David Whitburn

It’s been a very good weekend for me.  As well as helping my folks at one of their rentals, my beloved rugby team Auckland beat Otago in the Air NZ Cup, did lots of filing (yup paperwork suffered in our house move early last month) and some financial planning and goal setting.

On Friday night after the rugby game, I starting compiling the information for today’s goal setting meeting.  I looked at my share portfolios in NZ (hey there are some good NZ shares too for growth and cashflow), Australia and the US.  Then to another 4 websites to get my managed funds, REITs and mutual funds.

Then the easy part to establish the equity in my trusts’ properties today, and the cashflows from them.  And great news I have hit the million dollars in equity now , before I am 30 too.  I am very happy about this, but am even more excited about the future as I increase my financial and Business knowledge to build my skills.

My goals

I want to have $500,000 in passive cashflow per year inside 10 years.  To get this cashflow I will do this from residential property, commercial property, small business ownership (owning not operating), NZ and international direct share ownership as well as some managed and mutual funds.  Yup pretty big thinking.  About the same as getting a million dollars before I hit 30 when I was 25.

Other goals include starting my own family with my wife, spending more time with my wife, grandmother and parents, mastering large scale property development and teaching other people to be millionaire through Business, property and financial investment products, as I really thrive when teaching other people to succeed too.

“Unlike money, you can only spend time once – before it is forever gone.” David Whitburn

How am I going to do it

Thousands of small calculated steps as usual.  By taking lots of small steps even though to some it may not look like I am doing much, it is glaringly obvious to me that I am, as I see the improvements in my life towards achieving my plan.  I ask myself, who am I living life for – myself or other people?

What do you want?

The great news was I have hit one million in equity, a goal of mine I set aged 25 to hit before I was 30 years old.  I thought I could do it at that time, but having less than $100,000 equity at the time and just a $65K per annum job as a solicitor, I knew it would be an uphill battle.  And I knew that it would not come from savings as paying 39% tax on every dollar I earned, and at that time having cravings for gadgets and technology and travel, I knew that savings from my job wasn’t going to cut the mustard.  So ask yourself what you want, and how you are going to achieve it.  Phil Jones’ blog on financial planning is actual quite powerful with its 25 questions it seeks answers for:

1. What wealth vehicles are you going to use to generate wealth?
   • Real Estate
   • Business
   • Share Market
2. Are you going to use one of those strategies or multiple?
3. How will you allocate your time between the wealth strategies?
4. Will you use leverage through loans?
5. Will the loans be Interest Only, Principle & Interest, Table, or cashflow Mortgages?
6. Will you try to eliminate debt before investing?
7. How long will you focus on debt reduction?
8. What are your wealth goals, are they specifically defined time and dollar value goals?
9. Is the long term strategy to be debt free or have a large portfolio that has lower debt to value ratios?
10. Are you planning to live off cashflow? If so how much do you need and whats the plan to get there?
11. How are you planning for tax?
12. Are you using all possible strategies to reduce your tax?
13. What is your asset plan, do you need to adjust it?
14. Are you working together with your partner or in parallel to them?
15. Do you have separate bank accounts or joint ones?
16. Do you have a prenup? If not what happens if separation happens?
17. Do you have a will? Have you updated it recently? Does it reflect your current wishes? Will it guide your children correctly and limit their ability to blow the inheritance when they are young?
18. Do you have life insurance? Who and where does it pay?
19. Do you have medical insurance?
20. Do you need income protection insurance or rental protection insurance?
21. How are you planning to assist your children?
22. What is the strategy for a crisis?
23. Are you going to invest in NZ and overseas, in your town and around the country?
24. What makes a good investment, how will you recognise one?
25. If you invest in shares are they growth stocks or dividend ones? Whats your entry strategy, what’s your exit strategy?

Do yourself a favour and answer the questions to analyse what your financial framework is – and make your plan from it.

How did I get started?

A lot of people that know me have asked why I invest in shares and managed funds.  To answer this question I need to take you back in time to when I was at University.  But back at Auckland University in 1997 I reflected on what I had done the year before.  In 1996 I had studied my butt off doing both Law intermediate and Med intermediate.  I worked hard enough and guess I had enough intellectual firepower to get the grades that year to do either.  I choose to stay in Auckland, where I had $50/week accommodation, thanks to Mum and Dad, I was 2 bus stages away from Uni, had more friends in Auckland, Auckland is internationally regarded as the country’s best University, and I had a $10/hour job at Deloitte (Big 4 accounting firm).  Like most students I had a lot of time up my sleeves, even though I did a Law Degree and Batchelor of Science degree at the same time.  Yes, I am geek, but I am proud of it.

