How much is enough?

[ali]

My cats eat better than me alot of the time.
That Gourmet Fancy Feast cat food is expensive, and tasty.

Really? But seriously, it is good to hear of how much others are saving or investing. We came late to sensible financial management and wealth creation (I am 40) but are now puting $10,000 a month into our mortgage, about $500 into two investment properties (although almost all of that comes back at tax time and then goes into the mortgage), which together equate to a little under 60% of our household post-tax income. We have two preschool aged children and could possibly save more, but we also want to enjoy ourselves without worrying too much about day-to-day expenses. We don't really buy 'stuff' unless we have to (our TV is a bulky, 10-year-old chinese cheapy and my car is 9 years old). I think it is important to get the balance right, although that in itself is not easy. I think the best way to create passive wealth is to start young!

Cheers, Ali

 

[virgo]

How much ?

Hiya

Frankly all those great asset base amounts the financial advisors tell me that i need to have for our retirement gives me a headache

I have a simple approach for myself: a 3 prong approach to where my cash flow will come from..

a) one third from super (say for eg 1000 per month)
b) one third from net rents from my IPs(say 1000)
c) one third from deposits(say 1000)


This is what i project my modest retirement will need; of course excess amounts will be the icing (or that annual Paris trip)

 

[Edmond Dantes]

Deltaberry that is great. 2 years is amazingly short. It is also amazing that you can live on so little. How do you do it?

Depends on your annual salary, Terry. I don't fulle agree of what DB says. One thing is having a 300k salary,other making 40k.

I dont think you're on 40k, right DB? Most likely on the other side.

 

[ali]

Hiya

Frankly all those great asset base amounts the financial advisors tell me that i need to have for our retirement gives me a headache

I have a simple approach for myself: a 3 prong approach to where my cash flow will come from..

a) one third from super (say for eg 1000 per month)
b) one third from net rents from my IPs(say 1000)
c) one third from deposits(say 1000)


This is what i project my modest retirement will need; of course excess amounts will be the icing (or that annual Paris trip)

Virgo, that is a great approach - the simpler the better I reckon as it is easy to over-complicate things. I am trying to plan some end-goals in terms of passive income, although my husband is no hurry to retire. Do you mean those figures in today's dollar values? If you don't mind the question: how much equity do you think you will need?
Cheers, Ali

 

[wategos]

I'm aiming at 4500 per month passive after tax income. Most of that will come from share dividends, about 2/3 of the way there now.

That Gourmet Fancy Feast cat food is expensive, and tasty.

True, after I add some pasta, chilli and pepper my guests never know the difference.

 

[jackbak]

QUESTION - have other people thought through similar processes, and where on the spectrum do you fit - at the Early retirement Extreme level - Mr Money Moustache - 30-35k per year - or needing to replace your income or more prior to you deciding to "Stop Work".

I think about it all the time!!!

Aiming to be able to retire in 25 years on around $100,000 p.a. in today's dollars (will be roughly $200,000 in 25 years taking inflation into account), if it comes earlier then even better. Sounds like a long time but only just beginning my working life and about 20% of the way there...

 

[TingTong]

$40-50k pa would be ok with me but $80-100k would be perfect in today's dollars.
My life is pretty simple, I eat when im hungry and sleep when im tired so i don't understand these people who say they need more than $100k a year.

 

[VYBerlinaV8]

My goal is to make $150k per year, in 2005 dollar terms.

I'd say I'm about 12-15 years away from that. Dropping a millions bucks on our new PPOR set us back a bit!

 

[lizzie]

It is interesting.

Say you earn't $100,000 and lived on $25,000. That would mean you are investing $75,000 pa.

Based on a 5% yield you would need $25,000/5% = $500,000 net egg to retire.

To build up $500,000 at $75,000 per year would take about 6.67 years.

But it would be shorter than this as you would be earning income on the savings as you build it up, so perhaps 6 years,

Sounds good in theory ... but who, living out of home, can really afford to live on $480/wk?

I know those on the pension do so, but they also get rental assistance, travel assistance, utilities assistance etc.

Also, $100,000 is a pretty darn good wage to start in life ... take it back down to the average income and see what the figures are like. Earn $60,000/yr and all of a sudden you're down to under $290/wk.

