How to Become an Investorgetic®: Passionate About Investing series: Part 8

Before I start this blog, I want to make sure you know what an Investorgetic® is. An Investorgetic® is a persona I created while writing Money Intelligence to counter the Consumerholic persona in our society. It's a term I coined that's made up of 2 words: investor and energetic. It means someone who is passionate about investing to build their wealth in a sustainable way. 

The devil is in the detail!

When it comes to your retirement, it’s no use crossing your fingers and hoping for the best. You need to know exactly how much money you will need, and the steps you need to take, to achieve the retirement lifestyle you want. 

A financial blueprint is your vision and your compass. It is a realistic, long-term plan of action based on your unique money numbers. It will keep you on track as you build your wealth and make your dream of financial liberation a reality.

But you cannot create a financial blueprint on your own. You need your partner’s input and you must seek professional advice from a financial planner.

An effective financial blueprint addresses the following key areas:

Your retirement income

The pension is not enough for most people. Could you live on $22,721 per single or $34,252 per couple, per year, for 20 years or more?

To have the kind of retirement lifestyle you want, you need to know how much income you will need each year. The first step to working this out is having a thorough understanding of your current financial situation.

Ask yourself the following:

·      What is your monthly gross income and net income?

·      How much tax do you pay?

·      How much is your employer contributing to your super fund?

·      What is your current super fund balance?

·      How much do you save each month?

·      How much are your monthly household expenses?

·      How much do you set aside for your children’s education each month?

·      How much do you save each month for a yearly holiday?  

Now, with your financial planner, crunch these numbers:

·      The income you will need at retirement in today’s value. Multiply this by 25. This is the asset balance you will need to have saved for retirement.

·      Your projected super balance in 20 years’ time, based on the superannuation contributions you currently make.

·      Your projected super balance in 20 years’ time if you were to salary sacrifice or buy a property with your super fund.

·      Your adjusted tax rate once you start building your assets and become an Investorgetic®.

Your investment portfolio

Your planned retirement income will determine the size of the investment portfolio you need. Your financial blueprint should detail the kind of assets you need and the steps required to get them.

Investment opportunities include:

·      Managed funds

·      Cash like Term deposits

·      Shares

·      Property

Your retirement home

Where do you want to live in your retirement? Twenty years ago, the standard plan for Sydney and Melbourne retirees was to sell their expensive homes and move to cheap and cheerful Queensland. This is no longer the trend. Retirees who live in the city now want to stay put, close to their children and to hospitals, transport and amenities.

To achieve this, you have a couple of options:

·      Downsize the family home. Move into a smaller, cheaper home or apartment within or near the city. The sale price of your family home and your downsized home can be put towards your retirement income. You could even begin this process five to 10 years before retirement by purchasing a smaller home and renting it out. This allows you to lock in the price of your retirement home and claim it as a tax-deductible investment property, while maximising future capital gains on your current home.

·      Apply for a reverse mortgage. A reverse mortgage is a home loan that banks offer to retirees who have huge equity in their homes but limited income. Loan repayments are not required as the interest accumulates. The loan is paid off when the mortgagee passes away and the property is sold. Some retirees will still be eligible for part-pension payments, but others will not due to their assets. They can, however, use cash released by the bank to cover their yearly expenses. I recommend this strategy for couples without children. You would not want your children to discover that their inheritance is going to the bank!

Investing can make a world of difference to your lifestyle at retirement. But does the idea of investing make you nervous? Stay tuned next week for how you can learn to invest with confidence.

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence®. Susan is passionate about helping people achieve financial liberation. At the age of six, she witnessed how her money-savvy mum (whom she calls the money manager) joined forces with her dad (whom she refers to as the money maker) to save the family business from bankruptcy and become financially free. Susan truly believes that people can become financially liberated by developing a healthy relationship with money. Buy the book in either printed copy or ebook and learn more about being money intelligent www.moneyintelligence.com.au