This is your Captain speaking is a monthly Question and Answer segment where I unpack some of the most popular questions from the Financial Independence community.
If you have a question for the Captain, the best place to ask is the CaptainFI Facebook group or by leaving a comment on blog posts.
If you would like to stay anonymous you can get in touch via the email from the CaptainFI blog contact form. I am also active on other social platforms and forums (but it’s easy for questions to get lost).
This is your Captain Speaking Q&A session 1
Captain FI: [00:00:00] Ladies and gentlemen, this is your captain speaking. Welcome aboard captain fi the financial independence podcast.
Welcome to an episode of captain fire, the financial independence podcast, where I opened the cockpit for some of the best and brightest in personal finance, as well as those who’ve reached or are on their way to financial independence.
This is your captain speaking. Welcome to the first monthly Q and a session where I go over some of the most popular and frequently asked questions that comes up on my blog podcast or social media. I do my absolute best to try and keep on top of the social media channels and answer where I can, but sometimes it’s a little bit overwhelming and I’m probably more guilty than most of.
Spending too much time on social media. So if anyone does want to ask a question or get in touch with me, the best place to do that is in the captain fire financial independence Facebook group. You can get the link if you just head to the captain fire Facebook page it’s already got a thousand members in it.
I started seeing incredible little community full of really knowledgeable people with all sorts of different experiences. But if you have a question you can literally Chuck it up in there and the most popular and frequent questions will make it onto the airwaves. I hope you’re noticing as well.
I’m recording today with a brand new microphone. So I had to finally say goodbye to my old microphone. I had too many complaints, so hopefully everyone’s enjoying the new CRISPR audio before we get started. I just want to let everyone know that these aren’t scripted answers. Some of the curly questions I have gone out and spoken to experts like my lawyer, my accountant, to try and get a bit of advice before I try and actually answer them for you.
But most of this stuff is just me off the cuff. So the aims for this Q and a it’s going to be pretty raw, a little bit more real, and it’s not really going to have much post production done to it. Before we start today’s Q and a episode. I just wanted to give a shout out to some of the people who have taken time to leave a rating and review on the podcast.
So first up comes from Elizabeth from teaching brave.com. Elizabeth says loving the captain fly podcasts. Just wanted to say thanks for the educational, entertaining and easy listening podcasts. I particularly enjoyed the e-business Institute episode as well as Shang from safe, my sets and Kurt from pillar.
I’ve learned a lot from the fire community and captain fire. Doesn’t disappoint looking forward to more episodes soon. Keep up the awesome content. She is Elizabeth. Wow. Thanks. Elizabeth, that’s giving me shivers. I really love hearing the feedback because it does take a lot of effort and a lot of time to put these episodes together, as well as running the captain fight blog.
So it really does make my day when people say they’re getting a lot out of it, so thanks very much for making the time to listen and for, to leave such a positive review. The next review is from Ray who gives five stars. Ray says great podcast. I enjoy it. And it especially good hearing from people who actually practice what they preach.
Lots of podcasts in this space are people who tell people finance tips, but still don’t have much money themselves. Thanks Ray honesty and transparency. Some of the most important things for me on this journey. And ultimately I started captain fire to help my journey to financial independence. I wanted to keep myself accountable to an audience and I wanted to be able to help people and pass on the tips that I’ve learned.
So I think it’s really important to practice what you preach. There are still a couple of like really good people that I follow in this space that, in the debt-free community may not have a lot of investments, but have, paid off quite a bit of debt and might just be starting to invest for the first time.
But I do tend to agree, mate. It’s reassuring when the people you’re engaging with have got skin in the game and kind of do know what they’re talking about. The last rating today comes from Flo who gives the pod four stars out of five. Flo says overall, it’s a good podcast, but sidetracks a bit.
Captain FI (2): [00:04:36] The host and guests have heaps of great info, but goes off topic a lot. I 40 minutes talking about bikes, which makes it difficult to stay interested would love it. If the podcast was shorter and only focused on financial topics thanks for the feedback. Flow . It’s actually really important to get constructive criticism and I’m trying really hard to limit the length of the podcast to only one hour and stay on track.
So I now have a pretty ruthless editor who is on board and if I sidetrack or go over the limit, she wacks me over the knuckles with a ruler. So rest assured I’m working on it, mate. So thank you for the feedback. So the first question I got actually came through a contact form submission on the website.
Richard writes in and asks captain what’s going on with your portfolio. Every time I read one of your net worth updates or you publish an article, it seems like you’ve invested in a new area. Why aren’t you just sticking to your core investment strategy of buying ETFs and LLCs? This is actually a great question.
And it’s been something I’ve wanted to talk about for quite a while on the podcast and the blog. First off, I’ll say, yes, I am. I’m simplifying my investing strategy. So in the past I had looked to buy ETFs or exchange traded funds, which were mostly index tracking funds and passive funds. And I’d also looked to buy listed investment companies or LLCs.
Such as athletic Argo, Milton and Brickworks whenever they were trading at a discount. So if anyone’s not familiar ETFs and LIC is can fundamentally hold a lot of the same stocks in them basically wrapped in wrapping them up into a parcel where, so an ETF uses a trust structure and an LIC uses a company structure, and there are some distinct advantages and disadvantages to each, but basically an LIC because of its company structure can then sometimes trade at either a premium or a discount to what it’s actually got in that parcel that it’s wrapping up.
And a lot of value investors in that index investing scheme seen have seen the potential of buying an LIC when it’s trading at a discount. Holding it benefiting from the dividends and then selling it when it trades at a premium. And that’s exactly what I did. I noticed that my LIC holdings were trading at a premium to the MTA and I simply sold them.
