Hi, and welcome to this week's episode of Money with Alpha. This week I wanted to talk about gaps and goals when it comes to your money. And it's something that's sort of come up quite a bit, and it's. It's an interesting concept. When we look at what our goals are for money and then what are the gaps that we have between our goals and our current situation?
I think quite often we. We don't want to look at our money because we're scared about the potential gaps. Um, but at the same time, we're also not clear on what the goals are either. So we have a lack of clarity that's preventing us from looking at our money.
And then we have a fear of the gap, which is also preventing us. But we don't know what the goal is, so we don't know what. So there's this whole mixture of the unknown and the unknown becomes scary. And the more we think about it, the less we want to.
And the less we want to, the bigger it becomes when we, you know, it's just this, like, cycle that we get our minds in and we. We end up, like, expanding things. I was. I was on a call this morning and someone was sort of sharing a win that they'd started to.
To look at their money and started to get organized, and they're like, I don't know why I put this off for so long. I was like, yes, that's exactly it. It's often just the idea of something or the perception of something being really hard and really scary that stops us from progressing.
So I want to try and bust some of these myths by talking about goals and gaps. And I also love alliteration, the GG sound. Now, when we talk about goals, when it comes to money, we. I think where we get stuck is like, how do we. What is my goal?
What do I want in life? Like, we have this whole search for meaning, search for purpose, and then we neglect the money side because we're also not clear on what we want out of life. So that then just makes this whole big, you know, question mark that's constantly floating above our heads as we.
As we walk through life and then run as we get older because there's just too many things to do. So it's about taking a breath, just sitting down and thinking, now there's different areas of your life that you can have financial goals for. So I've written a few of these down, so I'm going to read it a bit to make sure I don't Forget them.
But we have goals in relation to debt and that's like paying off debt. Like, do you have a goal that you want to be debt free by the time you're 50 or by the time you're, by the time you retire? And then what age do you want to retire?
Do you want to retire at 60, 65? What is that? So goal debt goals is one thing, lifestyle goals is another. Do you want to be able to go on an international holiday every two years and do a smaller domestic holiday every other year? Um, do you want buy a boat?
Do you want to have a jet ski? Do you want like what, what are the things that you actually want in relation to lifestyle things? Um, and this isn't about contraction, this is just at the start, it's about ideas. And no ideas off the table. You write it all out.
Because sometimes we have, you know, when we're growing up, like, oh, I'd love to have a boat or I'd love to have this. You know, my daughter has this dream boat in her mind at the moment. Um, but when we ever go out on our boat, she gets really seasick.
So I'm like, while the idea of this boat that you've only ever seen at the boat show when it's in dock on a jetty completely still is very different from actually being out on the water for long periods of time. And it's also very different to own a boat than just going out on one as well.
So while this is a dream for her, the reality might be quite different when she actually gets to the point of wanting to buy, presuming that she does. So, um, so we've got to actually kind of just. That's why it's just important, put it all on the table and then actually play out the reality of those ideas and go, do I really want this?
Not should I want this or could I afford it? That's not where we're going with this at all. It's really, do you actually want it? Because sometimes people like, oh, you know, I want the big house. And then you think, okay, we'll go look at some. Then you walk through them and you're like, oh, I really like this.
I feel like I'm just sort of, you're, um, this person inside this big house and it feels like there's, it's more empty now because it's bigger. You, ah, might want a smaller house where you don't feel quite so empty. Especially when you imagine kids growing up and moving out.
So just that type of Thing get really, really clear on what you actually want in your lifesty. Um, and why then wealth goals. So having a goal for wealth building, that's linked to a lot of these. So it's linked to the debt goal. It's also linked to the lifestyle goal because it depends what you're willing to potentially do without in order to meet the wealth goals that you have.
And by wealth I mean do you want to have a holiday home as well? Do you want to have multiple properties in a portfolio? Do you want to invest in shares? Do you want to do property development? Like how do you actually want to build wealth? Like what feels good for you?
Do you want to be a share trader? I'm not talking about investing here. Trading like I had a cousin, that's what he did and he traded, it was, it was super stressful and he was always exhausted because he was up at all hours of the night trading in the different markets.
