Author: Tara

A wealthy mindset: How we 10x-ed our net-worth by thinking differently about wealth

Tara Achieving financial freedom, Financial literacy , ,
Wealth

If you want financial freedom stop spending all of your time at work.

I know, it sounds backwards right! Different to everything you learned from your parents and at school.

Well if you’re stuck in a 9 to 5 grind and want out, maybe it’s time to think differently?

Here’s a story about how we 10xed our net worth by learning to think differently about wealth. In this post we’ll share what we learned and what we did with that knowledge. There’s no catch dear readers. Once you read this, you’ll discover that you can do it too.

Living the Aussie dream

I started my money making life in my early 20s in a respectable job as a wage earner with a university education. Sound familiar?

As expected, I quickly worked my way up the ladder to an executive position and then fought tooth and nail to win a coveted diplomatic posting to one of Australia’s Embassies overseas.

When I won that posting, I’d worked for 4 years and amassed a measly $7000 in savings. Granted I was young and just starting out with basic household goods to buy. But it wasn’t a good showing for 7,800 hours of work. My wealth had grown by less than one dollar for each of those hours I’ll never get back.

Damn…

But, about to embark on a well paid overseas gig, I then took that $7000 to a free financial planning session paid by the government and they helped me invest it in managed funds. They took their fees of course. Before I got on the plane I signed up to a stock market newsletter and bought a couple of stocks on the Aussie exchange. I had an inkling I needed to invest, but that was all I new to do at the time.

For the next three years I was living my dream – a diplomat in China earning Aussie dollars, spending Chinese Yuan with a large whack of my living costs paid by the government. All in return for being on call 24/7 as the frontline of Australian sovereign border to North China and North Korea.

It was a great experience and one of the highlights of my employed life.

The gravy was, at the end of that three year posting I came back to Oz with $160k in the bank. I felt rich! It turns out you can save a lot of your Aussie income when your living costs are in Chinese Yuan. And one of the stocks I bought took off to boot. Booyah!

Incidentally, I returned to Oz with $160k in my pocket right after the GFC. This was just as the 7% interest I was earning on bank savings began its free-fall to the 1% savings rates of today. A tangent, but a related one.

Back to the story….

With $160k behind me, I thought I’d take a leap of faith and change careers. So I went back to uni and re-trained in environmental science because, folks, that was all I knew to do… $15k in student loans later I had a Masters in front of my name. I didn’t think this way at the time, but all that degree did was put me in debt and prime me for another job as a respectable wage earner.

That new job came along and whaddayaknow I was suddenly a renewable energy expert kicking off a new career working the same old 9 to 5 grind.

When sh*t got real

3 years into that ‘new career’ the government I worked for was subject to its largest cut backs in history. 14,000 people lost their income earning jobs.

I was a contractor at the time. My head was at the front of that queue for the chopping block. As the main breadwinner – sh*t had gotten very real for me.

What to do, what to do? I had some cash in the bank but faced the looming prospect of unemployment. How did I get into this position?

I’d done everything I’d been told to do – I gotten good grades, a higher degree, a respectable job. I had parents who were wage earners and an unspoken understanding that this was also the path cut out for me. I’d worked hard and saved studiously. And yet, I was facing zero income and little hope of local reemployment due to cut backs

I remember I was angry and confused. Over the months I spent dodging and weaving to keep my job what crystallised in my mind from the anger in my gut was this – I didn’t want to be reliant on someone else for my financial security ever again.

Fast forward to 2020 and you hear the same familiar shattering of reality for tonnes of people across the globe.

But at that pivotal moment in my life, I realised I needed to DO different to GET different.

‘If you always do what you’ve always done, you’ll always get what you’ve always got.’

– Henry Ford

And so began my unconventional financial education. I say unconventional because it wasn’t about finance per se. Also, it was the first education I’d had that was not from a school or university. It was all about a subject I’d had zero personal experience with and one they don’t teach in class.

How the rich make money.

Lessons from a Rich Dad (how to build a wealthy mindset)

One of the first financial educators that came into view for me was Robert Kiyosaki. Kiyosaki is a well known financial educator and successful investor and entrepreneur. I can’t quite remember how I stumbled across him but looking back now I’m super bloody grateful I did.

Kiyosaki’s Rich Dad lessons opened my world and blew my mind. The Rich Dad teachings were just different to everything I’d learned and utterly challenged everything (I thought) I knew about money and wealth.

I knew if I could learn to think differently in the Rich Dad way, I could ‘do different to get different’. So I focussed on reading everything I could from the Rich Dad education suite and attended Rich Dad webinars.

Multiple books and online events later I’d distilled down to six the take away lessons that resonated with me. These six lessons taught me to think differently about money.

Here are the lessons I learned, and what we did with them.

Lesson #1 – Become financially literate and learn the rules of money.

There are a bunch of rules that govern wealth creation and that are not taught in school. Who knew right?

Some of them are revealed below and many of them Kiyosaki talks about in his books and online webinars.

If you want to make money you need to learn the rules of the wealth game and become financially literate. Not the finance degree kind of learning. The wealth building kind of learning. You need to learn about where to focus your time and effort, what to invest in, and how to keep the money you make.

What we did.

We put aside some of our surplus income each week to invest in our financial education. Not learning from schools. Learning from successful and wealthy people. In my spare time I read books, attended webinars and took courses. I focussed on everything the Rich Dad lessons had to say about money.

If you want to become more financially literate and learn the rules of money – start here with a Rich Dad webinar like we did. If you read on you’ll see how learning the Rich Dad lessons and rules of money – and then applying them – has paid off for us. We now have a life we couldn’t imagine when our Rich Dad journey started.

Lesson #2 – Savers are losers.

In school we’re all taught to get a job, save up, get a mortgage and pay it down with 100% interest over its life.

Kiyosaki teaches that this system is obsolete. Why would you save money when they’re printing more of it?

Savers have been losers since 1971 when fiat currency was de-pegged from the gold standard and government’s started printing as much money as they needed to keep economies out of trouble. Just check out the money printing that’s been going on.

how to build wealth
US dollar money printing

People are still walking around scratching their heads 13 years after the GFC about why the stock market keeps going up and up and in Australia, the US and the UK house prices are hitting record levels. It’s not the price of these assets going up in isolation. It’s their relative value in fiat currency. If you’re saving your money in fiat currency, you are going backwards at a rate of knots. If you’re trading from asset to asset in the same market, you’re less impacted.

What we did.

In 2011 we took the $160k in savings we’d had in the bank for two years and decided to invest most of it. We have only ever kept an emergency buffer as cash in the bank since learning the plummeting value of fiat currency. Cash is trash peeps.

Lesson #3 – The rich don’t work for money. They have money work for them (by investing it).

Woaah, what? Takes a minute to wrap your head around, but news flash here – truly rich people don’t have jobs. They don’t work as employees of other people. They’re investors or entrepreneurs or business owners. They certainly don’t trade their time, in units, directly for money. So having a job was never going to make me rich or even financially comfortable. I was always just going to be trading my time for money. No way Jose.

What we did.

We set financial goals around not having jobs. We made financial plans that were reverse engineered with the single outcome of escaping the rat race.

When my friends were busy climbing the corporate ladder to VP and Managing Director positions, I was busy trying to get my ass out of a job.

We decided not to chase promotions at work because the higher up you go the more of your life they want from you. I had multiple friends over this period pushing me toward career ‘promotions’; so called ‘higher paying jobs’. It was clear that they thought I should have been doing better. Several bosses asked me why I hadn’t ‘taken the next step’. I remember smiling and mumbling something incoherent on these occasions. Explaining what I was actually up to seemed an impossibility. Where to even start?

Instead of the path expected of me, I found a wage earning position that paid well but that also had flexible working hour arrangements (accrued time). I spent my accrued work hours becoming more financially literate and investing every last effort and dollar into building my assets column – outside of work.

Lesson # 4 – An asset is something that puts money in your pocket. You home is not necessarily an asset.

This is an underpinning of the Rich Dad financial education – knowing the difference between an asset and a liability. The rich buy assets, the poor buy liabilities. Assets put money in your pocket and liabilities take money out of your pocket. Rich Dad financial education is practical because Kiyosaki talks about what kind of assets to buy and how he went about accumulating them from a time when he was stone cold broke-ass like many of us have been.

What we did.

We started to invest in assets. We didn’t even have a home mortgage at the time – we were renting – but we bought our first investment property instead of a home. Because of the Rich Dad lessons about assets and liabilities, we knew what to look for. We looked exclusively for an investment property that would put money in our pocket. A property that would produce an income in rent and capital growth. We bought a run down dual income property – three apartments on one title with three independent income streams.

Lesson #5 – The rich use the income from the their assets to live and reinvest the surplus into into more leveraged assets

The Rich spend time building up their asset column and then use the income their assets produce to buy what they want. The poor stay poor buying liabilities like big homes, cars, holidays and gadgets that they can’t afford – to look rich.

The rich buy assets using other people’s money (good debt) and manage risk. The poor take personal debt (bad debt) to buy liabilities or are fearful of taking on debt at all.

What we did.

We started to use good debt strategies with our investing. The multi-family property we bought was leveraged at 90% so that we could make our own money go further. We kept as much as our own cash as we could to renovate the three apartments and increase the rental income.

By renovating our first investment property we had created some equity so we used that to buy another investment property leveraged at 90%.

We managed the cashflow from our wage earning jobs and our investments carefully – something Kiyosaki also teaches. And we always kept a buffer in case things went wrong.

The next step we took was to invest in our financial education again. We learned how to supercharge the rental income from our 4 investment properties. If you want to learn more about how we did this, you’ll find the details here.

Lesson #5, about using good debt and not getting into bad debt, was as much about what we didn’t do as what we did.

