I used to have a lot of fantasies of winning the lottery. I would play the same numbers every week and that would give me licence to think about how I was going to spend my multi-millions when I won….and then every week I would lose again. So depressing.
I think a lot of us do hope we will stumble across a get rich quick scheme or win the lotto and that will be our ticket to early retirement. I don’t play the lottery anymore because I realise there is no such thing as getting rich quick. Even so-called ‘overnight millionaires’ who invented the latest app or successful business, their wealth did not happen overnight. I am sure they would tell you that a lot of their blood, sweat and tears went into their business before they hit the big time.
I changed my attitude from hoping I would become rich through some random stroke of luck to actually following an investment plan that I laid out for myself. My goals are
- Borrow the absolute minimum from the bank for my house & pay extra on my mortgage to pay it down earlier than the 25 year loan term- I already achieved this and paid off my house at the end of 2020.
2. Invest as much as I can into ETFS and the share market. Ensuring a well – diversified spread
3. Make extra contributions into super. (I am currently paying 7% of my own salary into super on top of my employer contribution of 17%.
4. Consistently try to increase my income through side hustles and promotiond at my 9-5 job.
5. Reduce expenses and live below my means. Avoiding the lifestyle creep as my income has increased over the years has been instrumental in having a solid financial foundation at a relatively young age.
These are not crazy strategies and they certainly are not original. Many, many people have followed this plan to achieve financial independence. But what I have realised is that for a normal person with a normal salary the only way to achieve wealth is to be consistent and play a long game. I realised that time was on my side and compound interest could really work in anyone’s favour if they just get started.
This investment calculator shows you the power of compound interest. If I start off with my initial 10K investment and add $1000 per month for the next 30 years averaging a 7% return I will have 1.3 million by the time I am 55. This does not even include my Super balance. You can have a play-around at this link with your own figurures.
When I think about the things in life that would make me happy and how money factors into that, it really has changed a lot since my younger days. I have no interest now in a flashy car, a huge house or spending $150 on breakfast for the family on a Sunday. My kids will be eating $3 store bought pancake mix on a sunday morning as their special treat and I can guarantee you that they will love it just as much as they would sitting in some restaurant. The reality of the FIRE movement is that the people who are chasing an early retirement rarely are chasing these material items that many view come with wealth. Unfortunately having the flashy car and big house are the exact things that chain you to the 9-5 grind. The freedom to not have to work or to be able to enjoy working part-time is the true money related goal for me and what I will do when I achieve my goal net worth and goal passive income.
Start to think about what your days would consist off if you didn’t have to work. Would you be able to volunteer somewhere, exercise more, spend more time with family, work on your own blog or side hustle. All these things are FREE and can bring a lot more joy than driving a Mercedes. Of course at the end of the day you might really want to buy that Mercedes and if that is one of your goals it is totally fine but the point is sometimes it’s the simple things that we really want and managing our money early is what will get us there long before we turn 65.
That is why these numbers were mind blowing to me once I really understood how it works. This is something an average aussie with an average salary can actually achieve. Especially an Aussie couple who have two incomes coming in. 25 years is a long time but I can guarantee your future self will thank you for it if you do. Following this basic strategy doesn’t mean you can’t enjoy the ride and spend on things you want to spend on. It is just about acknowledging that there is no quick fire short cut only consistency and commitment will get you there.