I um, just looked at that and went oh no, that's not for me. I like my sleep. And um, so. But I invest still so I just do it a different way. So excuse me. So how do you want to build wealth? And that thing links off into your risk profile that also make, helps you make decisions about where you want to invest and how you want to invest as well.
Uh, retirement goals, that's another one. You know what again, what age do you want to retire? And then the wealth goals linked to it and the debt gold and the lifestyle. What sort of lifestyle do you want in retirement? Do you still want to go on overseas holidays? Do you want to buy a camper van and travel around the country or do you want to, you know, fly to Europe and buy a caravan there and travel around and then sell it again?
Um, do you want to, I don't know, go on a backpacking trip around, um, South America? Who knows? I mean obviously you know, the backpacking possibly not so much in retirement, but what sort of thing do you want, you want to do road trips around the place. You know, it's, it's important to understand what it is that you want, how healthy and fit you want to be and the activities you need to do in order to maintain that.
Um, and does it involve cost? Some things may not. Like my father in law belongs to a walking group and he happens to live in a beautiful environment so there's lots of beautiful walks where he lives. Um, but he just meets his friends once a week and he's not really interested in traveling anywhere anymore.
So he, but he does have he likes nice food. So for him, he goes to lovely restaurants. And so that's part of his lifestyle in retirement, is to be able to afford to go to try nice restaurants. And around him, he lives in this, like, agricultural belt in the south of Germany.
There's some beautiful restaurants around there as well, so he can afford to enjoy them. And that, for him, is his ideal retirement. Legacy is the last one. So I will. I'll summarize these also as well. But legacy is one of those things where you're like, well, do I want to leave anything for my kids?
Um, if I don't have children, do I want to leave it to a charity? Or even if I do, where, how do you want to. Do you want to leave anything at all? And if you do, where, where will the money go? Like, do you want to, you know, support a charity?
Do you want to support other family members who may have been maybe doing it tough? Do you want to support your kids or not? Do you want to keep them in charge? Like, how do you want to do it and how much do you want to do as well, you need to sort of factor in all of those so that you look at your debt goals, your lifestyle goals, your wealth goals, your retirement goals, and your legacy goals.
And you don't have to be super duper clear on what each of these are. It's not like you need a figure that goes in each one of those boxes, you know, like, oh, I need this amount. There's variability here. And as we grow older as well, sometimes we may realize that the goals are either too low or too high, and we need to adjust them.
So it's also not a set and forget situation either. So we're evolving beings as humans, and as we grow, we become hopefully wiser. Um, and then we start to get to know ourselves a bit more. And then we also get to know a bit more about what we actually want, not what we've kind of been fed through family, friends, society, advertisements, social media, all of it.
There's so much that gets thrown at us. We have to try and distill out all of the guff. And some of it's valuable, but just might not necessarily be right for you. And the only person who can make that decision is you. So that's why I do these sorts of episodes to prompt the questions to get you thinking about these things.
So if you're driving, maybe come, you know, back to this, obviously, or just pull over and write down those five areas that I mentioned for goals and come back to it, it's really worthwhile just writing down what sort of things you want. And, and if you don't know, this is where the gap part will come.
So this first one is just setting your current goals and intentions for those five areas. Then we look at the gaps. So if you start to go, okay, let's see, you know, you need to start to put some figures down, um, at the moment, what you can also do.
So there's two different ways. You can either, uh, start with the end in mind and work backwards, or you can put, uh, down what you think you can manage in each of these areas. So there's calculators. If you go to the Money Smart website, so it's moneysmart.gov au they have some really good calculators to help with some of these.
So they've got debt repayment calculators in there. So you can put in what, your current loan balance, current loan balance is your current interest rate. And then you can put down whether you pay monthly or fortnightly. I wouldn't, I would really suggest you look at both of those because paying fortnightly can actually make quite a big difference.
If you've got an offset account, not so relevant, um, but it could still make a difference. So you can have a look anyway. And then you put down what you can afford, what you're paying at the moment, and you see the trajectory of when the loan will be paid out.