When our peers were dropping $700k on homes to live in and taking on massive personal mortgages, we didn’t. Instead, we paid $40k with a $360k bank loan for a modest little cottage right by the beach. It was a house we knew we could one day turn into asset that put money in our pocket. We invested our surplus income and sweat equity into renovating the cottage, mostly DIY.

As we watched our friends and peers buy new $50k cars with finance straight off the showroom floor, we didn’t do that either. We bought both our cars as either demo or second hand models no more than 2 years old and paid cash for them.

When maxing out your credit cards on retail therapy and expensive nights out was the norm, we didn’t buy stuff we didn’t really need. Instead, we used our rewards credit card to get maximum value from our home offset account (reducing our interest payments and getting cashback). We paid the credit card in full every month and rolled it into a mortgage package so the bank waived the annual credit card fee. This credit card strategy uses smart structuring and is a total home loan interest killer. It’s something a lot of folks can do, but simply overlook.

Lesson #6 – Taxes are your single largest expense. The rich don’t pay taxes – the educated upper middle class pay all the taxes.

Kiyosaki teaches that high paid employees pay the most taxes. Just look up income tax rates around the global versus company tax. The worst place to be if you want to keep the money you earn is an employed professional.

Corporations pay less tax than individuals as an incentive from government to create tax paying jobs. Investors pay the least taxes.

The lesson we took away? If you want to keep your money, earn it as an investor or in a corporation. Far out brussel sprout. I couldn’t believe I’d been a tax mule all these years and so ignorant about it…

What we did.

We structured our investments in trusts and companies. We focussed on moving our income streams from the highly taxed employee basket, to the low tax corporation basket. Eventually we’ll move more and more of our income into the investor basket.

We currently earn and then spend and then get taxed for 75% of our income.

Before our Rich Dad education we earned, got taxed and then spent for 100% of our income.

Changing the way we earned income has reduced our personal cost of living by thousands per year due to favourable company tax rules. Our net worth has also benefited by $130k to $170k by using the rules of money we learned from our Rich Dad education.

The final word – our wealthy mindset results

Building a wealth mindset and applying the Rich Dad concepts that we learned in the Robert Kiyosaki webinars has set us financially free. I’m happy to report that I’m no longer an employee. 🙂 I’m free to do what I want each day – which is play with our beautiful Vizslas, set up our new home, start our homesteading project and write this blog.

We’ve also just bought that new home with cash – all part of the financial freedom plan.

Our net worth is over 10 times what it was when we started applying the Rich Dad rules of money.

We live off the income generated by our assets via tax efficient company structures.

Any surplus income we have we look to reinvest in other income earning assets.

We work as we chose to, because we’ve got new goals in life. Mostly, we enjoy life and our time is our own.

None of this required epic mastery of anything special. We just learned to think differently, build a wealthy mindset and do what the rich did.

Thanks to Mr Kiyosaki and his Rich Dad.

Til next post – have fun, be happy, do good!

And if this post got you thinking about your financial future maybe get yourself to a Rich Dad webinar and please – share the love!

Market fundamentals you need to know before investing in cryptocurrency

Tara Investing in Cryptocurrency , ,
investing in cryptocurrency

If you’re an intrepid investor but missed the crypto train in early 2021, you may just be taking a second look at the market.

Crypto assets have experienced an epic dip since May. Most assets have retraced 50% to 80% of their YTD peaks. A opportunity maybe to ‘buy the dip’?

If you are thinking of investing in crypto this post will help you learn the crypto market fundamentals before you take that leap. If you don’t know the market basics, you may be taking more investment risk than you’re aware of. You’re also investing uninformed, which in our humble experience never ends well. So read on wannabe crypto investors, and make sure you get to the end to find out the next steps you should take to invest successfully in crypto.

‘Coins’ versus ‘tokens’

Before we get into the crypto asset ecosystem, let’s talk about the difference between coins and tokens. This can confuse people when they’re first starting out. In short, coins are assets on their native blockchain. For example Bitcoin on the Bitcoin blockchain and Ether on the Ethereum blockchain. Tokens are assets foreign to the blockchain they live on. Examples are Tether which is a second-layer token on multiple blockchains.

In this article we’ll refer to all crypto assets as coins, but in some cases the use might be interchangeable with tokens.

Investing in cryptocurrency – market fundamentals

Fiat currency (USD etc) flows into cryptocurrency according to the market capitalization of different crypto assets. This is because investors typically enter a new asset class looking for the lowest risk assets in the class. Investors will generally also equate highest market cap with lowest risk asset.

Then, when the investor becomes more knowledgeable or informed about and comfortable with the investment space, they branch out. By understand how the crypto market structure impacts the flow of money into and out of crypto, you can make more informed investment decisions when you’re first starting out.

#1 Crypto price trends start with Bitcoin

Bitcoin is the highest market cap and lowest risk crypto asset (barring stablecoins). This is because it is the most well-known and has the greatest ‘trust’ or ‘authority’ score. Bitcoin dominates the total cryptocurrency market capitalisation by a long way and it leads price trends in the market. Because Bitcoin is the headline crypto asset – some say the reserve currency of the crypto asset ecosystem – money generally flows into crypto assets from the fiat money system starting with Bitcoin.  

Money flowing into and out of Bitcoin can have a massive impact on price movements in other coins.

#2 Money flows from Bitcoin into large cap Altcoins

Next, as Bitcoin investors become more informed about other crypto assets, they tend to diversify.  The money starts to flow from Bitcoin into large cap Altcoins (alternative coins to Bitcoin are called ‘Altcoins’). Large cap Altcoins are the top altcoins by market cap, led by Ethereum (ETH). As the money flows into these coins from Bitcoin, the price of this bag of coins can often move AFTER a Bitcoin move, with a lagging effect.

Bitcoin plus top 10 large cap Altcoins . On a macro level, fiat flows down the list by market cap.

Large cap altcoins are more volatile than Bitcoin and can even include some ‘shitcoins’ among them – meme coins like DOGE coin with little real utility or project value. This is a characteristic of crypto and something to be aware of as an investor. Crypto is not like other investment markets.  Market cap is not necessarily an indicator of strength, or value, or lower risk. It can equally be an indicator of sentiment and the kind of ‘social trading’ popular in crypto culture.

#3 The wild, wild west of small cap Altcoins

Finally, there are the small cap Altcoins. Money can often flow from large cap to small cap altcoins. These are the riskiest and most volatile crypto assets by far. They also bring the promise of the greatest investment gains. No risk, no reward hey peeps!

#4 Money also flows by crypto asset class

The other way that money can flow in crypto is in and out of different asset classes. The asset classes are generally grouped by crypto use cases. For example, the Stablecoins such as USDC and USDT that provide a peg to the USD as a safehaven from crypto market volatility. Non-fungible tokens (NFTs), Decentralised Finance (DeFI) and Oracles are well known asset classes. You can think of these classes as similar to the different industries you see in the stock market. Typically money flows in and out of assets by class in either a cyclical or ad hoc manner, meaning ‘like coins’ in the same class can move together. It’s common to have leading coins in each class (by market cap) and instances where pairs of coins with similar use cases move together.

Investing in cryptocurrency – how to track the money flows

If you’re investing in cryptocurrency you need to know about some critical ‘tickers’ or trading indexes, to help track the flow of money by market cap and use case. Keep an eye on these indexes and understand what each represents. They can help you understand what part of the investment cycle crypto assets are in, and therefore the near, medium and longer-term prospects for particular investments.

TOTAL

TOTAL is the ticker that measures total market capitalisation and the very first index to take a look at if you’re considering investing in crypto. This ticker will show you whether the total investment in cryptocurrencies is in an upward trend. If ‘the trend is your friend’ in investing, then this chart matters. It will help you understand both bullish and bearish macro views of crypto, based on what you see on the chart.

Here it looks to be forming a possible falling wedge on the daily chart, and could also be on the verge of setting a higher low after the February 2021 low. Or it could be in a major downtrend lasting for some time. I don’t have a crystal ball y’all – it’s more about making informed decisions.

Investing in cryptocurrency

Bitcoin Dominance (BTC.D)

Probably the most important index to understand and follow is Bitcoin Dominance (ticker BTC.D). BTC.D measures Bitcoin’s share of the total market cap of the cryptocurrency market. It’s a good idea to understand the relationships in movements between Bitcoin Dominance, the Bitcoin price and Altcoin prices. For example, when people are buying Bitcoin but the total crypto market cap is not growing, then Bitcoin’s share of that total market cap increases and the BTC.D chart goes up. This is bad for Altcoins in general because it signals that Bitcoin is outperforming them.

BTC.D moves the market

When people are buying Bitcoin (the trading pair BTC/USD is rising) but BTC.D is trending downward, this is generally because the total crypto market cap (TOTAL) is also rising. A rising tide floats all boats. This trend is good for ALT/USD trading pairs but less good for ALT/BTC trading pairs because Bitcoin is rising.

The movements of BTC.D fundamentally define movements and trends across the crypto market for different coins on all timescales. I personally wouldn’t invest in any cryptocurrency without first checking this chart.

TOTAL2

The next is TOTAL2. TOTAL2 measures the total market cap of all coins except Bitcoin. It’s a measure of the money flow into and out of Altcoins. TOTAL2 trending higher when BTC.D is trending lower is an indicator of what’s commonly referred to as ‘Altcoin season’. This is a time in the market cycle where you can expect Altcoins to outperform Bitcoin.

DEFIPERP

This is an index made up of a bag of the largest Decentralised Finance crypto assets. It uses a weighted average of the prices of DeFi crypto assets including KNC, MKR, ZRX, REN, REP, SNX, COMP, TOMO, RUNE, CRV, DOT, LINK, MTA, SOL, CREAM, BAND, SRM, SUSHI, SWRV, AVAX, YFI, UNI, WNXM, AAVE, BAL. It tracks the movement of money into DeFi as a proportion of the total market capitalisation.

