Simple approach to making money
Stuff’s series How I Made My First Million finds out from millionaires how they got there. This week, Susan Edmunds talks to Sam Stubbs, founder of KiwiSaver provider Simplicity.
How did you make your first $1m, how old were you?
I was about 35, and had made it by being an investment banker and stockbroker in London. Much more fun was my first $1000, aged 12, running a little business installing phone extensions in West Auckland.
In those days all phones were owned and installed by the
Post Office, and they only allowed one phone per house.
We scavenged parts from phones thrown out in the jumbo bin at the post office repair centre in Henderson. And we were given a few (and new) ones by them from time to time. We assembled working phones from those parts and installed them around the neighbourhood. If it was $10 if we liked you, $20 if we didn’t.
Do you follow any personal finance rules?
A few. I keep things simple. I have a debit card only, no credit cards, and accounts with only one bank. All investments outside my home are in Simplicity funds. I drive pretty cheap cars, and have a very normal life in terms of the wine I buy, the cafes I go to, and the holidays I have.
What are two money tips you’d give to a 20-year-old who wants to become a millionaire?
The first would be to buy the most expensive house you can possibly afford, and as soon as possible. It’ll give you tax-free capital gains, is the cheapest borrowing there is, and you get to enjoy it every day.
The second would be to avoid all other debt. No credit cards, no after pay schemes, no personal loans, no pay day lenders. Those who get the power of compounding interest earn it. Those who don’t pay it.
And a third one is for adults to save $1024 of their own money into KiwiSaver every year. If you do, the Government gives you an extra $521 a year. That’s free money, and a 50 per cent return on your contribution.
Any financial myths you think must be busted?
Money is simple.
Our industry wants you to think it’s complex and difficult, so they can charge you high fees to deal with it. But the basics of money are really simple to understand and master.
In 30 minutes you can learn how to be in control of your finances for the rest of your life.
Do you weigh more importance to saving or investing?
Saving. Look after the cents, and the dollars will take care of themselves.
What was worst financial decision you made?
Helping restore a 100-year-old yacht. Let’s call it our gift to the nation . . .
Do you feel rich?
Yes. But real wealth isn’t about money. My health is fine, and my life rich with people and places. I also have the best job in the world, working with fabulous people. I’m very grateful.
Can money buy happiness?
It can, but only to a point. Poverty sucks, so having enough money to be warm, fed and with options in life really matters. That’s why we set up Simplicity as a not-for-profit, to help give that to all New Zealanders. But after the basics, more and more money can buy less and less happiness. And after a while, it can bring genuine misery. There are plenty of surveys showing that happiness peaks at an income of about $200,000, and goes down from there.
I’ve met too many unhappy millionaires. And people change when they get rich, sometimes not for the better. They get worried about losing their money, about others taking it, and about others having more. Being wealthy is a twin-edged sword, you have to handle it very carefully.
Do you think there is such a thing as reaching optimum wealth? If so, have you reached this point?
Yes I do, and I reached it early on. Much of what you can buy with money isn’t worth what you give up to get it. It’s too easy to cash in things like family time, holidays and peace of mind, and it isn’t often worth it. Given time or money, I would choose time.
What is your advice to people to stay wealthy – getting rich is one thing, is staying rich just as difficult?
I have one simple rule to keep and grow your wealth. Unless you’re an expert, diversity your investments. Then no one thing can lose you a lot, and most things will do well over time. Warren Buffet agrees. I sleep well at night knowing my savings are in 3000-plus investments across 23 different countries. A KiwiSaver account does all that. It’s simple.