I’d actually achieved a capital loss on that year that was in March of 2020. And then I immediately bought into ETFs. Now I’m not an expert on this, but for me personally, I just see the ETFs as a bit more of an efficient structure. And I’m also focusing less on the dividend style strategy now that I have a good baseline dividend income.
So to summarize my core investment strategy now is simply buying ETFs. Now that also. Something that’s made this a lot easier and more hands-off is I’ve actually changed brokers. So everyone knew before. And, I had a big article on my blog and I talked about it quite a bit and actually had, screenshots.
I’ve used self welfare for years. I think, they were a really good broker and, chess monsters offering the some of the cheapest brokerage in Australia, but they didn’t have the ability to automate the investments. So I gave pillar ago and it seems pretty good. And after a few months I was really happy with it and that’s why I’ve actually switched all my holdings over to Pearl on here.
Now, the reason I did this is because of their auto invest feature, which pretty much means I can go completely hands-off for my core investing strategy. So using the auto invest feature, literally. $2,000 gets billed from my bank account. Every fortnight goes into their cash management account and gets automatically invested into three of my core ETFs, which is a 200 VTS or VU buy.
Whichever one is least. So I think at the moment, the lowest holding is VU. So it seems to just be buying that. Now look people up bombarding me saying ah, don’t, about the U S to Aussie dollar price movements. Does that influence your investing? And, to answer that, I would say yes previously it had influenced, but I just had this decision saturation.
There are all these things going on and I found it really hard to make what I thought was a good core. Every fortnight, what I was going to invest in. When I went through using the self wealth premium function, I could actually see where I had placed all of my trades. I was actually. Doing myself, a disservice.
So whenever the market went down, I held off on my purchases and then once the market went up, then I seem to buy again, which was exactly the opposite of what I wanted. I thought I was some smug, clever in Terminator style investor that was, benefiting from this really awesome DCA strategy.
But no, I was actually just making myself have lower returns. So using the auto invest, I’ve literally completely taken myself out of the loop and it just ticks along in the background. Of course you can go one step further from this, which is using a automated rubber advice platform. And that’s something that I’m looking into at the moment.
Richard, this is probably what you’re getting out. When you say every time I check your blog, you seem to be investing in something new. Yes, I put a couple of thousand dollars into stock spot which is a robo advisor. If anyone is familiar with that, it basically just means you give them the money and they literally invest it.
However they see fit according to your survey response. So for me, I took their survey and I think that put me. In the Topaz. Ah, sometimes I get this wrong and I’d do the opposite. I’m pretty sure Topaz is their most aggressive one. Which you know, is still only 78% growth stocks. And what’s that 28% defensive assets like gold or bonds.
So yes, despite my objections to bolt, to bonds, gold and cash, technically I’ve invested in them through stocks, Bob going to keep this experiment running and I’ll probably keep adding money into stock spot until I get it to 10,000 is when it’s like a fully diversified set up. Cause they face in your investments.
So that means, $2,000, you get 50% bonds, 50% stocks. And then as you contribute more, it diversifies until you get to that baseline 10 K. So yes, I’m probably going to continue having a play with that. And just looking at the returns from the stock spot against the returns that I’m getting on my Perla ETF portfolio.
And then, we’ll make a decision in the future as to. What the best way forward is in terms of other investments. Yes. I have done a little bit of peer to peer lending. I have bought a little bit of Bitcoin and Ethereum. Yes, I bought some Tesla stock. Mostly. This is what I classify as micro investing, or sometimes people call this the core satellite investing approach.
So my core approach being the holding of ETFs and the satellites being these smaller, maybe more speculative plays. And it’s also because I wanted to, I want to invest in these things and I want to review it and I want to write what it’s about for the blog, so that, you guys out there reading and listening can get the benefit of my experience because this is something I found really confusing and confronting when I first started investing.
And there’s just so much information out there that it’s nearly impossible to keep track of everything. So look, there you go. There’s an eight minute answer to what should have been a very simple question. Yes. My investment strategy has changed. I have admitted that I am not this amazing investor that I thought I was gaming the system with the dollar cost averaging.
So I had to take myself out of the loop using an automated automated investing, functioned with pillar. And then all these smaller things you see me investing in. I really just, it’s really just the satellite aspect of this course. I like investing strategy. Now, the next question comes from a fellow blogger.
Jim, so Jim has commented in the financial independence Facebook group. This might be obvious, but I would love any information regarding your best frugality tips. Okay, Jim the three top tips that I would say that will help you with frugality on your path to financial independence. Number one is track your expenses.
Track your expenses. It doesn’t mean you have to do a budget. Doing a budget is a great idea if you’re just getting started because you really need to have an understanding of your balance sheet, incomings and outgoings treat your personal finances, like a little business. Obviously any business that’s got outgoings more than the in goings is going to fail.
And that’s the same when it comes to personal finance and running your household. So if you have a budget and have an understanding of your ins and outs, that’s going to let you know exactly how much you have to invest. Now, of course, you could flip that around rich dad says, rich dad from Robert Kiyosaki’s bestseller, rich dad, poor dad.
He says, you should invest at the start of the month and then spend what is left after investing. So if you have a budget, you’re going to know exactly how much you need to live that way at the start of the month. You can do your investing or, the start of your pay cycle, do your investing. And then the remainder that’s what you’re going to live off, tracking your expenses.
This is really great because it helps it promotes this psychological benefit, which is you just don’t. I want to spend your money and you start realizing okay. I want to spend money on stuff that I like. I don’t want to spend money on crap. And it’s really confronting when you first start tracking your expenses because it forces you to look at all these holes in the boat, like these leaky, Bo all these expenses and really you can just then start plugging those holes.
