What's your 'cash' goal?

[JoannaK]

** me --> crawls back into small corner from whence I emerged and rethinks definition of financial success **

the definition of financial success is whatever you want it to be! If it's $100k pa net, then that's what it is. you're the one that has to be happy with it.

to be honest, our goal is one that we've just plucked out of the air with no rhyme or reason to it....at the end of the day it's just a number and something that we aspire to. It is a work in progress, and it keeps changing as our underlying position changes.

the most important aim of our goal is to have unencumbered underlying assets and passive income being generated from those assets. Anything on top because of our ventures is just a bonus.

$100k pa might be your goal now, but I won't be surprised if you don't retire when you reach that goal, you'll move your goal upwards and keep on keeping on. Why? Because you can.

BTW - I read an interesting quote in the BRW recently that went: "money doesn't buy you happiness, it only alleviates your misery"....

 

[quoll]

$100k pa might be your goal now, but I won't be surprised if you don't retire when you reach that goal, you'll move your goal upwards and keep on keeping on. Why? Because you can.

Agree

Some of us will take a break, have a rest from doing the JOB but I think it would be strange for most here to stop, hit the goal, retire, play golf, bowls or caravan around the country til we die.

I feel that the journey becomes a hobby, something you can take pride in having done, gee guess what the golf, bowls etc are, hobbies. Investing is a game and $$ is a good way to keep score.

Just remember to enjoy and work towards the goal (current goal) until YOU move the goal post.

cheers
quoll

 

[quoll]

$2.5M is about right. I base that on requiring a passive income from that cash of $100K pa indexed to inflation. OK, so its a perpetuity where the growth (inflation) is 3% and the realisable rate of return from its investment is 7% (I think I saw some add with a 7.0% cash rate recently)...

This looks so much like my calcs ... BUT the more I learn the more it stuff's me up.

Why

Because I can generate more than 7% ..

I need passive income now, because I've got a JOB. But once you remove the JOB you have a lot of time, there are many ways to generate income that involve a bit of risk and a bit of effort. So my current thinking is I can generate the required income with less capital working 3-6 months of the year.

I'm back into a throwing ideas around mode. What can I do, how can I do it.

It's messing with my head, but I now the 7% is one way a safe easy way but just over the horizon are a lot of other options. It won't be long.

cheers
quoll

 

[DavidMc]

What an interesting thread.

I never knew anyone here had aspirations of so much. Money is used to by lifestyle. I wonder what type of lifestyle are you all after and how much do you think it would really cost? More importantly, what age is it best to enjoy this? I'm 29 and I could retire today in luxury in Thailand. Full service hotel accommodation, all restaurant meals, daily massage, laundry, transport, diving, hiking, sightseeing, entertainment plus contingency for under $25k AUD per year. Of course that's not everybody's cup of tea (nor mine right now - I enjoy having good health care, etc) however imagine doing that for a year and still invest on the side. Do the maths on your dream lifestyle and see. A 1998 Ferrari F355 Berlinetta F1 can be leased from around $2.2k per month (in Australia).

On the flip side, if you aim for the moon, whether you miss it or not you'll be 50 or 60 years old. Your idea of the 'millionaire lifestyle' might be cheaper than you think.

It might be an interesting exercise to do this.

Furnished penthouse in Melbourne (or any other major Western city) - $4,000pm (renting)
Cleaner - $200pm
Utilities - $200pm
Laundry - $400pm
Ferrari - $2,400pm
Eating out - $1,800pm ($30 x 2 people x 30 days rough calc)
Entertainment - $2,000pm
Holidays - $2,000pm (assuming $24k per year - not a bad trip!)
Fashion - $1,000pm
Contingencies and things I forgot - $1,000pm
Health - $200pm

$14.8k per month,
$177.6k per year.

Lets round it up to $250k for a couple cause I know I've missed a lot.

Maybe I'm just not thinking big enough...? I thought that was pretty wild for me (it doesn't include donations).

Oh, that's right. Kids. That's why you need the millions

 

[DavidMc]

I forgot to answer Alex's original question. The concept of cash is a bit strange to me too. It's 'average annual equity growth' for me (i.e. a function of gross assets).

