This month I want to map out a few financial strategies that I have used to set my family up for a secure financial future.
I learned early on in life that the smartest way to become financially secure is to study and model the ‘masters’. Don’t listen to anyone who isn’t in the financial position you aspire to be in or hasn’t already been there and done that. There is no need to reinvent the wheel, just copy what other successful people have done and avoid making the same mistakes they’ve made.
When the Forbes Top 400 richest people were interviewed about how to become wealthy, 75% of them answered
“Become and Stay Debt Free”
75 out of every 100 of the richest people on earth all gave the same advice, stay debt-free personally. By eliminating all personal debt such as mortgages, credit cards, and car loans it has allowed me to have a much higher borrowing capacity so I can borrow more to buy investments, that appreciate in value over the long term. These assets (investment properties) then help my hard-earned dollars to work harder for me and will end up paying me a passive income stream in retirement. The faster you pay off your ‘bad debt’ the faster you can look to retire!
The recipe and strategy I’ve developed to have more money than you can ever spend in retirement is very simple:
Pay your house off and acquire a minimum of 2 investment properties before you retire.
When you pay your house off, imagine having all of your income each month to do what you want to do… That is an incredible feeling and it usually means more holidays and spending quality time with your family and friends. It also gives you the ability to invest more in other assets.
Retirement is all about cash flow… You can’t retire on equity!
Studying the mistakes that most clients have made on their financial journey before joining Crown, actually taught me an incredible lesson in regards to property. What I’ve learned from my clients is that the best property investment strategy is simply to Buy and Hold. With Compound interest doing all the heavy lifting over time, it results in your property price growing very nicely if held for a few decades.
Every single day I would hear clients tell me:
“If only we’d kept the first house we ever bought, we would be a lot better off as that property is now worth so much more than what sold it for…”
But not one day in 20+ years have I ever heard a client say:
“Oh, I’m so glad that we sold our first-ever property that we bought …”
So my mindset regarding property developed into:
“Never Ever Sell”
You can still use the equity you build up in the property over time to leverage yourself into other properties, you don’t necessarily have to sell to be able to access your equity.
With my current investment properties, I see each property as one of my ‘super funds’. I won’t sell or touch them until I’m retired! I’m confident that when I do reach retirement I’ll be happy with my decision to hold.
I have also found that dollar cost averaging (investing the same amount of money on a regular basis – weekly, monthly or quarterly) into Super via salary sacrificing pre-tax money or using post-tax money to invest small amounts regularly into apps such as Raiz has helped build a nice little nest egg for my and my family without even noticing it, as it’s all Automated. Having a regular amount of money on autopilot going into superannuation or investment apps makes investing so much simpler and reduces the risk, as you get the average return over the period that your dollar cost averaged into those investments.
To summarise the simple strategy on how I’ve set up my family and how you can also set up yours:
- Pay off your Home Loan ASAP (must be in under 15 years)
- Acquire 2 investment properties before you retire
- Never Sell property – think of them as bonus ‘super funds’ for the day you retire
- Automate a dollar cost-averaging investment strategy into Super (Salary Sacrifice) or by using Investment Apps for outside of super.
If you implement this simple strategy your future self will be very thankful !