So that’s probably one of my, that’s probably my top frugality tips there. Track, track your expense answers and have a budget. If if you’re
Captain FI: [00:15:29] with your finances. The second one cook at home. Plant-based meals. Okay. You don’t have to give up me. You don’t have to become a vegan or vegetarian and, side note, all the processed vegan crap food is crap.
And it’s really expensive. Like my sister loves Coveo, but that shit’s $8 a tub. It’s tiny little tubs, she’s pregnant at the moment. So she could probably eat 10 of them in one city. So whole food. I read this amazing book called the China study. I think it’s Dr. Colin Campbell.
And some people dispute it. Somebody will say he’s full of crap, but I think he’s pretty well on the money. You should always look at the flip side, right? Look at pros and cons and look at peer reviewed articles. Now he’s a he’s a PhD and I’m pretty sure his son is a doctor and they both run this business and they have the, I’m not sure if it’s like the.
China study Institute or the Campbell Institute or something. They have some business where they basically, try and promote people to be healthy. Okay. So anything moderation is the key. So I really liked the book called in defense of food by Michael Poland. It was actually a documentary he used to, he was really good.
It was on Netflix for a while. It was like an hour and a half, but it looks like it’s been removed and they’ve broken it up into a mini series and it’s, it’s going on like commercial TV shows. I think I saw some of it on SBS on demand or something. So you can still access this stuff for free is inflammation.
But Michael Pollan has a saying, which he’s one of my favorite sayings when it comes to, food and frugal eating and that’s eat food, not too much, mostly plants. All right. So mostly plants and. If you’re eating whole food, it’s so cheap. Like you look at a couple of bucks, gets you a big bag of potatoes, right?
You go to a farmer’s market, you can get incredible amounts of healthy, fresh whole food produce. Yeah. And it, and you can make some amazing foods with it. Some of the most staple foods that I eat are like things like beans, rice, pumpkin Kamari, sweet potato squash they’re awesome.
It’s so yummy. And you’re getting all the awesome, fresh foods. You’re getting all the vitamins, you’re getting all the fiber, getting all the carbs that your body needs. All right. You actually getting a lot of proteins, don’t let Jim Burroughs tell you, you need to eat whole digit kilos of chicken, a dough to get big.
That’s bullshit. I’ve been weightlifting for five years, pretty seriously. And I’m not Arnold Schwarzenegger by any stretch of the imagination, but I still I’ve never felt stronger and I’ve never felt. Fitter. And for me, a big part of that is training, trying to, eat cleanly, trying to eat whole foods.
Now I’m never going to shame someone on their diet, but a whole food plant based diet or a majority, whole food plant-based diet is going to be super cheap. And if you cook it at home you can meal prep. I basically have all my meals usually done up for the week. And I can usually get them for around a dollar to a dollar 50 per serve.
And I, a lot of food, like a lot of all my mates, they laugh at how much I ate my family. Sometimes give me shit about how much I ate. So I’m I’m either big appetite, right? So I make big, like my, either use these glass one liter tubs and I fill it up, and I’ll eat three of them a day, plus a bowl of cereal and a whole bunch of fruit and different snacks.
Like I get teased at work. Sometimes they call me worms, I had to I had to go and get a box of tea, worming tablets, and a, an eight one in front of someone just to make a point. So they’d stop teasing me. That’s what happens when you exercise and you eat mostly plants, you have a big appetite.
So my third tip for free Galilee, it’s linked to the first one. So it’s cancel your subscriptions. Okay. And if you track your spending, you’ll know what these things are. So for example, if you have car insurance do you really need to be paying a monthly. Installment on fully comprehensive car insurance.
Maybe you do, if you own too much car and you’re driving a brand new car and you’re so scared that you might lose it in an accident. Me, I drive, I’m pretty sure my, my customer will be worth $5,000. Now I could literally go out and buy 10 of them right now, but I’m not going to do that.
The point I’m trying to make here is I don’t need comprehensive car insurance. So every year for me to insure that car fully comprehensively would cost something like $800, which turns out to be like a 90 to $100 monthly payment plan. And, that’s ridiculous. I just have third-party property on my car, because I’m only worried about insuring. For something that’s going to financially devastate me. So if I, if I’m doing something I shouldn’t, I’m not paying attention and I rear end a Lamborghini and that Lamborghini cost $250,000, and they’re mostly made of plastic and carbon fiber. So your rear end one of those, the whole thing’s staffed to pay out $250,000, that had financially devastated me.
So I’m happy to pay $180 a year for that level of insurance. Okay. Similarly for my phone, I don’t pay, a hundred dollars plus monthly subscription. For fricking phone and a phone plan. No, I use a prepaid data SIM there’s a whole bunch of really great options out there, depending on your coverage needs.
And yeah, I think I paid 150 bucks for a 12 months subscription. They came with 60 or 80 gigs of data or something it’s more than I could ever use. Yeah. So just getting smart about the subscription. So cutting away the subscriptions and just paying upfront for the things you actually need. And some people find that hard to cashflow and budget for my response is get a sinking fund.
Okay. Once you start getting on top of your budget, you get on top of your bills. You’re going to have a surplus of money and. Pop that aside, use it initially to build up your emergency fund and if need be perhaps take a chunk out to pay for some of these things. But ideally you’ll have your, your sinking fund or it will be a savings account and you regularly put however much you need per pay.
20, 50 bucks, a hundred bucks, a pay goes off aside into the sinking fund. And then when these big financial bills come once a year, whether that’s your car red show, whether that’s your insurance, whether that’s your phone bill, bam, you just pay it out of that account. And it’s done. You don’t owe any money.
