Enough is enough

Crown Money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money podcast. I'm Jessie Edge and I'm joined by Scott Parry. How you going?

Tremendous. How are you? Good.

How is the weather up in Queensland today?

Yeah, it's nice. 23. I deserve it. It's the best winter I've ever had. That's awesome.

That is amazing. And what's the beach like where you are?

Yeah, the sand squeaks, so I think that makes it pretty clean. So squeaky sand. I think the water's 23 degrees, so, man, it's just. Honestly, I could not be happier with the relocation. So very, very slow lifestyle up here, but, man, loving the ability to work from home.

Yeah, that's awesome. I think everybody is. Now, what are we going to talk about today?

I think it's something on everybody's mind. Whether they've asked themselves the question or not is a different point. But how much is enough? How much money is enough? When do you know it's time to hang the boots up and kick back, relax and enjoy the show? I think one of the saddest things.

Very good question. For a lot of people, it'd be like, no amount is enough, Right? That's kind of the problem.

Yeah, they're the saddest people because they just never are happy because they keep chasing the shiny paper and it never lands. And as a result of that, they unfortunately sacrifice everything else that's important to them. So, yeah, that is. I've seen. I mean, the richest people, some of the richest people I've ever met are definitely the saddest people or unhappiest people that I've ever met. So, yeah, it goes. Goes a long way. Just to come back to how much is enough and what are we aiming at? We need to have a target. No one's got any target. Everyone's just floating along. Well, my super is going up and my probably is going up, but, like, how do you know when enough is enough and you don't have to work anymore, you don't have to trade your time for money. And you can actually, at the moment have all this money and no time. And you want to be able to get to a position where you've got all this time and all this money. So I think that in reality, there are five types of wealth. Financial, obviously, money. Social wealth. Relationships. Physical wealth, which is your health. Mental wealth, which is obviously knowledge. And then time. Wealth, which is your freedom. And so I think the pursuit of financial wealth can rob you of the others. So don't let that happen. And that's what today's chat is about. How much is enough? So do you want to hear a little hack? Do you want to hear a little calculation?

I feel like yes, if you've got the answer for us, that would be great.

So this is what I've sort of come up with and has worked for a lot of clients just to give them a ballpark figure. It's not certainly gospel or anything like that. It's just really about how much income do you want each and every week to live off in today's money? And what's that figure for you, Jess?

How much do I want each and every week to be able to live off? Do I have to include mortgage repayments and everything else?

That is a very great question. No, because every single one of you is debt free by the time you retire because you've been on a crown money management system and you've followed the strategy, so you're debt free at retirement. That is completely whole street. Nice.

All right, well, like, okay, we're talking, you know, really comfortable life in retirement without being too crazy. Then I think probably $2,000 a week.

2,000 a week?

Is that asking too much?

Never.

Well, by the time I retire, that'll just be the cost of lettuce.

Yeah, yeah, it's true. So 2000 a week is $104,000 per year passive, passive income we're talking about. Right. And so what you need to do is you just simply double, let's call 100 grand to get my numbers round. I want 100 grand a year passive income when I retire. Cool. How do we find out how much is enough? You simply double the figure, double the 100 grand. So that gives us 200 grand and you add a zero. So whatever your passive income desired amount is per year, you simply double the figure out of zero. So, Jess, you want 100 grand a year. That's 200,000 plus the zero is $2 million. That's your asset base required. Not including your home. That is your asset base required so you can kick back.

Not including my home.

That's.

That's a tough one. That seems almost unachievable.

