La, la, la, la, la, I don’t want to hear about what I need to do financially to live a happy life and be financially free. Sounds silly doesn’t it, who doesn’t want to have financial freedom and have the best life you want for yourself and your family. But if you have your head in the sand when it comes to your finances you are not alone.
I have had many clients come to me in their late 50’s looking to plan for life after work, and after some initial planning have come back and said to me “we should have done something sooner”. What are the reasons that people leave this so late? If you’re like most people you are too busy working, bringing up your kids and life is just too busy. You’re most probably thinking this financial stuff is just plain boring! I’m not motivated to look at it, it’s just too hard, she’ll be right or we will look at it later, which normally means when we don’t have much time to action anything.
So ,what will get you motivated? Knowing you will have a meaningful life now, enjoy your nights out, your holidays, spending time with family, pursing a hobby and the life you dream for yourself post work. You know what, you can have it all. It just requires a little time to plan and a little action. The earlier you start leads to greater compounding over time and less hard work towards the end of your working career.
But I don’t know whether I am on track? Well here are FIVE things you can do to determine whether you are on track or off track and need to take further action.
- What are your goals while still in the workforce?
- What do you imagine your life to be post work? In most cases there will be a $ amount attached to it. Particularly post work, the amount of income you require to fund your everyday lifestyle, how often you change your car, holidays, funding children’s weddings etc, you get the picture. This all leads to a number to fund it all. You are also likely to live longer than previous generations so you need to take this into account. But once you know this you can plan for it.
- Where are you now? What’s your current state of affairs? Income, assets, expenses, insurances, debt etc.
- What’s the GAP? Based on your current actions are you on track, are you going to get there or you may just want to bury your head in the sand like most people. Once you know this you are now able to take action or set a course in place.
- TAKE ACTION!!! You now know what you need to do, hold yourselves accountable to that IDEAL LIFE you want for yourself. If you don’t know how to do this then seek advice from a qualified financial planner, this is what they do.
You can do it, just get your head out of the sand and take action. You may find it is less painful than what you thought and guess what, you will lead the life you want for yourself.
To show you the impact of compounding or small incremental changes let me give you an example; when I started working in my early 20’s I decided to salary sacrificing into my super 5% every year above my employer’s contribution and continue to do so today. Yes I had HECS debt, rent to pay, then a mortgage, I got married, we now have two fantastic young boys(yes they are a little naughty sometimes), then there were school fees, and a few holidays along the way. However the extra contributions into super became a habit and it hasn’t impacted our lifestyle, we took action and made it work, it’s automatic now. The same can be done for investments in your own name.
Today I see people at similar stages to myself and some are even older who have not done this and trust me my super would be around twice the value of theirs! But the lesson is not about bragging, it is about showing that the small incremental changes you make now have a long term compounding effect over time.
Yes I know I can’t touch my super for another 25yrs or until I decide to retire. Trust me, my intention is to live a long life so when I turn 65 or whatever retirement age I choose, I will be able to lead the life I want for myself and my family without sacrificing financially( I will have that choice), and that’s due to small incremental changes that I made 20 years ago that add up over the long term.
Some people think taking “no action” is a plan. Let me tell you, that is not a plan. A plan is “an intention or decision about what one is going to do”.
If you would like to know what investable assets you need when you finish work feel free to email me and I’ll send a couple of questions to answer and then I will come back to you with what I believe you need in investable assets to fund you goals.
Glenn Doherty CFP – Financial Organiser/SMSF Specialist – firstname.lastname@example.org or 0401 253 729.