I got into the social scene and political scene at Uni, making lots of friends and literally many hundreds of acquaintances.  Wine Tasting Club, Tramping Club, Tennis Club, Indoor Soccer Uni Team, Chemistry Student Representative, Auckland University Law Students Society, Founder of the Croquet Club, Young National Party, etc.  And you know what – they were all poor students.  In fact it became the metaphor – everyone just thought that since they were students they were poor and that is ok.  Well here’s the thing, I thought this was a load of rubbish.  I got sick of people saying “I am poor because I am a student.”

So I thought about ways I got be a ‘wealthy student’.  A lot of people don’t know but students actually get a whole heap of benefits from leverage.  We could get student loans from the government easily with no income testing or research into the likely chance of payback into the loan (eg. why oh why do hip hop dance and twilight golf courses qualify for student loans – I will save that for another blog).  Banks were offering students Interest-free loans of $500 to $3,000.  So I had 5 bank accounts with Interest free overdrafts at one stage.

Event management company

With another well networked friend (who is now a legendary commercial construction project manager in the UK) we set up an Event Management Company and having run friends parties, big 21st birthdays and student parties we ventured into the commercial market getting clients like Housing New Zealand, the Navy, Deloitte and doing joint ventures with Auckland University Alumni, Law Students Society and then ventured into spec events.  We got 91ZM on board with a $25,000 sponsorship pack in of radio advertising and puchase of tickets from us.  We had the great people at Lion Nathan sold into our proposals that we would knock out in a couple of hours over a beer appealing the the Emerging Drinkers market – a term we coined and milked.  Yes we had thousands of dollars in free beer for including Lion’s name on the ads that we didn’t have to pay for.  In fact it got better as the Akld Uni Students Asscn (AUSA) paid for our printing and ads in their infamous but widely circulated free magazine Craccum.  Those were the glory days and I made tens of thousands of dollars whilst studying at Uni.  It really wasn’t that hard.

Some people still thought I was a wanker because I had money, but I can assure that all of those events went off.  The only damage done was to the museum having to open an hour and a half late after an absolutely amazing Law School Students Ball.  We had an ancient greek theme, and all you can eat and drink for $55.  It sold out within 2 hours at the fire capacity of 450 people.  Lion Nathan made the day with Champagne on arrival and a wide variety of beer and wine on tap.  The Spit Roast Catering Company was magic with the all important stomach lining.  Unfortunately a few dozen plates broke and the floor was covered by an inch of alcohol by 2am.  Despite a Massive clean up – the museum couldn’t open in time.  We got letters from the Museum and their lawyers.  Not what a 21 year old wants to see.

“Obstacles are those frightening things that become visible when we take our eyes off our goals.”  Henry Ford

Whilst most people would be freaked out, and luckily having great access to the legal system and parents friends including QCs, judges and top law firm partners – this, like most litigation didn’t phase me much.  I keep going until I left Uni.  However with the change to full time work I took my eye of the ball and goal, and got hyped into the personal development as a wage slave.  I joined a share Club (non-pooled) at Deloitte and put tens of thousands into direct share investments and a couple of managed funds.  I did this for nearly 3 years full time until I saw the light and started my foray into property in late 2002.

At that time my US Shares were decimated.  They including Nokia, Coca Cola and alas some bio tech companies bought in 1999.  I got greedy and suckered into the end of the a Massive bust in the US sharemarket, and got slammed by the double whammy of the NZ dollar going from 39US cents to $1 NZD to 72US cents : $1 NZD.  Lesson learned.

So I didn’t pull that money out.  I saved $7,000NZD and got a kiwibank home loan for $135,000 (and $1,500 low equity fee capitalised into the loan) to fund the puchase price of a Manurewa property.  I did the renovations in the weekend and evenings during the week when I could escape from my big office at Russell McVeagh in the Vero Building.  I figured out the capital gains I got were going up 8 times faster than my salary, and for one 6th the time during the renovation.  By working hard as an employee lawyer I was actually costing myself money!  Stupid eh!  So I bought a second property, quit my job never to return and made similarly great money!

The rest is history.  I guess that what I do now is living history for me and my wife, and I am really enjoying life.  I know my next million will come a lot quicker than the 29 years it has taken to get this first million, and I will have fun along the way making it.

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