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Ben Kingsley Blog post by Ben Kingsley

Nothing ever Changes if Nothing Ever Changes

Have you considered if your retirement income will sustain your lifestyle? If not perhaps it is time to put away the fear of change and act now. Households are going to be in for a rude shock in retirement, as they come to terms with reduced income and the impact on their lifestyle unless they start acting now.

There is a rule of thumb to help people work out what level of wealth (income producing investment) is needed to be in a position to replace their current household income instead of having to work for it.  It’s 20 times their required income.

For example if your household income is say $100,000 then you will need an asset base net of debt of $2 million.  So if you were getting a 5% return on this money it equals $100,000. Let’s explore this concerning point a bit further by asking ourselves what is the projected level of money we are going to have in Super by the time we are 65 years old.  For most people this figure will not be greater than $700,000.  If again we are getting a 5% return on this investment then we can expect to have a household income of $35,000 a year in today dollars.

With that level of income, how good is your retirement going to be?  Can you rely on the government of the day to provide anymore in terms of pension?  Maybe, or maybe not, but one thing is for sure, it’s not going to be a large amount of money!

One thing is 100% sure – you are going to have two options with your life at this point:

  1. Accept that your existing quality of life and standard of living are going to change, even when you sell down assets such as the family home – once its gone, it’s gone!; or
  2. Accept that you are going to have to stay in the work force until such time as you have enough to live off

So what are you willing to do to change this situation?  As humans we are creatures of habit, we are all guilty at one point or many in our lives where we fall into a routine and accept the status quo.

Well nothing ever changes if nothing ever changes, meaning if you aren’t prepared to change things and take action, then your destiny will be fairly predictable and the financial outcomes will be too.

Naturally, I’m not willing to sit back and watch people take no action and make no changes.  It’s my professional pursuit to make changes to the lives of people who come into contact and work with Empower Wealth. So here is an exercise help you make change:

  • Step 1 – Look at your finances, savings, investment, super etc and workout what you think the value will be by the time you are 60.  Use 5% as a rule of thumb to calculate what income you can expect.  Use 6% as your compounding return on your investments.
  • Step 2 – If your projections are showing you will have less than you want in retirement – ask yourself a simple, but not easy, question to answer – “What are you willing to give up now, which will have a financial benefit in terms of creating more surplus income to invest?”  To help with this exercise, list some possible options and then list the advantages and disadvantages of each item to help you make a call in what you can or can’t live with or without.
  • Step 3 – Make the change, don’t procrastinate.  Change is a constant in the world and should be in our lives.  Without it, nothing will improve.
  • Step 4 – Seek help if you need to work out what is the right decision for you and your household.  As I mentioned earlier as creatures of habit we don’t like change, but research shows that if you have an accountability partner (a professional who is helping you and not judging you), then you are more than likely going to succeed.  In fact the research states that it increases your chances of achieving your goals by 85%*.
  • Step 5 – Think about the benefit this change will bring you.  Write them down and put them on the fridge, so whenever your natural human nature kicks in to try to derail you from your financial goals, read this list of benefits.  Maintain the discipline.
  • Step 6 – In time, enjoy the spoils of your efforts.

Life is what you make it.  Knowledge is empowering if you act on it.

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