There’s no nasty little subscription bill. No, one’s continually taking your money. Now again, this is ironic and I am a hypocrite because I do actually have a couple of subscriptions. A lot of them are to do with the business actually, so I can write them off. Under that. So one of them being this podcasting hosting service, another being an editing service.
But my consumer subscription is Spotify. So I do have a Spotify account because the ads just drove me nuts, especially when I was in the gym. Anyway, we’re getting off track now. Subscriptions, make sure you’re not paying for stuff you don’t use, gym subscriptions. That’s the biggest one, I’ll make up a statistic here, but isn’t it like 50% or more of people with a gym subscription.
Don’t actually go to the gym. It’s one of those psychological purchases, oh, I’m trying to get in shape. So I’ve got this gym membership, but you never use it. Okay. The gym owner says thank you very much because my equipment’s not wearing out, but I’m still getting the money. Critically think about these things that you subscribed to, or these services that you might be paying for, that you don’t need and just get rid of them.
So there you go. That’s my top. Three frugal tips as a bonus on just drive a secondhand car, don’t buy a new car. Okay. And you know what, don’t even drive your car. If you can walk or cycle or use public transport, that’s a really good option. I’ve got a little electric mountain bike. It’s awesome.
It’s got a little battery on it. Some people say it’s cheating, but it’s great. I can zip to the shops and back I can actually ride to work. When I’m going over to friends’ houses, I can, I can just put it on. I’ve got lights on it. So awesome. Okay. So there you go. Think about driving less.
The next question comes from Rob, who asks, what would you do today? If you were sitting on copious amounts of cash, I’m 27 and now I have a net worth of over 600,000 due to being a property investor from age 18, I started getting into stocks because I’m sick of the headaches of property. However, due to the market volatility, I’m not 100% confident if I should continue to dollar cost average into the market, should I hold my cash and wait for the world economy to normalize?
Or should I just keep. Dollar cost averaging. Now, Rob, that’s a great question. May I’ll just grab my crystal ball to find out what the markets are going to do. Now ADC is a good question. My, and it’s actually something that the Aussie Firebug asked me on one of his recent episodes because he gets asked very similar questions and ma look, it’s a fair enough question.
So I probably shouldn’t probably shouldn’t just for the reason why, we all do dollar cost averaging is because we don’t know what the future’s going to hold. Yeah. And I think you have to ask yourself, put all of your cash into the market. And, there were a couple of shit days and, maybe really shit days, and you’ve seen it go down by, 10, 20.
Even 50%, like what happened in March last year now? How would that make you feel? Would that make you happy? No, it wouldn’t because the pain of loss is, felt so much worse than the gain when the market goes up. All right. So if you want to think about this, like objectively, there’s been a number of like quantitative analysis analyses done by various investment firms and I’m pretty sure the math just States, you’re better off to lump some investor, right?
Because on average, the market goes up more than it goes down, but what those studies fail to To factor in this human psychology aspect of it. I like to think that me personally, I would always just be this Terminator investor robot that would lump sum, invest my money and, get the mathematical benefit from that.
But in reality, we’re all human, and we have emotions. So I would probably end up breaking it into a number of smaller chunks to put into the market over time. And, ultimately mate you’re going to have to figure out what you’re going to do. That’s gonna make you sleep. Better at night.
Okay. The next question is from Louise, who asks is a financial advisor really worth it. I’m shopping around now for one, I have a net worth over $1 million. I’m in my early thirties in the accumulation phase and working out how I can accelerate building wealth so that I can fire in my early forties. So Louise, just in luck, I actually spoke to a financial advisor and should have an awesome podcast episode.
Coming out, we did do a sneak peek with a article that went out on the blog and What I would say is that not all financial advisors are the same and whether you actually need one or not depends the majority of people it’s probably not necessary, but it can be quite reassuring and helpful if you maybe have a, a bit of a nervous personality, most of us can get away with the, the good enough or the 80% solution.
With a bit of self-education reading self-discipline and, just being a savvy customer in general, but I would see a number of reasons why it might be appropriate to track down like a licensed financial advisor for advice, or even emergency financially financial counseling. The first one is probably pretty obvious and that’s, if you’re young and inexperienced and you have no idea what you’re doing, you don’t have any mentors, you don’t have any coaches, you don’t know.
Who to look up to and you, maybe you’re not confident with your finances at all, then, that’s probably recent enough to seek out a financial advisor. Another reason it might be are you impaired or disabled in some way, or are you acting on behalf of someone who is, cause you, you have a duty of care there to make sure that you are getting that person the best service.
Another reason might be a significant change in your personal circumstance. Like a marriage birth death. Relationship separation, divorce, all of those triggers may be a reason why you want to seek out a financial advisor. Another reason might simply be you’ve come into significant wealth.
Like you’ve won the lottery, you’ve got an inheritance or maybe a settlement or a payout at work. And a lot of people stuff flooded that money away. I don’t know what the stats there are on on lottery winners, but I think pretty sure most people who win the lottery end up going broke, right?
Because if you can’t manage $10,000, what makes you think you can manage a million dollars? Other reasons to seek a financial advisor? It might be as simple as being a professional in a high risk occupation. Like a doctor, lawyer, builder, athlete people in those fields, they probably want to get their their finances squared away.
And probably the last thing is if you are considering buying a house or an investment property, right? There’s a lot of property spruikers out there that will try and sell you properties that you might not be in your best interest. So if you can see a financial advisor and they can actually tell you the truth about it, then that’s probably money well spent.
So if you’re thinking about getting a, seeing a financial advisor, track down a qualified experienced fee for service advisor, who does not charge commissions, all right, you don’t want a percentage based fee. You don’t want a subscription based fee. You just want a fee for service that way, you know exactly what you’re gonna get and exactly what it’s going to cost.
