The 10 Year Wealth test: Are You on Track for 2036? – Guidance Financial Services

An observation that I’ve personally found to hold true is that we overestimate what we can get done in a day, but we underestimate what we can get done in a year. It’s easy to get distracted or overwhelmed by the day-to-day busyness, and feel like we’re getting nowhere. Yet taking a succession of seemingly small actions, does amount to significant progress when we take a step back and look at the longer arc. 

To a degree, this is what we see as compounding in financial markets too. Those who look at their balance each day see ups and downs, a whole bunch of noise. But when viewed over a year or ideally even longer, growth can be really significant, provided you’ve avoided the temptation to fiddle. 

Goal setting is a common success factor for most aspects of life, and it certainly has relevance with regards to financial planning. 

The beginning of a year is a common time for us to think about our goals, so in today’s episode I’m hoping to prompt you to create some 10 year goals. I appreciate that is a long time frame, but compounding is a powerful force, provided it has the time necessary to work in your favour. 10 years is a good time frame to see that impact in its full glory. 

Alright, enough preamble, let’s dive into this week’s episode the 10 year wealth test, are you on track for 2036? 

I’ve identified 4 steps to help you execute on your 10 year plan: 

• Where are you now?
• The 2036 vision
• What does success look like?
• The How – strategies and tactics

1. Where are you now? 

If we’re going to make progress on your financial security and the choices in life that this provides, we need to start by understanding where you are right now, what is the baseline? 

Building your balance sheet is the first port of call. List your assets, your debts, and arrive at a net figure. 

Next understand your cash flow. Do you have a savings capacity, or is every dollar that comes into the household going back out? Assuming you do have a savings capacity quantify it, since this is likely to be a key enabler to wealth creation. 

How long has your mortgage got to go given the current repayments that you are making? Perhaps it will be cleared within the 10 year period, in which case an element of the strategy may concern what to do with the cash flow that was previously absorbed by mortgage repayments. 

2. The 2036 vision 

Where do you want to be financially in 10 years? Will you be still working, retired, in a new career, or perhaps working part time. What about other goals like travel, or the kids education. Maybe over the next decade your kids will reach the point where they’re ready to buy a home, and you would like to help them be able to afford something near you. Financial autonomy is about gaining choice. What choices are you looking to achieve? 

Jot down your ideas, mull over them for a few days or weeks, then prioritise them. You might find that one goal conflicts with another. For instance you may have a goal of paying off your home loan, whilst also having a goal of spending two months travelling in Europe. Clearly the money spent on the trip pushes against the mortgage clearance goal, so therefore you need to determine your priorities. If you happen to have a copy of my Financial Autonomy book, you’ll find a process in there to help you with this. 

3. What does success look like? 

You’ve determined your vision, now we need to put some numbers around that. What is the budget for that travel goal that you have? If clearing the mortgage is on your list, by when? If retirement or semi-retirement is one of your 2036 goals, how much income will you need? You may even be able to use an online calculator to then extrapolate what super balance you would need to produce this level of income. The point in this step is to convert that vision into measurable targets. 

4. The How – strategies and tactics 

In the previous step you defined your targets 10 years from now. But ten years is a long time, and it’s easy to get waylaid. A key ingredient of successful long-term planning is to have milestones, goals that you can tick off along the way to ensure you stay the course, and provide some positive encouragement. 

See if you can break down your 10 year goal, with an initial milestone a year from now, and perhaps every second year from there. 

Your savings capacity is clearly a key component of your wealth creation strategy. Perhaps this could go towards extra mortgage repayments, super contributions, a new investment, or debt repayments on a geared strategy. Consider your prioritised list of goals and direct most, if not all of your savings capacity, towards the achievement of goal number 1, given you have identified this as the most important objective that you wish to achieve. 

Increased income will certainly help in achieving your 10 year goal. Is there an extra accreditation that you could do to shift up the income tree? Perhaps it’s time to check the job market and see if there are greater rewards elsewhere. 

Setting your Goals and working out your 10 year strategies is exciting and optimistic stuff, but also take a moment to reflect on the risks. Have you got a cash buffer in case you were made redundant? Is there life insurance and income protection in place to protect you and your family from an adverse health event. What if interest rates rose considerably, are you in a position to handle this. And will do your job still be around 10 years from now? Identify the risks that are relevant to you, and determine what your response would be were these to unfold. 

Finally, this isn’t a one and done exercise. Put a reminder in your phone to check in a year from now on how you’ve gone. Are you on track with your first year milestone? Things change in life, does the 10 year goal that you set the year prior still remain where you want to be? 

Thanks for listening to another episode of the Financial Autonomy podcast. I hope you found this one helpful. Of course if you need help with your 10 year plan and building wealth, visit our website and schedule an appointment. Nick, myself, and the rest of the team here to help.