Investing in cryptocurrency
TOTAL, BTC.D, TOTAL2 & DEFIPERP – understand and use all of them to make informed investment decisions

The final word – crypto is an ecosystem so take it one step at a time

There is a lot to learn about the crypto asset ecosystem. We’ll do our best here to spread the love with information we wish we had before we started investing. These basics will give you a shot at:

  • working out, based on how much risk you want to take, whether large or small caps are your cup of tea
  • what coin categories you might be interested in investing in
  • when is a good time to buy crypto based on how the money flows.

If you want to take the next step and start making money with crypto, then get yourself along to this entirely online Rich Dad Summit.

You’ll get 2 days worth of great investment content including successful entrepreneur and investor Robert Kiyosaki covering topics how to invest in Bitcoin and how to easily get around some of the beginner challenges with buying and owning crypto.

The cryptocurrency market is the wild west of investing so if your risk appetite is not up to investing in cryptocurrency then head over and take a look at some of our other traditional financial freedom investing ideas.

Until next post – have fun, be happy and do good!

Oh, and if you get value from our content please share the love!


How to buy the right dual income property

Tara FIRE investing, Real estate , ,
Dual income property

This one property investing strategy can make you financially free.

We’re not kidding. We’re talking about the wealth building potential of dual income property.

Dual income property has been a foundation stone of our financial freedom strategy so far. It’s a super wealth building strategy if you know what you’re doing. And the good news is you don’t need to stumble through.

Here’s the intro to this series to get things started.

Today, we take you through how to buy the right dual income property for financial freedom. At the outset, you’re going to want to know what your investment strategy is and what your investment objectives should be, because if you don’t how’re you going to meet them right? So let’s get started.

The dual income property strategy

Your initial investment strategy is buying low and upgrading the property for short term cashflow and capital growth, so you can continue your property (or other) investing journey. This is not the end of your plans for this property, but it IS how you’ll leverage it into another investment and keep on with your wealth building plans.

Buying low means you can preserve your own capital and will have some spare cash for upgrades. This bit is critical peeps! The value creation strategies we talk about below will help you take out equity as quickly as possible for your next investment venture.

Our full dual income property strategy will emerge over the course of this series .. I can just tell you are on the edge of your seats with anticipation 🙂

dual income property
Investing in dual income property can supercharge your wealth building strategy but you have to buy the right property

Investing objectives for dual income property

Positive cashlow

In our intro to this series we talk about the main benefit of dual income property being cashflow. So cashflow is going to be one of your main objectives because it’s relatively easy to achieve when you’ve got dual income. A cashflow positive property is when your annual rent covers all annual expenses and you have a little left over in your pocket.

So how do you work out if it’s cashflow positive when you don’t know what all your expenses are?

The 10% rule

The first thing you’re going to need to do is work out the gross rental yield for the property. From our experience and as a rule of thumb, with older properties you are looking for at least 10% gross rental yield to achieve a marginally cashflow positive property. One caveat – your yield percentage can really live or die on the condition of that property and its occupancy rate. We’ll get to that later….

Your gross rental yield calculations should follow this formula:

Property yield = annual rent / property price x 100

So for example, a $400,000 property with a gross rent of $40,000 will give you a gross rental yield of 10%.

This is a nice rule of thumb because it’s easy to work out when you’re hitting the pavement inspecting potential investment properties.

Properties that are less than 10 years old may have some worthwhile depreciation benefits for both the building and its fittings and fixtures. You can also use these benefits as a strategy to achieve a positive cashflow outcome. BUT peeps, the depreciation thing only works if you have complementary income you’re paying high tax rates on – like a high earning wage. If you’re looking at an investment that on the surface doesn’t meet the 10% rule, consider whether depreciation tax offsets against your personal income might get you across the line. If you want to learn more about this strategy, we recommend reading ‘7 Steps to Wealth‘ by John L. Fitzgerald.

Newer dual income properties will come at a higher buy in price. This will mean a larger deposit, which may eat into your portfolio investment plans. It’s also hard to know with certainty before you buy whether this strategy will work with the specific property you’re targeting, unless you get a depreciation report done before purchase. Last we had one done it cost about $600…

Find property with low operating costs

We mentioned before that your holding costs and occupancy can really put a spanner in the works when it comes to positive cashflow. So if you want to find a property that is not going to kill your wealth building strategy with ongoing expenses. Here a checklist of things you want to see in a good property:

  • Brick veneer – external timber requires heaps of paint, maintenance and repair
  • Structurally sound with solid roof and stumps / slab
  • Hard wearing flooring – tiles, timber, laminate or planks. Tenants trash carpet and that becomes expensive.
  • Separate electricity meters for each unit or apartment – so the tenant pays their own power bills
  • Separate plumbing and good quality water efficient tap ware – if you have these you can pass on variable water charges, lowering your ongoing costs
  • A property on a single title – so you’re only paying the one city rates bill and not a rates bill for each unit. This one factor can literally save you thousands a year.
dual income property
Our dual income property – low maintenance, brick veneer on a single title, separate entrances, and separate electricity meters.

Capital gains

Now we’ve covered what to look for to land yourself some healthy cashflow, let’s talk capital gains. Your objective is always to get good growth no matter what kind of property investing you’re into right? But how do you know with a dual income property what growth might be on the table?

Organic growth – find the right location.

The right location will give you some good organic growth if you hold the property as part of your portfolio and look to leverage it as a financial freedom strategy. Now, there are a gazillion cities, towns and suburbs across Australia or America or even the UK and finding the right area is going to be up to you. Sorry!

Once you do get to a shortlist of locations, take a look at historic data over the last 10 and 5 years. You want a location with strong long term capital growth over at least 10 years. Strong is anything above 7% per annum. Depending on your time horizon, you also want that growth NOT to have all rolled out in the 3 years prior. This is because growth in property can be lumpy – where you might get a really good 24 months of capital growth and then a slow period of 3 years. If you jump in at the beginning of that slow 3 year period, you’re going to be waiting a long time to recycle any equity from your dual income property into your next investment.

Manufactured growth – find the right property

Manufactured growth strategies for dual income property differ massively from single family homes. Here is a checklist some of the things you want to look for, with a dual income property, based on your growth objective.

Cosmetic renovation opportunity – think purple, pink or orange wall paint, lace curtains, moth eaten carpet, overgrown garden. This is gold when it comes to easy to manufacture equity. A internal cosmetic renovation of paint, flooring, window coverings and some simple landscaping can help produce a higher valuation on the property AND increase your rent and your cashflow position.

Structural must haves – there are also somethings that the property must have to take advantage of manufactured growth opportunities longer term:

  • Carports or space for off street parking for each unit or apartment.
  • Firewalls between each apartment, usually constructed of Besser brick. You can check by poking your head into the ceiling cavity – they should extend up to the roof between each unit.
  • Separate entrances for each apartment or the ability to create them.
  • The potential to create separate and private outdoor spaces for each apartment.
  • Adequate (for the size of the building) stormwater drainage from the roof to the street.
  • You also want to make sure that each apartment in the property has separate electricity meters and separate water meters, or the ability to inexpensively separate them, and that you a buying a property on a single title.

We’ll cover why these things are important in part 3 of the series, but for now you’ll have to trust us – these are the thing to look for if you want a super charged strategy for financial freedom.

Where to find a low buy-in dual income property?

So if you’re still following along we’re at the bit in the story where we talk about where. Where do you find dual income property that lets you buy low and leaves you some cash to do upgrades, without blowing all of your savings on the one deal?

One of the major hurdles to dual income property investment for folks trying to build their financial nest egg is the buy in price or affordability. In tier 1 cities in Australia – like Sydney, Melbourne, Brisbane, Perth and even Adelaide – a dual income property comes in at a whopping $800k plus so you’ll need $100k plus in your pocket to buy. This just isn’t an affordable investment for a lot of people. It’s probably the same in the States or the UK… In some cases these price tags have already spilled over to tier 2 cities like Newcastle, the Sunshine Coast (well its not a city but you get the picture), the Gold Coast and Geelong

But.. in tier 3 cities (more like regional towns) you can still find dual income properties at affordable prices within a reasonable buy-in range. And the good news is that since the pandemic, tier 3 cities have become a lot more attractive for renters because of the lesser disruptions and impacts from shut downs, and for their affordability. We’d be looking specifically at towns within a 2 hour drive of a major city and with a population of 80,000+ as well as some diverse industries behind them to prop up employment. Think Cessnock in NSW, Toowoomba in Queensland, Devonport in Tasmania, Bendigo or Ballarat in Victoria. In these locations, dual income properties are still a possibility for many folks with a buy in price of $400 – $500k.

The final word – hey, hey you’re underway

In this post we’ve kicked off our dual income property planning with how to buy the right dual income property. Adding value peeps! We’ve set out:

  • a clear initial buying strategy – to buy low and upgrade so you can manufacture immediate cashflow and capital growth.
  • a checklist of what to look for when you buy – to maximise your property investment income and eventually the money you’ll make
  • some pointers on where you will find these types of properties.

Not all dual income properties are equal in the game of money financial freedom seekers. Buying a dual income property with these things in mind should help get you on the right track and on the fast track to crushing your financial freedom plans.

NFA – which stands for not financial advice (as opposed to NFI which stands for No F*cking Idea and is the opposite of what we’re all about here at the LLP).

Intro – The wealth building potential of dual income property

Part 2 – How to make passive income from property, double your money and pocket a 15% annual return

Til next post – have fun, be happy, do good!

The wealth building potential of dual income property

Tara Achieving financial freedom, Real estate , , 3 Comments
Dual income property

This is the intro post in our series ‘The wealth building potential of dual income property’. We own dual income property and it’s been a fundamental strategy in our financial freedom plan. We’re going to take you dear readers through the wealth building potential of dual income property using a bunch of different value creation techniques. You’ll get the real story, warts and all – not the BS sales pitch that real estate developers want you to believe. You’ll also get our tips from the trenches; we’ve made the mistakes so you don’t have to!

