You can't always get what you want...
10 Feb 2015
By David Raits
You can't always get what you want, but if you try sometime you might find you get what you need. Lyrics by Jagger/Richards
While I was listening to the Rolling Stones play this classic song on their recent tour, it occurred to me that the second half of the simplistic chorus has a message that can be instructive for younger people in achieving financial goals.
In these days of record high mortgage stress and people 'doing it tough,' we hear a lot about what we can't and don't have. However, my experience is that while people may like to complain about what they can't have, they often haven't actually sat down and investigated this properly and tried to plan how to get what they want. Without analysing what other choices or sacrifices they need to make to enable them to have what they want, how do they know?
For Generation Y the seemingly impossible task of entering the housing market in our major cities is a case in point. Getting together a six figure deposit while paying rent is a seriously difficult task and requires real planning. Of course, the answer isn't to complain about it but focus on how you're going to achieve the outcome you want. Sadly it seems though we have a generation of whom many have simply given up.
Achieving the impossible
If you start saving and stay disciplined, you may be surprised how much is possible. Saving a $50,000 deposit at the rate of $500 per month will take about seven and a half years assuming the money is accumulating in a normal bank account paying 2.5 per cent pa. Many transactional bank accounts pay far less. However this goal could be reached about a year earlier if a balanced portfolio is used that returns 7.5 per cent pa. (Note: Returns are not guaranteed and are before tax. Tax impacts vary and depend on individual circumstances).
Once in debt the same logic applies in reverse, if your goal is to be debt free ASAP. A typical mortgage of $500,000 will require 25 years of monthly loan payments of approximately $3,000 based on current interest rates. However this goal can be reached at least six years earlier if an extra $500 per month can be generated or saved from other expenses and the loan repayment increased to $3,500.
The key to all of this is to closely analyse your income and expenditure, see what is really important and develop a long-term financial plan to see how powerful even relatively small amounts of regular savings can be when compounded over a long time frame.
So, if you do 'try sometime, you may find you get what you need.'