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Michael Pope Blog post by Michael Pope

How do you Get Started?

In the previous Newsletter, we looked at the first step in Money Planning  –  knowing where you are now  –  and outlined the sort of information that you would need to collect to be able to prepare a picture of your current financial position.

But that’s only the beginning – your financial position will be constantly changing over time, and an understanding of your likely future financial position will require thinking about how your cashflows will change from year to year.  For example, how do you expect that your income will change over the years between now and retirement; how will the amount you need to spend on bills change; how will your spending on living and lifestyle change?  We also need to be conscious of the fact that Mortgage Interest Rates will change from year to year, that the value of any properties or other assets you own will change over time, and that there will be costs and spending in the future that will need to be accommodated, such as school fees, a new car, etc.  And to complete the picture, you will need to think about when you would like to retire and what sort of income will be required in retirement to support your desired lifestyle.

Combining a clear picture of your current Income, Expenditure, Assets and Liabilities together with a series of assumptions about how these things are expected to change in the future will allow preparation of a projection of future cashflows and accumulated wealth through the remainder of your working life and beyond into retirement.

Once you have put this information together and completed the mathematical projections, you will be in a position to answer a very important question – “Is my current level of wealth building, whether through savings, superannuation or investments, going to provide a large enough wealth base by the time I retire to provide a passive income stream sufficient to pay for my desired lifestyle?”  Based on all the statistics and research that we have examined, it seems that there is a high probability that the answer to this question will be a resounding “No”.

For most Australians, building wealth for Retirement consists solely on relying on the Superannuation Guarantee, whereby your employer is required to contribute an amount equal to 9% of your Salary into a Superannuation Fund.  While this is designed to ensure that you will have some wealth for your Retirement, the type of projections that we are talking about will quickly show that it will not be adequate for even a modest lifestyle, let alone a comfortable one, in Retirement.

These projections can very quickly show you whether you are currently building enough wealth for your retirement or not, and, if not, they can also be used to evaluate the impact of alternative investment scenarios that may be able to improve your financial outlook.

We recently conducted a series of Webinars entitled “How to build a Multi Million Dollar Property Portfolio” during which we demonstrated some of the tools that we use at Empower Wealth to assist our clients to gain an understanding of their financial potential.  You can watch a recording of one of these webinars by going to https://ewwebsiteprod.wpengine.com/free-property-webinar and registering at the bottom of the page.

If you would be interested in seeing how these tools and techniques could be applied to your own personal financial situation, please come and see us for a free one hour consultation by going to https://ewwebsiteprod.wpengine.com/ or just give us a call.

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