Property Hub - Investment Insights & Inspiration - Property WEALTH (2/7) - W: Your Why

Starting point is 00:00:00 Welcome to Get Invested, the leading weekly podcast to help you unlock your full potential and enjoy your version of sustainable success that lies at the intersection of your three elves, yourself, your health, and your wealth. I'm your host and guide, Bushy Martin, and each week we go deep, sharing great conversations with proven experts in all walks of life, including the best investors, property experts, analysts, leaders, founders, sports stars, and health gurus to uncover their secret know-how on where they invest their time, their skills, and their money, and the benefits that this creates. To help you find out what it takes to break free from the grind and discover your flavor of freedom

Starting point is 00:00:49 to create your freedom formula. You see, the truth is that everyone invests. Every second of every minute of every day, we're investing our time, our skills, our energy, and our money in something. Some of us are investing consciously, some unconsciously, sometimes for good, sometimes for bad, and sometimes for no impact. Get Invested will help you start living by design, not by default. I'm going to help you to make it happen, not let it happen. You'll hear the top tips on how you can live with conscious intent so that you can live more, work less, and live your legacy by investing now. You'll enjoy the stories and secrets of high performers who invest for success in every aspect of their lives and discover the top tips on how to get started,

Starting point is 00:01:36 how to make the most of your investment journey, and ultimately to be living your dream, not someone else's. As you engage in each episode, you'll glean the information, inspiration, and implementation that you need to get empowered and get invested in imagining and actioning the life that you've always dreamed about. And Get Invested is proudly part of Property Hub, your home for property investment insights and inspiration. Make sure you subscribe now on your favourite podcast player to get every episode of Get Invested and Realty Talk, which is Australia's leading and longest running online property show that's full of red hot property investment news and insights, direct from all of the industry leaders and influencers.

Starting point is 00:02:21 You can also connect with me personally and join the Get Invested community of fellow Freedom Fighters at bushymartin.com.au or on knowhowproperty.com.au. Now, let's get invested. Hi Freedom Fighters. Welcome back to your next Freedom Formula session. now that you've got a better sense of the need to invest to secure and protect your future from our first session you now appreciate the common mistakes that a lot of investors make and you're aware of the eight critical fundamental vitamins along with the six-stage property wealth process to make it happen so let's start to unpack the stages that you need to follow

Starting point is 00:03:07 to achieve your version of sustainable success and your lifestyle goals Now, before we do this, it's important to emphasise that the property growth wealth revolution isn't a silver bullet, one size fits all recipe, as everyone's needs, goals, desires, timelines and capacities are all different, which means that your investment approach and strategy will be different and customised to suit your specific needs and your specific situation. in this way we're talking about creating a gps not a roadmap because your needs goals wants and circumstances will change and and evolve over time and as long as you're clear on where you will end up then the freedom formulas gps vitamins and property wealth framework will guide you back contract towards your end destination. Whenever you inevitably take detours, different pathways or get blown off course. So stage one of your property investment journey is the W for Y in wealth, where your Y is about getting crystal clear about your ideal lifestyle and exactly how

Starting point is 00:04:29 you want to live your life. In other words, what are you doing with who, when and where on a daily, weekly, monthly, and yearly basis. Because if you know how you want to live, then it's easy to monetize this and work out how much your ideal lifestyle costs per year as part of determining what we call your freedom numbers. If you know how much your ideal lifestyle costs per year in what we call your lifestyle income and how many years before you want to be in that position or what we call your break-free timeline then it's really easy to calculate what your nest egg number needs to be which is the value of the income producing assets that you need to accumulate that will create the passive income that will fund your ideal lifestyle.

Starting point is 00:05:17 But before we dig into this and give you some examples let's start with why your why is important because if you don't know where you're heading and where you'll end up you're not likely to last a distance and you're more likely to chop and change and be at the whim of every next get rich quick scheme that comes along because exponential growth that leads to sustainable success is a long-term 15 year plus journey it's built on developing your patience and persistence muscles so that you can enjoy the massive rewards of delayed gratification based on compounding growth. And the wonder of compounding returns is what Albert Einstein called the eighth wonder of the world. He who understands it, earns it. And he that ignores it, ends up paying for it. Because

Starting point is 00:06:07 it's a two-edged sword. You can either stay comfortable now and end up very uncomfortable later, or you can make some very small sacrifices and experience a little bit of discomfort now to end up very comfortable later. So your future's in your hands. What will you choose? So having a crystal clear and vivid vision of your ideal lifestyle that engages all of your senses will become both a magnet and a compass. A magnet that will be strong and attractive enough for you

Starting point is 00:06:37 to overcome all of the inevitable speed bumps that you'll incur along the way to ensure that you make it happen, but also a compass as every decision and choice that you then make on a day-to-day basis will be guided by whether it will take you closer to or further away from your ideal lifestyle. And you need to start with the end in mind and work backwards to craft an investment strategy that will help you attain and maintain your ideal lifestyle however you decide to define this because everyone's different. So how do you do this?

