How to recognise your retirement is heading for a train wreck…

AJ Financial Planninginvesting Lifestyle propertyHow to recognise your retirement is heading for a train wreck…

In our line of work, we often see common pitfalls arise that have a habit of destroying retirement plans. Here is a summary of the most common ones:

1. The dream home—Life is not perfect but sometimes, the bruises and bumps along the way make the fabric of life all the more interesting. The pursuit of having the ‘dream home’ can be intoxicating; an endless quest for perfection.

The issue with pursuing a dream home is not the idea by definition, but if it involves taking on a large debt, it has a habit of spiralling into trouble.

Overextending yourself with debt can place emotional stress on you and destroy your ability to build long-term wealth. Sometimes, the maintenance and running costs of an amazing property can also be a massive drain on cashflow, sapping any hopes for long-term savings.

It is important to keep your debts in check and enjoy seeing your savings build wealth and allow you to live life for what it offers. Remember, there is more to life than bricks and mortar. Having cashflow to enjoy your life’s journey along the way can be far more rewarding, both financially and from a lifestyle perspective too.

2. The ‘next big thing’—Many people think to obtain big returns, you need to throw a lot of money at the latest, biggest investments and it needs to be in the next ‘hot’ sector. However, this isn’t always the case. Oftentimes, a new, hot idea can fail spectacularly, and wipe out your capital with it. Due to the higher volatility of these investments, if you really want to speculate or have a gamble, it’s wise to put only a small amount of capital on it, as if the upside transpires, the returns are far larger.

Rather than investing in new stocks, a well thought-out strategy with sound investments, statistically has a higher probability of success than taking a punt on the next hot idea.

3. ‘Do it later on’—My mother-in-law, Viv, used to regularly encourage her father, Don, to get involved in lawn bowls. Don was an incredible entrepreneur of his time and at the age of 85-years-old, he could add up quicker in his head than I could punch the sum into my calculator. We often used to chuckle about his response to my mother-in-law when the idea of playing lawn bowls was raised. Don’s reply would be that it was something for ‘old people’ and that he would consider it later on in life!

For most people, retirement planning, superannuation or investment planning is perpetually on the ‘to do’ list. The reality is, often life is so busy, age has a nasty habit of creeping up on us when we least expect it. I know I often wonder who the old guy is looking at me in the mirror.

By shortening the time horizon for investing, you increase the pressure to meet retirement objectives. If you lengthen the time horizon, financial pressures tend to reduce. As Don always used to tell me when I was a lot younger, “Start planning now for your future”. And while most of Don’s advice was right on the money, having played the odd bit of barefoot lawn bowls on a sunny Sunday afternoon, I’ve discovered it can actually be a lot of fun. So don’t leave lawn bowls—or retirement planning—until it’s too late!

Before embarking on any investment decisions, I recommend you always seek professional guidance from a licensed financial planner. Of course, I recommend AJ Financial Planning.