to buy more expensive possessions or go on loads of holidays (that will come later once my family is set up). I will use the money wisely and invest it in my stocks and shares ISA and property.

My improved understanding of money has led me to focus in on our own house and sorting our budget out. Cashflow always seems to be an issue and I have had to trim down the budget. As my current job is not the money I have been earning in recent years, I have had to stop overpaying the 3 mortgages on my 1st 3 rentals.

This has saved me £1000 (mortgage overpayments) and our cashflow is now ok. The mortgage overpayments were due to stop anyway as I am about to flip them from interest only to repayment.

This goes against my new mentality of getting cashflow from my rentals, but it is psychological. My 1st 3 rentals were in negative equity for a long time and it brought with it a lot of negativity. I want them to be paid off. The good thing is now that after 3 years of intensive overpayment they all have 25% equity in them.

Going forward, any properties I have in DUFF Properties (new property business) will be interest only. This will mean I have some rentals repayment and some interest only. The repayment will mean the houses get paid off by the tenants and the interest only means I will benefit from cashflow and any capital appreciation. This sort of diversification is what my accountant and FA have advised me to do and it suits me personally.

My idea of being set up financially has changed. I used to think paying the mortgage off early was the key but now I think it is all about cashflow. My new mentality is that I want my passive income (from property and other investments) to exceed my expenses. If I can get to this level of passive income in the next few years, my mortgage can be overpaid and will be paid off early anyway.

Get my house in order. Earn good money. Invest wisely. Any profits from investments and from excessive wages (when I get on good jobs) is again re-invested. This sort of cycle will get us our FI quickly, I am convinced of it.

Despite my income not being what it was, I am still pushing for rental number 5. Once I get money from my existing house I live in and rental no.4 it will happen. I have started going to property seminars and meetings to be around like-minded people and people who know a lot more than me. This will help me decide on my next move (rental no.5) and will motivate me further towards FI.

In my opinion it is about having an abundant mentality and not a scarcity mentality. This opinion has come from reading books like ‘The 7 habits of highly effective people’ (Stephen R. Covey).

The 7 habits states that when looking at an abundance of wealth, it is important to know the difference between abundance mentality and scarcity mentality. Scarcity mindset is when you think there is only so much out there (in my case money) and if someone has a large piece of the pie, it means less for everyone else. This can lead to negative feelings towards people who are successful in any area of life.

Scarcity mindset can lead to competing (negatively) and comparing to others (a definite negative trait). This is like pretentious people who like to keep up with the Jones family. An example is buying the latest Range Rover you can’t really afford just to keep up. Fuck that! I am more than happy with my Passat and tend to focus on miles to the gallon.

On the other hand, the abundance mentality adopts the attitude that there is enough for everyone. After all the books I have read, I have gradually moved over to the abundant side of the fence. I believe there is enough money out there so I can get my FI before my 60s and 70s. Fuck it, before my 50s so I can live life on my terms.

Mr Covey goes on to state that the abundance mentality is about sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives and creativity. Although I started writing this book to enable me to get more money (get my house in order and attain more wealth) it has also become about helping other people. I am happy to highlight my financial fuck ups just so other people can learn from them and make informed decisions that will help them acquire money and become financially literate.

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