Retirement - Latest Figures For a Comfortable Retirement Increases!!

The Association of Super Funds of Australia generally provide quarterly reports on the estimates of living expenses for Australians in retirement, giving us the opportunity to establish an understanding of how much we should be looking at spending in retirement.

Of course, these figures are just averages, and each couple/person will be completely different, based on their level of living expenses, the area they live in and many other factors that come into play.

Before we jump into the figures, you must understand that you should understand your own living expenses and do a deep dive into what sort of lifestyle you would like to live in retirement before looking at the average figures.

Do you want to be travelling for three to six months a year for the next ten years?

Do you just want to be at home for the majority of the time and are okay with looking after the grandchildren?

Have you got a mansion that needs a lot of upkeep? Or a smaller unit that has body corporate fees?

Have you got pets or want pets?

Have you paid off your mortgage or are you renting?

All of these things make a massive difference to living expenses as you move through retirement, so establish the life you want to live first by sitting down and having a discussion with your partner, family or Financial Adviser about the lifestyle you want in retirement. Once you have done this, look at the numbers you will need to live on for you to retire comfortably for you!

If you did the above, great work, you have now been able to establish a personally tailored expenses plan for retirement, however if you do not have the resources or expertise to do the above, that is okay, because the ASFA have done it for us.

ASFA, 2023 [1]

As you can see, there is a decent difference in the expenses for a comfortable and modest lifestyle, so let’s delve into what the main differences are and this may give you an idea about what living expenses you can expect.

**Please note, all expenses are based on the fact that you have paid off your mortgage in retirement, therefore if you have a mortgage, you will need to add this on top of the above expenses!

Expenses Per Week in Retirement- 65-85 years old

The main differences in lifestyle comes down to the ability to go on overseas holidays, as a more modest lifestyle will spend all of their holiday expenses on travelling domestically. The other major difference is expenses on health, including medications and the like, this is due to the concessions on offer for those who earn less from their superannuation, it doesn’t mean that they may be getting less services for health, it just means they are not spending as much money on health.

We can see, overall, a comfortable lifestyle may see you travelling abroad a little bit more and using your car more, but overall, the differences in expenses per week are not astronomical.

Therefore, before you decide that you are ready to retire, or maybe you see these numbers and figure that you are not ready to retire, have a long and hard discussion to figure out what sort of lifestyle you will be living in retirement.

Do you want to spend it up a bit more and travel? Do you want to enjoy the peace and quiet in a regional town and get away from the big smoke?

All questions that only you can answer!

Therefore, I recommend sitting down and spending some time talking with a professional, such as a trusted Financial Adviser, who can give you some clarity and be a sounding board for all of your dreams and vision for retirement.

Until next time,

Take Back Control

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1. ASFA - https://www.superannuation.asn.au/resources/retirement-standard

How We Bought Our First Home!

Have you dreamed of owning your first home?

A place to to make your own, without parents or in-laws on top of you all the time. Or without having to worry about rental inspections, having to move every two to three years and landlords who just won’t fix that damn fence.

Having your own home does come with a whole heap of perks, especially if you are a young family or starting to think about beginning your own family.

However, Australia’s housing market is extremely difficult to get into, buying your first home for many is a milestone that is almost impossible.

But, for those who are persistent, for those who are working hard towards a Dream of Buying that First Home, no matter what, it is still possible.

First thing my wife and I did when we bought our first home was talk to family and friends, unfortunately during that time, there were not too many people who could give us advice.

Most of our friends had not bought their first home, and family members who had bought their first home, bought nearly twenty years ago or more!

Unfortunately, twenty years ago does not even begin to relate to the most recent times. Therefore, with not a lot of help, we turned to reading (I am an avid reader) and enlisted the help of a professional mortgage broker.

After reading a few personal finance books, one of which was Scott Pape’s “Barefoot Investor’s- The only Money Guide You Will Ever Need,” (Great initial reading to get the ball rolling) we realised that we needed to build up a deposit.