So if you’ve been wondering whether a duplex or triplex investment is right for you, read on financial freedom seekers.

What is dual income property?

To start you off, check out this little intro to dual income property on our Traditional FI page. In short, a dual income property is multiple apartments or town houses in one property, giving the owner more than one rental income stream. You’ll often hear dual income properties referred to as duplexes, triplexes or multifamily properties.  These are typically in a small complex or are semi-detached in that they share a common wall and some common areas. At the big end of town, they’re entire multilevel apartment buildings.

Dual income property
Our first property investment was this dual income property

Picking the right investment property for your financial freedom plan

There are two things about property investment that make it attractive as a financial freedom or wealth building strategy – capital gains and cashflow. When you’re looking for an investment property, it often boils down to a choice between the two.

Capital gains are the increase in the price of the property over time as the market moves (not all property increases in price while you hold it, we’re just saying that this is what you’re aiming for). If you’re aiming to build a property portfolio you can live off, you need capital gains to fund your deposit for future property investments.

Cashflow is generated from the rent your tenants pay you. You need this to be able to service future bank loans to leverage your deposit into more property.

There are also a couple of generalisations in the property market (which itself is a generalisation!) to know about when picking what property to invest in and where:

  1. City properties are capital gains properties – they tend to be more expensive, grow in price faster over time, and because of this they produce a lower yield
  2. Properties in smaller regional towns are better cashflow properties – they’re cheaper to buy and the yield is better, but there’s not the market demand to drive high price increases.

We’ve observed these generalisations in real life across different property markets around Australia, although there are always exceptions. Investment properties that give you both capital growth and cashflow FROM THE OUTSET truly are the holy grail of real estate investing. We say from the outset because if you hold an investment property long enough and pay down the mortgage it will inevitably produce some capital gains and you’ll be cashflow positive with rental growth and smaller loan payments….

Anyway…This is all good context to understand where you are at in your investments and your financial freedom planning, what you need to take the next step (cashflow or capital growth) and how dual income property it might fit in to those plans.

What is the benefit of investing in a dual income property?

Cashflow

Dual income properties are typically labelled a ‘cashflow play’ in property investment – because you get more beds, baths and kitchens than in a single-family dwelling. That leads to more rental income. Cashflow is seen to be the major benefit of dual income property investing and it’s what we focussed on when we were looking for a dual income property.

Income diversity

Dual income property gives you a couple of independent income streams. This is an important advantage over single family properties especially if you have a sizeable loan against the property. The thing with rental properties is, tenants vacate them. And when they’re vacant, your rent stops. With dual income properties, you can spread out the rental leases and the natural vacancies that occur between tenants and you always have rent coming in. Huzzah!

Value creation opportunities

The benefits so far are all around income generation. But dual income properties also have massive value creation opportunities and this is why we’re devoting an entire series to exploring how dual income strategies can catapult your wealth building and financial freedom! In terms of a property investment, multifamily properties are extremely versatile and can be a real blank slate opportunity for the motivated, active value creation type investor. Once you’ve set them up, they can also become low risk passive investment – all depending on how they’re run.

Building wealth from dual income property

So how do you leverage this type of property to build wealth? In our dual income property series we’re going to take you through the killer wealth building strategy that we used to pour rocket fuel on our dual income property investment – step by step dear readers.  Over the coming weeks, we’ll post about:

  1. How to buy the right dual income property
  2. How we turned a $60,000 investment into a $180 per week income and doubled our money in 12 months
  3. How to explode the equity in a dual income property – twice!
  4. How we’re killing it with our secret dual income strategy  
  5. Options to cash out from a dual income property

We’re going to take you through what we did, all of the numbers, our tips from the trenches at each stage, and we’ll even share photos along the way. We’ll also reveal some traps for the uninitiated and things we wish we knew BEFORE we got started.

The final word – is dual income property a good investment?

You’ll have to make up your own mind dear readers, once you read through this series and have weighed up the pros and cons yourself. Only you’ll know whether it’s right for you.

One thing to note upfront – dual income property is not an advanced investor strategy! Our first property purchase was a dual income property – before we bought our home! We were property novices – so if we can do it, you can too!

Stay tuned!

Part 1 – How to buy the right dual income property

Part 2 – How to make passive income from property, double your money and pocket a 15% annual return

Until next post – have fun, be happy, do good!

Investing in cryptocurrency – how much we made in one week with Celsius Wallet

Tara Decentralised Finance, Passive income ideas , ,
Celsius crypto review
Celsius crypto

We’re going to share how we go and get ourselves some free money each week using the DeFi crypto app called Celsius. We’ll review the app – it’s features and safety and what we learned (and how much moolah we made) in the past week using the Celsius Wallet to earn passive income from cryptocurrency.

This is part 4 in our series DeFi: the new financial frontier where we explore DeFi crypto and the new rules of making passive money online. We’ll post links to Part 1 to 3 of our DeFi series at the bottom of this post.

What is Celsius wallet?

Celsius is a DeFi crypto platform that provides personal financial services – like banks do – but instead for investing in cryptocurrency. The company, headquartered in London, focuses on the financial services they say the big banks have forgotten about – fair interest rates, zero fees and fast transactions. Celsius have existed since 2017 but their service offerings have exploded over the last 12 months as more people enter the decentralised finance market to find banking alternatives to earn interest on their hard earned savings. The Celsius platform is now available to users in more than 100 countries around the world includ.ing Australia, UK, Canada – all the usual suspects

Celsius operates mainly through Celsius app, which is available for iOS and Android and is where you can access their financial services. Although it’s not strictly a crypto wallet, the app acts like a crypto wallet is some of its functions and features. We downloaded the Celsius app a week ago and started to use their services.

What can you use Celsius wallet for?

Earn interest on DeFi crypto and Stablecoins

This is the main reason we decided to give Celsius wallet a go. Frankly, we’re tired of earning zero percent interest on money in the bank. Low interest and growing inflation are a feature of the new money game in a post pandemic era. They’re also a big part of why financial freedom seekers need to get educated about the new rules of money and pivot with their financial independence strategies.

We transferred some crypto into the Celsius Wallet from other cryptocurrency exchanges a week ago. Here’s what we learned about earning interest on our crypto using Celsius Wallet:

Interest rates. Over the week we earned interest rates of between 5% and 13% across a number of different coins. Celsius calculates your interest earned every Friday and total interest earnings are updated each Monday. Every Monday, they also send you an email with the new rates that they are offering that week. That is another thing to know about DeFi lending products like the Celsius one; the interest you earn changes with the forces of supply and demand for that particular coin in the market (as well as some other factors). A free market for money lending not controlled by central bank dictated interest rates! What a novel idea.

Crypto coins and tokens – higher interest higher risk. At present Celsius wallet supports over 40 coins and tokens in their lending (interest) service. We earned rates as high as 14% during the week. We only lent crypto that we own with zero dollars in – which means that we bought the crypto previously, the price went up and then we sold a portion and took our initial investment out. This is part of our strategy to manage the risks of crypto price volatility. It effectively means we are earning interest of between 5% and 14% with zero risk.

Stablecoins – high interest, lower risk. The other thing that we lend on Celsius is stablecoins. We received an 8.8% APY on two different stablecoins – USDT and USDC. Earning interest on stablecoins is the lowest risk product on Celsius. This is because the price is not subject to the large fluctuations that other crypto can experience. You can learn more about stablecoin earnings here. There are no minimum deposits for Celsius, which is also a great feature if you want to test it out or teach your kids about crypto and financial freedom. We diversify our stablecoin lending across a few different stablecoins as another a risk management strategy.

Celsius price
CEL is the ticker for Celsius token. Hold CEL in your Celsius account to boost the interest rate you receive on Celsius app.

Flexible terms – get your coins out at any time. Now unlike DeFi crypto staking products that require you to lock your cryptocurrency into smart contracts or lending protocols for a nominated period, you can lend on Celsius with flexible terms. You simply follow the withdrawal process in the app, go through all of the in-built security features like 2FA and PIN code confirmation and enter the blockchain public key for the address you want to send your crypto to.

Like with any cryptocurrency transaction, you have to make sure the address is correct and you’re using the right blockchain network for the coin you want to transfer but this is pretty easy. For example, if we wanted to withdraw some ETH, we would log in to a crypto exchange like Binance or Coinspot, grab the correct deposit address generated from within that platform and copy and paste that address into the Celsius wallet withdrawal screen. Voila!

CEL token – The other thing to know about Celsius interest rates is how Celsius token works. Celsius has a token that they use to provide interest rate ‘boosts’ for ‘Celcians’ that use their service. The ticker is CEL and the token is traded on decentralised exchanges like UniSwap or on FTX. You can also buy CEL directly in the app but we don’t recommend this due to the fees charged by third party providers. You can opt to earn your interest in either CEL or in the currency you deposited. If you hold and earn in CEL you will receive a higher interest rate on your coins. The more CEL your hold as a percentage of your total holdings, the higher your earnings rate.

Celsius interest calculator. One of the best features of the app is their in-app interest calculator. You simply scroll to the coin you want to lend and put in how much of that coin you have. It then calculates your earnings over a week and a year.

Celsius interest calculator
Celsius in-app interest calculator

Features

One thing about Celsius Wallet is that it currently offers one of the best rewards around for ETH or Ethereum. It’s not easy to find good flexible interest rates for ETH (where you can take your ETH out at any time) because staking ETH carries the condition that your coins are locked in the protocol until ETH version 2.0 is released. This could be in 2H 2021 but it might be also be later. If you have ETH, and don’t want to lock your coins in for an undefined timeframe, you can get 5-6% interest on Celsius.

If you want to get yourself on Celsius and would love some free Bitcoin, you can use our link and put in our referral code 1910143eb7 once you login in and set up your account. You can enter the code by going into your profile in the menu.

You get $40 worth of BTC for your first transfer of $400 in more. T&Cs apply but you basically just need to leave the $400 in there for 40 days.