Starting point is 00:07:11 well again there's a myriad of ways of getting clear on exactly how you want to live your life for my wife Sonia and I every year over the last 25 years we take between two to four days during our January holiday to revisit our life vision for me I write down in vivid language a diary of what my perfect day looks like from the moment I wake up to the time my head hits the pillow what I'm doing with who and when in all personal and professional aspects of my life i then transfer this onto a full color vision board with great pictures and photos of all the things that are important to me because i'm a very visual learner then i print and laminate this vision board and plaster all over the house from the shower to the wall in my studio

Starting point is 00:07:56 so that it subliminally imprints on my subconscious and draws me inexplicably towards it for my wife sonia she writes a letter to her mother in 10 years time describing in infinite detail what she's doing and what she's achieved. At the very least, you can sit down with your partner over a bottle of wine on a Sunday afternoon for a few hours and talk to each other about your vision of your perfect life. Let your creativity and imagination run wild without any boundaries and no limitations. You'll be amazed at how inspiring this is and how much it brings you closer together and on the same page when it comes to your future. as einstein was famous for saying imagination is everything it's the preview of your life's

Starting point is 00:08:41 coming attractions so let your creativity run riot and to capture this there's a multitude of ways that you can record it and revisit it so that you're naturally attracted to bringing it into existence you can create a vision board like me write an affirmation a poem a letter or a song you can record it on your phone and play it back to yourself at the start and end of each day listen to it while you're in the shower or look yourself square in the eye in the mirror and say it out loud to yourself even if you don't believe it and make sure you talk about it in the present tense as though you're already living your ideal life the options are endless depending on how you best learn but don't overlook or shortcut the fundamental importance of getting

Starting point is 00:09:28 clear on your why and your vision of your life. If you don't know where you're heading and you're not excited about your future, your Zephyr Life's great adventure will die on the vine as you just keep doing the same old, same old day in, day out. Remember that the definition of insanity is to keep doing the same thing over and over and expecting a different result. So get creative and get excited. Rekindle your childhood curiosity and excitement about the wonder of the world and all of its potential and its possibilities.

Starting point is 00:10:04 And revisit your life vision every year so that you encapsulate any evolving changes in your wants, goals and desires, as well as re-energizing your excitement and enthusiasm to make your vision become a reality. This process is a lot of fun and it's very inspiring. you'll get very excited about what your life is going to become and without realizing it if you keep visualizing it and it makes you feel good you'll bring it into existence now i'm not

Starting point is 00:10:33 being woo-woo here i've repeatedly done this throughout my life and it never fails and every successful person in any sphere that i've ever met does the same thing by starting with a compelling vivid vision of the end in mind so just give it a go i mean what have you got to lose yes it's going to be uncomfortable at first but the secret to growth is to get comfortable with being uncomfortable and if you want more help with this just email me at bushy at knowhowproperty.com.au and I'll email you back the full chapter 14 of my book the freedom formula on creating and capturing your why that walks you through all of this so that you start living with intent and start living by design, not by default. Once this is in place, it's then

Starting point is 00:11:26 about determining how much is enough for you to fund and enjoy your ideal lifestyle. This is about monetizing your life vision. If you know what your perfect day, your perfect week, your perfect month and a perfect year looks like and feels like, then it's just a matter of confirming how much this lifestyle costs and then investing in the right type and amount of income producing growth assets that will create the nest egg size that will give you the level of passive income that will then fund this ideal lifestyle. It's not a matter of just continuously pursuing wealth for wealth's sake because this will burn you out in the process of always chasing and wanting more and more. I'm talking here about the difference between being rich and being wealthy. So let me

Starting point is 00:12:12 ask you a question. If your work income stopped today, how long could you continue to fund your current lifestyle? For most hard-working Aussies, it's a matter of days, weeks, or maybe months. And this is the difference between being rich and wealthy. Most Australians are what I would class as rich. We earn good incomes that allow us to enjoy good lifestyles today. But if you turn off your employment or work income tap, how long will you be able to maintain and fund your current lifestyle. Being wealthy, on the other hand, is being in a position to passively fund your ideal lifestyle indefinitely

Starting point is 00:12:51 without relying on you and your time to generate it. Because the currency of wealth is your freedom of time to do the things that are important to you, that give you joy and fulfillment. And just as being comfortable with good is the killer of becoming great, so too being rich is the killer of becoming wealthy. Our level of current comfort gets in the way of challenging us to invest in our future.

