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Some say I'm a dreamer, but I’m not the only one

Posted by Paul Wilson

I want to retire by 50 – doesn’t everyone?

I’m sure all of us also want to keep more of our hard earned money, pay off our home faster and have financial security in retirement.

(Luckily) I realised at an early age that this is what I wanted in life – to be comfortable, or more than comfortable, and that’s what motivated me to start investing in property.

Not everyone’s superannuation will be able to provide the lifestyle they want in retirement and unfortunately some face that harsh reality towards the end of their working life – I know my super wouldn’t without the passive income from my property portfolio.

So how do we, everyday Australians, break out of the rat race with the hopes of retiring by 50?

I’ll be honest with you – it’s not impossible but it is hard; because if it was easy, everyone would be sailing the oceans in their super-yachts drinking champers, and the working world would come to a standstill.

It’s no secret that property is a great long-term investment vehicle for creating wealth, hence why 25 per cent of Australians own one or more pieces of real estate.

But creating long-lasting wealth requires some thinking outside of the box.

Most people’s plan looks like this:

They slowly pay off their mortgage – willingly using the banks business model Then they hit the panic button around the ages of 45 and 55 In reaction, they increase their contributions into superannuation Then unfortunately start taking greater risks to make up for lost time

A much better alternative (created with some out-of-the-box thinking), is to:

Leverage your equity as a deposit for an investment property Rapidly pay off your mortgage in your working years using tax and cash-flow planning Compound growth and continue to plan and acquire further investments while eliminating debt Then come retirement, you’ll be able to live off the passive income from your investments

I mentioned above that a lot of people willingly use the banks business model and never stop to think if there was another way to pay off their mortgage. That’s such a shame, because there are plenty of savings to be had by making one minor change. 

For example, investor A takes out a $450,000 loan on a 30 year term with an interest rate of 5.5 per cent and makes monthly repayments of $2,555.

All well and good, but investor A will eventually pay back $920,000 – a whopping $470,000 of it being interest.

Investor B on the other hand has the same loan, same term and same rate, but makes weekly repayments of $638, $2,555 divided by 4, and the difference will shock you.

Investor B will eventually only pay back $690,000, saving $240,000 in interest and reducing their loan term to only 16 years and 2 months.

Moral of the story: If you do the hard yards in the early days, and think outside the box, you’ll have more time to reap the benefits. If you’re already approaching the big five-o and reading this article, not to worry, there’s no time like the present.

If it’s time for you to kick things into gear, contact me today on 1800 600 890.

 


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