Sunday, 13 October 2019

Talking about $$ and that 'Enough" Figure

Meg and Jack ready for work. Photo taken last summer with paddocks looking vastly different to the lush green of our present Spring 2019.

There was a pleasing response to my previous post What News? where I talked about Brian's impending 'retirement' and our collective need to quash some of the taboos around discussing and sharing financial planning and monetary strategies/advice/ideas.

So I thought I should run another post to open more discussion and address some of the issues raised in the comments received.
Thank you to all who commented and sent emails. Your generous well wishes are wonderful and very much appreciated.

One of the comments on the previous blog post mentioned having a contingency plan for our old age, if we can no longer manage the physically demanding aspect of running the farm.

We do have a plan for when that occurs. Maybe in our eighties? Hopefully not until then.

We would need to sell this property and purchase something smaller which would also deem us eligible for the age pension. 

Some people are not aware that, according to current Age Pension rules, the primary residence and up to five acres is not included as an asset when assessing an individual's age pension entitlements. In our case, we have sixteen acres so we would not be eligible for the age pension as the rule stands at present.

Where the Age pension is concerned the goal posts seem to move according to which party is in government, so in our $$ calculations we have factored in a lifetime of being self-funded retirees. If we do become eligible for the age pension, for whatever reason, it would be an added bonus that we would gladly accept.

The writer of the comment below (wishes to remain anonymous), is finding it really tricky to know how much they would need to live on at their current standard of living.

"Deciding that magic figure which is 'enough' to retire on is truly

doing my head in. One website based on extensive research of retired

couples suggests the amount of around $60,000 a year and states

that by the time retirees reach 80 they live on $50,000 or so a year

and that includes inflation. I have asked my retiree friends what

their magic ‘enough’ figure is. One couple are on $72,000 per year as

they travel extensively and will continue to do so for the next 5

years. Then they plan to pare it right back. Another couple are on

$50,000 a year and they also manage to have overseas holidays every

couple of years."

How do we know how much will be enough to live on? 

She is already very savvy about her spreadsheets and projections, she seems to have thought of all the possibilities, inflation etc.

There is no ONE answer to how much we're going to need. It depends on our lifestyle, interests, hobbies and what we expect to be doing to fill our days. 

Do we want to travel? What type of travel?
Do we want to regularly eat out in restaurants or will it be fish 'n chips on the beach twice a year? 
Do we want to own the latest car or are we content with a good second hand car that we will keep for as long as it performs safely?
Will there be a possibility to earn money from a part time job, a market stall or a skill that we can do from home and earn some money?
Do we have expensive food tastes? Wine, beer and spirits?

That 'enough' figure for us will be different to someone else's 'enough' figure.

One way to get an idea of how much we will need is to track all of our spending for a year or preferably two years.

I have a Money smart app on my phone and I write down every dollar that we spend. Some months are big spenders when rates or utilities bills come in, or we need to mend or buy new equipment. Our house and car insurances are deducted from our joint access account each month. I include these figures in our monthly spending.

Every outgoing is written into my phone app. (Or just in a notebook if that works better for you). At the end of every month I write the total expenditure figure into a notebook next to a column that tracks all that we have earned during that month. 

Credit card purchases are written into my spending app too, so there are no purchases that slip through without being tallied. 
Our credit cards are paid automatically every month. A simple procedure that can be done through our bank or on-line banking.

Incomings and outgoings. My method is unsophisticated but it works for me.

It's amazing (and interesting) how a few dollars here and a dollar there, in either column, adds up over the month... and the year.

Once you have an 'enough' figure in your head, try to live on that amount for a year; try it for size. You may be pleasantly surprised, but you may also get quite a shock.

I'm quite shocked at the amount we pay in outgoings (registrations and insurance, tractor, trailer, farm and livestock expenses) but pleasantly surprised at the in-comings from selling our produce at markets and the Farmgate stall, the small bee-keeping business, and writing for Grass Roots magazine.

Keeping this record was one of the clinchers towards knowing that we could cease employment. Working for the boss will be a thing of the past, and gosh that's a feeling like no other.
For self confidence in managing our own money we need to educate ourselves. Read, study, explore, research. There is so much free information at our fingertips (on-line) and at our public library but sadly, there is a shortage of places where we can get advice at no cost or have informative discussions/ sharing knowledge and experiences.
It's our money, we worked hard for it, I don't want to fritter it away on costly financial guidance and an advisor who is out to feather his own nest on my hard earned savings.
I'm so very pleased that I found  Scott Pape - The barefoot Investor a few years ago and recommend the book to everyone of all ages. Every library has a few copies, have a read, buy your own copy, give a copy to each of your children. It will be the best $20 (approx) you ever spend.

To the younger readers who imagine retirement as two lifetimes away; get involved in making your money work for you now by paying attention to your superannuation. Do as Scott Pape says and flick it from 'default mode" ASAP. Your'e likely to be paying higher fees because that's exactly what your superannuation managers want you to do.

For great advice on managing money and savings, tips and inspiration on how to save money, go to Rhonda's Down to Earth blog for her gentle wisdom and traditional, but still absolutely relevant, common sense and logic. Rhonda's books hold bible status to many people. Mine is well thumbed with sticky notes at relevant (to me) pages.

There are countless valuable nuggets of wisdom on Scott Pape's blog and you can sign up to receive his free regular and educational emails. Scott Pape Barefoot Investor

Education and advice on investing in shares at Dave's blog Strong Money Australia

and Phil's generous wisdom on Mr Homemaker are both incredibly informative.