And you can start to play with the calculator and go, if I put an extra $50 a in there, what difference would that make? And you'll start to see the time horizon shrink. And then you can, so you can play around with that. And you go, okay, I need to find an extra $50 in my budget.
Say that's where you want to go a month to pay off my debt. And that way I know I'm going to have it paid off by the time I'm 55, 60, whatever, whatever the number is. And you write that down, okay, this is the amount I'm paying now. This is the amount I need to pay based on this interest rate.
And then I'll have it paid off by then. Okay, so that's, that's one gap that you figured out where there's a potential bridge. Then you look at your lifestyle. If the lifestyle you want has a certain dollar value a year, you can break that down into monthly. And you need to maybe put some money aside in order so you might not spend it.
That's what I'm saying. So your lifestyle it might be that you go once a year to like, for instance, every two years we go back to see, um, family in Germany and we'll tack on some other bits, um, onto that trip as well. So we have to factor that into the budget and that's part of the lifestyle.
So I put, I'm obviously not spending that money every month, but I'm putting money aside every month in anticipation of that. So you figure out what your number is every year or every two years and then you put some money aside and you can put into one of those calculators that's on the Money Smart website, savings.
And if you can put it into a high interest savings account, you can actually get some money for it. But that money still remains in cash because you want it to be available. You don't want it to go into the share market or into an investment that you can't touch or that might fluctuate too much.
So you know, if something does go backwards and then that money's not there, you can't go on that trip that year. So you want to keep that money secured. Just put it in a high interest savings account, term deposit if you must, but it's something you're going to add to so it's easier to have it in a more flexible account.
And that way you can kind of go, okay, well, I know I'm going to need this amount in two years. What do I need to save every month now? Plus, keeping in mind it's not just about that trip. I might want to do some smaller ones because, you know, I don't wait two years for a holiday.
Um, and I might want to go to the theater. I might want to do some other fun stuff as well. So you can factor that in. So you can have like your goal for instance at the moment might be an amount in two years time. And then you figure out where you are now in your savings and then you start to calculate what you need to do to bridge the gap to get to your goal.
Wealth then becomes a bit of a bigger one. So wealth and retirement and possibly legacy you can start to look at a little bit together. So you have a look at how much you're going to need in retirement. And that, that's a, uh, that's a bit of a moving feast.
Um, it's very much inflation dependent, lifestyle in retirement dependent. My husband and I were literally just talking about it this morning and I had read an article that said that a couple will need about $75,000 a year to live a Very comfortable life. Okay. Whereas he'd read something that said $100,000 but that included an overseas trip.
I thought, okay, all right, so you can do some research on this because different, so many different factors in there. If you want to travel, obviously the price, the amount that you need is higher. If you don't want to travel as much, then the amount will be lower. Um, what other kinds of things do you want to do?
When are you going to retire? How long do you think? I know this is a terrible thing to think about, but it's necessary. Uh, are we looking at going into living into 90s? Is there an age pension? Um, that's possible there as well. Again, there's some calculators on the Money Smart website that will kind of, they'll give you the trajectory of now to the future.
They won't tell you how much you're going to need in retirement because that is a more complex, um, concept. Um, and it also depends what you've got in your retirement account. In Australia, it's the superannuation system in America, your 401k, your RSA, Canada. Like there's different systems out there.
What you've got in that account now versus like, do you need to have 1.5 million in there? Do you need to have 2 million in there? By what age? As well? So if you're older, it might be higher if you're younger. Um, um, it depends on where you're at and it also depends on your relationship.
Like my husband is 10 years older than me, I've got more working life. He's already starting to think about early retirement. So there's different conversations that you need to have. So that's why this, because there's so much variability. You need to try and sort of figure it out yourself.
You can ask professionals obviously to help you with that too. There is a lot of data out there. The Australian Retirement Trust has a relatively good calculator that helps you with this too. It's changed a bit recently, so it's not quite as all encompassing but it's a guide. But like I said, what I've read recently is like 1.5 to 2 million for a couple in their 50s, late 50s or early 60s.