How does Celsius crypto interest work?

We find that people are automatically suspicious of the higher interest rates that you can achieve in DeFi crypto. A lot of folks think that all DeFi is just Ponzi schemes. It’s always good when it comes to your finances to approach new products with a good deal of caution and scepticism. And crypto is a literal minefield of scams and fraud. That’s why we’re here to report back!

So let us explain how Celsius offers the interest rates they do. Under the Celsius business model their rewards (interest) are funded by their lending business. They lend the coins that users transfer into the app onto hedge funds, institutional traders and exchanges, as well as other corporate partners. These partners deposit up to 150% collateral (in crypto) to secure the Celsius loan and they pay Celsius interest on that loans. Celsius also lends US dollars directly to app users – with digital assets as collateral – and earns interest from those loans.

One risk in this model is very large movement (50% plus) in the underlying value of the coins used as collateral for Celsius on-lending. A large swing in the traded price of coins loaned by Celsius may initiate a margin call on the loan. If this happens, Celsius takes ownership of the collateral to secure its position (and yours!). The margin call process comes from traditional banking services but there is a different level of risk involved for borrowers because of price volatility in cryptocurrency.

A word of warning about borrowing crypto

Celsius also offers a borrowing product where you provide your own cryptocurrency as collateral to borrow either fiat currency (US dollars) or more crypto. You might ask – why you would borrow against your crypto? Well, its a form of leverage where you can continue to hold your crypto coins and have them move with market fluctuations but access value in them at the same time. You borrow coins to leverage your market return on those coins for example or put them to work somewhere in the DeFi system.

We don’t do this. We don’t use leverage when we’re investing in cryptocurrency because as we explained above we don’t want to be exposed to the risk of a margin call if there is a sharp drop in crypto markets while we sleep. This literally just happened in May 2021, and liquidated A LOT of leveraged positions across a number of large lending and borrowing protocols.

DeFi borrowing
Source: theblockcrypo.com
Is Celsius safe
Hodl security feature

None of this is financial advice dear readers – we’re just sharing our experiences. If you’re going to borrow or use leverage, that is up to you in the true ethos of crypto which is about managing your finances the way you want. It all depends on your risk appetite.

Is the Celsius Wallet secure?

The Celsius app has some great security features to protect your crypto. When you set up Celsius wallet you are required to set up an App Pin Code (like with your banking app) and provide your KYC or ‘Know Your Customer’ details. This includes name, address and ID document. Verification occurs within minutes and then you’re all ready to start earning, and borrowing.

BUT, before you do anything make sure you head into the menu and set up the additional security features for the App. This includes turning on their biometric security access if you use that feature on your mobile phone, setting up 2 factor authentication, and also setting up “Hodl mode’. Hodl in crypto language means ‘hold’ or stash your coins rather than trade or sell them. Hodl mode is an extra layer of security on withdrawals only. It prevents any withdrawals from your account without a separate PIN code. Remember to write everything down in a safe place peeps!

Celsius crypto interest
Our week 1 Celsius earnings

The final word

In our first week on Celsius Wallet we earned $19.90. That’s US dollars so around $25 Australian. Now it’s not enough to break the bank and make us rich, but all we did was download the app, set up the wallet and its security, and transfer some cryptocurrency and stablecoins in that we already had and was sitting around doing nothing. We also did it in a way that sought to manage risk.

It literally took about 10 minutes to set up a little low risk cryptocurrency passive income stream of $100 per month. And Celsius wallet isn’t the only crypto wallet we use while investing in cryptocurrency. Across our different accounts, the passive income that we earn adds up.

We diversify across coins and across cryptocurrency wallets to manage risk and find the best yields. It’s just like not having all your eggs in one basket. We also don’t go for any of the leverage cryptocurrency investing strategies and avoid strategies that might have a high exposure to impermanent loss.

Like we always say, the fat stacks are out there financial freedom seekers. You need to get educated. We hope we’ve helped you do that here today! If we have, please remember to use our links and codes – get yourself some free BTC and help out our blog too! 🙂

As always dear readers – this is not financial advice. Invest at your own risk and always do your due diligence.

DeFi series Part 1: The 2021 DeFi lowdown – time to pay attention peeps!

Part 2: The game of money is changing – so what is DeFi?

Part 3: How to invest in DeFi and earn double digit interest on your savings

Til next time, have fun, be happy, do good!

How to invest in DeFi and earn double digit interest on your savings

Tara Decentralised Finance, Passive income ideas ,
How to invest in DeFi

Part 3 of our series DeFi: the new financial frontier

In part 2 of our DeFi: the new financial frontier series we talk about how Blockchain technology is causing tectonics shifts in money systems with something called DeFi. As bank interest rates tank to record lows, company dividends take a hit and inflation climbs (see our inflation post here), financial freedom seekers and FIRE investors are falling on hard times. If financial freedom starts with saving more of your income, but your savings are going backwards, how do you get ahead? In this post, we talk about new opportunities to invest in DeFi crypto.

Lending with Decentralised Finance

We’ve already mentioned in our DeFI series that using Blockchain, anyone can lend their own money directly into DeFi crypto lending protocols and earn far better interest rates than the bank. This can all be done basically with a little bit of set up leg work and a few clicks of your mouse button. If you missed that post its important background for this one – you can find it here.

In this post, we’ll run through an example of how to make better than bank or term deposit interest on your fiat currecny, with DeFi.

We’re going to use a combination of the following resources so if you haven’t set these up yet that is a good place to start:

  1. An account somewhere you can buy Stablecoins and some Ethereum token – like a crypto exchange. We’ll use Binance.
  2. A web wallet to transfer your coins between the exchange and the lending protocol. We’ll use a browser extension wallet called Metamask but another is MyEthWallet. Actually there are tonnes of different wallets you can use – if you want to find the safest kind use a Hardware Wallet.
  3. A lending protocol. We’ll use Aave but others are Maker and Compound. You don’t need an account with them to lend money into their liquidity pool.

What interest rates can you get with DeFi?

The thing to know about DeFi crypto is interest rates fluctuate with market supply and demand. Shock horror I know. A world where banks don’t control interest rates, actual lending markets do!

We start on a DeFi crypto borrowing and lending platform called Aave. This example runs through a web based step by step, but there are a bunch of mobile based apps (wallets) that you can use pretty seamlessly to access an entire ecosystem of DeFi lending products. Its a whole new world of banking out there peeps! Here is a great resource if you want to earn interest on your crypto on the go with a list of the best mobile crypto wallets.

If you open Aave and click ‘deposit’ at the top of the screen you can find the lending and borrowing rates for different DeFi Stablecoins. If you’re not sure what Stablecoins are or how they are different to other crypto coins, take a look at part 1 of our DeFi series.

Now, not all of these are Stablecoins so the ones you are looking for are in red.

How to invest in DeFi
Aave lending protocol V2 interest rates

I currently have some Tether (USDT) which is a Stablecoin I bought with my Fiat money. It’s sitting in my Binance wallet. I’ve decided to lend that USDT on the Aave platform. Today’s interest rate is 5.22%. If you don’t own coins already, your first step will be to buy some on Binance and once you do it will appear in your Binance wallet.

The next step is to transfer the USDT from my Binance wallet to my MetaMask web wallet. Think of this step like taking fiat currency out of your bank account and putting it in your physical wallet so you can use that money.

If you’re using MetaMask for the first time, here’s a great article with some basic set up instructions for MetaMask wallet.

This is as easy as going into your Binance wallet, selecting the coin, then clicking transfer and entering in the amount you wish to transfer.

You then need to go into your web wallet and click and copy your MetaMask web wallet address for the Ethereum network. Once you have the address copied to clipboard, go back into the Binance transfer page and follow the prompts to paste in that address into the transfer screen. You then click transfer. Some verifications will happen and this all takes a few minutes.

I also need to transfer some Ethereum into my web wallet to pay the gas fees for using the Ethereum Blockchain. I use the same process to do this on Binance with same web wallet address from MetaMask but by selecting ETH instead of USDT as the coin I want to transfer.

Once you’ve completed the transfer you should see the coins in your Metamask wallet, but you may need to add the coin types to your MetaMask wallet first before they appear.

A word on ETH gas fees

As AAVE is built on the Ethereum blockchain, you need to use the Ethereum network and its token (ETH) to interact with AAVE. The ETH token acts as your ‘gas’ to use the Ethereum network. You’ll often see this referred to as ‘gas fees’.

One caveat in using DeFi crypto is that gas fees on the Ethereum network can be very, very high. The fees change with supply and demand and with transaction complexity. The fees work out to be exorbitant on small transactions, so economies of scale matter when you are moving Stablecoins around in order to lend them out or use them as collateral to borrow. If the gas fee is $225 (which it was when I went to use the Ethereum network this morning), then you need to move at least $7000 USD worth of USDT in order to recover the gas fees in your interest (transaction in and out of Aave) and stay ahead based on the lending rate for USDT in this example.

One way to get around the high Ethereum gas fees is to transact through the Matic network. This requires a slightly more advanced tech level. Matic acts as a sidechain to the Ethereum Bockchain. You will need to add the Matic network to your web wallet add funds to the Matic Layer 2 protocol to do this. Once you have the Matic sidechain set up and funded in your MetaMask web wallet, you then open the Matic Mainnet in your web wallet and connect your web wallet to Aave. The Aave integration should show that you’re in the Matic/Polygon sidechain.

There are a bunch of other ways and DeFi crypto products that help you to avoid ETH gas fees and we’ll go over these in other posts.

If you take a look on Aave using the Matic network you don’t have the same range of Stablecoins open for deposit or the same interest rates as you do using the Ethereum network. Fees are lower using Matic, but so are interest rates. So Matic is better if you’re lending smaller amounts but Ethereum pays off if your lending larger amounts.

