Start with the end in mind and focus on it often – especially when you feel like wavering!
Both sides of politics in Australia are telling us that we will need to wait for an increasingly longer time before being able to access the aged pension. Although the rules around qualifying for the pension are complex and must be explained by a qualified professional in relation to your own needs, one thing is clear – you need to take responsibility for your own wealth creation if you wish to be able to have the retirement you wish for.
Set a personal goal is to create a capital base big enough to generate sufficient income to meet your daily and annual needs WITHOUT reducing the capital base.
Work out your income needs – let’s say $100,000pa. In retirement for the sake of this exercise let’s invest risk free – say govt bonds - and let’s assume an easy rate of 5%pa. A capital base of $2,000,000 at 5%pa generates $100,000pa. This is both simple and easy to understand. **
The rules around retirement in Australia are complex – you are being imprudent to ignore that complexity simply because it’s a long way off. You should treat your mortgage broker, accountant as your most important financial allies. You need to know each one personally and be able to talk to them whenever you need to.
Never invest in something you don’t understand. One day if your plans falter you need to be able to look at yourself in the mirror and see the person responsible looking back at you. No-one will take an interest in your future better than you. Your key advisers should be integral passengers at the front of your financial bus trip, but you need to be the driver. They should not be driving the bus with you not even being in the bus as a passenger.
Here is a financial folly – most Australians think that superannuation of $300,000 sounds like a lot. Let’s say you currently earn $50,000pa. How can savings equivalent to 6 years income last your potential retirement lifetime! This illustrates that financial folly.
We are sometimes told (by politicians) that $1,000,000 in superannuation makes you part of the super rich. By my definition - $1,000,000 invested at 5%pa equals $50,000. In my world that is not super rich. In my world $1,000,000 is not even close to enough to retire on. Those same politicians will retire on their parliamentary pensions for life. Don’t rely on politicians for your financial future.
Each and every one of us has the potential to aspire higher should we so choose. The principles that I will cover in this series of blogs will show you how. There are various asset classes to invest in with the two primary ones being property and shares.
My series of blogs will deal with investing directly in property
In the current housing boom post Covid, there is clearly considerable interest in property again.
Are all houses good investments? What makes a “good” investment?
I will cover that in next week’s blog
** When I began my own personal investment journey the govt bond rate was around 5%, it is currently under 2%. This does not alter the goal – it may simply alter the time taken to get there. Adjusting goals to reality is all part of the process.
Disclaimer : This email provides basic and generalised information only. It has no regard to a particular person's financial goals and objectives or particular personal situation. The reader should seek advice specific to their situation before making any decision and acting on anything contained within.
Alan Heath
No question is too small for my time...Call or email me anytime...