Starting point is 00:13:20 So how much is enough for you? How much annual income do you need to fund your ideal lifestyle? Because there's no right or wrong answer to this as everyone's answer is going to be different. Now don't be too overwhelmed by this either because over the decades that I've been helping people with property, the first question I always ask is what does your ideal lifestyle look like and how much does this lifestyle cost a year?

Starting point is 00:13:48 And over 95% of the responses are either complete silence or confused head-scratching looks or a response something along the lines of, I don't have a clue, Bushy. I've never thought about this before. So I'm going to challenge you to get crystal on this. and if you don't have a sense of what your ideal lifestyle looks like and how much it's going to cost per year then let me give you an easy example to bring it to life this is where what we call

Starting point is 00:14:17 your freedom numbers comes in the four key numbers that will become your goalposts to focus your attention and guide your investment direction and these are your lifestyle income your break-free timeline, your nest egg number, the gap, and what results from these is your freedom number. We help you calculate these using our unique Freedom Forecaster, a set of calculations based on a series of well-informed assumptions that helps capture what you want to be, where you are now, where you will end up if you do nothing differently, what's the gap, and how much do you need to invest in now to achieve your lifestyle goals. Now I stress that we're not financial planners or accountants, so what I'm going to share with you on this is purely general

Starting point is 00:15:06 information. So before you invest in anything, make sure you talk to your accountant to ensure that what you invest in suits your situation and your risk profile. But as a starting point, our Freedom Forecaster gives you a good first pass indication of how you're tracking towards your ideal future, where you will end up, and what you need to do to bridge the gap. So let's do a quick example of the Freedom Forecaster to put some shape around all of this. If you don't know yet what your ideal lifestyle looks like and how much it's going to cost a year, then take a look at your current lifestyle and your current income. If you're happy with this, then start here, because approximately 80% of your current income will sustain your existing

Starting point is 00:15:51 lifestyle, assuming you've paid off your home by the time you want to stop work. And if you invest wisely in property, your portfolio will help you to do this years earlier and save you tens of thousands of dollars of loan interest in the process. But more on this in a later session. Now, what's a good comfortable lifestyle income to be aiming at? Well, I've done a lot of research on this, and you'll need around about $120,000 a year for a couple to enjoy a comfortable lifestyle that allows you to enjoy an annual overseas holiday, to be able to eat out regularly at restaurants, have a reasonable car,

Starting point is 00:16:26 afford bottled wine and good clothes, afford private health insurance, enjoy frequent leisure activity, and to be able to replace your kitchen and bathroom every 20 years or so. Now, this compares to the measly amount of the age pension, which is currently around about $35,000 a year for a couple, if you're able to get it,

Starting point is 00:16:45 after jumping through all of the hoops and the asset test. And on this level of income, a couple will struggle to survive, with life reduced to basic food and clothes, cutting your own hair, only taking part in no-cost or very low-cost leisure activities, no private health insurance, no budget to fix housing repairs, no car, no alcohol unless you brew your own, only being able to afford occasional club special meals or infrequent cheap takeaways, and holidays being restricted to day trips in your own town or city. now that doesn't sound like a very comfortable lifestyle to enjoy in your golden years after years of and decades of hard work so again make sure you get invested now but I digress so for the purpose of this freedom forecaster exercise let's assume that you're aiming to create an ongoing passive income of $120,000 a year when you stop work this is your lifestyle income and to produce this consistent level of ongoing income you need to invest to generate an income producing nest egg of between 2.4 million and 3 million which is based on a four

Starting point is 00:17:57 to five percent net return and the emphasis here is on income producing because there's a big fallacy that many Australians have that the home they live in is an investment and our homes actually represent about 54% of our household assets on average. So over half of our wealth is tied up in our homes. But our homes don't classify as an investment asset. As an investment asset needs to satisfy three very key criteria. Firstly, they need to increase in value over time. So yes, our homes tick this box. Secondly, that they're easily saleable in a liquid market with lots of sellers and buyers. So yes, yet again, our homes tick this box. But thirdly, and most importantly, they're able to give you an ongoing income stream. And it's on this critical measure