Um, and that ah, would be for retirement income for a couple again at about 75,000 a year. So it's just. And that also depends on the markets, what the markets are doing, the returns, what you're invested in. So many variables. But for now let's just work with some headline numbers.
But you need to have a little bit of an idea of what you're doing. And that would be with a home paid off by the time you retire. And that's why you need to have a debt goal, making sure that's paid off, um, and then have your investments inside your retirement fund and also outside.
I'm, I'm a fan of having it in both because the retirement systems have rules around them and while they are more tax effective, generally speaking, especially in Australia, because that's the one I'm more familiar with. Um, it's this, there's rules around how you can get your money out. I think it's also good to have some flexibility to have some investments outside of that system as well, so that you get additional choice in how you spend your money and in what way, and lump sums, etc.
So that's then looking at a bit of a goal there and then where you are now and there's a gap. And then you can start to look at, well, how much would I have to put into this retirement fund each year in order to get to that point? And that's where the Money Smart website will help you as well.
So it'll say, okay, you need to make sure you put this much in every year, which you can bring down to break down to a month to be able to bridge that gap between what you're looking at as a goal and where you are right now. So you can, you can meet that.
And this is why it's really important to be able to do all these things in parallel. Because the more time you have, the better able you are to do things in parallel. So you can be paying off your home loan, you can be putting money aside for lifestyle, but while you're also putting money into other investments, while you're putting money into your retirement fund and generally just getting yourself set up and comfortable.
And when your money has a purpose like this, when you've got clear goals for the areas of your life and you know what the gaps are and you're working on filling those gaps, it makes it a lot easier to stick to a budget. Because if you're going to go somewhere and you're like, oh, wow, I'd really love to have this new tv.
And you're like, you know what? My TV is actually perfectly okay. There's nothing wrong with it. And that money is going to go into my wealth account this month. So it actually makes it a lot easier when you've got that because you're not denying yourself as well, because you're Putting money into a lifestyle account, which is by definition going to give you some fun, so you're not denying yourself the fun and you look at ways.
Well, what's really important to you to keep. Is it the daily coffee? Because sometimes it actually is. I don't drink coffee, so for me it's not a daily coffee. But for others it might be. I do have expensive taste in chocolate, so I, um, I still like to buy.
Admittedly I don't buy it as often now as I used to. Um, because that's also part of trying to make it a bit more special. If I have it every day, it's not as special. So it's just generally, what kind of feeling, what kind of life do you want be very conscious and intentional with that?
Uh, and it makes the decisions a bit easier and it makes sticking to things easier without feeling that level of denial. And I'm, I'm really passionate about that part in particular, because if we feel like we're denying ourselves something for too long, we will bust out and absolutely go completely other direction.
And then we feel guilty about it. Uh, and it's really harder to get back on the bandwagon. I mean, this is the same thing that happens with weight. We hear these stories all the time on a diet where you feel so constrained. You have a bust out, you put on weight again and you're like, oh, what's the point?
So we get in this cycle. Same thing works with money. Money and health are very interrelated in how we deal with them mentally as well as physically. So I highly recommend you just at least to start jotting some of these things down. You don't have to have it all figured out in one go.
Just. You can listen to this again if you need to, but just start to think about it and put some numbers down. Look at the calculators and see what you can actually do. You need to know where your money is and you need to have some idea of what your, your cash management process is.
I'm using that word deliberately instead of budget. I don't like the word budget. Um, but look at those, those five elements that I spoke about in terms of your goals. So your, your debt goals, your lifestyle goals, your wealth goals, your retirement goals, and your legacy goals. And if you have any issues trying to figure any of this out, please reach out.
I do offer a free clarity chat. Always happy to talk money and help get you unstuck. So, and also if the mindset side's holding you back, um, I do. This may actually come out the day before. I'm doing a money Mindset Strategies for Female Entrepreneurs masterclass. It's online. Um, I'll put the link there if you're.
If you're interested as well. And, um, yeah, and that's. That's available too. So I hope you can think about this a bit more and have a wonderful week.
