The BAREFOOT BROKER with JASON KHOURY: How to think about money

BESIDES being The Barefoot Broker, for 30 years I’ve been a student of Economics, Psychology, Statistics and Neuro Linguistic Programming.

Believe it or not, it all ties in together.

Kids out there, get stuck into any learning you can get your hands on – it all helps. You’d think that people who can refinance their mortgage to save money will consider it, right?

Well, not really. In fact, 80 per cent of people who have a mortgage or two know very well that they’re throwing money down the drain every month because their bank is ripping them off a little. So why don’t they get a broker – at no cost to them – to sort that out?

 

Illogicality

Is it logical that we shake hands when we meet someone, respecting an old custom intended to show we’re not bearing arms?

Is it logical that we’d never buy ‘no name’ nappies from a Supermarket? Of course not, which is why they don’t make them. Lets face it, we’re driven by emotion, rather than logic and the worst kind of emotion too – fear.

You see, our cavemen ancestors woke up every day fearing they’d get eaten by a tiger (PS: Go the Tigers!), rather than waking up planning something awesome.

Same goes today. We all fear losing a dollar, far more than getting excited about making a dollar.

 

Opportunity Cost

How economists measure what something costs, is called ‘opportunity cost’.

It’s the loss of other alternatives when one option is chosen.

It looks at the benefit/profit/value of something that must be given up to acquire something else. If you decided to clean your house last Saturday, rather than go to the beach, your day of cleaning came at a real economic cost, being the dollar value you attribute to a day at the beach.

Consider Sarah in a year’s time, next year in April 2019, who’s still paying 4.1 per cent on her $1m home loan, knowing full well that it could have been 3.59 per cent all year if she had bothered.

If you asked Sarah what she lost in the last year, she’d probably reply ‘nothing’.

An economist would say she LOST $5,100 cash in the past year (in fact a little more, looking at cumulative interest). You see, Sarah feels that she didn’t make a decision not to refinance.

But guess what, not making a decision is a decision. Because she didn’t look to refinance today, Sarah has made a decision not to look at refinancing and has today consciously forfeited $5,100 over the next year – her own little private donation to the big banks.

If today you’re not ready today to commit to go for a walk every night, is that cool? Sure it is, but you must own the fact that today you made a solid decision of ‘YES’ to ‘NOT’ to start walking at night. Sorry.

Let’s put 80 per cent of borrowers to the side – those that complain at barbecues about electricity and petrol prices but are more than happy to lose $5,100 every year on their home loan.

The Pareto Principle is another economic term noting that 20 per cent of people get the benefits, at the cost of the other 80 per cent (or that 80 per cent of effects come from 20 per cent of the cause).

In my working life I only deal with the 20 per cent. I simply don’t ever hear from the other 80 per cent, who are content to just stick with their existing situation.

My colleague and I have written over a quarter of a billion dollars in mortgages over the last 12 months for those who want to LEARN to bypass their fear of dealing with a mortgage broker and get ahead. Good for them. I wish I could get my little boys to learn to GET INFORMED so they can eat stuff on their plate that they don’t recognise!

I get warm and fuzzies by still having accounts at the CBA (I had a kids Passbook account when I was 5 too, what a great tactic), but sorry, my mortgages end up where my family will improve financially. Full stop, emotion aside.

Hold on, don’t get me wrong…if you attribute a real dollar value to the fact that your bank sponsors your favourite NRL team, by all means that IS logical, as long as you calculate it and then consciously decide its worth losing exactly that much money to you. Otherwise, you’re floating in the wind.

 

Not saving money, is losing money.

Anyway, as I started off saying, iChoice clients haven’t just refinanced to reduce their payments. They also get a fix part of their borrowings, unlock equity, mobilise for their next move, embrace dual offsets and restructure for a better tax and lifestyle outcome – and get 100 per cent free professional representation by iChoice, keeping them informed and helping them avoid mistakes in the future.

But for the 80 per cent of those staying put, my clients thank you for subsidising their interest rates; the banks couldn’t possibly be able to discount their interest rate by that much, if they had to do it for everyone! 80:20 must prevail!

The message this week is ‘i-Choice’ – that is, get informed to choose to get ahead faster. There’s nothing to fear but fear itself.
Not moving forward, is moving backwards. There is no stationary.

And for doctors, surgeons, police, firefighters, ambulance personnel, teachers and uni graduates, get in touch and I’ll knock your socks off with what’s specially on offer for you lot.

TWT’s The Barefoot Broker has studied at the University of Sydney, Australian Catholic University, The Australian Securities Institute, Intellitrain and The Mind Body Co.

Having contested and lost the 2015 State Election for the seat of Drummoyne, Jason remains the Managing Partner of the award-winning iChoice in Concord West and is available for any questions from all TWT readers this week on 0400 900 300.