What does it take to retire financially free?

"Post-Tax" income is a figment imho.
Tax rulings change all the time. With every government change.
We Australians were always made to believe that making Losses upfront was good (Pre-Tax).
Post Tax you would make the money. Great! And that was good.
Times have changed now. Capital Gains stagnate.
And investors holding an asset that drains funds from their employment income does not allow us to retire, does it?

Unfortunately, people who retired with Pre Tax losses found their way back to employment agencies, when they realise unknowingly, that they were caught up with the fad that it is "Okay to lose money upfront". Expecting a Capital Gain.
Negative gearing was the holy grail.

We investors were subsidising the cost of the renters.
(Apparently they were a lot smarter bunch imho as times have shown)

Because we were promised to make it back at Tax time!
And better still, news to boot, Capital growth that will eventually follow in 5+ years time.
One can NOT retire with income the ATO promises to credit you back.
Rulings Change every 5 years. Or even lesser.
Government come and Go. CGT changes. Banks move from IO to P&I in a wink.

Much like Living on Equity strategy (LOE strategy) which was the rave of the day back in 2005s.
I had hoped to do that! It was utopia.

Can anyone expect to draw down equity every 5 years now and live off that equity?
Banks have changed rules from IO to P&I with the Royal Commission etc.
Those days are long gone. What happened to those investors in today's market...

Make money upfront my friends. With rents to supplement income from employment.
And Capital growth to boot.
And retire with Real cashflow not the accountant's version of today's scenario.
Because tomorrow is just tomorrow, no one can promise.
Pay your taxes,
And don't expect a handout from ATO.
Times change.
Govt change.
And rulings change ALL the time (even by the same Treasurer).


...

 

Possible some may not retire financially free aka Haven't got a hope in Hell, if this article is valid.

Number of older Australians drowning in debt on the rise

 

One paragraph in the linked article states:

“The service has seen a big increase in the number of Australians over the age of 55 reaching out for help to deal with what it calls "severe debt", which is debt at more than six times a person's annual disposable income.”
​

We must be in BIG trouble as we are over 55 and our debt is way more than 6 times our disposable income.

What should I do? Call the Helpline??

 

Simple.
Money out < Money in.
Passive, or active.

You can definitely do it on a low income.
Just easier with higher cash-flow in.
Leaves room for error.
More forgiving to the unexpected in life.

Reality is, most won't get there.
Phenomenally less by a pre-retirement age.
I'd wager, even most on these forums.

It takes a lot of discipline.
Ideally an early start in age.
And sprinkle of good fortune.

 

I feel you left out the most important one, the one most fail to do and that is:-

An incredible amount of hard work!!!

 

No-body listens when I mention there's work involved.
Best to leave it out.
Easier to spruik.

Hard-work. It's a relative term.
The way I see it:

You're sitting on the couch in your undies.
Hot day, fans on, TV has something showing.
Imagine wanting to watch something different on the telly.
The remote's on the other side of the room.
Either get up to change the channel, or just lay there and keep watching the crap.

Now what's on TV is your life.
Is getting up to get the remote hard-work, or just the (bare-minimum) actions you need to take to change it?

 

Who has time to sit on the couch
Let alone in ya undies
Any reasonable tax paying person should be at work

 

nah everyone can retire in comfort just buy properties because it always goes up and make you rich, why would anyone bother with hard work?

 

Isn't your disposable income supposed to be income available after you've serviced all your debts?

The name gives it away.... disposable income is basically cash you are free to burn?

Your average punter has 47 working years to sort their s*** out for retirement. it's not like it sneaks up on you unexpectedly. If they can't do that, especially when the last 27 of them have come in a time of uninterrupted economic growth with no recession, then you can only imagine what financial difficulty they would be in if you had normal economic cycles with recessions every 8-10 years....

 

I've never understood the Aussie fascination with negative gearing. Yes , if course it makes perfect sense when a market is actively rising to buy in and ride the wave, but I think a lot of investors get emotionally involved with their IP and hold on for too long instead of cashing in the profit and either putting it into another rising market or a cash cow. I just sold a slightly negative IP in Melbourne to move the equity into a property that would give me good cash flow. Interestingly have also been selling ips in regional NZ with yields of at least 8pc from purchase. Guess what? Got the same gain from a regional NZ IP as an outer Melbourne one walking distance to train station. That last boom lifted a lot of ships but will be a while I think until we see that again.

 

People who say "I'm buying a property to negatively gear to save tax". Not as good as my mate who was saving up to buy an investment property with cash to negatively gear. Negative gearing is not a strategy, it's a tax outcome.

 

That is why I posted.

Based on their definition, I would have thought everyone would be in “severe debt”.

Based on their definition, I am in deep ****.

 

No I think when people use disposable income it usually mean your net pay, ie after tax,super and other government charges has taken out.

 

I dont think that retirement will simply mean doing nothing.
Retirement will mean doing only what you want to do.
I consider myself retired as I can spend weeks away from my office at any time and if it wasn’t for my cars and charitable functions I could spend months away.
My dad retired at 72, then spent the next 10 years as a part time long line trawling fisherman. It was incredibly hard work but he loved it. He only gave it up at 82 as he could no longer drive at night.
My main company is under management but in my boredom I now renovate inner city terraces, finance large scale developments, buy and sell cars that I like. I now earn three times what I was earning when I was ceo.

 

What does it take to retire financially free?

Before anything else, it takes having a different mindset from the masses. If you don't develop a 'sophisticated' mindset, its unlikely to ever happen.

All actions (output) are triggered by emotions, and emotions are triggered by what physiological states we're in, and our state fluctuates according to our thoughts (input). It all starts and ends in the mind.

 

While I agree with you, it also takes a willingness to do what it takes. It's unlikely to happen if make excuses for yourself.

 

Love this!
And how often does it happen that people steer their time and energy into such a shortsighted outcome.
In your scenario the person may say “I have to work so can’t make it”. Let’s assume that person earns $50 an hour and let’s assume your meeting takes 4 hours.
That person has just put $200 ahead of potentially $100,000 of correct structuring advice.

 

Everyone talking about hard work...it's making me tired lol.

You guys need to take a leaf out of this guy