Hey, I'm glad you asked. Hey, hey. Big questions, big answers. So how do we achieve that? Well, the younger you start, the easier it is to achieve. That's compound interest at work in its finest. If you are listening out there in your late 50s, this is probably something you want to be telling Your kids, because I think your train is nearly at the station. So this is something which I geez, I wish my dad taught me this. But I'm hoping that all of you guys out there can tell your kids about this and just start doing this yourself. So how do we get 2 million doll asset base by the time we retire? And that means that we can have 100 grand a year. And why is it 2 million? Well, if you do the simple math here, $2 million and you times that by 5%, which is the interest. Now I'm not saying that it's going to, you're going to earn 100 grand a year in interest every single year. Some years you're going to earn more, some years going to earn less. However, take into account here, that's just the interest you're not getting into the principal. So that's why it's so high. I mean, if you said, Scott, I'm going to probably be able to get to a million, I think you're still going to be doing well, but that means you're just going to be chewing into some of your principal. And I think the kids are going to be okay. A lot of people go off and leave something for the kids, man. They've got a debt free house to inherit. They're good, they'll be fine. So the name of the game when you retire is to spend all the money you have before you die. That's how it flips. Right now you're in accumulation mode. You want to try and save as much you possibly can, but once you retire, then the game goes. I've got to spend all this on experiences, my family, my friends, helping people, whatever you want to do with your money in retirement. But it all goes back in the box. Whatever you don't spend, it goes back in the box. So $2 million is your target, Jess. Now how do we get to $2 million in net assets? Well, great question. And once again, let's just break this down to a simple analogy using property. Now, I'm not saying you should use property, I'm not giving you any financial advice. I'm just saying these are the numbers on a property. If this was the strategy you selected to go with which most Australians do. So let's pretend you bought a $600,000 property today, 2022, and all of a sudden that property, you borrow 90% on it. So you owe 540, you've got to put down a $60,000 deposit plus stamp duty, which you've got the equity in your Home, it's going to cost you around about 467 per week. Of $600,000 asset, it's costing you around 467 per week in interest. That's on today's rates. That's also going to go up as rates go up, but so too will your rent. That's going to rent for around 500 per week. So the secret to property and the secret to being able to retire with this $2 million is holding the asset. No one has made money out of property by flipping stuff in one or two years. You've got stamp duty costs, your capital gains tax, all these sort of things chew into your profit. So it's the buy and hold strategy. And you only need to do this twice. You only need to do this twice, and then there you're going to be good. So follow me. We bought a house this year for 600 grand, right? In 10 years time, we're going to get it revalued. In 2032, I think it would have averaged 5% per year, which means it's now worth 900 grand. So some years it would have done 10%, some years it would have done 0%. But let's pretend in 10 years time, your house has gone up 300 grand. It was purchased for 600, it's now worth 900. Nothing crazy, not at all bullish or optimistic. I think that's quite realistic. So in 2032, your house worth 900, you still owe 540, so you've got a nice chunk of equity there. It'd be silly to sell it then. So what you want to do is hold it for another 10 years. So we're now pushing that to 2042. And so, Jesse, you're certainly coming up to what that would be about 60 years of age or close to it. And in 2042, you're ready to retire. And what you want to do is then say, okay, where do we sit? The property is now worth 1.3 million. So the property you bought for $600,000 today, in 20 years time could be worth 1.3 million. You still owe 540. You never paid a cent off the debt for some reason, and as a result of that, you'd be renting for around 850 per week. And what that really means is if you sold that one property, you're going to make three quarters of a million dollars in profit, take your capital gains tax, and then that's retirement savings. So that's how you boost your super fund by $750,000 pre seed capital gains tax from just buying and holding one property for 20 years. Now you do that twice, there's 1.5 million plus your super is going to be worth at least 500,000 with you and your husband, at least. And there's your 2 million. Oh, so it's not as hard as what I mean, you said $2 million. Wow. I don't even know if that's achievable. But if you just bought one investment property now for $600,000, in 20 years time, it could be worth 1.3 million. You're going to take $750,000 off the table, take some capital gains tax, you can add that to your retirement life savings, or you could just hold the property and enjoy a passive income stream of $400 per week and you've still got the $1.3 million asset which you can cash out anytime. So that's another way to look at it, is I've still got that passive income coming in. I want around about 100 grand per year. Well, you've already got 25, 26 grand a year passive income just off that one property, not to mention what your super is doing. And if you do that twice, well then you're in a position where you nearly got $800 a week passive income stream off your property portfolio plus your super. You're going to get close to that $2,000 per week.

That's amazing. That does not sound as difficult as I thought it was going to be.

And it's not. But it needs time. It needs time. And so we're every all about time, isn't it? Everyone starts to look at property and think, no, they're going to make money over one or two or three years. It's not the play. Back in my day, I used to think I want fast, quick wins. Now I want to play the game which says if I wait, I win. That's my new game. And this is like with compounding interest, you're getting interest on interest, and in that 2042, if that is an actual fact, your property price is worth 1.3 million. And there's a crazy year of capital growth in 2042, and it does 10%. You've made 130 grand in one year. You're getting the actual capital growth off the asset value, not your initial deposit back in 2022. So that's how property could help you get to that $2 million. You only need to do that twice. One property now and then one. We're not Saying, don't buy a property now. I'm saying one property and then another property at some stage in the future. And as long as you're getting those earlier than later, then you're going to be in a position where you're getting compound interest to work for you, and you're going to be very, very close to your retirement goal. $2 million in net assets, not including your home.

I just think it's. Yeah, it's really good to know that number. Like you said at the beginning, you know, how much is enough? And just having an understanding of that and a picture, big picture of, okay, that's actually how much I need. Because I think we all just kind of drift through without having that. That number in mind and kind of going, oh, well, whatever I have at retirement, that's what I have. But you do need to kind of plan ahead and make sure you hit that target.

Imagine someone sat down with you, you started your working life and said, jess, all you need to do to be able to retire on 100 grand a year passive income is to buy two investment pros before you retire. Okay, I can do that and pay house off. P.S.

Got to do that one. Nice one. Well, that's really cool.

Simple. Whatever your actual desired annual passive income stream is in retirement, double it at a zero. And that is the target we're aiming at.

Wonderful. Awesome. Thank you so much for that, Scott. That was very insight.

Thank you for being the guinea pig and looking forward to seeing what properties you're buying.

Yeah, I'm looking forward to having my $2,000 a week in retirement. It's going to be great.

Awesome.

Thank you so much. We'll speak to you again soon.

Ciao.