How to invest in DeFi
Matic Polygon sidechain version of Aave lending protocol

DeFi crypto is still early days

Here we come across the catch with DeFi. Its nascent, so the actual use of the DeFi system isn’t quite living up the decentralised finance ethos because of the fees involved sometimes on the Ethereum network. Developers are working on computational ways of reducing fees and only once this happens will DeFi become practical for many smaller users. It can also be tricky to navigate at first and integrations between exchanges, wallets and protocols can be a bit buggy. The risks are also wildly larger than operating in the fiat money system. Be warned that this is speculative investment.

Depositing into Aave Liquidity Pool

After moving the USDT and ETH to my web wallet, I have to connect my web wallet to the Aave protocol. This is a simple click at the top right corner and a process of following their prompts.

How to invest in DeFi
Connect your wallet to the Aave lending protocol

Once connected I can transfer the USDT in my web wallet to the Aave lending pool by hitting ‘deposit’ at the top of the screen. This will take you to your web wallet interface so you can select the coin and transfer amount. Before I confirm the transaction, Aave shows me the gas fees involved.

The final word – higher interest is just a few clicks away

So now, my savings have gone from fiat, to USDT and have been deposited into the Aave lending pool. I’m now earning the market rate, which today you can see is 5.22%, but tomorrow could be different. You can still make money in your sleep if you’re prepared to risk more and lend larger amounts into these DeFi liquidity pools. Be sure to manage your risks as we mention here. Also, test the tech first with small amounts. Aave is a well known platform with over $18B USD equivalent in its Liquidity Protocol and the likes of Mark Cuban lending through it. But don’t put all your eggs in one basket because true to the Blockchain ethos, it’s a non-custodial protocol and that means if things go to custard, there is no protection for you.

Til next time – have fun, be happy, do good!

The game of money is changing – so what is DeFi?

Tara Achieving financial freedom, Decentralised Finance ,
what is DeFi

Part 2 in our series DeFi: the new financial frontier

A new financial architecture is being built by super smart computer technologists and even some economists. It’s called DeFi crypto and it’s about much more than just crypto. It’s going to be bigger than Bitcoin. Perhaps even bigger than the internet V2.0. In fact, it’s the single most important thing you as a financial freedom seeker can get your head around – now. But what is DeFi? What does in mean for your financial freedom in practical terms?

Our DeFi: the new financial frontier series is helping financial freedom seekers understand the monumental shifts in the tectonic plates of our global money system. If financial freedom is all about how well you play the game of money, then that game just got new rules so stay tuned to this series as we explain them.

Who controls the ledger controls the money game

Ledgers have historically recorded financial and commercial transactions between people – the ‘who owns what when’ – since, well, a long time.  If you think about it, for any significant exchange of value, there’s a central record of the transaction kept by someone. Ledgers are more than just a record. They’re also about trust. An independent third-party bearing witness to the exchange of value between strangers and so on. Whoever controls the ledger has significant power in the game of money. Over the rules that is. How transactions must occur, between whom, and how much they cost.

So, who controls the ledgers? Middlemen such as banks, insurers, brokers, auditors and policy makers, and the institutions they have created do. And through this the centralised control of money has become the norm. But will it always be?

What is DeFi? The new rules of decentralised money

what is DeFi

DeFi is the decentralisation of financial products using blockchain technology.

DeFi uses Blockchain technology to replace the role of middleman in financial and commercial transactions and decentralise the control of money.

Blockchain was created to act as a ledger that no one entity could control but that needs the participation of many to operate. It seems simple on the surface but in its very design, blockchain technology fundamentally ‘up-ends’ the money game as its currently played. That’s why there is a lot of scrambling going on in the halls of traditional financial institutions, about Bitcoin and cryptocurrency. But cryptocurrency and bitcoin are just white noise once you step back and take a look at the bigger picture of Blockchain meets Money.

Blockchain meets money

Blockchain technology’s decentralisation of money – Decentalised Finance (DeFi) – will profoundly change our money future.  The changes have already started. The introduction of Blockchain technology to the world of finance is seeping into the money system under the cover of crypto and Bitcoin. Over the coming decade, DeFi crypto will likely impact the way you save, where you put your money, how you borrow, where and how you invest in assets, how you manage them, the stocks you buy, your retirement nest egg, your investment income and any trading you might do. Just about everything to with your money.

You see, Blockchain changes the money game in four critical ways:

  1. It acts as an immutable public ledger through which participants can validate transactions automating the trust element between third parties,
  2. Its design decentralises control over that ledger,
  3. it allows the tokenisation of assets by fractionalising ownership of those assets, and
  4. It transcends national borders, putting opportunity in the hands of the masses and millions of unbanked across the globe.

What does DeFi mean for your financial freedom?

The real-life impacts on your financial freedom due the structural changes being bought borne out through Blockchain and DeFi crypto are profound peeps! Here are just a few we can think of:

  • Faster financial and commercial transactions – blockchain now provides an easy way to send money quickly and cheaply across the globe
  • Fewer middlemen and rent takers = fewer fees and charges = you keep more of your hard earned assets
  • Lower barriers to entry – no minimum investment requirements for example that apply to some of the most profitable instruments in financial markets
  • Lower cost to buy in to financial opportunities so greater access to markets
  • Fairer ways to grow wealth
  • More transparency to replace the opaque rules that currently apply to the game of money – particularly gold investing, and
  • The biggest of them all: You get to control your money – no custodians, banks, no gatekeepers clipping the ticket or saying no to your financial future

The final word – may the odds be ever in your favour

I really want to focus on that last dot point because it is exactly what financial freedom is about. You taking control of your money. DeFi crypto can give you new tools to do exactly that – if you learn the rules of the game and get comfortable with the tech. Don’t be afraid, but do get educated. And do manage risk! The new game of money is here.  It involves investing in cryptocurrency and decentralised finance. As they say in the movies, may the odds be ever in your favour!

Check out part 3 in our DeFi series to see how to earn double digit interest on your money with DeFi crypto.

Until next time – have fun, be happy, do good!

Airbnb passive income – can you make good money in 2021?

Tara Airbnb profit, House hacking, Passive income ideas , ,
Airbnb passive income

You may have heard the horror stories of Airbnb hosts having to shut down and losing all of their Airbnb income as the pandemic raged globally in 2020. It wasn’t just Airbnb hosts losing their pants – a lot of businesses and families struggled. But it did bring into sharper focus the risks of hosting on Airbnb. We lived it. We’re here to tell the tale. So is Airbnb profitable for hosts in 2021? How much can you make on Airbnb in a post pandemic era? Or is it all too damn risky now? In this post, we’ll look at how much you can make in Airbnb profit in April 2021, starting with our own one bed apartment. We’ll also delve into how to manage the financial risks of setting up Airbnb passive income. Read on peeps to see for yourself what an Airbnb side hustle can be worth.

The perfect ‘lil Airbnb passive income property

We have a little one-bedroom apartment on Airbnb in regional town in Australia. It’s located close to the city centre and next to a nice golf course. It’s about 52m2 internal, with a full galley kitchen, bedroom, separate bathroom/laundry and open living dining. The place has its own private, sunny courtyard with nice seating area and lovely garden.

We used to rent it on the long-term rental market for $210 per week or around $10,080 per year, factoring in vacancies between tenants. $10,080 was gross income, and after mortgage and bills we were in the red (negatively geared) by a little each year. A dumb position to be in looking back and I’m not sure why we let so many years go by with it negatively geared. But that’s another story.

We began thinking a few years ago when we were looking at how to better our financial equation that our little one bedder would be the perfect property to trial on Airbnb. We had renovated the place in 2014 and it wouldn’t take much in terms of capital to turn it into a short-term rental. Airbnb side hustle number one, here we come!  

We set up the property for short term guests, (another capital outlay), had professional photos taken and listed the place in May 2019. We weren’t sure who would book as there was not a lot of data on that regional market, but we knew how much moolah we had in the deal. We did our best with the data available and knew the nightly rate we needed, based on local market occupancy, to make a good profit.

How much money can you make on Airbnb in 2021?

Fast forward to April 2021 and that little one bedder has long since paid back its initial set up investment and is no longer negatively geared. Here is how much we made in Airbnb profit from this property in April 2021:

Airbnb passive income
Our one bed Airbnb listing in regional Australia
how much can you make on Airbnb in 2021

So the answer financial freedom seekers is yes – you can make money on Airbnb in 2021. Even with a global pandemic holding back the reins on international travel. This one bed apartment that used to lose a few grand for us each year on the long-term rental market made a profit of $1559 in April alone. The first of our 4 Airbnb properties turned out to be the perfect toe in the water….

If you want to know how to make Airbnb but don’t have any investment properties – we’ve got your covered too! The good news is there is a strategy to make Airbnb profit with zero investment properties that we’ve used and made good money from. Check it out here along with all of the other tools and resources we know and love to make money with Airbnb.

Airbnb passive income

The beauty of that $1559 is that it ranks pretty highly on the passive income scale. During the month of April we put a total of no more than 5 hours into running that apartment on Airbnb. We’re able to do this because we have set up the operating and financial systems and processes to run the listing passively. So that’s a cool 300 bucks an hour. For a little one bedder with a small initial investment risk, turns out it was no-brainer. But taking that first step financially was not easy until we really got a handle on the risks.

Taking your first step to Airbnb profit

Time to pimp your assets peeps! If you want to escape the rat race and you own some property, then one of the first places to start is reviewing those assets. Are they costing or making you money? Have you got the best cashflow strategy in place? Can you use them to live financially free here and now? Airbnb can be a very rewarding passive income strategy and we’ve shown here Airbnb is profitable for hosts in 2021. If you can pimp your property assets financial freedom seekers, we say get on it!

If you’re thinking about an Airbnb profit strategy for yourself but are worried about losing money, then it’s a simple case of doing the numbers. One of my favourite bosses of all time has a sign on his office wall:

“in God we trust, all others bring data”.

