For most of my married life, I have been the sole income earner for my family. This reflected both my wife and my own values of ensuring at least one parent was available to ensure our children always had a parent available. This has meant that we lived off approximately half the income of dual-income households, often meaning going away for holidays, even locally and for a couple of days, was a luxury. It also meant that as a sole income earner, there was a pressure that came with this to ensure I was earning enough and also that I couldn’t step away from this role, even when I felt overwhelmed and stressed.
Unsustainable work life
Due to a combination of changes in the sector I work demanding ever more time and energy, my awareness that I was getting older, and that if chronic work stress led me into burnout where I was unable to financially support my family, I realised I needed to strategically take action sooner in case my health gave way.
I was about 45 years of age, working full time in a leadership position in a university, studying my doctorate, maintaining a small private practice, and with two kids in high school. I was tired and felt my life was a treadmill. One wake up call was when my kids asked me what I wanted for Christmas. I didn’t know what I wanted for Christmas or even what I wanted at all. I had lost connection with myself and what I wanted.
When one is a sole income earner, one cannot just decide to take a year off to do self-care. My wife did not want to work, partly due to losing confidence from being so long out of the workforce. Whether I liked it or not, I had no choice. I felt my work was becoming more demanding, and my resilience was gradually decreasing. I realised I could rely on no one to help and it was up to me to find a way to look after my future self, which I predicted, would be fully burnt out in a few years if the work trajectory continued.
One of the benefits of working for a university in Australia is that they put aside 17% into superannuation, so this helped reassure me that by the time I can access it, it would provide a basic amount for us as a couple. The problem was that I would still need to wait until 60 to access it and I wasn’t sure if I would make it.
I also started feeling resentful that if I were to die early, all that I worked for, I would not enjoy. While some might say, yeah, but your wife and kids would benefit (which someone close to me did say), I would say – while that is true and important, I also believe that the person making the sacrifices should also benefit from the sacrifices they make.
The change
I decided I needed to find a passive way of building up my income. Working long hours, doing private practice on top of a more than full-time job, in addition to studying my doctorate, was trading my waking hours to support my family. At the time, we had about 12 months of mortgage payments before it was paid off. I spoke with my bank manager and found we could get equity out of our house to purchase investment products. I decided I wanted to buy a rental property and some shares.
Although I had studied the real estate listings for several months, I was a rookie. We bought a small two-bedroom unit in the regional city where we lived (Note: a classic rookie mistake – only investing in one’s own backyard). I had worked out the sums – it would cost us $100 a week to hold. In 30 years, we would have a rental property paid off, which would contribute to my retirement. Just this act alone gave me what I was needing – some hope so that if I needed to retire early, we could sell and it would inject some money until I would qualify for superannuation.
Another motivation for taking out debt from our mortgage was to address lifestyle inflation. I knew that if we paid off the house, the mortgage repayments would be diverted into the family budget and we would be better off by only a small amount, but it would be largely wasted. Committing to an investment property was a means of forced saving.
Both the property and the shares (mainly ETFs) performed okay and met my expectations at the time. But after a couple of years after looking at the sums and YouTube videos, I realised we could do better. Money was cheap, and loans were relatively easy to get. My income was relatively good. We decided to buy a duplex in the same suburb we lived. This was positively geared and a really good price (though the street is not the best – full of duplexes owned by investors).
After watching more YouTube investment videos, I realised that if I scale, and if I buy in growth areas, I could build wealth quicker, and hence retire earlier. I realised I did not have the expertise to choose well, so I reached out to a buyer’s agent whose strategy was to buy 10 cheap properties as a foundation portfolio, from which to build more. Through him, we bought another three properties until we maxed out our borrowing capacity.
About this time I decided to change my job as I felt my existing job was now unsustainable and not healthy for me. Unfortunately, my new job was not what I had expected, and I found myself making a decision to leave and start contract work. This was a really good decision as I hadn’t realised how burnt out I was, and while I am still as busy, it is not a stress busy. Although this was at a time when the interest rates were climbing and all our properties had shifted from positive to negatively geared (e.g. they were costing more to hold than the rental income), because they were increasing in value, I felt confident I could make this decision. If we needed to, we could sell one or two to help tide us over, or we could dip into equity until things smoothed over.
Just before leaving the second job, we reached out to another buyer’s agent to buy a higher quality property in a growth area, with the intention of selling it later to pay down the debts of the others.
The results to date
I have been really pleased with the results to date. Although we are cash poor (we still don’t take holidays) and have over $1.5m in debt, the average increase of all the properties equity combined over the last 12 months has been $36k per month. If the rate of growth drops to 5%, then this equity will still be increasing by $15k a month. This is multiple times more wealth being created than is in my stocks or superannuation, and even more than I am earning each month. Several properties have doubled in value. We now own 50% of the equity (increasing each month) even though most loans are interest only.
When the interest rates decrease, for each percent decrease, will mean we will have almost a day a week extra income, which I can take to cut back on work, reinvest, or take a holiday.
I consider now that I am in partial retirement. I do not feel I am a slave to my job as I can leave when I want. I plan by the age of 55 to be working 4 days a week, and 60 to work 3 days a week, in paid work. For me, retirement is being able to do what I want to do with my time, without worrying about the financial costs. I do not want to stop work until I am ready, and this may be after the official retirement age of 67. I feel I still have a lot to contribute and find doing so rewarding. I feel confident that we will be able to take holidays into the future. In addition, I have planned so we will not run out of money when fully retired, and that when we die, our kids will have access to an inheritance that will enable them to pursue a financially better life than we had. (On this note, we may look at trust structures to protect these assets in case our kids have relationship breakdowns).
Learning
Had I known what I know today, I would have not sold houses of my places of residence when moving, but kept each house I moved from as a rental property. Doing this alone, I could have fully retired by now. Second, I would have started investing in property as soon as I could. I did not understand how mortgages work and when younger, my main goal was to pay off my mortgage and debts as soon as possible, rather than use debt to generate wealth. Third, I would have taken months to select a buyer’s agent to identify which has a strategy I prefer. I would ensure they have a solid track record. I would not select a property myself, as I am not an expert in real estate. I made many mistakes as a rookie investor that has cost me probably millions lost future earnings. I didn’t know what I didn’t know.
What I can do is help others avoid the mistakes and benefit from my learnings. Hence this page. I also have made it a point to teach and encourage my own children so that they can also use the power of debt to work for them, so that they can retire earlier and on their terms.
I also have realised that my goals have changed. Initially, my goal was that this strategy might be an insurance policy in case my work became untenable. Then added to this, I want a better quality retirement. Then I wanted the funds to not run out so that we do not need to rely on the pension. Finally, we can look at leaving an inheritance to the children, even if we are needing high cost care at end of life. We are mindful that nothing is guaranteed and that governments might bring in taxes that will negatively impact these plans. However if this happens, we’ll cross the bridge as it comes.