Ever since my recent holiday with Mel around the north island of New Zealand, I've taken to being a lot more serious about money, and the spending of it. I overspent my budget on the holiday, and it's annoyed me that not only did I do less than I wanted to, but I spent more than I was able to. This is because of a pattern in my life that's centred around a lack of discipline and foresight involving money and the use of it.

I've had illusions of grandeur, about getting involved in various schemes to increase the money I have, but they've all fallen by the wayside, one way or another. Instead, I've simply been going through life and enjoying the lifestyle that I'm capable of, without thought of the future. I've had the philosophy of living one day at a time, and just enjoying the moment.

It's all very well and good to live for the moment, but living without thought for the future hasn't done me much good.

So now I'm getting serious about it all.

Since the holiday I've started a very detailed budget that I've planned out the rest of this year on. I'm going to be more disciplined about my spending habits, and instead of wasting money, I'll account for everything that I spend. I'll assign budgets to various areas of my life, and do what I can to stick to it. I've also created an extra 'necessary expense' that equals 10% of my after-tax income. That expense is a savings account, that's not going to be touched (except for emergencies, of course). Emergencies used to be movies or dinner out... But not any more.

I'm going to get rid of debts that I've built up, and as my strategy will be simple. Find an extra $100 per month and put it into the smallest debt. When that debt is paid off, take the amount I was paying to that debt and add it to the spare $100 and add that to the payments of the next debt. And then, when that debt is paid off, take the amount I was paying to that debt and add it all to the payments of the next debt, and so on. With this method, I should be able to get rid of all debt within the next 18 months.

Once I get this pattern started, and a solid savings plan under way, any leftover cash each week will go to paying off debt as well, over and above what I've got planned.

When I'm completely out of debt (eg. credit cards, loans, etc), I'll then start using the extra cash to invest in property. I have a plan for that too...

I've been researching it over the past couple of years, as I've mentioned in past journal entries, by reading about property investment on the internet, buying books, and talking to people who are already doing it. I bought a book last week called From 0 to 130 Properties in 3.5 Years, which has been fantastic for the advice and experience it offers. The idea presented in the book is not necessarily to buy property for capital gains (although that's a beneficial bonus if you can get it), but to buy property for the passive income it can provide.

Instead of negative gearing, which is to buy a property to lose money, and then deduct it from your tax, the author doesn't see the sense in buying something to lose you money, and hope to make it back in 20+ years through capital gains. Instead, he favours the approach of buying a house that, from the beginning, is 'cashflow positive'. Eg. buy a house that's being rented, or can be rented out, and the income from the rent covers ALL the costs of owning that house, giving a profit each week (even if it's only $50 a week).

Over time, as you invest in cashflow positive properties, the profit earnt each week provides a 'passive income', which is an income that comes in regardless of any (or much) effort on your part. Ultimately, as you follow this kind of plan, you will gain a passive income that allows you to quit your job, and you become, by definition, financially independent. The author, at the time of writing, has a passive income in excess of $300,000 per year. And over 130 properties, giving him an asset base of many millions of dollars!

I know it's not going to be easy. I know it's not going to happen overnight. But I'm tired of living in debt (like so many others), and I'm tired of having an uncertain future by not having enough money to cover emergency costs.

This has been accentuated by the recent death of my car's starter motor, which is expensive to fix (shouldn't expect too much else with a BMW though...). Because of various other costs and my lack of an emergency fund, I'm having to wait until I can increase my 'spare cash' in order to pay for the repair of it.

'Princess' has been wonderful. She's been very understanding and accommodating, and as we've been seeing each other, I've been able to use her generosity to allow me the use of her car when we've been together for me to go shopping, etc. We've gone shopping together, which has been nice, and last weekend she went to Christchurch and let me use her car while she was gone. She's lovely, and her support has been wonderful. I've also gone through my budget with her and shown her my plans. She's an accountant, and has approved. )

I was going to sell my car once it's repaired, and use the money to put towards debt and buy a cheap car. However, after researching the for-sale value of the BMW, I've discovered that the value is about one-third what I originally paid for it just over 3 years ago. It's become the 'cheap car' that I was planning on buying... So now I'm just going to keep using it until it's run into the ground, or stolen and written off. (It's insured for the amount I purchased it. Sure, the insurance payments are a little higher than if I insured it for market value, but the benefit was worth it, as far as I was concerned.)

So that's the update on that part of my life. I hope to have my first investment property before the end of next year.