Many individuals seek my advice because they aspire to have it all – the dream house, amazing holidays, private schools, and the lifestyle they’ve worked so hard for. However, a lingering concern plagues their minds – are they building enough wealth to enjoy both their present and future? The fear of spending everything they earn and jeopardising their financial security weighs heavily on them, especially given their relentless work ethic.
Can you truly have your cake and eat it too? The answer is a resounding YES, but it necessitates careful planning.
Step 1 – The Game-Changing Spending Plan
Yes, you read that correctly – a Spending Plan! Initially, many clients discover that they are unknowingly spending their entire income. However, through a meticulous Spending Plan, they often realise they have surplus cash flow. Identifying where this money is going proves challenging, but it is an essential first step.
Step 2 – Spend Less, Invest More
Achieving the balance between spending and saving is more challenging than it sounds. Merely allocating 11% to Superannuation may not be sufficient to sustain the desired lifestyle in retirement.
Step 3 – Reverse Engineer Success with The Magic Number
Starting with the end goal in mind, we can reverse engineer a plan to ensure a secure retirement. While ASIC Smart Money suggests a comfortable retirement income, it may not align with your current lifestyle. A rule of thumb involves subtracting mortgage repayments from current spending to determine the magic number, aiming for a debt-free retirement.
Step 4 – Calculate the Required Assets
Determining the required asset size becomes crucial once spending and retirement income are calculated. Using a conservative estimate of a 5% return, a comfortable income goal of $100,000 necessitates $2 million in assets (excluding the family home).
Step 5 – Delight in The Cake
With a solid plan in place, individuals can now enjoy the fun stuff – the vacations, school fees, and all the enjoyable aspects of life. By employing these techniques, they cannot only ensure a secure retirement but also navigate other financial goals.
In essence, having your cake and eating it, too, is feasible, but it demands disciplined planning and strategic financial management.
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