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You can retire 5 years earlier just by spending 3% less! (You'll want to take 2 minutes to read this...)

Updated: May 6

This comparison is an amazing way of showing the power of 'paying yourself first' and benefitting from compounding returns when you do save.

Above: Net Asset Comparison Graph

In this example, the couple are both 35 years old, earning $230,000 p.a. combined with a mortgage of $900,000 and combined super balances of $230,000. This is a very normal, typical client in their mid 30s! In the blue scenario the clients pay their minimum mortgage repayments and spend everything else on living expenses. Even as they pay down more principal off their loan in later years, because they aren't good with their spending, they suffer lifestyle creep and continue to spend everything that comes in.

By contrast, in the red scenario the clients are only saving 3% of their income in the first year (which can sometimes be enough when people have very high expenses with a young family and a big mortgage). In year one, the clients are only saving $300 per month! However, because they are diligent in paying themselves first, as their mortgage reduces over the years, they begin to save more and more.

The same exact client and wealth position (by age 87), but one has the ability to retire a whopping 5 years earlier just by cutting back the expenses $70 per week.

Through our advice strategies we can help utilise that $70 per week in the best possible manner, whether it is by making additional mortgage repayments, investing or putting more money into super (often this decision is determined by economic factors such as current interest rates or an individuals investment timeframe or marginal tax rate).

As Financial Planners, we can help keep you accountable to your regular savings target and maximise the benefits of your savings. Book your free initial appointment today!

Above: Home Loan Comparison Graph

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