A good strategy starts with some reverse engineering. You have to start with where you want to be, and work it back.
By understanding your current financial position and setting some short term, medium term and long term goals, your 2030 step by step plan is simply about how to bridge the gaps – starting today.
On the go? Here’s 30 seconds of key take outs:
- Adopt the mantra ‘if you think it, ink it’. Recording your goals is a giant leap towards reaching them because you already know where you want to go.
- Bring the year 2030 to life. Once you do that, it is simply a step by step approach to success.
- Personalise your plan based on your goals, age, financial position and lifestyle.
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5 steps toward putting your 2030 strategy in place
Committing time to shaping up your financial and lifestyle goals is a giant leap towards success. Why? If you can articulate where you want to be, and you understand where you are now, all that’s left to do is plan how to bridge the gaps.
Here are 4 steps you can take to plan your financial future.
Strategy step #1: start with the big picture
Why do you think the Navy, Army and Airforce sits you down with you every 12 months to do your SPARs? Being clear about where you’re heading, and why, sets you up for success right from the start.
If you just follow your GPS to an unfamiliar destination without even understanding the general direction, just one traffic diversion could completely through you off your destination. You need to know where you’re heading, before you leave your driveway. Being able to visualise your destination keeps you focused on reaching your goal despite distractions.
Take the story of the foot soldier and the General. The digger has been assigned one specific task – to dig a trench to agreed dimensions. Being task orientated, he starts digging. Once finished, he is assigned his next task.
The General takes a much more strategic view, making sure tasks assigned to the soldiers are carried out adequately, while also planning moves on the battlefield. This requires abstract, strategic thinking.
Who earns more, the digger with his task by task responsibilities or the strategic General with the big picture view? There is far more value attributed to thinking strategically.
When setting goals, start with the year 2030 or 10 or 15 years from now, but make sure to set step goals along the way. If a goal feels like it is too far away, it is easier to get distracted. Goals set and achieved along the way, will keep you motivated to reach for the next one.
Your goal might be as simple as a statement that ‘by 2030 I want a property portfolio earning an income that is double my salary at the time’. What is important here is the why? It is the why that is the motivator. Try this: ‘I want my property portfolio to be earning double my salary at the time, so that in 2030 I can explore another career or study opportunity, even if my life partner is on paternity / maternity leave.’
Goal setting is a skill and I urge you to practice it. Some young people I meet with don’t know what they’d like to be doing on the weekend let alone this year, or in 5 or 10 years time.
It feels empowering to get your thoughts down on paper, organise them and put an action plan or checklist in place to reach them.
Know exactly where you’re heading and why. If you’re stuck on what those goals are, you’re not alone. We can help.
Strategy step #2: understand your current financial position
Once you know where you’re heading, you need to understand exactly where you are today so you can work out how to reach your destination.
Get clear on your current incoming cash flow and outgoing expenses. You need to understand your financial position such as how much money hits your bank account each pay day, and how much of that money is then paid over to service debts.
Debts or liabilities, includes loans such as credit cards, car loans, personal loans and mortgages.
To borrow for an investment property as part of your overall strategy to achieve the goals you’ve set, you’ll need to have your financial records and understanding, ship shape.
A bank or lender will be looking for a surplus of funds to calculate your borrowing capacity. You’ll need numbers to support how much debt you can comfortably afford to repay. Lenders will factor in some upward rate movement to make sure you can cover loan repayments if interest rates were to rise.
Strategy step #3: keep it simple and achievable
Keep your investment strategy simple, affordable and achievable. Most first time investors start with residential property because the concept of earning rental income from a house is familiar, and is the easiest to manage.
Based on my experience and success, I believe building an asset base of residential properties is the way to go.
A residential property portfolio will give you the experience of owning assets. Down the track you can leverage these assets to tackle some bigger projects.
Strategy step #4: make sure your strategy fits your lifestyle
Another key factor to consider when putting a short, medium and longer term plan in place is your lifestyle.
The Defence Force lifestyle is unique in that you can be crash posted with a couple of weeks to get your stuff together, then you’re off for 6 or 9 months’ deployment.
A nomadic lifestyle demands a simple, passive investment property management approach. Stand-alone houses work well because you hold the asset in your name without the complications of strata titles, and other higher maintenance title options.
A freestanding home on its own title has greater ‘land content’ and banks tend to favour this type of asset over strata type properties. Strata titles are fine, if you’re living a more sedentary lifestyle with flexibility of time to manage the responsibilities.
Celebrate your success
Celebrate every step along the way. Each time you take one step forward toward a goal, take a moment to reflect and celebrate. Then it’s on to the next one!
Imagine New Years Eve 2030 as an extra special reason to celebrate because you’ve prioritised your goals for the past decade and a bit, and you’re now a successful property investor with plenty of lifestyle options in front of you?