Have you have ever wondered how you are going to live on less than $20,000 per year on the pension after you finished work?
Oh you aren’t worried – you have super? Well APRA studies show that after nearly 30 years of compulsory superannuation the average retirement income for self-funded retirees is just about $21,000 per year. Paul Keating knew what he was doing when he set the levels of contribution at 9% of salary – it would produce just enough to replace the pension, but not much more. And the Government won’t have to pay you after you stop work. The reality is, it simply won’t be able to afford to pay you as our population ages and advances in health mean you will live much longer.
Very early on in my investing career, I reached a point where I simply couldn’t borrow any more money to buy more property. My appetite for property had outgrown the bank’s willingness to lend. So I had to find a more creative way to expand my portfolio. I had bought a house for $48,000 in Victoria Park and had no conventional way to finance it.
What was I to do?
Simple. I used my credit cards. This was time when the banks would routinely send out pre-approved letters telling me I could get a card with a $10,000 limit – just fill in the form and return. So I did. Over some time, I collected five of these – just enough to buy my new investment property. I spent another $3,000 renovating the property, got a new valuation for $80,000 and hey presto, the bank would loan me money again. So I refinanced the loan, paid back the credit cards and pocketed some of the additional cash left over for myself.
I decided a long time ago that I would be financially free and would never rely on the Government for a pension after I stopped work. I just could not imagine living like that. Thankfully, I have had the opportunity to do something about my choice. How about you?
In the past, people happily worked their whole lives in exchange for a handshake and a gold watch. Then they spent the balance of their lives struggling to get by, waiting for the next pension rise so they could keep up with the increase in the cost of living. Yet now more than ever you need to be aware of the absolute need to provide for yourself, if you want a comfortable life after work. Or even if you want to stop work long before your reach the new retirement age of 70 years.
Craig speaks with Jason Penna from www.propertybooks.com.au about his property investing & developing career and his upcoming book – Crowdfunding Real Estate – The Next Generation in Property Investing.
The short answer to the question “do interest rates matter?” is “yes”, “no” and “it depends.”
Last week the Reserve Bank of Australia cut official interest rates from 2.5% to 2.25% – the first change in rates since August 2013. Much joy was had by all. Retailers, exporters, domestic tourism operators, stockbrokers and the Government all rejoiced.
It gave the media a bit to chat about for 24 hours or so and economists a chance to justify their existence. There was speculation about whether or not the banks would pass on the rate cuts – answered within hours when they all did, and some even dropped rates by more than the 0.25%. There was much hand-wringing and point scoring about who predicted the cut and if they thought there would be another soon.
Concern, sometimes pain and often confusion, precede a breakthrough. For some time now, I have been somewhat concerned and sometimes a bit confused about the future – with particular emphasis on how people will be able to create the lifestyle that they want. And I don’t think it is getting any easier to create wealth, which is a pre-requisite for a high standard of living in a Western society, given the pressures and temptations we face in this modern life.
I am a huge believer in financial freedom – you see money makes it possible for you to stop having to worry about money. Then you have freedom to live. Remember, freedom is all about your journey, not your destination.
I believe that you can choose the life you want and that you can design your life. My mission is to inspire people to create the life that they want. Property investing is just the vehicle of choice to pay for that lifestyle.
Yet when we read of median prices for property over $800,000 in Sydney, $600,000 in Melbourne and $500,000 in Perth, we need to start asking ourselves how we can even afford to invest in real estate? I’m not despondent at all – there will always be a way for those truly looking for answers.
I spoke with Tony McManus over at 6PR radio last weekend. We talked about the year ahead – for the national market and for Perth. We also chatted a bit about the future of investing and what is on the way. You can listen in below.