Now there are ways to get financial advisors, you can reach out to your super fund. I know some people would recommend that because obviously, they’re probably just gonna say, ah, contribute more to your super but nevertheless, it could be a starting place for you to actually, find one the services Australia, which is, the SoundLink website that also is a great place to look.
But also the two professional financial advisor bodies, which is the FPA, the financial planning association and the AFA, or the association of financial advisors are also great places to, to reach out, just do your homework before check the ACIC financial advisor register or the money smart financial advisor register, because then you can confirm they actually are qualified.
To be giving advice and like it’s lit yet. You can also see if there’s been any breaches or complaints against the look my I’ll take on it. Is that the irony about financial advice is that giving good financial advice? Isn’t actually that profitable, right? Cause what are they going to say? Okay. Spend less earn more investing in index funds.
That’s like an 80% solution to growing your wealth. There’s no magic bullet. There’s no secret to getting wealthy. It’s that’s literally it. When I, along my journey, I found wealth accumulation is more about personal behaviors and mindset. And it’s less about actually investing.
It almost seems that when it comes to investing that less is more, but if maybe if you need a helping hand and or all those reasons we discussed a financial advisor may. Be able to provide you with some additional information strategies or Hey, even just professional networking opportunities that are actually specifically tailored to your personal circumstances.
And that’s the big thing here, right? Like we talk a lot on this podcast and I talk a lot on my blog and on social media about, general circumstances and what I personally do, but what I do might not be appropriate for someone else. Like I’m a young professional, I have no kids, it’s a very different story to a lot of people. And maybe my risk tolerance is going to be different to your risk tolerance. My investing timeframe is different to your investing timeframe. So seeing a a. Financial planner or a financial advisor, just might give you that extra confidence that, Hey, this advice is actually specifically tailored to me.
And so for some people that’s worth it, I’d say maybe personally, I’ve not had a great experience at all. Maybe that’s just me. Some people think I’m an asshole and maybe I expect too much of the financial advisors. Give it a go. What have you got to lose? The initial consult fee they usually free, or you could, you might pay for an hourly rate.
Just give it a go. See what you think. I’d love to see your your outcome and your feedback. So if you do choose to see one get in touch and let me know how it goes. The next question comes from Barry. Who’s our who asks, how can I best invest for my child’s future? Let’s say long-term until they are 21 years old.
Should I look at property growth stocks or dividend stocks? What’s going to offer me the biggest bang for buck over this investment term. Beza, I’m far from an expert in this topic. But I would say keep it simple mate. So there are investment bonds or like life investment bonds that you can invest in and contribute to towards your child’s future, which, vest at an age, between 18 or 21 or whatever you set.
I don’t know a lot of them, it’s some kind of a mix between an investment and an insurance product and like a trust Aussie Firebug has done a really good podcast episode on that. I recommend just going onto his website or podcasts and just, control effing life insurance, or, investing for your kids.
Me personally though I keep it simple. I just keep everything invested in the same spot in one place. And when you know, my feature kids or, my, my nieces and nephews when they’re old enough, they need their first car or maybe some money towards their tertiary education. It, my plan is to basically just sell a chunk of my investments and hand it to them.
All right. It’s simple, keeps everything in one place and it gives me the most flexibility. There might be some tax advantages from using a, like a life bond or like a term investment bond, I’m not quite sure what the terminology is there. I note that some brokers also now are enabling you to invest like in trust for your children as well.
Sorry, not an expert, but my thoughts on this is just keep it simple. And I would probably just say, invest it in your name. And then when your kid is old enough, sell a bit and give it to them. The next question is from Daniella who asks for any information about digital investing, please? Now what Daniella is referring to is I wrote a series of articles on websites and using websites as a side hustle, or sometimes we call it digital property or digital real estate.
So for people that aren’t familiar with that a blog article, basically to make money off of digital investments, you need to help people. You need to solve someone’s problem or fix their pain point. Now, the two most common ways people do this is by writing content. That people want to read. So you might be answering a particular type of question, like what’s the best way to train my Labrador.
So you might have a blog all about Labrador training specific to that breed the temperament and the ages. And it’s optimized such that when people type those questions into Google, they land on your website. Now to actually make any money from this, you obviously need to sell something so you can sell advertising space.
And the most easy way to do that is through Google ad sense, right? So you just have the code sitting on your site, or there are a number of plugins that you can use to do this automatically. You don’t need to know how to code, but it does make it a bit easier. And you can literally just display adverts.
So when people go to your Labrador site, they’ll see ads that are tailored to their cookies. So if it’s someone in the fire space, their cookies are probably all to do with banking and investment. So you’re likely to see ads for things like Motley fool or, calcaneum goldmine, they’re the ones I always get.
The irony is I would never click on anything like that. And. The second way is the second easiest way is by affiliate marketing. All right. And the easiest way to do affiliate marketing is via the Amazon associates program. So in your article about training Labradors which you’ve SEO optimized, and you’ve got your traffic coming to your blog you could say, I use this particular color or this particular leash, it’s and you could talk about why you use it, and you could then have a link in the text, or you could have a little box to say, if you want to buy this, click this link.
And then if people click that link and they buy the leash, you’ll get between one to 4% of the sale value. So when we’re talking about things like a leash. No, that might only be 10 or $20. You might only be making a couple of cents out of that. The thing is it’s scalable. So if you have one or two clicks to your website a month, obviously that’s not going to make you much, but if you get a 100,000 clicks a month, then it starts to be a pretty reasonable little side hustle.
Now you don’t have to go and build these sites from scratch. You actually can buy them. And when I interviewed Matt and Liz rod who had two very successful digital like website investors they talk about using flipper and they actually have a course all about it. I did the course. It’s awesome.