We then talked to a mortgage broker who was able to go through our financial situation and give us a ball park figure to aim for a good deposit, which was roughly around $80,000 at the time for a $500,000 house and land package. (We had around an $18,000 deposit saved up at this time)

We didn’t have anywhere near this figure at the time, and this was below the 20% deposit that the “Barefoot Investor” suggested, but we knew that we just wanted to get into our first home and didn’t care too much for the Lenders Mortgage Insurance (LMI)[1].

[Lenders mortgage insurance is the insurance a bank will take out, and make you pay for, if you have less than a 20% deposit. In case your property decreases in value and you need to sell due to defaulting, the bank will not lose money.]

So these are the steps we took to buying our first home:

1. Read about personal finance and build a budget (Work more to earn more and reduce expenses where possible, SACRIFICE is necessary)

2. Research the areas/locations that you want to buy in, you need to decide this before you know how much you will need to spend for your first home.

3. Engage a Mortgage Broker, one who is experienced in helping first home owners! Build a plan to get that deposit (Need to have a final figure for your home before engaging in this step).

4. Be Patient and review your financial situation once a month. Keep looking on Realestate.com and Domain, but don’t get caught up in wanting anything until you are close to your deposit goal.

5. Be DISCIPLINED- Pay yourself first (ie; Transfer your savings into a separate savings account, one that you cannot touch.

Being young, a little naïve and not having any experience at all did end up working in our favour though, as we decided that we were going to build a deposit and buy our first home within twelve months. If you know my wife and I, we are extremely stubborn and once we make our minds up about something, we work hard to make it happen. If we were older, had more experience and knew how much we would have to sacrifice, it may have been a bit different. But above all else, we wanted to buy our first home and take the first step in making our lives our own.

In late 2017, we built our budget and started saving like crazy, putting away 60-70% of our wages into savings, it helped that we were living with our parents at the time, especially considering we were earning less than $90,000 before tax between the two of us.

We started working more, and took on extra jobs, any way in which we could earn a little bit more to build our deposit faster.

During this time, there are a lot of emotions, especially if you feel stuck in your parent’s house, like my wife did. Emotions start running a little bit higher, the closer you get to your goal, the feeling that you will achieve your goal soon will actually make your decision making process less realistic. Not to mention more arguments/frustrated tension between family members or roommates.

Hence why it is important to have your plan and budget that you need to be disciplined enough to stick to.

How did our first home buying story end? Well, by mid-2018, we took the plunge and signed on a house and land package contract. (Against the advice of our mortgage broker at the time.)

Our very first home - Moved in Oct - 2019 (Sold early 2022)

Which was a story in itself, as we went through a whole heap of problems throughout the build and learnt a lot about the building process. The main learning was you buy land, you do not need to go with a builder that has their name on that land. No matter what the sales person says to you, you are buying the land and not the builder!

We haven’t been deterred by our horrible first building experience though, as we are now building our second home, having bought land late in 2021. (Either that, or we didn’t learn from the first time LOL)

But we can leave that story for another time, as there are just a few more things you need to know before I leave you to start DREAMING about your first home…

As mentioned above, we were pretty young and very naïve when we decided to buy our first home, so here are the things we wish we knew before we started planning our very first home!

• First Home Owner Grant - $10,000 contribution from the government for a first home owner (New home or build up to $750,000) [2]

• First Home Super Saver Scheme - Can put up to $15,000 of contributions per FY and Save up to $50,000 in your Super Fund (Saving on tax and potentially getting better returns than a savings account.) **Talk to a professional Financial Adviser before deciding on this strategy.

• First Home Buyer Guarantee - The government will insure up to 15% of the home value, so you only need a 5% deposit [4]

• Stamp Duty Exemption or Concessions - Pay $0 on stamp duty for first homes valued up to $600,000 or get a concession for between $600,001-$750,000

There are plenty of incentives to buying your first home and a heap of different strategies to help you to build/buy your dream first home…

**Please see all links to government sources below for more information!

Therefore, you should speak with a professional, such as a mortgage broker or financial adviser who may be able to help you get a great understanding of your personal situation and circumstances. As everyone is very different and there are multiple ways in which you can build your deposit to buying your first home.