I’m not into god but the rest is plain truth. Actually, I’m not into data either, but there’s no financial freedom without it! What I’m getting at is that the financial risk with Airbnb is tangible and manageable. So where to get started?

AirDNA

We’ve lauded the benefits of AirDNA in a previous post so no need to go on about it too much here. In short, it’s a genius tool if you’re worried about taking the first steps into making killer Airbnb passive income. It gives you critical insights into the nightly rate you can charge and the occupancy you can expect in your local area – based on real data. And it’s darn cheap at under $50 for the month, no ongoing subscription – especially for information you get.

How do you work out potential Airbnb income and profit?

So what do you do with the AirDNA data, once you get it? You’re going to want to turn it into useful financial information to help your investment decisions. Sign up for our free Airbnb Profit Estimator to put your Airbnb data into action!

Airbnb Profit estimator – The Airbnb Profit Estimator is our simple to use spreadsheet tool for wannabe Airbnb investors, and time poor Airbnb hosts. The aim?  To help y’all with the financial side of investing in and making money on Airbnb. Here’s what’s in the bundle:

This is where you plug in the AiDNA research. The profit estimator helps you see the potential Airbnb profit you can make based on the nightly rate you can achieve and the occupancy rates in your local market. This data is available through AirDNA. Or you can work it out in a round about way on the Airbnb App – its just way more complex and time consuming.

Airbnb set-up budget planner – this will help you make sure you don’t over capitalise when setting up your first Airbnb. It works in tandem with the Profit Estimator. It calculates your investment breakeven in weeks based on your potential profit and projected (or actual) set up costs. Spend too much early and you’ll be slogging it through months before you see any actual profit.

Income statement – helps you record your Airbnb income and expenses from day one. It calculates monthly and annual profit, profit margin as well as capitalisation rate. This one is for time poor Airbnb hosts or Airbnb side hustlers. If you have a real job, this will make the finances of running an Airbnb a breeze.

This tool is designed to help you take the first step to Airbnb passive income and stay on top of the numbers as you grow your Airbnb profits and maybe even your Airbnb business.

The final word – knowledge is only power with action!

Don’t be held back by disinformation or false news. But also, probably don’t make investment decisions based on the numbers we give you here. Do the numbers yourself like you would for any investment. Start with out free Airbnb Profit Estimator.

If you want to become an Airbnb Host, here is a link to the platform. As they say in the (wherever they say it)…. the rest is up to you!

Until next time – have fun, be happy, do good!

Inflation forecasts for 2021: how to hedge for financial freedom

Tara Achieving financial freedom, Financial Independence Retire Early, FIRE investing , ,
Inflation forecast

Well that was a few hours of my life I’ll never get back. Researching the latest inflation figures and economist viewpoints. Now, let’s see if I can turn those few hours into a three minute engrossing read for you. Challenge accepted!

In this post we take a look at inflation forecasts for 2021, the debasement of fiat currency, how these might impact our passive income and financial freedom goals and how to hedge against them.

Mainstream media, at least in Australia, has been awash with stories about increasing house prices in capital cities and skyrocketing prices in regional areas. Apparently prices in February rose in every capital city and every rest of state region in the entire country. This hasn’t happened since 2010. Fuelling the growth, they say, is the recovery after lockdown.  Government building incentives and low interest rates. Add to that the fact that Aussies have returned in their droves from overseas and now need a place to live. It’s certainly not population growth as gone are the days of immigration led economic boom times. At least temporarily.

Stocks have also been on an unrelenting run up throughout 2020 bar the March dip. Price to earnings ratios are through the roof. Economists keep calling the top, but we never quite seem to hit it. By any Warren Buffet measure, markets are overheated and a correction is imminent.

Are we in an inflation economy?

We’re all aware that governments have been printing money at record levels to keep the economy afloat during Covid. Quantitative easing that has dwarfed the money printing of the Global Financial Crisis. But did you know that in March, the International Monetary Fund magic-ed out of thin air $650 billion in what they call ‘Special Drawing Rights’ – cash they intend to lend to a bunch of member countries? This didn’t make the 6 o’clock news.

Special Drawing Rights were a tool created a few decades back to deal with what was thought to be an impending US Dollar crisis. They’re a basket of 5 fiat currencies that used to be pegged to the Gold price but now are pegged to nothing. Since their creation in 1969 $200 billion has been issued in SDRs, so this year’s efforts are a tripling of that. SDRs can fly under the radar because they prop up member economies without adding to their official debt levels.

What I’m getting to with all of this is, if you thought the world was awash with cash already, you can add another $650 billion to that tidal wave that won’t show up as debt on government books and that no-one we know really knows about.

So are house prices really going up because of economic recovery and returning expats, or is the value of the fiat cash in your pocket or bank account dropping like a lead balloon with inflationary monetary policy?

So what the hell is going on?

Some economists say it’s a myth that money printing causes inflation, but if you’re worried about the price of goods and assets going up and things becoming unaffordable, you’re not alone.  Just search on Google Trends and you can see the search engine data for yourself. And here’s some Australian consumer price data as a cherry on the top.

Inflation 2021 - consumer price growth
ABS & CBA data. Australian consumer prices. Source

It is true that inflation as calculated by economists has many inputs including wage growth and spending. If you look at the money printing that happened during the GFC and inflation rates afterwards, you’d be put somewhat at ease about what’s coming. Quantitative Easing didn’t lead to rife inflation in the OECD post 2008.

Inflation forecast 2021
OECD inflation data and forecast from the GFC until now.

You could argue that wage growth and spending were the two missing factors then and now. They’re just not happening. The velocity of money (transactions) in the economy has fallen through the floor. Companies and people are hoarding their cash uncertain about what the future brings. Household savings rates have ballooned. Who can blame us?

Inflation 2021 - household savings
ABS data. Australian Household savings jumped during Covid as did savings rates around the world. Source

So without wage growth and spending, inflation forecasts for 2021 are moderate across the board. The OECD has them ticking upwards along with the Reserve Bank here in Australia, but at historically moderate levels.

The answer is no-one really knows. Read this and you’ll see that the head of Australian economics at the Commonwealth Bank of Australia isn’t even sure. To take a trading view, he argues you could build a bullish and a bearish inflation forecast for 2021.

Fiat currency debasement

Meanwhile, is anyone else thinking that the prices you’re paying for property and other assets seem to bely what the government data and forecasts say? Has anyone noticed that stock markets are on an unending tilt upwards while the economy and jobs have tanked? Has anyone realised that since 2008 central bank balance sheets have been growing by around 13% each year? If you haven’t heard about this, have a listen to Raol Pal or Michael Saylor.

So maybe it’s not inflation at all (with CPI based on the price of a basket of consumer goods). Maybe with the printing of money world wide and the crazy growth balance sheets what we are actually experiencing is the debasement of fiat currency on a global scale. Maybe this is just causing assets to rise (or just to hold their value against fiat currency), but not consumer goods. It’s something to get your head around but without a doubt, things are changing. Quietly in a way that is creeping up on us, we’ve moved into unchartered financial territory.

So, what we’re saying is, if you’re planning to be financially free at some point in the next 5 years then it’s time to keep your eye on the ball. We may not know until afterwards whether covid economic recovery will be inflationary or whether all fiat currency is debasing and hence the value of assets rising against fiat. But in this time of enormous uncertainty you need to hedge your bets.

How to hedge against inflation or debasing currency

If the value of your cash disintegrates over time and you didn’t do anything about it when it was happening, financial freedom will be much harder to attain. But what do you do financial freedom seekers, to hedge against inflation?   How do you keep moving forward on your financial independence journey?

Cashflow is still king

Let’s face it, income is your first concern to pay your bills and put food on the table. So passive income is still a massive focus in your financial independence journey and will continue be a cornerstone of our blog.

On top of maximising your income, FIRE (Financial Independence Retire Early) talks about savings rates being the single biggest determinant of financial freedom and your retire early strategy. In 2020 the RBA provided explicit forward guidance that we won’t be getting anything for our savings anytime soon by stating that “the Board does not expect to increase the cash rate for at least 3 years.”  If we’re in an inflation economy or fiat is debasing, cash is a losing game – you’ve got to use it or lose it peeps!

So what do you do with your excess cashflow and passive income? What do you invest in if inflation surprises to the upside?

Digital assets

Let’s face it, if banks are going to keep giving you 0% on your savings for the next 3 years, your cash in the bank is going backwards. Bank bail-out laws, at least in Australia, also put your cash in the bank at risk in event of some kind of catastrophe. One thing is sure, with uncertainty comes risk. Don’t assume your cash in the bank is safe and you’ll be protected dear readers. Squirrelling may not be as safe as you once thought. The independence part of financial independence is more important now than ever.

Bitcoin was made for this very situation and while the price is pulling back there may be an opportunity to hedge any currency risk right there. If fiat currency is debasing at the same rate as central bank balance sheets are growing, you’re looking for assets that can maintain a growth rate over 13% just to tread water. This would explain the growth in equities and in crypto. And as blockchain brings tokenisation to more assets, Bitcoin is just the start of a migration to digital assets and the internet of value.

DeFi

There are other ways to beat the bank rates but they involve more risk. You want to find returns for your cash that sit above the real inflation rate or currency debasement rate to stay ahead. We’d personally be aiming for something over 5% for short term interest. With companies stashing their cash too, these kinds or returns in dividends are harder to come by. Check out this post where we talk about ways to generate more passive income from your savings in the emerging DeFi financial services arena. We staking crypto and lend stablecoins and are earning rates as high as 30%. But remember, it’s buyer beware as always when it comes to the wild, wild west of crypto. But we’d say that cash and investment risk is rising across the board with mainstream products, you just don’t know or hear about it because rules of the centralised money game are transparent to but a few.