Actually, they provide some free training for captain fire Rita. So you can check that out if you want. A lot of this information is freely available on YouTube. So maybe just jump onto YouTube and type in like how to do affiliate marketing, WordPress blogs and you’ll get some really cool information.
What I like about Mann Liz’s courses, it’s pretty much all the information Sarah in one place. So yeah. Now you might be asking, okay how do I make, how does my site, how do I make the site rank? It’s, there’s no magic bullet. Again, it’s a sort of a combination of an art and a science, but essentially you need to have lots of really good content and you need to optimize it.
So when you talk about optimizing it, you need to make sure you’re using the right keywords. And you’re not, you’re not spammy. You’re not targeting keywords that are like super difficult. You want to go for keywords that get a lot of traffic and have low difficulty. And the last part of it is links.
All right. So ideally you want to get as many backlinks to your site as possible, but you also need to provide links from your blog out to other people relevant to the field. And that’s how Google knows what your site’s about. There’s a little jingle that Liz has in her training course, and I’m too embarrassed to do it, but basically.
Keyword contents and links. All right. It’s not as hard as everyone thinks, just keyword, contents and links. Yep. Can’t bring myself to do the jingle, but there you go. Now, other than Google AdSense and Amazon affiliate marketing, you can make money with like bespoke advertising. So you could come up with a deal with a particular company that you are going to, put a banner or a sidebar ad for that company.
And you can charge a certain fixed monthly rate. And you could also become, you could create an affiliate program with that company as well. Like you don’t need to just use Amazon. It’s just, it happens to be that Amazon is one of the most popular or the most used affiliate programs.
Now other than, selling advertising and affiliate marketing, there are other ways you can make money with websites, for example subscription services. So you could provide like a paywall to have some better content under them. So a lot of journalism websites, like I can’t think of any off the top of my name, off the top of my head, but a lot of them, they’ll let you view one or two articles, but if you want to view more, you have to, the articles are behind a paywall.
So that’s an example these, they used to be newspapers, but now they’re online magazines. And they’re behind paywalls. So that’s, restricted content and subscriptions is another way that you can do it. And of course, the last way is to sell products. All right. So I personally hate drop shipping.
It’s so stressful. A lot of people, a lot of young people have been like incredibly successful at it. I personally don’t like it because I don’t like having to deal with the human interaction side. Imagine if someone didn’t like the product and you had to refund them what a headache.
No. I don’t do drop shipping or anything like that. A lot of people do. A lot of people will make lots of money out of it. However, I would probably say that a lot people make more money about selling guides on how to drop ship than they actually do on drop shipping. It’s like these fake guru stuff.
So probably just stay away from drop shipping, but selling products. What does work though is selling your IP. So selling like courses, selling e-books budgeting templates, like you just need to look on Instagram and see the shit that’s getting flogged. And people are making loads of money. Some of the courses are really good. Yeah. And they really help people. And that’s awesome. But there’s also a lot of crap out there buyer beware. So there you go. That’s probably my top tips about digital investing. Generally, you can buy a site For anything between, around 10 to 12 times monthly earnings, which is pretty incredible.
But if you talk about it from a business perspective and there are of course multipliers, right? So if you have a really good site that has a lot of content, or maybe you have a really killer domain name, you have a moat, we call it a moat in the industry. That’s like something that separates you from the competition.
Like for example, Coke has a moat over say like Pepsi or other sodas because it’s Coke, right? So the brand itself is so popular and that, that is a moat around that brand. And that’s something Warren Buffett will talk about a lot with his investing. And you can apply that to websites as well.
So if something is unique about that website that can often be a multiplier. So I’ve seen some websites go for 70 times a monthly earnings, so ideally You won’t just go out and pay all this money for a website. Ideally you would just start really simple. You’ll build your own and you’ll learn.
You’ll make all the mistakes. And then once you get competent, maybe you could look at buying a site on, something like Flippa or empire flippers.com. But again, by BeAware there’s so many traps that can pull you up. And there’s a lot of ways to like fake traffic. There’s a lot of waste, like fake income spreadsheets.
I would say just maybe be a bit cynical and I’m not, you don’t have to be negative, but I just say a healthy bit of skepticism is probably going to keep you safe in this in this field. Okay. Cassie writes in to say we are just about to finish paying off our mortgage and we’ve started a small investment property.
And we’re looking forward to focusing more on shares once we’ve smashed the mortgage, which will hopefully let us fire in five to eight years. I’d love more info on ETFs and how to build the snowball. First up Cassie. I just want to say congratulations on nearly paying off your mortgage. That is really awesome.
Maybe you could just focus on smashing that out over the next, I don’t know whether it’s, I guess months or maybe year or two. It’s an amazing feeling once you pay it off, like I saw the demeanor change in my mum when she got her super and used that to pay off her mortgage.
And it was almost like this huge weight had lifted from her shoulders and she was just so much happier. So for a lot of people having a paid-off place to live is like the bedrock of their investment portfolio, right? So there’s no way they’re going to start investing until they’ve had that. On the flip side, there are people that do both.
In fact, there are people that pay interest only on their properties or investment properties so that they can invest more. It all comes down to your personal, risk attitude and tolerance. Me personally, I’d love to have a paid off house as well. One day. So in terms of building the snowball, there’s honestly not a lot of information cast, like you just need to get started.
It sounds like you already have. So all I’d say is, to build the snowball, all you need to do is regularly contribute to it and reinvest your dividends. And honestly, that’s it potentially something you could look at is called debt recycling. And the long and short of it is it’s a way to basically turn non tax deductible loan interest into tax deductible loan interest.
