Currently I’m in the 85th percentile for income in my country, that’s a lot of people to be ahead of, but somehow I just don’t feel like I’m making much progress. I actively invest and have done so from a relatively young age (27 years old) but the more I calculate progress towards my end goal, the more it seems to be out of reach.
Cost-of-Living & Housing Crisis
At this moment in time, Australia is going through a Cost-of-Living crisis as well as a housing crisis. To put it in perspective my rental renewal has jumped up 35% in just one year and I’d like to say I’m an outlier, but that is normal for what the market is doing right now. Australia just let through 500,000 people into the country (immigration) but has not kept pace with building residences. Lines for rentals are increasingly pushing past 60 people per viewing and the battle to win the lease is encouraging people to apply for the rental at a higher rate, further exacerbating the problem.
This is also alongside records price increases in terms of consumer goods. Petrol is constantly around $2.20/L and the cost of groceries for a couple seems to average around $250-300 at the moment. The situation is causing so much attention that the 2 major supermarkets are being investigated for price gouging.
It’s not only impacted the rental market, but also the cost of buying a home. The median cost of a home in my area is approaching $900,000, with properties further out (about a 40 minute drive) going for a median of $550,000 – $700,000. Keep in mind that the median income in Australia is roughly $62,000. A friend who bought a house 3 years ago for $550,000, is now worth ~$850,000. It seems like missing that point in time has greatly damaged my ability to get into the property market.
My Investment Strategy and Why I Feel Poor
My investment strategy is currently to invest in low-cost index funds in order to compound from an early age. I manage to invest roughly 30% of my take home pay but when calculating with a compound interest calculator, I feel like I’m getting no where.
My goal is to eventually achieve a $2 million portfolio so that I can live by the 4% rule. Being about to drawdown 4% of $2 Million would give me roughly $80,000 annually to live off of. However, when running that $80,000 through an inflation calculator, the ‘power’ would only be worth ~$52,000 in the 2 decades it would roughly take me to get there. That’s below the median income by ~$10,000 when compared to today’s wages. So even after focusing on pursing a stock portfolio with a 4% rule, and with 2 decades passing (and assuming I don’t drop the ball in that time), I may not be drawing down enough to retire early.
Millionaire Fastlane
Not so long ago I read the book ‘Millionaire Fastlane’ by M. J. DeMarco. To put it bluntly, I saw the reviews for the book and decided it was worth the purchase, but throughout reading it at the time I was woefully unimpressed. There were many things I disliked, the author quoting himself, the use of derogatory language aimed at anyone following conventional wealth building strategies and the tone of childish belittlement. I could go on, but I may write a detailed review on it in the future.
At the conclusion of the book, I was adamant that there was nothing really of note to take away. However, with time I’ve started to really grasp one of the main fundamentals of the book, that low-cost index funds or building real estate portfolios, is essentially being in the ‘slow lane’. The ‘fast lane’ is reserved for people who risk the abysmal success rate of building a brand/business and gain the abnormally large profits that come with it. It wasn’t until recently that I revisited this mockingly presented lesson, reflected, and realised that there is truth in the fact that getting wealthy in a shorter time frame does require further risk.
Adjustment of Expectations
I can’t tell if the system is busted, if I’m doing something wrong or my expectations are warped. Maybe I’m in a small window of time where both the housing crisis and cost-of-living crisis are obscuring what the future will hold. Maybe this is the ‘emotional investing’ part of my journey that you’re meant to ignore when committing to a lifetime of low-cost index fund investing. All I know is that at this current time, being in the 85th percentile for income does not feel like I’m all that much ahead. Maybe I need to readjust my expectations of early retirement, or adopt a part-time strategy in order to get that freedom early. Maybe if I’m lucky, It’ll all fix itself by the time I need to look for a home. Fingers crossed.
Let me know what you think about my take!
