By EK Wills
I grew up in the excess of the 80’s when everyone expected to become a millionaire. My father was one, so why shouldn’t I? Except the 80’s didn’t last and he wasn’t the Rich Dad that taught you how to do it sensibly and slowly because that was boring.
He was a risk taker and a good one. The 80’s were his gold fields and he knew how to reap the rewards. He didn’t need a savings plan but he knew that you needed regular income to service your debt in order to create wealth.
Yes, he was your excellent Asian businessman.
But I'm not.
I had high dreams and expectations after spending my formative years surrounded by boom and bust. Long after my parents had divorced (who didn’t back then?), Dad used to say that my mother was great at being frugal but didn’t know how to make money.
Interestingly she had managed to set up her retirement on her own after a few investments and now lives in Byron and goes for coffee with her friends.
Most people hope that winning the lottery will solve their monetary problems and for some, this will happen – but not many. So what can you do to plan your comfortable retirement?
Pay yourself first
The best advice I heard was “Pay yourself first”. But what does this mean?
The financial gurus always break it down differently to sell their books but essentially it means you need to keep a portion of your regular income, even if modest, for later.
You don’t have to plan every cent or budget your life on a spreadsheet. Just one hour’s pay per day (or 15% of your income every week) to put into away would be a fantastic fail safe.
The common advice seems to be to put it into a super fund because it is essentially tax free and regular small amounts eg$10/day add up to huge amounts later.
Not very interesting or ground breaking is it?
Must start today
But you do need to think of yourself later by starting today.
The super funds try to hook your interest by advertising. Remember the escalators? One person goes up while the other one loses out and goes down? Well, it is actually based on fact if you don't know what your money is doing.
The big issue is that no one thinks it applies to them when they are young, optimistic and full of ideas of what their future is going to look like. Often, it is only realized far down the track when people panic.
I work with nurses who have traditionally been considered to not earn big salaries. But let me tell you that many of the people I work with are in a better position than the doctors! Doctors spent all their time and money on studying (there are fees to get an education now) so need to catch up to the nurses who get a 10 year start. Nurses start work young, earn regularly (shift work can easily bump up your income) and often invest in property after buying their own home.
And many regular incomes can do this, you don't need to be a big earner.
Retail therapy
Ever get down and think “I’ll just treat myself to a new outfit?”
Boringly, usually what you buy today often means nothing later.
I am currently reading The Barefoot Investor and it mentions the amount of waste generated on accumulating ‘stuff’ but the biggest eye opener is how much ends up as landfill within six weeks of buying it!
The key is to spend consciously not frugally. It’s just like dieting: it never works but healthy eating is key. Spend on things you identify as important rather than what you see that day.
Creatures of habit
Ultimately, if you have a solid daily routine which becomes a habit of how you spend money, it is automatic. But it needs practice to get to that point. That’s the hard part if you make it too tough to stick to the plan.
Scott Pape in his book, suggests identifying three things you want from money.
It could be the freedom to travel or be financially secure.
3 things I want from money:
1. to provide for my family now
2. to be able to reward our family with things like travel
3. financial growth to build wealth
If you want details from a practicality point of you, there are plenty of books to read and devour. But it can be simple with a few rules in place.
Make it fun by thinking of it as a project for the future you.
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