Financial Independence (Home Ownership, Super, Long Retirement) not possible for wage earners: What do we need and how do we get it?

[Value Collector]

Ok on principle, the 10% annual return year on , after tax is BS..but yes demonstrates the concept

As we spoke about in the other thread, if you just bought BHP shares in mid 2000, and reinvested dividends you would have achieved about 20% annual compounded returns for the past 23 years.

$10,000 into BHP on the 1st of June 2000 is worth about $600,000 today. Not bad, certainly gives ones retirement a kick start.

 

[Belli]

Both my late wife and myself PAYG earners. What I consider generous superannuation concessions helped; salary sacrificed previous mortgage payments on a pre-tax basis, same with any pay rises, not so grand property and also invested outside superannuation. It was a gradual process and nothing remarkable about it. Material goods were of good quality but purchased used where possible (still have dining table bought back in 1988.) Didn't deny our children but it had to be within our available money.

Probably our mind-set was a large part of it due to our experiences growing up with parents who were not high flyers by any stretch of the imagination.

 

[IFocus]

ditto.

EDIT: luck helps

Right Place Right Time and being in the position to take action
and DOING SOMETHING.

How do you think both of you would have gone without "Luck" and or Trading and property?
Simply a P.A.Y.E wage earner (Perhaps along with your wife).
Even worse if you were 20-30 NOW and starting on your journey. (After Education).

I like to think it was my genius, clever disciplined mind that did it but to avoid cognitive dissidence likely more due to luck and my clever wife .

In hind sign if I had stuck to property and market investing would have made an even greater return, trading consumed enormous amounts of time to get profitable and I did well but could have put the time to better use, but then there was a big benefit of earning about psychology (more than just the spruker stuff) complete eye opener that I use to this day.

 

[rcw1]

I like to think it was my genius, clever disciplined mind that did it ...

Good afternoon IFocus
that sounds awfully familiar ... ha ha ha ha haha
Then rcw1 woke up ... ha ha ha ha ha

Have a very nice day, today.

Kind regards
rcw1

 

[moXJO]

Right Place Right Time and being in the position to take action
and DOING SOMETHING.

How do you think both of you would have gone without "Luck" and or Trading and property?
Simply a P.A.Y.E wage earner (Perhaps along with your wife).
Even worse if you were 20-30 NOW and starting on your journey. (After Education).

Action, dedication and commitment is a big thing. I had all the knowledge at 16 but not the gumption.

Realistically I started later with an actual plan. Prior I was just turning fistfuls of cash and not utilising it in a way that grew wealth in a planned manner. I grew up poor as hell.

I'm great at making big sums in high risk trades a few times a year, Im good at jumping on sure things. Business I was smart enough to do everything and too dumb to realise that's the most stupid thing you can do in business.
A good team in business is what makes you rich.

Then theres the mental side of it. Funnily enough knowing the destructive mental patterns doesn't mean they magically disappear. For me, the racism I was subjected to as a kid left me unconsciously undercharging. Or giving too much of my time for free in some kind of effort to prove I was a valid community member. It actually causes more damage to wealth building than you think.

I am now in the process of having to enforce the long planned strategy for my kids who have little interest in investing.
So ages 21,17,8,7 was a new years resolution and this thread just happened to pop up.
So the big factor imo is discipline to keep it up and not to touch it and keep it simple.

They will end up with everything I've made anyway. But habits need to be formed for generational wealth so it doesn't get blown up down the track.

 

[macca]

Just on PAYE, my adult kids all earn over $100k pa yet live in quite nice houses that they rent for $500 a week, that is a lot of cash left over each week which could easily have funded RE or major ASX fund investment

It took decades but fortunately they eventually worked out that it is Not compulsory to spend every cent every week

Now they are getting ahead which is just as well as they are all over 40, time to stick it somewhere that will pay for your lifestyle when you can no longer work.

The catalyst was that one of them got sick enough for ICU ,now fully recovered, but the realisation of life with no money coming in shook the place up a bit

Still plenty of time as both spouses work and their kids are also working so enthusiasm to accumulate has replaced enthusiasm to spend.

We all know how zealous Reformed Converts can be and they are good examples

 

[Belli]

Thank you to the posters who have opened up regarding their endeavours and struggles.

I am now in the process of having to enforce the long planned strategy for my kids who have little interest in investing.

I do hope you have success there. It's a difficult thing to germinate motivation when there is currently little to zero interest about investing.

