It’s always interesting to hear the answers people give when asked to name their most valuable asset. Unsurprisingly, age and lifestyle play key roles in the variety of answers given. Most young people would answer this question with material possessions (think car) while a young married couple might say their family home. A pre-retiree might say their super is their most valuable asset and at a certain age the focus on money flips to health.
Our financial planners have a unique take on this question. We feel that your most valuable asset is… YOU!
Let’s think about it. From youth through to retirement, your ability to earn an income and what you do with it, largely dictates how comfortable you and your family will be.
Let’s explore this further. Let’s assume we leave university at 21 and join the workforce and earn the current average weekly salary in the country(1) for our whole career. By the time 65 hits and it is retirement time, you would have earned almost $4m. This is a very simplistic calculation doesn’t factor in cost-of-living indexing. This means the average couple, excluding maternity / paternity leave, have earning capacity of $8m during their working lives.
Invest in yourself and this figure could be even higher. From further education to starting a side hustle, it’s incredibly powerful when you accept that you can influence your own earning potential and destiny.
Let’s look a bit deeper into this $8m. So, where does it all go? Some will go to paying tax, then a proportion will most certainly go towards life events – weddings, children, divorce. What else? Rent? Mortgage repayments on a big house? Mortgage repayments on a modest house? How many cars will you go through over 40+ years? How many holidays? Coffees? Are you someone who must have the latest and greatest material goods to make life easier? And what about investing?
So, two questions for you;
1. How much of your lifetime earnings are you going to set aside for retirement?
2. How much time do you invest in yourself over your working life?
Of that $8m of income, you and your partner only need to invest $284 a month each to end up with $2m in investments at retirement(2). This excludes your superannuation, your family home and any other investments you make along the way.
Many financial planners do not include your residential home and car as a true asset for the purposes of retirement as they do not generate income but rather cost money in maintenance. You will always need a place to live, so creating wealth outside your home is incredibly important.
Looking after yourself is not limited to your earning capacity but also your health. Keep yourself fit and continue to grow and educate yourself. Not only will you earn more than average, you’ll enjoy the journey more and put yourself in a position to enjoy the benefits of retirement. Put simply – your life will be better because of these actions.
So, where’s your $8m going?!
1. https://www.abs.gov.au/ausstats/[email protected]/lookup/6302.0Media%20Release0Nov%202019
2. Assuming 7% average earnings on investments and regular monthly investments.