So what’s your financial destination?

So what’s your financial destination?

If we are going on a holiday the first thing we need to decide is our destination. Kind of obvious that before we think about where we are going to stay, how we are going to get there, what we will do when we get there and we need to decide where it is we actually want to go.

It is funny though – when it comes to our financial journey and ultimate destination almost no-one decides where they are going which can cause all sorts of problems.

These problems tend to focus on two main areas:
• Not taking any actions, or
• Focusing on the transactions BEFORE we decide on the outcomes (destination) we are trying to get to.

To keep using the holiday analogy, imagine someone said where are you going for your next holiday and you replied Qantas. It would seem kind of silly and strange to say that, but that’s exactly what we do around our financial journey.

If we ask someone what they want their retirement / financial freedom to look like (the destination) they will sometimes reply “I don’t know but I think I need to buy an investment property or start a Self-Managed Super Fund or start a share portfolio”

Now this is exactly like answering Qantas to the question on where you are going for your holidays.

Financially, just like the holiday planning – it is much, much better to start off by working out your destination or goals FIRST.

We can do this by answering some simple questions such as:
• If you were retired now, how much would you need coming in each year after tax to live a good life.
• Would that amount cover all the nice stuff, overseas holiday, your passions, pastimes or would you need some more coming in each year to cover these things

We now have a “number” that is your income number that if that was coming in from your investments would provide financial freedom, choice and potential retirement to you.

We can convert this income number to a lump sum number – an amount of investments you will need to produce that income and never risk running out of money. (How we work out that number is a whole other topic – watch for future posts.)

We would add to that 3 more questions
• If you were retired right now, would you need some lump sum funds set aside for “toys” – cars, caravans, boats, a Harley, a yacht ? – those sort of things.
• If you were retired right now, would you need a lump sum set aside to help people – say helping your kids into their first homes, or to help charities or causes you are passionate about.
• Are there any other goals or dreams that you would need a lump sum for?

We then add these lump sums to our income lump sum and we have your own personalised “number”. This is your destination, which is how much you will need for financial freedom and the choice about whether you work or not and so you can retire whenever you choose.

Then like a good holiday plan – we can start working out the best way to where you want to go from our starting point – where are we now.

Financially, this includes what strategies you will use to get there, things like:
• Building a successful business and using the cashflow to build passive assets
• Paying off debt
• Buying an investment property or 2
• Putting more into Super
• Starting a Self-Managed Super fund
• Building a professionally managed share portfolio

Perhaps, some or all of these.

As always before you act on anything in these articles you should get advice that is specific to your own circumstances.

If you would like a “discovery” session to work out your own number and discuss some of the potential strategies to get you to financial freedom – just let us know. For the right people – we offer this at our expense – that is no cost to you.

Have an awesome day 🙂

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