20 simple steps to financial freedom
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management.
"In war, events of importance are the result of trivial causes". These may be the words of Julius Caesar, but they are stingingly apt when applied to our modern-day lives.
Preparing for retirement feels like a battle, but the outcome can change vastly, based on a series of bite-sized decisions.
All too often we find people looking for that magic bullet. As anyone in the military will tell you, one bullet won't win a war and a pint of sweat saves a gallon of blood.
So stop and look in the mirror. You are the bullet. And you are going to need to sweat as well as fire in all directions.
When meeting people who have made a success of retirement planning, there are a bunch of traits we come across time and again. The most important? These individuals have never relied on one part of their life providing the money. Even those with successful businesses or high-earning jobs have multiple tactics at play. A good outcome is not left to chance and never depends on a single payoff.
1. They don't over-capitalise their own property. It's not an investment and they know it.
2. They work the property ladder and do up houses, banking capital gains. Often these jumps involve their own home, as gains are tax-free. Working within the new bright-line tax test this is still permissible every couple of years.
3. They buy a rental property. Property is one of the few things people will borrow against, making it a geared investment. Other people's income pays off a large part of their asset, leaving them to keep saving from their own income.
4. They have paid off their own mortgage in a fast and furious fashion.
5. They have a partner who works, regardless of the income gap between them. These couples don't think of their other half as a retirement plan.
6. They aim to become a specialist or have a unique skill in their career. This gives them the opportunity to start their own business in a field they know well.
7. They never contemplate hobby businesses.
8. They ask for shares in their employer's business and become part of a strategy to sell the company.
9. They manoeuvre themselves into a position within their company where there is a skill or knowledge shortage in order to contract back to the employer with flexibility and high charge-out rates.
10. They own a business where the strategy for succession and selling the company is well thought-out. Many discuss how the company will be sold at the point it is set up.
11. They have high savings rates. At some point turbo savings will have taken place. A couple will live off one salary and save the other.
12. High-earners will have automated savings to prevent these being spent on lifestyle assets that are non-productive.
13. They don't waste money on collections – wine, art, cars, jewellery.
14. They bank rather than blow inheritances.
15. They have made their kids financially self-sufficient.
16. They take risk and understand it cannot be fully calculated or controlled. They know that doing nothing or refusing any risk can have highly detrimental results.
17. They consult experts. This means taking financial advice, using insurance brokers, tax experts and getting all contracts checked by specialist lawyers.
18. They invest rather than save. Only emergency funds are kept on deposit. All other reserves are in diversified sharemarket, property and bond portfolios.
19. They don't view themselves as their own fund manager or DIY investor.
20. They are on top of their health and fitness issues in the run up to retirement.
As the great Russian writer, Leo Tolstoy said "the two most powerful warriors are patience and time". These sentiments apply equally to the retirement planning battle we all face.
Written by Janine Starks. First appeared on Stuff.co.nz.
* Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.