How to Achieve Future Financial Security and Freedom

Let’s face it, everyone that lives in this world has fear. I for one have some fear which to this date, I find it hard to overcome, for examples: fear of spiders, fear of height. Out of all the various fear that we might have, I think it is fair to say however, that everyone has somewhat this one very same fear: fear of future finance situation.

Financial fear is more than just fear of not being able to provide for ‘myself’. In fact, through my observations, people who have future financial fear do so because they’re afraid they won’t be able to provide for other people. Their children, spouse and families.

Media doesn’t help either by publishing articles such as “house prices are too expensive”, “young generation can never enter the house market”, “prices keep soaring higher and higher”, etc. If you are not careful, feeding yourself with these news everyday is truly bad for your body, mind and soul!

But here is the good news! You have within you, the ability to secure your future financially. Everyone can do it. There is no magic in it. The key here is investing and education. One can’t live without the other. You would have heard by now the word “investing” thrown around. However, without the right education, you are only planning to fail. Investing requires hard-earned money to begin with, and without the education and knowledge around it, it would simply be a gambling exercise.

What is investing? Investing in my opinion is the act of making your money grow more than the basic-needs’ price growth (ie. inflation). For example, if inflation rate is at 2%, it means that the price of every single item in this world (milk, cars, bottle of water, etc) would have increased by 2%. A $2 milk today will be $2.002 next year. It may not sound much, but if this keep happening every year, in 30 years time, that $2 milk will become $3.55. That’s 77.5% increase in price! And we’re just talking about milk. How about other items and needs? 

The problem is, we can’t always rely on our salary alone. Why? Because your salary may not be growing at 2%/year. Let’s face it, how many of you have had a salary increase in recent years? I for one haven’t had a salary increase in the past year. If you did have an increase, how much did it increase with? If the increase is 2% it means that you’re just barely getting by. If you’re not getting an increase, it means that you’re actually bringing home less money simply because price of every item has increased by 2%. And as you grow older, your work effectiveness also decreases, thus resulting in even more salary stagnancy. In reality, the younger ones have more time at their disposal. They are also faster and can learn quicker.

If we’re not careful, relying on job alone is a risky future planning.

So, this is where investing becomes very important. How come? Because generally, investing gives your money an increase that is way higher than the inflation rate. There are many forms of investments. Managed funds (superannuation included), property, shares, gold and other ones. My superannuation for example, grows by 10-11%/year. Property investing returns on average 8%/year.

As you can see above, when you invest, your money will grow way more than the inflation rate and your salary. Thus, not only would you be able to pay for basic needs, but still have “leftover” to enjoy life even further. So, write this down:

1. THE CONCEPT: To secure your future financially, you will have to make sure your money earns more than basic needs price growth. And the vehicle to achieve this is investing.

Now, investing alone is not sufficient. What’s more important is ultimately, the amount of money we actually take home. As I mentioned earlier, the financial fear people have is the probability of not being able to provide for their family when they can no longer work in the future. It means, we have to make sure that the money we take home can cover the cost of the needs of the family. The cost is different between one family to another.

For me, to be able to provide comfortably for my family, I would need either $100,000 (before tax) and still have mortgage, OR $70,000 (before tax) without mortgage.

2. THE EXECUTION: How much money do I need to be able to provide for my family comfortably?

From here, we can actually now work the numbers backwards.

If my investment returns 10%, to earn $100,000, I have to have $1,000,000 NET worth in my investment portfolio. This can be in the form of $1,000,000 in shares, gold, commodity or, if it’s a property: 5 houses fully paid off rented at $450/week each.

For me personally, my investment choice is property. Why? Because it would take a lot longer for me to save up to be able to buy $1,000,000 worth of shares. While with property, for every $50,000 I can buy one. And this is the great thing about it, if you pay Principal & Interest, eventually, in 30 years all of your mortgages would have been paid off.

As long as you’re discipline with saving money, saving $50k wouldn’t take long. Coupled with the equity growth, you can keep collecting properties. And, if you want to be super defensive, and want to stop at 5 properties, you can. I myself have 5 properties now which in 30 years I know I would have paid off my mortgage, thus giving me the $100,000 passive income ie. FINANCIAL FREEDOM!

And as you can imagine, in 30 years time, the rent would have grown. It wouldn’t be $450 anymore which means you’ll get even more income.

Is it really this simple? Yes! Does it require hard work? No. Does it require discipline? Absolutely! If you just keep spending money on useless stuff instead of saving it, then no amount of money can help you. The more you earn will simply give you more excuse to spend more.

Easy Buyer’s Agent help clients buying the right property so that you have a product that is rentable with great rental returns while minimising risks such as vacancies, etc. Get in contact with us if you want more information on building financial freedom and security.