Starting point is 00:18:51 that our homes fail the investment test, as they actually cost us money for rates, repairs, etc. that isn't tax deductible. So our owner-occupied homes actually pull money out of our pocket, not put it in. It's the same reason that I believe that crypto doesn't pass the investment sniff test. Now, sure, there's an argument that you can sell your home capital gains-free when you decide to stop work and downsize to a lower-cost home and then invest or live off the surplus. But you've still got to live somewhere, and we normally don't shrink to grow. And while it may be okay to downsize, for many of us, we don't like to downgrade to something of lower quality so the sale surplus is generally a lot less than expected. The bottom line your home's

Starting point is 00:19:38 not a cash flow producing investment so exclude this from your calculations and any future sale surplus isn't that a bonus. This also recognizes that your home is your safe fortress and whatever you invest in needs to be directed at assisting you in eliminating any home loan debt sooner rather than later. So if the world turns to pee, no one can take your home away. We'll talk more about this when we unpack the E for examine your capacity and the importance of finance structure. Now returning to our example of the $120,000 per year target comfortable lifestyle income, your required target nest egg, nest egg number as I call it, is between 2.4 mil to three mil. And this is based on the assumption that when you stop work, you don't

Starting point is 00:20:29 spend or eat into your principal savings, but instead you live off the income that your nest egg generates via interest, rent, dividends, et cetera. In this way, you can effectively live comfortably forever without getting into the dangerous territory where spending and eating into your principal savings becomes a negative spiral where you end up with nothing. By preserving your investment nest egg principle, you also end up with a sizable lasting legacy to pass on to your family and loved ones. And this perpetual financial freedom is really important at a time when our lifespans are increasing substantially as we live much longer, thanks to medical and health advances. So don't sell yourself short. Now, 2.4 mil to 3 million

Starting point is 00:21:15 investments at first sounds like a big scary number, but it's not if you have enough time on your hands, as you're about to hear shortly. And let's assume that your break-free timeline is 15 years, which is how long before you want to be in a position when you don't have to work anymore. And note that I didn't say retire or stop work, because I believe more in rewirement than retirement. Because we all need an ongoing purpose in life, and most of us want to continue to make a contribution through some level of work whether it's voluntary or part-time. So now that we've set the goalposts the next thing we need to do is to project where we're likely doing it up if we don't do anything differently to what we're already doing. Because if continuing to do what

Starting point is 00:22:02 we're already doing is enough then we don't need to invest differently at all. But if there's a projected gap then we've got the opportunity to do something about bridging it. So to assess where we're likely to end up, we need to look at our existing investments and project what value they're likely to be at when we decide to reduce or to stop work. For simplicity, let's assume that your current combined household super balance is around about $200,000, which is pretty close to the average level for an Aussie couple close to 40 years of age, according to the Association of Superannuation Funds of Australia, or ASFA. For the purpose of this exercise, let's also assume that you've got around 30-odd grand in savings sitting in your home loan offset account or

Starting point is 00:22:47 other savings account, and you've got about $5,000 in shares. So where are you going to end up in 20 years' time if you do nothing differently and you have 200 grand in super, 30 grand in savings, five grand in shares, and your combined household income's about 150 grand? Well, based on average long-term growth rates for each of these assets and allowing for inflation of 2.65% a year, which is within the Reserve Bank's target range of 2% to 3%, you're going to end up with a total investment nest egg of $791,000, assuming ongoing employer super contributions of about 12% of your salary. If your investment nest egg is then converted to a tax-effective income stream, this will give you an annual income of just over $39,000 a year. Now, this is not much better than

Starting point is 00:23:40 the full pension for a couple so you're headed for a very lean lifestyle when you stop work and this is what most people do if they're just focusing on paying down their home and putting money into super. Now $791,000 is a long way short of the 2.4 mil to 3 mil nest egg target that'll be required to fund your lifestyle income of about $120,000 a year. This means that you're a minimum of $1.6 million, right up to $2.2 million short of your nest egg number in 20 years' time. This is what we call the gap. And at first, it sounds daunting. But if we deduct inflation from this figure in 20 years' time, back to what it's actually worth today, then you're only $567,000 short right now, which is one good quality high growth property. So your freedom