Sorry but I'm rather sceptical ... if you were living at home and all expenses were paid for you ... if you didn't have a partner or children ... if you were earning an above average income ... if you had no car (and I'm only talking running costs here) ...

 

[lizzie]

but are now puting $10,000 a month into our mortgage, about $500 into two investment properties (although almost all of that comes back at tax time and then goes into the mortgage), which together equate to a little under 60% of our household post-tax income.

Which again ... is great in theory ... but most people aren't earning $220,000 after tax ($350,000+ pre tax).

** $11,000/mth/60x100x12

 

[sash]

Agree....but it is possible via clever use of paying debt, principle reduction, and savings.

I worked out...that I am dropping principle by about 130-160k per year (includes compounding affect of interest reduction). Most of it is as a result of large CF+ income from rental properties.

If I can bank $1.5m over the next 10 years...I will be a happy chappie.

Which again ... is great in theory ... but most people aren't earning $220,000 after tax ($350,000+ pre tax).

 

[lizzie]

I don't disagree that getting ahead can be done.

We're on what appears (compared to other SS'ers) on a very moderate income ... yet we've gone from nothing to mortgage free on a $mil+ property (once the dust settles, contracts going thru as we speak) - super in high 6 figures - and a couple of positive rentals - in the space of 14 years.

Would've been a lot more if I'd known what I was doing.

However, the majority of that was by increasing equity/value rather than skimping/saving. We usually spend almost all of what comes in as a PAYG on living expenses, mortgages and reno supplies.

And we are all a rare odd sort on here - can't see the other 98% of the population taking either path ... man ... I'm sick and tired of painting ceilings ...

 

[kathryn d]

$480 week seems pretty easy, if investing is your focus.
http://www.realestate.com.au/property-house-qld-brisbane+city-404655961

5 bedroom house @$620 week = $124 each
utilities @$200 month = $40 each
Food (I'm being double generous) =$50 each
transportation = $40 each
misc =$50 each
total.......................................... $304 each
savings @ 176 week x 52= $9152 pa

http://www.rs.realestate.com.au/cgi-bin/rsearch?snf=rbs&searchFormSource=advanced search&a=s&chk=0&pme=any&is=1&tb=BRISBANE CITY&u=BRISBANE CITY&cu=fn-rea&pxe=any&t=shr&s=qld&p=10&o=p

Lots of rooms you can rent @ $115-$160 range too, if the person can't be bothered taking in roommates.

Only serious investors will want to live this way.
They would also have a second p/t job.
Nothing will stop the motivated people.

This will get you the first "fixer upper" after a few years saving (or convince your other roommates/ friends to purchase with you.
Having like-minded friends would be helpful.

 

[virgo]

How much?

Virgo, that is a great approach - the simpler the better I reckon as it is easy to over-complicate things. I am trying to plan some end-goals in terms of passive income, although my husband is no hurry to retire. Do you mean those figures in today's dollar values? If you don't mind the question: how much equity do you think you will need?
Cheers, Ali

Hiya Ali

I cook once a month for the community; mainly retired people plus all walks of life...3 months ago i met this old couple...be patient i have a story to tell...

They did not seem to know anyone and so i brought my food and thought i will talk to them...boy! was my initial assumptions wrong! turns out the husband worked for AMP as a financial advisor and retired at 40 did i mention he was a Colombo Plan scholar? So i ask him how he did it...use OPM (Other people's money) he said; buy property as soon as you can....he has never gone on the pension and lives entirely off rents...

So i told him i want to retire too in 10 years but just can't estimate how much one needs...very easy he says...he and his wife paid off their mortgage, make do without a car (they have a huge house near the train station in Epping, Sydney) and $2000 per month makes them pretty comfortable.. plus they afford the yearly trip overseas too:)

(i did ask about kids; they say they calculated starting from when their son entered uni and that is when they assume independence)

So my target is 2500-3000 per month.(10 years time)

a) 1000 per month from net rents (achieved!)
b) 1000 from super (based on 5% return; needs super of 200K: )
c) 1000 from term deposits (again needs 200K base ; needs 20K savings per year should be achievable in a 10 year timeframe )

So there you have it...a very simple retirement plan...of course i plan to surpass that but that is just a rough model...hope this helps

 

[sanj]

Hi Virgo, arent you Singaporean?

