Retirement usually revolves around careful planning. It is no accident that some people retire earlier and easier than others. Capacity to invest usually starts with income and is either enhanced or limited by family planning.
Income and family planning are essential ingredients to a good retirement plan. Knowing the levels of income you are likely to achieve, given your career choices, helps with planning. Family planning of how many children you would like and the types of education you want for them is a key factor around wealth creation.
The more children, the higher private school fees will be, the more money you need to earn.
Looking back, I really created my wealth by being focused. I would buy a home, improve it through renovating and garden creation and then I would sell it and buy another one and repeat the process. To this day, I am still addicted to renovating. Most recently I managed to almost triple the value of my family home in Toorak by renovating it over the years. The final renovation job today is featured on page four of Marshall White’s prestige property book.
I continued to renovate and trade up and by the time I reached my mid-thirties, I had no mortgage, which gave me great capacity to equity release for my investment portfolio.
I encourage a lot of people who are not in a position to trade [up] properties and need stability at home to use the equity in their homes to start investing in a property. A second property purchase for an investment is often a great way to help clear the family mortgage. Monitor the growth of your investment property portfolio and, once there is significant equity equal to the debt on the family home, sell down the asset (pay some capital gains tax) and clear the mortgage.
If you do the numbers of clearing a mortgage and alleviating interest, you are better off clearing the mortgage and replacing the investment property with the equity in the family home.
This is why an important part of my formula is to create equity in your own home as soon as possible. The equity in your home is then available to you to start investing. Once you’ve reached $100,000 equity, in your own home, and you have serviceability around your cash flow, generally, you can start investing. The true benefit in owning your own home outright really kicks in when you want to start buying more investment properties.
Call 1300-2-SOLID to organise a time to speak with Lynne and take control of your retirement.
– An excerpt from Lynne’s book ‘The Formula’ –