It’s time to think about your wealth allocation

Another strategy worth giving some thought is to migrate some or more of your tertiary wealth (paper and digital wealth) into secondary wealth (products) and primary wealth (primary resources, raw materials). For the average person, primary wealth building is usually with property, land, or monetary metals. We think over the next 5 years you can add Bitcoin to this list of primary assets and some other digital assets that don’t exist yet but will emerge as assets tokenise on the Blockchain.

Most of the wealthy 1% already know that if fiat currency is debasing then a way to hedge against that is to borrow fiat now and buy assets, which will adjust upwards as currency weakens. Governments are applying oil to the wheels of big debt by relaxing lending rules. Stimulus packages too. So if it’s available to you, this is one strategy you might think about. It’s definitely why we will not be parting with our real estate investments any time soon.

What we’re not saying is put more of your wealth into ETFs that claim to be back by those primary and secondary resources. Have a read of this article on The illusion of Owning Gold. If it smells fishy, it usually is. Resource ETFs are a tertiary asset. You need to make sure whatever assets you invest in, the legal title for the asset is in your name in part or in full. Like it is with digital assets on the Blockchain.

The final word – we’re not stashing our cash

Inflation and fiat currency debasement can be like the proverbial frog in boiling water for financial freedom seekers. We don’t know it’s eroded our wealth until it has. Keep a watching brief on the prices of primary products – monetary metals like gold, sliver and copper. Stay across the price of raw commodities like timber. Watch the prices of asset classes and real estate instead of the consumer price index and government inflation numbers. If assets are what we need to build our nest egg and produce income, any price rises in assets will flow though to your financial future. No matter what the economic data says, this is where the rubber hits the road to financial freedom.

The temptation in uncertain times is to save for a rainy day and collectively we’re doing it more than ever. But right now, if you’ve got your wealth in cash and you’re on a wage you’ll be going backwards. And that’s not a recipe for financial independence. None of this is financial advice dear readers but definitely food for thought.

 Until next time – have fun, be happy, do good!

The 2021 DeFi lowdown – time to pay attention peeps!

Tara Decentralised Finance, Financial Independence Retire Early , ,
2021 DeFi lowdown
What is DeFi?

Part one of our DeFi: the new financial frontier series

Y’all know we’re passionate about financial independence, passive income and the FIRE movement. But not many of the leading FIRE blogs are talking about DeFi or decentralised finance. Well we at The Live Life Project think it’s time to pull back the covers on this new frontier of personal finance. Like all new frontiers, DeFI is a bit wild, wild west. So in this post we’ll explain what DeFi is, why financial freedom seekers should know about DeFi, and some passive income ideas from DeFi to get you started.

This is the first post on our DeFi: The new financial frontier series, where we will give you the lowdown on DeFi in 2021.

What is DeFi?

DeFi is a ‘peer to peer’ internet system of executing financial transactions. Transactions like lending or borrowing are performed directly between two parties using blockchain ledger technology. Transactions are executed by computer code, and secured by cryptography. Because it uses blockchain technology, DeFi is typically associated with cryptocurrency. Critically, DeFi is designed so it doesn’t require any middle men and gatekeepers like banks, exchanges and lenders. This means no more banks controlling our access to financial opportunities and earning a fat percentage profit of every financial and banking transaction we make.

To demonstrate just how DeFi has exploded, take a look at this graph of the total value of USD locked in DeFi. That number has skyrocketed from $914 million 12 months ago to more than $75 billion in 2021. And it’s still early days financial freedom seekers. You can also access a pretty reliable DeFi index here.

What is DeFi
DeFi explosion over the last 12 months. Source DeFi Pulse.

Traditional banking BS

I wanted to share an annoying bank anecdote that happened to us personally just this year to set the scene for ‘why’ DeFi. We have a couple of investment properties as I’ve mentioned and in March were in the process of selling our home. In addition to the owner mortgage against the home, we had a small equity loan of $60,000. Before we sold our home, we wanted to transfer the equity loan to one of our investment properties. We wanted to do this maximise the cash we have to buy our next home.The bank had valued the investment property as containing plenty of spare equity so easy peasy right?

When we went to the bank with this request, the answer was a flat ‘no’. But why, we asked? It’s just a matter of transferring the loan from one asset to another. The reason – there was no internal process to make this happen. Sigh. Because there was no process the bank required of us a completely new loan application on the investment property. This meant a total reassessment of our finances, tonnes of paperwork, another $500 in bank application fees, plus broker fees blah blah blah.

I bet most of y’all have a similar frustrating anecdote about unreasonable policies in getting financial services from traditional banks. We could all have a massive bank whinge-off into eternity. Yay us. But that’s the thing with decentralised finance, no more banks to deal with and more control over your equity and your money. Huzzah to that we say!

A new world of money?

DeFi is about more than just crypto. It’s an entirely new world of money. A new finance system built on trustless transactions that use blockchain and internet technology. Here’s a real world example of DeFI applied to lending. DeFi loan transactions are executed through what’s called ‘lending protocols’ like Aave, Maker or Compound. These protocols use ‘smart contracts’ – code on the blockchain – to execute a financial agreement between two parties when predetermined conditions are met. ‘What the hell….???’ I hear you say. Sounds like gobbledegook. But put simply, its computer code (program) to execute financial transactions on an immutable public accounting ledger (blockchain), so you no longer need a ‘trusted third party’ like a bank.

DeFi appears to be morphing into an alternate financial system with many of simple personal banking financial products offered by the traditional finance sector. Think borrowing, lending, term deposits and credit cards just to name a few.  But this all happens without the middle man taking a big fat cut of the profits or adding fees on fees. You see, instead of the bank paying you 0.5% interest on your hard-earned savings only to lend that money on for 3.5% themselves, DeFI gives you the option to provide the liquidity directly and earn the higher interest rate. And that’s just one example of why people have started moving to DeFi. DeFi takes on the role of banks, exchanges and insurers today—like lending, borrowing and trading. It puts this role in the hands of regular people like us so we have the opportunity to earn more from our own assets.

If you are sick of earning 0% interest on your cash or bemoaning the lack of options in traditional finance to earn income from your savings, then it’s time to pay attention to DeFi people!

Making passive income from DeFi

There are two low-tech, beginner level ways to make passive income from DeFi with interest rates well above anything you can get in traditional finance. We’ll go into these in more detail in our next posts in this series. But here’s a summary to give you some simple passive income ideas from DeFi:

Stablecoin high interest savings accounts

You can earn interest on stablecoins you own by depositing them with different crypto currency liquidity providers.  Stablecoins are cryptocurrencies that are pegged to and often backed by fiat currency – usually the US dollar. They’re called stablecoins because their prices don’t fluctuate as much as the prices of other crypto coins (they’re pegged to fiat that doesn’t fluctuate as much). Examples of popular stablecoins are USDT, DAI, USDC, TUSD.

Think of this product as a high interest savings account that you would ordinarily put your fiat dollars in, but with better rates than you can get from any traditional bank. Protocols or platforms like Aave, BlockFi, Gemini and Nexo offer stablecoin passive income products. Interest rates range from 2%, which is not really worth it, up to 10% or even more. You usually get paid in the same stablecoin you deposited.

To earn stablecoin passive income you buy the stablecoins with your fiat dollars on an exchange like Binance, Kucoin or Coinspot. You then set up an account with one of these liquidity providers and transfer or deposit stablecoins into that account and start earning. Some larger exchanges like Binance will pay you to hold your stablecoins in their wallet on flexible terms (unlocked).

Crypto staking 

Crypto staking is more like a term deposit for your crypto currency. You deposit your crypto coins into a staking wallet. The coins are used to support the consensus process (validating blockchain transactions) needed to run a particular blockchain network. Stakers need to hold coins in order to validate blockchain transactions, for which they earn incentives. The more coins they hold, the better. When you stake your coins in a staker’s wallet they can either be locked or unlocked. In return for staking your coins you receive interest. If your coins are locked, then they must be held there for an agreed time period or the interest rate is foregone – similar to a term deposit.

You can stake your crypto directly on some of the larger crypto exchanges like Binance, in a hard wallet with providers such as CoolWallet, Trezor or Ledger, or via a staking platform such as Stake Fish. It’s easiest to stake on an exchange if you’re a beginner. Just like term deposits, rates depend on the type of coin and the term of your deposit as well as other native factors. Read the fine print! You can get terms from one to 12 months routinely. You get paid in kind (the same coin you deposited) or in what’s called a token. Tokens are a form of reward for partaking in an activity within a blockchain. They are blockchain network specific but are often tradeable on cryptocurrency exchanges like Binance or Kucoin. You can trade your tokens for other coins or exchange them into fiat currency via these exchanges.

Staking is higher risk than passive income from stablecoins because you are exposed to the fluctuating market price of your crypto while it’s staked. Crypto coin prices are extremely volatile and can and often do move either up or down more than 30% in a single day. You’re looking to stake crypto coins that are in a long-term uptrend. This way, you benefit from both the coin price and the passive income.

The final word – managing risk

Like traditional bank savings accounts and term deposits, DeFi staking and savings products differ. But unlike traditional bank products the risks are much higher. It’s your responsibility to understand the product and the risks. Remember, decentralised finance is about you controlling your money. There isn’t the same government protection and regulation in place if things go awry. DeFi coin prices are more volatile and returns can fluctuate. You must be comfortable with this to invest. You must manage your risk, such as by only using well established platforms with cold storage security, diversifying across platforms, and sticking to core Stablecoins. If riskier investments are for you , you could allocate a nominal portion of your investment portfolio/assets that you don’t rely on for weekly income or retirement. Start small!

We’ll review which platforms and DeFi passive income products are best in 2021 in an upcoming post in this series so stay tuned financial freedom seekers!

Til our next post in this DeFi series – Have fun, be happy, do good!

Join our community!
Share the love!
Follow our feed!
Pins galore!
Pins galore!
fb-share-icon
Freedom on Insta!

Disclaimer and Warning - Terms and Conditions - Privacy Policy