As a fellow ex- Singaporean i dont think you can use the same rules as this guy did, in particular assuming total independence for your kids when they turn 18. Also, what about your folks? Will you need to support them or any other siblings?

I know im only 30 but still i spend a fair bit each month helping out some elderly relatives etc.

Anyway in my view it is good to be smart when it comes to expenditure but id much rather look at how i can make good amounts of money from a project instead of some of the ultra penny pinching ideas.

 

[mumbai]

Hi Virgo, arent you Singaporean?

As a fellow ex- Singaporean i dont think you can use the same rules as this guy did, in particular assuming total independence for your kids when they turn 18. Also, what about your folks? Will you need to support them or any other siblings?

I know im only 30 but still i spend a fair bit each month helping out some elderly relatives etc.

Anyway in my view it is good to be smart when it comes to expenditure but id much rather look at how i can make good amounts of money from a project instead of some of the ultra penny pinching ideas.

I am not Singaporean. But, being an Indian, share the same values. I spend a significant amount sending money overseas to parents/siblings and relatives too.

 

[virgo]

Penny Pinching?

Hi Sanj

Thanks for your input but if you know me as my friends do; i am the last penny pincher in the world (as a fellow Singaporean, you should know how tough it is not to eat out and i eat out almost every other day did i mention i do not have a job?)

Thankfully my folks are financially independent of me (my mum bought an annuity many years ago in Singapore when not many people have even heard of the word)...my brother "retired" at 35 (gulp!)

My kids do not need much (it is parents' expectations that are expensive IMHO) ...plenty of love, plenty of food around (that's what i was brought up with ha ha!)

yes, i will be undertaking a project very soon and if successful will help in achieving the 3rd prong (see above post)...how's that?

I am a simple person with simple tastes; i have seen too much poverty in this world ( i lived in Sri Lanka for a few years..long story) that many huge amounts quoted on this forum for retirement sounds quite "vulgar" to me:(

(okay gotta get ready to dodge some bricks now)

 

[virgo]

Filial Piety

I am not Singaporean. But, being an Indian, share the same values. I spend a significant amount sending money overseas to parents/siblings and relatives too.

Hi R@j

I hope you do not find my post flippant; that would be the least of my intentions, i assure you...i was merely stating the fact that supporting my family is not in my financial plan but i know that some cultures do ....i am just fortunate in this instance....

I wish you all the best in your investing journey

 

[Ace in the Hole]

$480 week seems pretty easy, if investing is your focus.
http://www.realestate.com.au/property-house-qld-brisbane+city-404655961

5 bedroom house @$620 week = $124 each
utilities @$200 month = $40 each
Food (I'm being double generous) =$50 each
transportation = $40 each
misc =$50 each
total.......................................... $304 each
savings @ 176 week x 52= $9152 pa

http://www.rs.realestate.com.au/cgi-bin/rsearch?snf=rbs&searchFormSource=advanced search&a=s&chk=0&pme=any&is=1&tb=BRISBANE CITY&u=BRISBANE CITY&cu=fn-rea&pxe=any&t=shr&s=qld&p=10&o=p

Lots of rooms you can rent @ $115-$160 range too, if the person can't be bothered taking in roommates.

Only serious investors will want to live this way.

That's not living, that barely surviving.

So $50/week is supposed to cover:
Clothing
Fitness and Lesuire
Hobbies
Emergencies
Entertainment
Gifts
Rewards
Electronic goods
etc.

It can be done, but why?
It's so much easier to simply earn more money, so you can spend more and invest more.

 

[kathryn d]

That's not living, that barely surviving.

So $50/week is supposed to cover:
Clothing
Fitness and Lesuire
Hobbies
Emergencies
Entertainment
Gifts
Rewards
Electronic goods
etc.

It can be done, but why?
It's so much easier to simply earn more money, so you can spend more and invest more.

I'm not suggesting anyone do it.
There have been other threads previously covering this.
If you could see how much dedicated, low earning people can really survive on, you would actually see how generous my version is.

My husband bought 4 pairs of jeans, and I a t-shirt, and a book, all for $6 last Saturday. All at the op shop. Do we need to live this way? No.

We can eat very well on $25 pp a week.(when we do buy groceries)


When someone is saying its "too hard" I say "here is an option"
Getting a higher paying job is another "option"..but until then