I
have a confession. Even though I’m a personal finance guy – I still waste
money.
Okay,
that actually feels quite good to say out loud.
I
mean, I do fairly well with my money management, but I am no Patron Saint of
Savings.
I
did however meet one last night. And while in some quarters this may be seen as
a laudable pastime, I have to say by the sounds of it, the juice just isn’t
worth the squeeze.
Let
me share with you a conversation I had over dinner last night. As a bunch of
guys in our late twenties / early thirties, the topic of money came up as we
critiqued the latest (and greatest) iteration of my upcoming book’s cover. With
that came questions about what my career has been in the personal finance space
over the last few years, and then one of them casually popped out this
sentence:
‘I
save 75% of my after tax income’.
What?
Excuse me? As the rest of us queried his definition, I sat in disbelief.
How
can someone in their late twenties, living in a capital city in Australia,
survive on 25% of their after tax income? But despite our best efforts to get
him to ‘fess up to his obviously incorrect calculations, he stuck by it. He
said his goal was to retire by 40, in which case he had 12 years to put money
aside.
Now,
I for one am not going to diminish his efforts. To his credit, he was the only
one not to join us at Baxter’s Inn later that night, so perhaps he
wasn’t facetious, but I will question one thing – his intention of retiring
at age 40.
It’s
this part of the story which makes the least sense to me. As someone used to
teasing out lifestyle plans, and bringing to light the inherent conflicts which
exist for everyone, I found the concept of someone young and full of ambition
putting forward the goal of ceasing to work as young as possible to be a
complete non-sequitur.
And
here in lies why money management is far more important than money itself. The
uncomfortable truth is – it’s only those who can work hard enough and smart enough,
and are successful enough at an early age are able to retire at age 40. And if
I was to present to you the exact type of person who doesn’t want to sit around
all day doing nothing – well it’s the exact same type of person.
So
this young gent, earning lots of money, hard working, and not spending any
money is going to probably achieve his goal of retiring early. The only problem
is, when he gets there – he’s not going to want it. There will be too many well
ingrained habits of early mornings and full days for him to simply wave goodbye
to it all.
I
don’t mean to call this guy out all alone, he is just another one of us. He’s
caught up in the emotional effects of money, has chosen a direction, but hasn’t
really played the end scenario out in his mind. At some point he learned of the
concept of an early retirement and had been impressed with the idea. As anyone
does, he would have went about figuring out how to achieve it, and set the
process in motion.
But
it’s a half baked idea. Early retirement is certainly not what it’s cracked up
to be. Infact most people are forced into retirement, they aren’t looking for
it. Generally, people want to do whatever they can to stay active, stay
important, and be productive as long as possible.
If
your goal is to ‘own 150 properties’ by the time you’re 50 so you can retire
early – you can do it. Vendor leasing isn’t exactly a dark art and I’m sure you
can figure it out. If your goal is to continuously travel the world and never
get swept up in the stress of city living – you can do it. There are endless
ways to make a few bucks online these days.
Whatever
your plan is – that’s great – just make sure your behavior and lifestyle
adjustments match the outcome. For our young and successful hero who wants to
retire at age 40, all that is going to happen is he is going to miss out of
some pivotal life stages with friends while his asset base grows, only to find
it wasn’t worth it when he gets to age 40.
So
what does your ideal lifestyle look like? What is it you want to build an asset
base for? Knowing this, and thinking it through clearly will not only give you
a target to hit, but ensure you are spending your time as well as your money in
a way that benefits you the most.
First
thing is to decide what you want out of life without any external pressures
pushing you in any direction. Then you figure out what to do with your money to
make it happen.
And
building a large asset base will absolutely be a part of ensuring you live your
ideal lifestyle in the future also, so how do you go about doing this.
Well,
once there was a time where you needed a real estate agents, solicitors, stock
brokers, or financial planners to invest.
These
days you need a smart phone and the Raiz app.
One
is expensive, time consuming, inaccessible, and overly complicated.
One
is cheap, quick, transparent, and easy.
I’ll
let you decide which one’s which. For more information on Raiz fees, click here.
–
Clayton
Author
of upcoming book Fund Your Ideal Lifestyle
www.fundyourideallifestyle.com.au
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The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.
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