If you’ve ever heard of Peter Thornhill, he’s one of the superheroes in the, the financial independent space. And he’s very big on debt recycling. So he would he advocates that you. Basically take a loan out against your home and use that to buy a shares. He’s very his favorite shares are like the listed investment companies which pay good dividends and he would then use those dividends to either buy more shares or pay the mortgage off quicker.
And debt recycling has been shown to be quite effective in paying off your mortgage quicker. But remember, the flip side is you do take on that risk, right? So essentially you’re borrowing to invest and that’s called like gearing your portfolio. And gearing means you’ll get better gains from the.
Growth in the market, but it can also hurt you because, you’ve obviously over, you’ve leveraged and if the markets go down well, now you’re going to lose more. So it’s not for everyone, but that’s maybe something you could look out to accelerate the snowball. However, I would say the conservative option is literally just to pay off your mortgage and then dollar cost average into the ETFs.
As much as you’re willing to lose or as much as you can afford and reinvest the dividends. It’s so simple. The first couple of years you don’t really see a lot of gain. But once that portfolio gets, over a hundred thousand dollars, just the dividends pinging off that and the growth on that.
It’s unreal. Now, Margo has written in and OS captain white. Why did you decide to reveal your face? So for anyone who hasn’t been following along on the socials Yes. I had previously been blogging and podcasting anonymously now for about 18 months. And the reason was, I was terrified that if everybody knew what I was doing and it failed, then it would be this like embarrassing public failure.
The second that your rational reason why I wanted to stay anonymous was because I was, terrified of my HR or my supervisor finding out because I thought it would negatively impact my career. So in aviation’s a bit of a tricky industry to work in, and it can be really hard to climb rungs and the, to secure the next job up.
It means, getting, type rated or qualified on a new jet or an, a new aircraft and it can be really hard to secure those upgrades. If the company, Doesn’t think that you’re going to stay with them. Long-term right. It’s a big issue we have in the industry is people, just use jobs as stepping stones like ho and they, they go up they go to some tour operator or some skydiving operator and just seeing a turbine caravan endorsement.
And then they, they shove off to a better paying job or something like that. So I, I have a pretty secure job flying cargo internationally. And for some reason I thought I, they found out that I was captain fire, that I would, the company would fire me.
All right. I’d lose my shot at upgrades or something. And again, irrational fear. And the third reason was just like like a privacy thing, like a purely a privacy thing. Like I didn’t want to, I didn’t want people discovering who I was and bothering me, or, I don’t know why I thought people might like ask for money or something.
I thought that would be embarrassing and awkward and we would be better to just keep it to myself and keep it anonymous. One day I was having a chat to my friend, Tash, who is a fellow Instagrammer. And she’s got two massive channel side Instagram and tick-tock she produces a lot of awesome reels and like finance content on how to get like the best deals and investing and all that kind of stuff.
And she basically called me out on these like irrational fears and she’s the world’s not going to end if you show your face to people and, people are probably going to want to see that it makes you seem more legit. It makes you seem more approachable. And I thought, you know what?
All right, let’s give it a crack. I actually jumped on Instagram. And I did a real and it got like an insane response. I was terrified. I thought, like I had to, I have to delete this thing as soon as possible. Once it was out in the open and once that video was out, I was Oh, I breathed a sigh of relief because it felt like this huge weight has lifted.
Now, of course, I’m not going to give you my residential address and post like my Medicare card number and my date of birth and my private mobile because like basic privacy. But I’m more than happy to, ha get my face out there. It was going to happen eventually, I’ve been having business meetings with potential collaborators potential sponsors just wanting to go to actually like fire meetups in Sydney and around Australia.
And, eventually people were going to find out, that was why I was really grateful that Tash gave me a nudge in the right direction. And it’s been awesome. Like I’ve done a few little a few little videos here and there. And one of them got I don’t know, 135,000 views on Instagram.
So it’s been an awesome way to reach more people and spread the good word of financial independence. The next question’s an interesting one that comes from Yvonne. And I actually had to consult my accountant for this. Bear in mind, this could be like totally wrong, but here we go. So you’ve on asks if you have shares, which you’re able to dispose of and yeah.
Pay zero tax because you’re under the tax-free threshold, which is about 18,200. But you’ve technically made a gain. Can you then rebuy those sheets? And the simple answer is yes, you can, but. Why. So some people if they actually have made a loss on their shares will sell the shares crystallized their loss and then buy the share back.
And the reason they do that is to offset the gain on any of the stocks that they have that made a profit and that’s called tax loss, harvesting. And it, in, in theory it sounds great. But can you see who might not like this yeah. The tax office, the HEO call that I’ll wash sale.
And you can get in trouble for doing it, cause they call it tax avoidance and that’s a very dangerous thing to get accused of. But like anything, there are ways around it. You’ve, you were holding, I don’t know, Bita shares, 8,200. And for exposure to the Australian index, and that went down, you want to crystallize a loss, you sell it, but now you want exposure to the Australian market again.
You just buy vast, right. Vanguard, Australian shares, and then I’m pretty sure that. Is what my account says that doesn’t then meet the criteria of a wash sale for the tax office. It’s a bit of a gray area please don’t take this as advice or gospel. There are a couple of platforms I, I think like betterment or maybe personal capital over in the U S they do this tax loss harvesting.
I’m not sure if stock spot actually do this or not. I think they do. And I think that’s one of their, one of the ways these like robo investing platforms can give investors like a better yield without increasing like undue risk. So back to your Vaughn’s actual question, which is actually, she’s asking the opposite.
