“If we’re not looking at our money and not looking where we’re spending it and what our intention is around that, then to me that’s kind of crazy.”
Should we be investing in a share portfolio?
“Buying shares is a much better place to play…ideally you’d look at buying something like an Index fund.”
What about property?
“ I think the property market overall will continue to grow. Now I know that’s a big statement at the moment but I feel it will continue to grow.”
This thought-provoking information was provided by former financial planner Darren Laudenbach. Darren’s a presenter, speaker, trainer, mentor, coach, company director, and a shareholder, with accreditations and a lineage that confirm he’s the real deal.
20Twenty host Neil Johnson kick started the discussion on the back of news that Australia has notched up a world topping 26 consecutive years of economic growth.
Darren gave credit to good government management, the Reserve Bank’s efforts, and more importantly, God’s blessings on the nation.
“We are living in a country that God has blessed with natural resources the world has wanted,” Darren informed, saying that hasn’t been the case for many other countries.
He also acknowledged Australia’s wealth and stability is a positive for families.
“The government’s always concerned about how families are spending their money because it’s part of how the economy revolves. And it’s about businesses being confident in investing in things consumers are going to buy and where they’re going to spend their money.”
He said if we don’t have a plan we’re planning to fail and we would be failing with the resources God has given us.
That said, here’s the question.
“If we had somebody managing our money for us as a steward, and they didn’t have some kind of plan to manage our money, how confident would we be to give them more money to manage?”
And if God is the One who is providing the resources for us to prosper, how confident would He be to give us more if we don’t have a plan on how to use it?
“It would be pretty low,” Darren discerned.
Neil Johnston suggested it is biblical to be wise when it comes to money management and to invest it well…a topic that’s not often talked about.
Darren’s response was to quote Andy Stanley, who went as far as to say, ‘You can’t be a fully devoted follower of Jesus and not have your money management nailed.”
So, how important does that make the family budget?
“If you write something down it becomes very intentional,” Darren informed, saying you can adjust things once it’s written down.
“It also becomes a lot more in the front part of your brain where you’re thinking about things more.”
“And how do we know where we can be a bit wiser with our money? How do we know where we might, say get a better mobile plan?”
“If we’re not looking at our money and not looking where we’re spending it and what our intention is around that, then to me that’s kind of crazy,” Darren highlighted, before posing another important question.
Darren again emphasized the need to have a spending plan and a budget because that then gives us intention.
“And software these days can make that really easy,” Darren suggested.
Neil Johnson prompted Darren Laudenbach to give advice to those in a position to invest some of their capital in today’s current economic climate and to expand on the pitfalls that need to be avoided.
Darren’s response was to say some investors get it wrong because of their focus. He gave this example.
“If you and I Neil were to go into partnership and buy a café and there was a café down the road that we thought was worthwhile buying, what would we be looking at about that café?”
Neil admitted that his first priority would be for the café to generate income. Darren confirmed Neil’s answer was how most people would respond.
“And that’s absolutely correct,” Darren answered, saying that over time if the café is managed well the income would increase.
“Therefore the value of the café would go up. So if we paid $300 thousand dollars for that café and it generates a certain amount of income, and next year it’s generating 10 percent more in income, you’d expect to sell the café for 10 percent more than what we bought it for.”
“That’s the way most people buy a business. They typically buy a business focusing on the income the business can generate.”
“Now if we take that scenario and look at the share market, what most people do is they look at buying shares for the capital growth,” Darren began to explain, saying in reality, they’re buying a share in a business.
“So we shouldn’t look at it any differently than we would when buying a café,” Darren said.
“We’re looking at buying a business for cash flow. So if we’re buying those shares with the intention of getting income out of those shares, we’re going to be less focused on the daily gyrations of the market and we’re going to be more focused on the regular stability of those dividends.”
Darren advised that buying shares is a much better place to play as far as the psychology of investing is concerned.
“But also the whole intention. It’s about generating passive income over time. And we hope that the shares that we buy, that the income over time will increase, and history shows that it does, especially in Australia,” Darren shared, saying that has been increasing for hundreds of years not just the last 26 years.
“But that dividend does grow year after year and we could expect the value of those shares to grow as well,” Darren informed.
But how do you get into the share market and what’s the key to buying the right shares was Neil Johnson’s next question?
“Ideally you’d look at buying something like an index fund.”
“Traditionally managed fund managers actually don’t out-perform the Index in Australia. The indices in Australia are the All Ordinaries (the complete share index) and the S and P Index in Australia, the 200 Index. That’s the one that gets reported on the news every day,” Darren outlined.
“So one of the things you’re able to do through a couple of different companies, is to buy a parcel of shares that represent the Australian market. That might be the top 200 or the top 300 shares.”
“And the wonderful thing about that is that you can buy that for as little as a couple of hundred dollars, and you’re getting a parcel of shares that’s represented by the top 200 companies in Australia,” Darren said.
“You don’t have to go out there and try and analyse balance sheets, cash flows and forecasts, analysts opinions and all sorts of things to try to make a decision that can end you up with ‘analysis paralysis’.”
“What we end up with is that we can simply buy the market, set and forget it, and simply look at the cash-flow and the income that comes from that, then we’re getting a representation of the top 200 or 300 shares in the Australian market.”
“Those are called index funds.”
Onto the property market and Darren said research done by Phil Anderson reveals a cycle in property that runs for around 18.6 years.
“It tends to be about 14 years up and about 4 years down or flat. And that seems to be running out all the time.”
“I don’t know why that is,” Darren admitted, saying Phil Anderson’s research goes back to the early 1800’s.
“It’s there and it’s existed. We tend to follow the US market and we tend to be about a year behind. And I think the property market overall will continue to grow.”
“Now I know that’s a big statement at the moment but I feel it will continue to grow.”
“There’s a number of reasons why I believe that in Australia. But there will be pockets that will continue to grow faster than others.”
Darren Laudenbach – Presenter, Speaker, Trainer, Mentor, Coach, x-Financial Planner, Company Director, Shareholder – DipFP, AdvDipBus, Cert IV Financial Services (finance / mortgage broking), Cert IV Life Coaching.
Darren’s passion is to help Christian’s master their money – rather than being mastered by it. This has proven to lead households into a position of control of their finances and enjoy the peace of financial freedom. At the same time a good example is being set for children, friends and the community to emulate (salt & light).
Darren is a husband, a father of two daughters, is active in his local church as a Boys’ Brigade Officer, Former Church Treasurer & Board Member, and is involved with various community and youth projects.