I was helping a family friend recently with some financial planning. Audrey, ( not her real name ), is on the uphill side of 65, owns her own home, is debt free, has a high standard of living and is in reasonably good health.
And she has most of her life savings neatly tucked away in a few term deposits. Audrey is somewhat miffed that at the moment as she is flat out getting better than 3.5 % interest on her money. I did share with her my point of view that even though low interest rates are good for a lot of people they are not all that helpful for her right now. I suggested that, should she be wishing to change her investment mix, she should be looking for a return, considerably higher than 8 %, after tax and inflation.
She asked why I suggested that. I explained that at the moment her nest egg may be just keeping pace with inflation, which means that her savings are not growing. This is a big deal for all people. If your investments, be they cash or shares or hard assets like plant and equipment and buildings and livestock, are not making a reasonably good after tax and inflation return, you are in effect loosing purchasing power. While this may not seem like a big deal in the very short term, it turns into a nasty situation in the medium to long term. You either keep in front of the cost of inflation of your lifestyle and your business suffers.
Many people scoff when I suggest that an after tax and inflation return 8% of is achievable. Well, the fact is, it is achievable. The next question then is, how willing are you to make it happen.
At Landlife Education we help folks from all walks of life and with a wide range of small to medium size business, learn methods and strategies that help them manage their business operations in a way that allows for change and growth that is financially beneficial short and long term. We are conducting training programs in Central and North Queensland, beginning April 2014, for folks that wish to make a positive change, to their business and life styles. Contact us now for information about dates and locations.