Hence, why should enlist the help of a professional whenever you can, and you can meet with a mortgage broker or even an adviser free of charge in the first meeting most of the time. Whom will be happy to give you a few hints and tips to help you along the way to owning your first home!

Buying your first home can be daunting and can be something that seems impossible, but it does not have to be. You just have to know what you want, and go out and work for it. Truly, that is what it takes if you want to finally get into your first home, and it doesn’t sound all that difficult, but it does require discipline and an ability to sometimes say ‘NO’ to friends or family.

To Sacrifice a little bit now, for something good in the future!

For now, go and do some research on where you want to live, read some personal finance articles or books and start building out your plan to BUYING YOUR FIRST HOME!

Until next time,

Take Back Control

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[1] - Lenders Mortgage Insurance - https://insurancecouncil.com.au/articles/lenders-mortgage-insurance/

[2] - FHOG - https://www.sro.vic.gov.au/first-home-owner

[3] - FHSSS - https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/

[4] - FHBG - https://www.nhfic.gov.au/support-buy-home/first-home-guarantee

[5] - Stamp Duty Exemption or Concession - https://www.sro.vic.gov.au/fhbduty

What is Stopping You from being Financially Free?

Since starting in the Financial Planning profession and working as a client relationship manager, there has been a lot of learnings. You can learn a lot about the technical side of Superannuation, Estate planning, Retirement, Investing, Trust structures, Business/Companies, Budgeting and Cashflow projections…

All are really valid and great to know, however, there is no point learning all of that if you don’t understand how money and your everyday to day behaviour is interconnected. Locked together in a constant battle of wills, discipline and decision making that over a lifetime can lead to Financial Freedom and a great retirement or can lead to living off the age pension and counting your pennies everyday.

Everyone of course wants the Financial Freedom and the ability to do whatever you want, but not everyone is going to get there…

Therefore, today I want to share with you the top tips to attaining financial freedom and being able to significantly change your life at the same time!

And also explain why you have not attained Financial Freedom yet….

Understand the Past to Create the Future You DESIRE!

The key to unlocking your potential, as corny as it sounds, is to understanding your past and what behaviours you picked up from your upbringing. Most psychologists today are learning more and more about how our upbringing and the way our parents treated us truly affects how we behave when it comes to money decisions, and life in general.

The understanding of a psychologist who studies the evolutionary theory, is that we are born with 50% of our behaviours already embedded in our DNA. Therefore, we have no control over some aspects of our life, which makes it even more important for you to understand your strengths and weaknesses.

25-30% of our behaviours come from our upbringing, between the ages of 0-6 years old, where our brains were the most malleable or think of our brains as sponges that were prone to taking in everything from our environment.

The other 20-25% comes from our peers and social groups, where we try to fit in and mould into a group that we can connect with and find purpose.

If we were to take the idea of evolutionary psychology and put it into effect, it makes it even more important for you to understand how your parents view money and whether you are a spender or saver.

Hence, you need to really look back at your upbringing, ask your parents or look back into the past and ask yourself, what is money to me?

Do I save up every penny? Or do I spend most of my money? (If you are like the 80-85% of us, you are a spender, so don’t feel bad if you are)

Did my parents complain about money or see it as “Bad”? Do I?

Were my parents comfortable with debt or were they always stressed about the mortgage? Do you find yourself also becoming stressed?

What was your first money memory? Was it of piggy banks and saving to buy your first toy? Or were you given everything?

There is no right or wrong answers here, you should not feel guilty about your upbringing or blame your parents for the way you are now, although there is partial responsibility on their part.

What you need to do is start to understand your past, and start to understand that you can make life easier by setting up a plan based on your behaviours and how you view money now. The key is to become aware of your own behaviours, to stop and reflect, which is difficult at first, but like anything, the more you do it, the easier it becomes.

