For young Australians, the idea of early retirement may seem like an impossible dream, but it may not be as far off as you think.
In today’s economic climate of rising interest rates, a cost of living crisis and soaring inflation, many Australians are struggling to even pay their rent.
So while the idea of early retirement is probably not something many people are considering at the moment, a group of experts have revealed simple steps to help people move towards that goal.
At just 26 years old, Natasha Etchman is well on her way to achieving this goal, which she says is “not as difficult” as some people think.
The personal finance content creator, who has more than 62,000 followers, said this during a panel discussion at SXSW Sydney last month. tash investment Her Instagram account revealed that one of the key tools she uses to achieve her financial goals is investing.
She started investing in exchange-traded funds (ETFs) when she was 18 years old. An ETF is basically a bundle of assets and securities, such as various stocks and bonds.
Although these are different from stocks, with the latter representing a portion of ownership in publicly traded companies, a single ETF can contain dozens or hundreds of different stocks and bonds.
“I always wanted to work in the medical industry, but there is an income limit to it. I wanted to find another way to make money,” Etchman explained.
Her wise financial decisions enabled her to save enough money to buy her own apartment in Perth at the age of 22.
Etchman said one thing that really helped her in her early investing journey was learning about compound interest and that “you don’t have to invest that much money” to get good returns.
“If you’re buying everything, it’s not that difficult. If you’re buying index funds, you don’t have to pick one stock,” she says.
“I didn’t want to sit there and research individual stocks. I think that would be very boring.”
Another thing the 26-year-old realized early on was that investing was “not as risky” as she initially thought, and choosing ETFs and index funds wasn’t like “gambling.” He pointed out that there was no.
However, Etchman pointed out that there are other financial steps that people need to take first before focusing on investment activities.
He said paying off high-interest debts such as credit cards and personal loans should be a priority.
Brandon van der Kolk is another young Australian who decided that working and having a super fund wasn’t enough to live the life he wanted.
It was during his final year of university, studying to become a physical therapist, that he first realized he needed another source of income.
Mr van der Kolk said he started considering what kind of salary he could earn but was “not satisfied”.
“So I started getting interested in ways to turn my money into more money,” he said, which led him to the stock market.
When he first started investing, he did so-called “active investing,” buying and selling individual stocks.
He admits that he “didn’t know” what he was doing at first and suffered losses until his uncle convinced him to try “passive investing” such as ETFs.
As a result of that experience, Van der Kolk decided to create YouTube videos so he could share his investment mistakes and knowledge with a wider audience.
So, in 2017, his channel new money was born and is now one of Australia’s largest investment YouTube channels with over 830,000 subscribers.
In 2019, he decided to leave his career as a physical therapist and go “all in” on the investment channel.
He encouraged Australians to “do whatever resonates most with you” as they work towards financial freedom.
So for some people starting their own business may be the key, but for many others it will be something more passive like investing.
“For most people, the goal of early retirement is all about investing,” he said, but added that investing can be more of a “long game.”
He suggested that for those looking to “accelerate” that schedule, starting a business or focusing on content creation is a great way to go.
“I think content creation as a business is very attractive. Anyone can do it because they just take their smartphone, hold it to their face, and say what they want to say,” he said.
Australians who want to retire ‘comfortably’ should have at least $595,000 saved up in their super account by the time they leave work, according to the Australian Super Fund Alliance’s (ASFA) latest retirement standards. It was revealed earlier this year.
For couples, this jumps to up to $690,000.
This equates to annual spending of $69,691 per married couple and $49,462 per single person.
However, some people believe that in order to live a truly comfortable retirement, they need to save much more than that.
Australian Wealth Advisors financial planner Andrew Tratt argued the ASFA standard of $70,000 a year for a couple lifestyle sounded “terrible”.
“Most couples will want to spend $80,000 to $100,000 a year to live frugally,” he says.
“That’s not a luxury. Think about it actually costing you $1,000 a week for bills and living expenses, and you get a $20,000 vacation at the end of the year.
“This does not include things like doing chores or helping out with your family and children.”
Mr Trutt believes people who want to retire on good terms should have at least $1 million in a super account.