Starting point is 00:24:37 number based on all of this is $567,000 or one property. Now all of a sudden your $2.4 million to $3 million in income producing nest egg in 20 years time doesn't sound so unachievable as most hardworking Aussies with savings or equity in their homes are able to secure a $560,000 investment property. Now to further demonstrate what this looks like if you're trying to achieve your lifestyle income goals in 10 years instead of 20, your freedom numbers changed and look a little bit like this. If you do nothing differently, you'll end up with a nest egg of just 0.97,000, which is nearly half of the nest egg size achieved in 20 years. And you'll be trying to survive on a lifestyle income of under $25,000 a year. In other words, penny pinching poverty. The gap in 10 years

Starting point is 00:25:33 time will be between $1.9 million up to $2.5 million. And amortising this back to what it equates to in today's dollars once inflation is deducted, you'd need to invest over $1.1 million right now, which is about two to three quality properties. So you can hear the massive impact that your investment horizon has on your long-term quality of life. By doubling your break-free timeline from 10 to 20 years, you shift from having to invest $1.13 million or buy two to three properties now with a 10-year time frame down to just $567,000 or one property if you're looking to achieve $120,000 a year lifestyle income in 20 years. Yet again, it's all about time and the more you invest now over a longer time frame, the easier and less risky this all gets.

Starting point is 00:26:32 So again, don't delay, start today. And if you'd like to see what your future freedom forecast looks like, based on the specifics of your particular situation, feel free to reach out to me now at bushey at knowhowproperty.com.au. And this now brings us to the end of the W4Y Stage 1 of your Six-Stage Property Wealth Cycle Freedom Formula Approach, which is all about achieving and funding your ideal lifestyle so in summary the take-homes from today's session are start getting invested in addition to your super today if you want to

Starting point is 00:27:11 enjoy anything like a good lifestyle when you want to stop work don't try and reinvent the wheel by just focusing on the property because property is the last thing you need to look at after you've embraced the right principles the right process and the right people as encapsulated in your preventative wealth property vitamins and your six-stage property wealth process. Start with the end in mind by getting crystal clear on your why in terms of what does your ideal lifestyle look like in full vivid technicolor. Then monetize this by determining how much your ideal lifestyle costs per year. Then encapsulate this in your freedom numbers through your lifestyle income, your nest egg number and your break-free timeline. You then need to project

Starting point is 00:27:54 where you're likely to end up if you do nothing differently based on your current income and assets. This will confirm the gap between where you want to be and where you're likely to end up, which informs how much you need to invest now and or how many properties you need to secure. So now that your freedom numbers have let you know where you're headed, what your lifestyle income goals are, how much you need to invest now to make it all happen, the next step is to examine and confirm what your financial capacity is to invest which is what we're going to dive into in session three of the property wealth revolution which is e for examine and if you want to race ahead and or find out more feel free to grab a

Starting point is 00:28:37 free copy of my award-winning book get invested at knowhowproperty.com.au or if you want to get the full step-by-step process from woe to go in infinite detail, you can buy a copy of my full Freedom Formula book on Amazon, Booktopia, or any good bookstore or online provider. That's food for thought, and stay with us for more here on your property hubs, Get Invested. Thanks for getting invested. Now, here's three easy ways you can take action to start making it happen to ensure you build momentum and start living by design, not default, so that you're following your freedom formula. Firstly, subscribe to this podcast if you haven't already and keep the weekly inspiration coming. Secondly, get a copy of my book, Get Invested, for free and find

Starting point is 00:29:31 out what it takes for you to invest in living more and working less. Just visit bushymartin.com.au forward slash books or knowhowproperty.com.au or click on the links in the show notes. And thirdly, join me and the Get Invested community. Each month, I send a free and exclusive email full of practical self-help and wealth wisdom that our current Freedom Fighter subscribers can't wait to get. Just visit bushymartin.com.au, scroll to the bottom of the page and sign up. And there you have it. In three easy steps, you're on your way to dusting off your forgotten dreams and making them a reality get invested is proudly part of the property hub your home for property investment insights and inspiration when you subscribe to the show you

Starting point is 00:30:19 get all of your get invested episodes along with realty talk sprayer's longest running and leading online property show for red hot property investing news and insights direct from all of the industry leaders and influencers. And finally, feel free to connect with me on Twitter, Facebook, and LinkedIn, as I'd love to hear your feedback, your inspiration, your ideas, and your questions and queries anytime. Thanks for listening. Hear you next week. And as always, dream as if you'll live forever and live as if the days you'll last. Thank you.

Property Hub - Investment Insights & Inspiration - Property WEALTH (2/7) - W: Your Why

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