The catalyst was that one of them got sick enough for ICU ,now fully recovered, but the realisation of life with no money coming in shook the place up a bit

Probably one of the biggest ouch lessons you could have in life. Glad they have recovered too.

 

[Dona Ferentes]

3 kids, no tattoos.

 

[dyna]

compounding is amazing.

Learning as a teenage apprentice ,how to become financially literate . Being in the right place at the right time . ( especially in regard to R. E . investment that never needs to be sold )
Also applied to superannuation ( Pete Costello's crazy 2007 budget . That was a once in a lifetime chance to supercharge retirement savings . That opportunity will never come around again . Not in my lifetime , anyway )
More than all of that though , is the magic of compounding . The maths involved is sub junior high school stuff , but until you actually experience this phenomenon , you never really come to appreciate what an incredibly powerful wealth creation tool it really is . The first million takes time and requires hard work and saving and so on , but the second big one comes along in no time at all and it doesn't stop there.. Trust me on this , it really doesn't .You are so far in front that "inflation" and conspiracy theories of governments confiscating your super and other assets , don't even require your attention . What does require constant attention is , staying healthy and ......staying married. Not supposed to use the word " luck " on this forum , but I 'll stick my silly neck out and call it just that !

 

[Value Hunter]

As we spoke about in the other thread, if you just bought BHP shares in mid 2000, and reinvested dividends you would have achieved about 20% annual compounded returns for the past 23 years.

$10,000 into BHP on the 1st of June 2000 is worth about $600,000 today. Not bad, certainly gives ones retirement a kick start.

Of course if you were lucky enough to buy BHP at the very beginning of a long term secular bull market in commodities (which not many people saw coming) began then yes you would have done very well. If you bought BHP in mid 1981 (close to the peak of the last mining boom) it was trading around $15 per share (depending on the day/week you are looking at). If you then went to sell your BHP shares in February 2016 they traded around $15 per share. So you would have gotten only dividends and zero capital growth as your return over a 35 year period. With most stocks the entry point still matters a lot even over a 30 year period and that goes doubly so for cyclical stocks.

 

[divs4ever]

Of course if you were lucky enough to buy BHP at the very beginning of a long term secular bull market in commodities (which not many people saw coming) began then yes you would have done very well. If you bought BHP in mid 1981 (close to the peak of the last mining boom) it was trading around $15 per share (depending on the day/week you are looking at). If you then went to sell your BHP shares in February 2016 they traded around $15 per share. So you would have gotten only dividends and zero capital growth as your return over a 35 year period. With most stocks the entry point still matters a lot even over a 30 year period and that goes doubly so for cyclical stocks.

is that with or without the BHP demergers now i have only held BHP since 2011 but the bonus S32 and WDS have not been completely worthless ( even if considering only divs and not capital gains )

BTW i bought a parcel of BHP in January 2016 @ $14.80 so while capital gains can be fleeting there are opportunities for the bold investor

 

[Value Collector]

Of course if you were lucky enough to buy BHP at the very beginning of a long term secular bull market in commodities (which not many people saw coming) began then yes you would have done very well. If you bought BHP in mid 1981 (close to the peak of the last mining boom) it was trading around $15 per share (depending on the day/week you are looking at). If you then went to sell your BHP shares in February 2016 they traded around $15 per share. So you would have gotten only dividends and zero capital growth as your return over a 35 year period. With most stocks the entry point still matters a lot even over a 30 year period and that goes doubly so for cyclical stocks.

Hahaha, not quite right there mate, BHP did multiple stock splits between 1981 and 2016.

So that 1 x $15 share in 1981 would have been 4 x $15 shares in 2016, not to mention years of reinvested dividends meant you would have done very well, even buying at the high point.


But also,

BHP was a popular Mum and Dad type stock in 2000 and the late 1990’s I remember Commsec selling $5000 packages where you got a certain number of BHP, CBA and Woolies.

 

[Value Collector]

is that with or without the BHP demergers now i have only held BHP since 2011 but the bonus S32 and WDS have not been completely worthless ( even if considering only divs and not capital gains )

BTW i bought a parcel of BHP in January 2016 @ $14.80 so while capital gains can be fleeting there are opportunities for the bold investor

Nah, he forgot to calculate the stock splits, so the $15 would have turned into $60 plus all the dividends.