(Mr Homemaker's blog is about to move, but we can follow it through the links on his current blog)
Mr Homemaker (Phil)  has taught and guided me through some stressful moments when I needed independent advice more than I needed a stiff drink. For that I am forever grateful and this is why I want to pay it forward, open the discussion, prevent someone else from making mistakes that we almost made.

For inspiration and an interesting female viewpoint on all things finance I regularly check in on Miss Balance at All About Balance

In all things, I try to gather as much advice from all directions before making a decision on which method is right for me or us. Always being open to new, different suggestions can be an enormous help, and this is where other people's ideas are valuable.

I hope you find this discussion as helpful and enlightening as I have.

Do you have any anecdotes or words of wisdom to share? 
Hop in and join the discussion... your experience may help us.


Sally XX

Thursday, 3 October 2019

What News?

Some big changes will be happening around here next year.  There's a list of maintenance jobs to be done that is as long as my arm, plans to re-jig some of the gardens, ideas of hooking up the van and going fishing occasionally, and dreams of living less by the clock and rather by the sun and moon rhythms.
It's official.... Brian is "retiring" at the end of this year.  What I actually mean when I say "Retiring" is that he will be leaving his paid job after forty five years with Yalumba Wines, but he won't stop working. He will instead be his own boss, working his own hours at doing the things he enjoys doing, and with no staff to manage.
His position at Yalumba has grown with him over those years, so much knowledge is in his head, not written down or documented in any 'procedures' manual.  He will be difficult to replace, but replace him they must.
It's now his turn to live the life of his choice, and my turn to see more of him.

Turning sixty in June, and a minor health scare that made him think about his mortality, has brought about a change in his way of looking at life.  It also happened to me at around the age of sixty, and I was wondering when, or if, he might start to consider making some changes to enhance the quality of  the time that we have left.

A few months ago I gathered up all of our financial figures and asked a couple of finance people to look over the numbers that I had crunched.  It seemed too good to be true that we would be able to live on our superannuation and some investments until the end of our days, hopefully into our nineties. When they gave us the nod we were justifiably ecstatic.
Euphoric, but difficult to get my head around for many reasons; firstly I don't feel old enough to be "retired" but I'm certainly reminded of it every time I look in a mirror.
Secondly, we have become so accustomed  to living a frugal and simple life that our savings just kept growing to this point where there's enough to live on.
And there's that word. Enough!
When do we reach the point where we feel that we have enough?  I suspect that in our modern society many people will never feel that they have enough, regardless of how abundantly wealthy they are.
We are so very lucky that, as a team, we are both on the same wavelength regarding excessive consumerism. A simple and meaningful life of living within our means and close to nature is our manifesto, and we plan to continue living this way as long as we possibly can.
I mention this because I wonder if you can imagine the surprised look on the faces of the professional money people that we spoke to.
"You can live comfortably on that amount?? Per month??"
"We need to come and learn how you can live on that amount of money."
And yet, here's the thing, we don't feel deprived of anything. We live a beautiful, simple, abundant and thriving life.
We're rich!
Admittedly our meaning of 'rich' may differ from the way many other folks define the term.
We're happy to own and live in a small but comfortable home that we worked on to make it suitable for our needs. There may be a couple of small changes made as we age, small tweaks to assist us with our decreasing mobility in later years, but here is where we hope to be.

So this retirement thing!
I don't describe myself as retired.  After those first few months of "retirement" turned out to be busier just as full as when I was in the paid workforce, I soon decided to use the term, work from home.
I love having things to do, being busy. I love caring for the animals, growing our food and operating this small cottage industry that quietly churns along here with the Farmgate stall outside our front gate.
We both love teaching and running workshops. The people we've met, the warmth of the new friendships made, the community belonging-ness of it all. Sharing our produce and our knowledge, paying it forward, is immeasurable on any monetary scale. There's no price on it.

 Funnily enough, no one has asked "What will he do after retirement?" because we all know that he will have plenty to do. Well, that long list that I've got will keep him busy for awhile, but he has plans.
So, apart from the bees and maintaining our farm and livestock, he will be taking on small jobs that will come his way.
Sheep management for hobby farmers looking for someone to shear their sheep, mark lambs and general livestock maintenance.
Pruning fruit trees, regenerative land management consulting, and spraying of biodynamic preps, to name just a few of the jobs that will fill his days and keep him socially involved.
There's no denying that it will be a big change for him, and indeed for us as a couple, but I believe we're ready.
Bring it on.

We could not have got to this point without the financial advice and helpful guidance of Mr Homemaker   I am indebted to Phil, for his easy to understand, informative blog posts on superannuation, financial planning and shares investing. His generous personal guidance has been the clincher for us.

How do ordinary folks like us find their way through the maze of conflicting, (and expensive) financial advice?
It's a jungle out there, full of sharks who will weasel as much commission and fees as they can get for their own benefit, whilst maintaining they're interested only in our best interests.
In our society talking about finances seems to be a taboo subject, but surely it ought to be discussed more to educate people about their options. Almost every day we hear about someone who has been robbed of their life savings by a shonky bank or dodgy financial advisor.
Or people with no idea of what fees they are paying to have their money managed for them. You would be shocked at the high percentages that some folks are paying.
For the internet savvy there are many forums and financial education blogs at our fingertips, but for those with no access to the internet I believe there should be local discussion groups where people can exchange ideas and become informed through the sharing of  knowledge. But it's all kept to ourselves because it's not polite to discuss money matters and this is where the sharks get the advantage.

What do you think?
What has been your experience in navigating towards funding your retirement?
Do you have an interesting story to tell? Do you have a warning for us all?

Your comments and sharing of your experience just may help someone avoid making a wrong judgement or decision. If you prefer to remain anonymous, send an email so I can share your story without your name appearing.

Thanks for dropping in.
Sally XX

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