Want To Afford Retirement?
"They say Millennials are lazy, retire early and prove them right!" - Prudential
Picture Alexander Mils
Do you have children? As a parent, we are always pushing for more education, more up-skilling and better ways of money management for our kids to learn. We know because it can be hard out there to find income-qualifying opportunities. We know that jobs will be drying up with the increase in population, robotic's and computerised AI innovations.
Naturally, we want more for our children don't' we? Today, I caught this piece in my newsfeed about an airline stewardess who is on target to retire by aged 44. Naturally being a blogger in wealth, I was inquisitive. It goes on to advise that her yearly expenses were $24,000US and her goal was to save 25 times that amount and be invested. No big rules and sounds easy enough. The interesting strategy I would like to bring up is the 'Starve & Stack Method' described in the article links. Reading this title, I am thinking...gosh this is not really going to grab the readers and want-to-be investors. So, I jumped online and did a bit of poking around. It actually has merits. Nick Vail, a financial advisor with Integrity Wealth Advisors sells this strategy as "Building wealth without long term sacrifice". (Now that is getting sexier to me.) His idea evokes the said eighth wonder of the world - being compound interest, and by starting young in life, the exponential value is a great way to afford retirement. A young person in their early 20's has approximately 45-50 years of working years ahead of themselves. Earning on average approximately $32,000US ($47,000AUD), and possibly starting out with a live-in relationship or marriage. This strategy can take advantage of the time ahead and the lack of debt accrued at this age. The Starve and Stack Method is not as unattractive as first thought. It just says that for two years, save $50,000US ($74,000AUD) and invest straight away into a retirement fund that is not easy to access.
It also says to add $5,000US per year continuing to age 65. ($7,400AUD/$142.30 per week). And based on a conservative interest over time figure of 7%, your balance at retirement could mean $4Million less the fees over time. The keys points are to start early and the consistent crediting of the account each week/month, letting the compounding effect do the rest. The actual money added to your retirement fund was only $274,991US ($406,640AUD). If you were older and wanted to start, well, the right time is still to do it NOW.
The gains will be fewer, but there is still time to build your wealth.
Say, you had $100,000AUD already in a retirement fund and you had 20 years left working to hit age 65.
On still a conservative 7% interest overtime plus the $616AUD per month, you will still see a return of approximately $726,000AUD less fees over time.
And the best thing is you still only put in $247,840AUD. As unattractive as the 'Starve' part of the strategy is, it is completely do-able.
The biggest expenses will be accommodation, and then living expenses. For two years, share accommodation/ live in a granny flat / share with your parents / chose low-cost accommodation.
Defer the holiday.
Buy only what you actually need, not what is on sale and looks like a bargain just to be worn once or still in the shed still in the box in years to come.
Chose a cheaper phone plan, get off Netflix.
Plan your food for the week and make your lunches. Knowing that this sacrifice is temporary, just like going to University, will help you make those decisions to clamp down.
If partnered, surviving on one wage instead of two will help you hit your goal faster. On the other side if scrimping is not really your deal, then try to increase what you earn - more hours, get a casual job or gig, rent out a spare room, be an uber/lyft driver, sell items that you do not really need. The hardest thing to change will be the 'I want it now' ideology. Instead, think of it as your ticket to escape the workforce early, where you get to choose if you want to work, not because you have to work to live.
Being young has the world of opportunities before you. Being older has the wisdom gained.
As parents, it is our role to help educate our youth for their own decisions in their life. However, the greatest gift could be the ability to understand financial literacy.
Our motives are driven by how much we desire or the urgency involved.
Compounding interest is a beautiful way in which we can make money each and every day we live.
Meg Hogan x
Meg Hogan is an Amazon #1 Best Selling author in Australia and US for 'Get Rich Be The Voice' and a Business Coach helping owners maximise their business potential to be in the best possible position to reap more revenue and retain more personal wealth. With her 100% money-back guarantee of satisfaction, she gives certainty to her clients that their best interests are at heart. "My door is open or anyone who may wish to discuss their business challenges in hopes of finding some practical solutions. Book a free call to chat on what I can offer you, and walk away with at least 3 things you can do now to improve your situation."
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