She’s saying instead of crystallizing a loss can you crystallize a gain and yeah, you totally could. I guess if you are in a. Period of time where, you’re going to be in a low tax threshold. And you had planned to eventually sell those shares anyway. And you knew that later on you are going to be in a higher tax threshold then.
Yeah, I guess you could choose to dispose of those shares. Now that way you didn’t have any tax owing, you then switched your exposure to a similar fund and then held that so that you could continue to get gains until the point, the second point that you wish to dispose of those shares. And I guess that would lower your tax liability.
Once you were back in a high tax threshold. But yeah, again, like I’m not an expert, I’m not an accountant. I don’t know the tax law. I know. I don’t know if that’s illegal or not. Probably the best thing is for you to actually chat to a qualified tax lawyer to get some advice on that.
But yeah, that’s basically what I could come up with. Yeah. Sorry. It’s a bit of a bit of a shit answer, but there you go. Maybe someone who’s smarter than me can leave a comment or get in touch. So it’s tell me how far off the Mark actually was. The next question is from Jackie, who asks, is it better to dollar cost average into six ETFs once per year for diversification?
Or should I pick one of these ETFs and invest in it six times per year to get better average on the dollar cost averaging method? Wow. Okay. So first up Six different ETFs to get exposure or diversification might be overkill. So I personally invest in three, like a big cap ETFs for global diversification.
And even I think that is probably overkill. If I like had my time again, if I’m honest, I probably would just go with the all-in-one like high growth ETF, because it’s like super easy. All right. And it sounds like your balance between how much you’re investing in your brokerage. It sounds like you’ve settled on like by monthly investments.
So if you just had that one ETF and you made an investment every two months, like that’s probably the better way to do it. Not everyone wants that though. Like some people were like mad keen on having the six different ETFs, but basically the premise of dollar cost averaging is to make as many transactions as you can in the year to spread out the fluctuation risk, because the shares of vaults out and they go up and down and if you like time that wrong, you could get stung every time. Like they’re going down. Like you could buy it. Sorry. You could buy it once the price has gone up and then it could go down. So by spreading out your purchases over the year, your getting more chances that you’re going to buy it at the fair value as it goes up.
So I would say probably for me, I would say the better option is to spread out the purchases as, as much as possible. And maybe ask why am I holding six different ATFs. Okay. And the last question today comes from Allie. Who’s asking about how she can structure her financial independence and early retirement plan.
So Allie is planning or she would like ideally to hit fire next year. And isn’t quite at the point where her dividends can pay for her whole cost of living. So Allie’s cost of living is $60,000 a year. And she’s currently only getting $30,000 a year from her dividends. And I say only that’s a really healthy amount of money to be getting from your dividends.
So awesome work, Allie. Allie asks, is it better to aim for fat fire? Which for me might be only achievable in another five to 10 years and then live purely off the dividends or would it be better to just reach fire next year and pick up a part-time job? So Allie, what you’ve basically. Discovered is barista fire.
And it’s basically where you use your investment returns to cover some or ideally most of your cost of living. And then you just pick up some part-time work. Obviously it’s called barista fire because a lot of people suggest just making coffees at a local cafe. Me personally, like I would love to do that with something too with gardening, or even websites.
I joke and wonder maybe I should hang up my headset and wings and and just work in the Bunnings gardening department, and help people buy shrubs. And and then just do some websites in the evenings to cover the gaps. I think Barista FI awesome because it promotes like this healthy kind of work life balance.
And I know I’ve been quite obsessive about like fire and fat fire and sometimes that’s not healthy, so a lot of people might find it. They could be much happier going down a barista fire pathway, and I think it’s awesome that you’re thinking about this. And it, that can give you the flexibility, and you don’t even, you don’t have to necessarily go in like poor coffees or beers at a bar.
Like you could, if you’ve got your your F-you money behind you, you might even be able to negotiate going part-time at your current. Work. And a lot of people who do feel burnt out with their, their workload if they can basically go down to part-time, even 0.4 and just do two days a week they start to like really enjoy their job more.
Yeah, I think it’s definitely something that you should look more into. And for anyone who’s listening to this who’s on their path to fire or fat fire. Yeah. It might even be just worth having the conversation, or having the discussion with, say your partner or your employer about whether that’s, something that could be possible.
Okay, we’re getting close to the hour Mark. So we’re going to wrap it up there. Otherwise this could go on all day. Thanks so much to everyone who wrote in and asked a question. Obviously there’s so many questions to get through, so I’ll just be working my way down the list, the best place to ask your questions is just on the captain fire Facebook group, which is the financial independence group.
It’s going awesome. We’ve got a thousand members now and growing. You can also get ahold of me on Instagram and Twitter, but it’s very easy for your questions and comments to get lost in the sea of notifications. So the Facebook group is probably the. Best of all those three to ask the questions.
If you hate social media you can always get in touch, shoot through leaving a comment on the blog or using the contact form if you want it to be private as well. Thanks so much for listening. My goal is to try and get these Q and a sessions out monthly. If you like the idea of these Q and a pod sessions, please get in touch and let me know.
And of course, if you like this or any of the other episodes, please leave a comment or rating on iTunes. Every single one really does help. Thanks so much for listening and have a great day. Thanks for listening to another episode of the captain fire financial independence podcast. So read the transcripts or check out the show notes, head over to www captain fire.com for all the details.
If you have a question for the captain, make sure to get in touch, you might
Captain FI: [01:00:05] make it on the airwaves. You can reach me online through the captain five contact form. Get in touch through the socials. I’m active on Facebook and Instagram as well as a number of online finance and investing forums. And finally, remember the information presented on this show and the links provided Oh, for general information purposes only.
They should not be taken as constituting professional financial advice. You should always do your own research when making any financial decisions and make sure it’s appropriate for your personal circle themselves.