Plus as you mentioned you would have gotten some south 32 and the steel company (was it bluescope, I can’t remember)

 

[Iggy_Pop]

It is interesting to see the range of dollar values required for retirement. I always had a different view, in at some point you will know it is time to retire (which might just be not working full time). For me it was reaching a point with the stress of a middle management job, together with some health results telling me now is a good time to go. Still a bit scary but retired at 58 and now in the 6th year of retirement, all is going ok. So from my perspective, you will reach an age and you need to go, and you have to make what have accumulated work for you. You can make any number work and we are lucky to be in Australia where if it goes bad, there is considerable support. This is summarised in my signature -

I'm free to bore my well-bought friends and spend my cash until the end - Iggy Pop
Enjoy yourself ..... It's later than you think - Socrates

Iggy

 

[Value Hunter]

Hahaha, not quite right there mate, BHP did multiple stock splits between 1981 and 2016.

So that 1 x $15 share in 1981 would have been 4 x $15 shares in 2016, not to mention years of reinvested dividends meant you would have done very well, even buying at the high point.


But also,

BHP was a popular Mum and Dad type stock in 2000 and the late 1990’s I remember Commsec selling $5000 packages where you got a certain number of BHP, CBA and Woolies.

My bad. Because the ASX charts only go back so far I looked at the BHP website for older dated share prices without realizing that the BHP website did not adjust the price for stock splits (many websites displaying stock market data will show the stock price adjusted for splits).

As for the spinoffs although I was aware of them back then but because they happened a while ago it had completely faded from my memory that they occurred until you mentioned it!

 

[sptrawler]

I was always PAYG wage earner, 3 kids by 25, 4 by 30, my plan was go hard and go early.
First house was a restumped heap, worked hard for two years fixing it up, then sold it for triple my cost.
Moved to better house in the city and every spare dollar was invested in shares and property, all holidays were car and camping across Aust on the cheap.
Retired at 55 now 68, don't expect to qualify for the pension, but never say never. I no longer have investment property and concentrate on dividends.
As has already been said, most people run out of time before they run out money and people in their late 80's usually save on the pension.

Your health and mobility is far more important than your money, when it comes to an enjoyable retirement, enjoy your money while you have your health is my tip.

We are currently spending what we are earning on investments, but as we age I expect that to change.
Everyones different and there is no one size fits all, I have a mate who still works on the tools for wages and he is my age and worth about $20m and he made it didn't win it or inherit it.
As I say everyone to their own.

 

[qldfrog]

What does it matter where you get your money from? The important thing is not to spend all of it, and put those savings to work.

Plenty of self employed people fail to save and invest, some don’t even put money into super.

—————-

I really think you fail to see the benefits of compounding, you seem to think the only way to success is doing something special, but most fortunes come through simple compounding.

Ahhh compounding:
a counter example.
the frog super moneyuntil he gave up payg and started own company:
1993 to 2000
7y of contributions to the various super plans offered by employers.
total contributions $45k
balance at the end $42k
While interest on HL during that time were around 8%
So should I say more?
That embedded my view on force super contributions
I know that rules have changed and we now have more freedom and choice with super.
I also know we worked both as hard as possible to repay HL asap in a reverse compounding way..so the concept stays intact..
imagine the compounding fortune I should have now with my 10% annual return after tax....

 

[qldfrog]

why so?

View attachment 168276
Mirrabooka MIR- small cap LIC .
buy in super for the low-tax benefit, reinvest dividends

This does not includes taxation so either you have to pay CGT at the end: buy and hold or you trade more and the annual return is reduced.
So I am doubtful of the 10% figure
But interesting LIC and yes compounding works save early, even better pay debt early on ppor, or if debt interest higher than return after taxes

 

[qldfrog]

As we spoke about in the other thread, if you just bought BHP shares in mid 2000, and reinvested dividends you would have achieved about 20% annual compounded returns for the past 23 years.

$10,000 into BHP on the 1st of June 2000 is worth about $600,000 today. Not bad, certainly gives ones retirement a kick start.

True in a way, but you would have had these dividend tax free?hum do not think so
And when you sell these 600k, you would pay CGT on what 500k ? so out goes an extra big chunk.
I do not think the 20% quoted is anywhere near the real life after tax return..but I could be wrong .fair

 

[Value Collector]

True in a way, but you would have had these dividend tax free?hum do not think so
And when you sell these 600k, you would pay CGT on what 500k ? so out goes an extra big chunk.
I do not think the 20% quoted is anywhere near the real life after tax return..but I could be wrong .fair

The dividends are franked, so yes they could be tax free or even provide a refund depending on your tax bracket.

And, the Capital gain would qualify for the 50% discount, so half of it would be tax free, or if it was in your super and you didn’t sell until the pension phase it would be totally tax free.