Having a VISION of what your FUTURE is like and bring your PARTNER along for the journey!

It may sound a bit corny again, but truly having a vision of what your future looks like, even tastes, smells, sounds and feels like, is going to make it way more likely for you to succeed.

Once you have an understanding of your past, you need to set your eyes to the future, and you need to truly envision what it will be like in 1, 3, 5, 10 or even 20 years.

For most people, you don’t think all that often in the future tense, biologically, we are more adept at surviving in the here and now, therefore most of us will always be thinking in past or present tense. But, for true financial freedom, there is a necessity to think about the future.

Therefore, to buck the trend, to “escape the rat race,” you need to do what most people are not.

One of my favourite exercises to do which will help you to envision your future is to ask yourself, “what is a day in the life [insert your own name here] in 12 months time?”

**Remember, there are no right or wrong answers, it needs to be reasonable, but let your imagination take effect here. What does your morning look like? What are you doing throughout the day? Who are you with? Where are you going and where do you live?

Take at least 15 minutes to type or write this down, my preference is to write as you are more likely again to achieve this if you physically write it down. You are taking it from your minds eye to a physical manifestation in written form.

The key to this is to do it multiple times, to live it in your minds eye and to describe it as accurately as possible. You will find it difficult at the beginning, however with practise, it will become easier and easier. Or, if you are not a visionary and it is not a strength of yours, ask your partner to help you and to build a vision together.

If you do not have a partner, discuss it with friends or family, someone you can truly open up to and let it all out.

Create a SYSTEM and have the DISCIPLINE to stick to it!

Once you have an understanding of your behaviours and what you actually you want to achieve, you can look to breaking it down into manageable steps to getting you to that overall vision.

The best way to do this is to find someone who has done what you want to achieve previously, which I can guarantee there is someone out there who has achieved your vision of life.

Otherwise, talk to a professional, someone who lives and breathes helping people to live their goals and vision of the future everyday.

Either of these people will be able to help you formulate a system, however if you want to do it yourself, you can always look to creating your own systems.

You can do this by simply doing what I call reverse engineering, where you make your vision and create a goal around that vision. An example is you may want to be financially free and for you to do that you need to earn at least $90,000 per annum.

How do you get to $90,000 per annum from a mix of passive and active income streams? Where will it come from essentially?

Investments? Property? A business? A YouTube/podcast channel?

There are multiple ways you can do it, it all depends on your vision and understanding yourself, how you behave and what your strengths are!

Once you have the vehicle (investments/business, property etc.), you can step out goals to work on everyday to help you bring your vision to life.

That system may mean that you set up your bank accounts correctly, automating your savings so when your pay goes in, your savings goes out to another account, maybe even at a different bank.

The system could be simply you sit down every two weeks to revise your budget and spending, understanding where you money is going. Or getting your partner to do it, because they may be better at it then you.

Once you have set up a system, you just need to keep doing it, week in, week out. Having the discipline to make sure that it is on track by reviewing it and setting little milestones in which you can celebrate once you hit them.

A great way to make sure that you are keeping on track is to talk to someone, a partner or professional, who will keep you accountable. The power of telling someone you are going to do something is significant in helping you to living the vision you wrote down, just having someone to be there when it gets tough or discipline wanes. It is very underrated in our current society anyhow.

If Financial Freedom comes down to only three things, why don’t you have it in the first place?

Because most people get stuck in the day to day, they forget about their dreams and visions they had as a child growing up, they forget about being curious and don’t have time to reflect.

They grow content and settle for what they have, which is fine, if you are happy and living the life you want to live, but most people are not!

The other reason is simply because financial freedom takes TIME!

You need to have PATIENCE, and do what my wife calls “building your empire.” We live in such a fast pace society that we forget we have 90-100 years of life in us, not everything is going to come to you straight away and sometimes takes years if not decades of work and perseverance.

Hopefully this has effected you in a way that you will stop and think a little bit about your own life and where that is going.

But until next time,

Take Back Control