 

[alexlee]

The other way I was thinking about it was, would I prefer to have my current portfolio or the current net asset value in cash sitting in my bank account? I'd choose the former, simply because I can sell everything and get that cash, but can't turn the cash into my current portfolio.
Alex

 

[MichaelW]

OK,

Having applied a little bit of recalibration, how does this sound as a goal in "today's dollars", so we index it to inflation at 3% if projecting it forward to some point in the future.

$10M in unencumbered assets other than the PPOR.
Generating income at a conservative 6% risk free yield (regardless of asset class).
Gives passive income of $600K gross pa, should be enough net to cover a comfortable lifestyle.
Growing without needing re-investment by at least the inflation rate (so future proof).

Sound a bit better?

OK, so its $10M not $2.5M...

Cheers,
Michael.

 

[DavidMc]

Gives passive income of $600K gross pa, should be enough net to cover a comfortable lifestyle.

I think it would be a worthwhile exercise to sit down and work this out (as much as you can anyway). DaleGG's wealth sabotage product has a nice little spreadsheet for this from memory.

Sound a bit better?

OK, so its $10M not $2.5M...

Well, it's not better in the sense that it will take many years longer to get to. Don't forget you will continue to invest when you are financially free (in fact, you would have even more time to hunt around for the best deals).

 

[peteb]

This is very interesting, I just went on holidays, three familys (16 people).

We spent about 10K for accomadation, flights, meals and incidentals (2 adults and 2 children).

The other family spent 30K for the accomodation, flights (not sure buisiness class times 6 people) , meals and incidentals (including a 62K gift of jewelery for his wife) about 80K.

He has a net worth of 35 million we have a net worth of a tenth of that.

HE didnt think twice about it and has already booked for all of us again next year to the same place.

 

[The Y-man]

Maybe I'm just not thinking big enough...? I thought that was pretty wild for me (it doesn't include donations).

The jet, you forgot the jet!
http://www.airbus.com/en/aircraftfamilies/executive_aviation/

Cheers,
The Y-man

p.s. note fuel capacity on some of the models, and find out the price of jet fuel

 

[Belu]

The jet, you forgot the jet!
http://www.airbus.com/en/aircraftfamilies/executive_aviation/

Cheers,
The Y-man

p.s. note fuel capacity on some of the models, and find out the price of jet fuel

questa costa?

 

[Kenster]

Unleaded is $1.31 today, but it's possible to get it $0.04 cheaper with the Coles voucher

PS. Assuming Airbus is ok with this fuel

 

[alexlee]

Oh yeah, baby! The jet! Can't forget that. I mean, they don't let you take pets into the cabin! Definitely getting at least one of those NetJet shares.

 

[The Y-man]

Your idea of the 'millionaire lifestyle' might be cheaper than you think.

It might be an interesting exercise to do this.

DavidMc,

Kudos to you post, as not only do I believe it is an interesting exercise - I believe it is a very important one.

After all, how can one know what to aim for, if one does not even know how much the things you want in fact cost?

Most people freeze in their goal setting, as they automatically assume that some astronomical numbers are required to live the lifestyle they dream of, without fully costing it out.

Often times, once you know how much the lifestyle is going to cost, you can work backwards to the amount of assets required to generate the required income.

Sometimes, the cost of the underlying asset can confuse you when you are trying to cost the actual lifestyle.

Here is an interesting story about a holiday house in the Gold Coast I recently had the priviledge to stay in.

It wasn't a big house - as the land size was probably no larger than 500 sqm - more like a large 3 storey town house. While it was nice, it was nothing outrageously spectacular (the only thing of interest being a lift servicing the 3 floors). The views to the ocean were nice, but the other 3 sides were looking straight into the windows of the 20 storey condos next door.

Now here's the thing: the owner has allegedly been offered $13m or thereabouts for the house. Now in my little world, that's one mighty expensive house. If you were in it for the lifestyle only and not the underlying asset, I suspect you could pay much less for a penthouse in a condo with about the same floor space and much better views

As you say DavidMc, the lifestyle may be a lot more affordable than one thinks

Cheers,

The Y-man

 

[Rixter]

I think it would be a worthwhile exercise to sit down and work this out (as much as you can anyway). DaleGG's wealth sabotage product has a nice little spreadsheet for this from memory.

Yes I have Dales Wealth Sabotage package.

As described, it's on CD, which combines a 44 page PDF manual along with a series of very powerful spreadsheet tools.

