Originally posted by sbe
Question - You want liabilities to increase 170% but assets on 44% - isn't that a bad thing?
Prior to 2003, we were trying to self-fund our way to financial independence. That is, by using our own money - we did have some borrowings but we keep them to a minimum. Our LVR in Jan 2003 was 8.5% (really, really conservative).
One thing I learnt through this Forum and attending seminars/workshops is that there is nothing wrong with borrowing money, especially for appreciating assets, as long as you take a sensible approach. In fact, using Other Peoples' Money or OPM you will become financially independent quicker.
So, in 2003, we increased our assets by 21% and our liabilities (i.e. loans) by 149%. Our LVR increased to 19% (really conservative). In 2004, based on our success in 2003, we are aiming to be slightly more aggressive - assets by 44%, loans by 170% and LVR to 35% (still conservative).
Be careful with percentages. For example, in Jan 2003, if one had assets of $1M and loans of $100K (LVR of 10%) and one bought new assets of $200K with 100% borrowings, then one's assets have increased by 20% but one's liabilities have increased by 200% - LVR has increased to 25% (still conservative).
So, increasing one's liabilities by 170% is not a bad thing as long as one's LVR is still conversative. It just means that one is starting from a low borrowings' base.
Originally posted by sbe
My long term plan fits on one page !
Don't suppose you'd be willing to post your plan for others to learn from - erasing / dummying all numbers/% and personal information of course.
I'm for one interested in the format / points. I think we can all do better in the planning side.
Obviously, I can't post our Plan as is because of the personal information. If I removed all this information, I don't think it would be of much value. So, I thought I would give you the layout page by page:
Page 1 - Cover Sheet
Page 2 - Table of Contents
Page 3 - Aim of the Plan (to enable us to become financially indpendent) and Background (family structure, ages, etc)
Page 4 - Last Year's "Call to Action" List (including what was planned, what was achieved and when it was achieved, what wasn't achieved and the reasons why)
Pages 5 to 7 - Current Assets and Their Issues (for each entity, that is business, SMSF, Hybrid Trust and each family member, the details of all assets (property, shares and cash) including purchase date, purchase price, current value and all issues with that asset)
Page 8 - Current Liabilities (the details of each loan including lender, borrower, security given, loan type, date of application, interest rate, initial loan, current balance and purpose)
Page 9 - Current Net Worth (for each entity, assets by asset class, liabilities and net worth)
Page 10 - This Year's "Call to Action" List (including each action item, when it is planned to be done and why we are doing it)
Page 11 and 12 - Forecasted Assets at Year's End (similar to pages 5 to 7)
Page 13 - Forecasted Liabilities at Year's End (similar to page 8)
Page 14 - Forecasted Net Worth at Year's End (similar to page 9)
Pages 15 to 17 - Investment Strategies for our business, our SMSF, our Hybrid Trust and our PPOR (how are we going to increase the value of each over the 10 years)
Pages 18 to 19 - Likely End Result (no one can predict nor control the future but we wanted some confidence/assurrance that our Plan will work and achieve our end result in 10 years. So, we used the different inflation, capital growth and interest rates combinations from page 233 of Jan's book "More Wealth From Residential Property" and the PIA software and ran a number of scenarios to give us a picture of where we are likely to be in 10 years time. We repeated the exercise for 15 years time. We summarised the findings in this Section. In reality, this section and the previous section were done together - we picked a strategy, calculated the likely end results, finetuned the strategy, re-calculated the likely end results, etc, etc. When reading, it makes sense to have them in the order as presented)
You may think the above is a bit "over the top". We were serious about becoming financially independent and we really wanted a Plan that we knew would work for us. So we went to this level of detail. We have shown our Plan to our team (accountant, solicitor, mortgage broker and bank) - from the Plan, they know we are serious, dedicated and professional.
Hope that helps - if you have any questions, please post on the Forum and I will respond.
KieranK