Are you ready to break free from the 9-5 and start living your retirement dreams? The road to retiring early in Australia is paved with ambitious goals, smart decisions and savvy financial strategy. Here's how to achieve financial freedom and live your best life, sooner than you might think.
Starting the Journey to Retirement
Retirement may seem like a distant dream, but it starts with a simple switch in mindset. Instead of trading your time for money, you want to eventually trade your money for time. By building your asset base strategically while you’re earning good money, you can eventually generate enough passive income to pay for your core lifestyle expenses, allowing you to enjoy a comfortable retirement. Golf and pina coladas, anyone?
What is Financial Freedom?
My definition of financial freedom is when your asset base has the ability to generate enough passive income to pay for your core lifestyle costs, such as mortgage repayments, everyday expenses, and even things like travel and fun experiences. It’s also known as financial independence, and you might’ve heard about people striving to achieve FIRE, an acronym for “financial independence, retire early”. If you want to spend more than your asset base can generate, you still have the choice of working to generate extra income or dipping into your savings. This is sometimes referred to as Coast FIRE, as in, coasting towards retirement! Sounds pretty good.
How to Achieve Financial Freedom
To achieve financial freedom you need to build an asset base (ideally starting early on in your prime earning years) that can generate enough passive income to cover your core living expenses.
Understand These Important Investment Concepts
When building your asset base, focus on accumulating capital growth assets first. Capital growth assets have the ability to compound (often at a faster rate than income-generating assets) and are not taxed along the way, unless you sell them. Once your capital asset base is big enough, you can turn on the investment income tap and say goodbye to the grind!
Capital Growth
Capital growth refers to the growth of your asset base, usually through assets such as business, property, and shares. To grow your asset base quickly, consider leveraging debt to buy more assets that have the potential to increase in value.
Income Yield
Income yield refers to the amount of income an asset generates, such as rental income from property or dividends from shares.
Consider the Tax Outcomes of Different Investment Concepts
It's important to note that capital growth is taxed upon the sale of an asset, while income yield is taxed every tax year. This affects the power of compounding, as capital growth has the ability to compound on itself, while income growth is taxed annually, stunting its long-term growth.
Heed These Words of Wisdom About Investing For Retirement
Rich Dad, Poor Dad:
From the famous book by Robert Kiyosaki , "An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket." Remember, your home is actually a liability, and the more liabilities you have, the longer you need to work or the more income you need to generate to achieve freedom.
Albert Einstein:
Here’s one from possibly the smartest man in human history. "The most powerful force on Earth is the principle of compounding." When Einstein talks investing, we listen!
The earlier you start growing your asset base, the longer it compounds and the larger it grows. Just look at how massive Australia’s total superannuation assets have become (it’s about $3.3 trillion) to understand the power of compound growth, especially when the urge to sell and take profits is resisted.
The Psychology of Money:
In another killer finance book , Morgan Housel says, "Money's greatest intrinsic value—and this can't be overstated—is its ability to give you control over your time." Remember, the end goal with retiring early is not how much money you have, it's having the time to do what you want.
How BlueRock Can Help You Reach Financial Freedom
If you’re ready to set some serious wealth goals to achieve financial freedom and retire early, here’s how we can help you get there. Throughout our advice process we:
- Help you define what financial freedom looks like for YOU.
- Calculate the asset base required to achieve financial freedom.
- Determine how you’re placed to achieve this financial freedom with your current financial position.
- Provide advice on the best decisions to improve your financial situation in order to help you achieve it or exceed it.
To get started on this wealth adventure to early retirement, get in touch with our financial advisors and investment experts today.
The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
