Fast-forward 2 years. How do you see your life unfolding?
Will you be still working – by choice? Will you be retired and living off a government pension? Will you be self-funded living your dream?
Hope is not a strategy!
We are all moving inexorably in the direction of that which we’re focused or else moving with the herd.
Be wary of the herd mentality.
Your financial destiny will be dictated by one of the following financial scenarios:
- Inheritance
- Savings
- Gambling/Lotto
- Investing and leverage
Lets do the exercise of quantifying how much you would need in order to fund an $80000 per year lifestyle.
Let’s assume you own your cars, house and toys
Incidentally as you no longer have a job that consumes over 40 hours per week – you will have a lot of extra time in which to spend your money.
$80k less tax equates to $65k. If you have a partner this figure is now around $33k each or $630 per week.
Food, petrol, clothes, travel, presents, home maintenance, car depreciation, movies, meals out, concerts, hobbies, sporting events, general bills including, heating, electricity, rates, pay tv, broadband, mobile phone……
$80k per year is not extravagant for most people.
Some will respond by suggesting that they could survive on $30k -$40k per year – that’s fine but we’re not talking ‘survival’ here.
Ask the question how much do you think you would want in order to sustain a great standard of living and consider yourself financially independent? Me? That’s not for this blurb but it’s certainly a lot more than $80k per year.
Anyway back on topic.
How is this nest egg going to manifest?
Pension? I’m guessing that may account for $25k
Savings? $1 million invested in a term deposit may get you $60k per year, reducing annually as inflation kicks in
Inheritence? Good luck!
Leveraged Investments? Assuming you don’t have a crystal ball, what level of risk are you willing to accept in order to build your safety net?
Where is all your money going?
Home.
A home loan of $360k taken out over 25 years will result in you paying the bank $800k! That’s if you never refinance for over due credit cars, car replacement, kids education, renovations etc
It gets worse!
This is after tax.
You will have to earn almost $1.2 million JUST to pay off your home.
You could use some of your ‘spare’ cash to invest in another Investment Property. That’s another $360k. Sure this probably won’t cost you as much, what with the tax benefits and rent etc BUT is reliant on you actually having an extra $200-$300 per week to play with AND to be astute (lucky) enough to pick a realty market that appreciates faster than inflation
The share market. Your mate at the pub usually has a good tip or two and loves to tell stories of how well he’s doing BUT still drives a 10 year old car and let’s you pay for his round! Remember the day you think is the best day to buy stock is the exact day someone else thinks is the time to sell!
Start a business. Lot’s of great tax deductions. Petrol, home office, mobile phone, trips abroad.
Do you have any qualifications in business, accounting, finance or marketing?
Do you have the confidence to take a couple of years off work and invest thousands of dollars upfront into inventory, staff, insurance, offices, warehouses, advertising etc?
All sounds too hard – maybe it’s best to resort back to hope! Let’s hope the herd I’m in takes the right turn and we all beat the system and strike gold and accidentally achieve our dreams and goals...
Me?
I’ve spent a long time researching and analysing most of the above and have concluded that the highest return lowest risk and least stressful investment strategy is…..drumroll….a low cost established home based business.
It’s a no brainer. To retire in 10 years on $80k per year would require well over a million dollars outside of your home equity and that’s subject to the ravages of inflation. To create an income online of $80k per year would take 1-5 years
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