The package is designed to help you with setting financial goals and monitoring your progress whilst explaining why so many people do not succeed in achieving their financial goals. It is also the first time that Dale explains, in writing, the concept of "Investment Schizophrenia" that he has spoken about for so long.

For those who dont have it do yourselves a favour and look it up on the web or find it advertised in the back few pages of the API magazine..Simply brilliant!

 

[DavidMc]

The jet, you forgot the jet!
http://www.airbus.com/en/aircraftfamilies/executive_aviation/

I dunno. Would you really want *own* one of those things? Storage, pilot(s), cabin crew, all relevant licensing, insurance, maintenance, registration, petrol, taxes and whatever else? To me that's just a lot of hassle. Not to mention the ridiculous environmental impact (of course you are welcome to your own views on the environment).

Why not just become a member of all fancy members lounges (One world and Star Alliance should cover 95% of airports), fly first class every time and use VHA cars or helicopters to get you to and from the airport? For me, you get the same 'experience'/'lifestyle' at a much cheaper price (and therefore much sooner) but more importantly less hassle. I think in the future there will be more 'ridiculously comfortable' commercially available flying options.

 

[alexlee]

Because you don't have to wait in line to check in or pass through security!

You can own a share of these things, I understand.
Alex

 

[MichaelW]

I think it would be a worthwhile exercise to sit down and work this out (as much as you can anyway). DaleGG's wealth sabotage product has a nice little spreadsheet for this from memory.

David,

The "should be enough" was obviously tongue in cheek. In fact, I already have a detailed budget spreadsheet for my current expenses which I have tweaked for some small upside and then factored into my retirement planning spreadsheet. I am a very organised boy...

So, in essence, I guess I agree its important to have a clear goal and work backwards from that, as that is precisely what I have done. Having said that, I'm sure I can find something to put the growing income in retirement to use on. Did someone mention a jet?

Cheers,
Michael.

 

[Kenster]

I dunno. Would you really want *own* one of those things? Storage, pilot(s), cabin crew, all relevant licensing, insurance, maintenance, registration, petrol, taxes and whatever else? To me that's just a lot of hassle. Not to mention the ridiculous environmental impact (of course you are welcome to your own views on the environment).

Why not just become a member of all fancy members lounges (One world and Star Alliance should cover 95% of airports), fly first class every time and use VHA cars or helicopters to get you to and from the airport? For me, you get the same 'experience'/'lifestyle' at a much cheaper price (and therefore much sooner) but more importantly less hassle. I think in the future there will be more 'ridiculously comfortable' commercially available flying options.

The way our psychology works: Whatever we consciously think, talk and do, it would have direct consequence on our unconscious mind.

Since the unconscious directs 95% of our actions (and hence our results), it's better to train it to completely believe in our dream, so that it acts as a contributor, an active participant, a willing partner to the dream.

To do this, it is important to be conscious of the dialogue we talk to ourself, and the way we talk it: The look, the sound, the feel, the taste and the smell. The more real the picture is, the more believable it would make on the unconscious.

If we consciously say "I have a Big Dream", and on the other hand, "It's ok to Live Small", then the unconscious would know which one to act on: "Live Small". It would then direct all our energy, reasoning, reaction to achieve that message.

This is when we experience effects like yoyo performance, procrastination, indecision, fearfulness, lack of energy. Whatever the conscious try to say, think, do, the unconscious would sabotage it.

What would we get in real life? Small result.

Beware of our thinking.

 

[DavidMc]

I'm aware of this and I agree to an extent. It's good to think big, think positive however you must incorporate some element of realisim. If you took it to the extreme you might end up working your butt off till the day you keel over and die chasing your $10m pa dream if you took it too literally. Now, Y-man might actually be realistic in this dream (as I don't know his financial situation), however this is something that the average person who have to either take a ridiculous amount of risk or live a severily compromised lifestyle to achieve if it is even possible at all.

All I'm suggesting is:
1. It's good to work out a reasonably good idea of what you need. Otherwise, how else do you know when you get there? Ever known people to just keep working like crazy even after they've reached this goal? Some of them don't know anything else to do at this stage in their lives as they never took time out to smell the flowers along the way. The other thing that happens is that they get there then think 'now what?', raise the goal and keep on working in a job they don't really love.
2. The 'lifestyle' you desire might not cost as much as you think.