Somersoft Members 80/20 Rule to Financial Independence.

Rixter

Rixter

Following on from This Thread

Francesca C said:
How many of us on the forum are financially free?
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Great question!

I'd say its the 80/20 general rule of thumb for sure.

Out of all the forum members 20% would actually have multiple properties.

Out those with 1 or more properties 20% would actually build a portfolio big enough to become financially independent from it.

Looking at the SS membership this morning there is - Members: 6,324 and Active Members: 1,118 (80/20 thereabouts)

eg. 1118 x 20% = 223 with 1 or more IPs.

eg 223 x 20% = 44 will make financial independence.

Peoples thoughts?
 
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I think their might be a higher percentage of people on these forums that have investment properties. I think the majority would, as it is an investors forum!

I think the 80/20 rule would work for maybe 80% of people on these forums being active investors, and 20% being active investors that are financially independent.
 
I think that 223 would be a more likely number for financial freedom than 44. I think the number of active memebers would more truly represent those with IP than a % of that number. I would have throught the number higher again for 1 ip.

The tricky thing is the definition of financial freedom. It all depends upon your stratgy and goals and some-one might actually be viewed as financially free under another's strategy but not their own. :D
 
I COULD be financially free, but only if I drop my living standard below what I'm ok with. Terrible, this whole materialism thing.
Alex
 
I was listening to ABC radio yesterday with a USA Professor discussing IQs. He said a third of the population have an IQ such that they cannot function with the information requirements of todays society due to their intelligence level (lower third of IQs), not even considering lack of education as well.

Based on this theory, I would not therefore expect to see much of this third of the population on an investor site.
 
Hi Rixter,

There are 61 of us on the forum at this time. Meaning 61 don't have to go to work today ;)

Cheers,

Bazza
 
I would define 'financially free' as being able to choose whether to work or not. Which is my situation.

But as Alex alluded to. Being able to choose not to work and then living in a cave does not mean you are financially free.

If it did, every homeless person could consider them self financially free. Which they are in a sense lol.
 
stumunro said:
I think their might be a higher percentage of people on these forums that have investment properties. I think the majority would, as it is an investors forum!

I think the 80/20 rule would work for maybe 80% of people on these forums being active investors, and 20% being active investors that are financially independent.
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I agree, it's probably more like 20% having TWO or more investment properties, not one or more. The other 80% would be considering purchase or had already purchased.

Those without properties are probably the unregistered lurkers, although some of those do have properties as well.

Dan
 
GoAnna! said:
I think that 223 would be a more likely number for financial freedom than 44. I think the number of active memebers would more truly represent those with IP than a % of that number.
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I personally dont believe so. I dont have the numbers at hand now showing the percentages of people with just one IP compared to 2, 3, 4, 5 etc but I do remember the percentage really dropped off. From memory it was less than 0.5% with multiple 2 or more IPs. The article I read at the time put the drop off down to ppl hitting the DSR and other walls along the way, eventually losing focus and giving up on their initial dream from when they first started out.

The tricky thing is the definition of financial freedom.
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Yes I agree, however for this context lets refer it to having enough passive income to meet the individuals idealic lifestyle expenses in their eyes.

P.S. I have also edited to "Multiple" properties (for this was my initial interpretation)
 
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Rixter said:
Out those with 1 or more properties 20% would actually build a portfolio big enough to become financially independent from it.
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Rick

I think your figures are pretty much accurate, particularly if you're talking about becoming financially independent from a property portfolio alone. Generally speaking, it can take some time to build such a portfolio, and issues such as serviceability and equity/LVRs can slow the whole process down from time to time.

However, I believe that there would be a number of people on SS who are, or will be, financially independent, but who also have other investments, businesses, superannuation, etc which will contribute towards their financial freedom.

Cheers
LynnH
 
Got to love stats...I think over the course of the years, 44 is a very low number. There are for example, so many youngens here that are already making the big bucks, so in essence, as time goes by, so will this ratio...perhaps 25/75 or even 30/70..it depends on too many factors..if there is a recession, does it mean we go to 18/82? Interesting topic...:D
 
I read somewhere (in a Steve McKnight book, I think) that in Australia, 2% of people own (or jointly own) more than one of something that could be called an 'investment property'.

I strongly suspect that most Australians do not own an IP, maybe 20% own an IP, 2% own 2 IPs, and less than 0.5% own more than 2 IPs. It's actually pretty rare. Other than previous generation family members on my wife's side, I don't think I actually know anyone (ie friends, my family) who owns IPs other than my wife and I.
 
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Rixter said:
Yes I agree, however for this context lets refer it to having enough passive income to meet the individuals idealic lifestyle expenses in their eyes.
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Which is very subjective. Some people may be perfectly happy on $50k passive income, but some might need/want $100k, $200k or $1m or whatever. If I want $500k income to 'live' and my portfolio can generate $100k, I'm not financially free. But if I change my mindset and am satisfied with $100k, then I AM financially free.
Alex
 
I think 20% of active members owning more than 1 IP may be a little low. Generally I'd say it's correct, but SS isn't your usual sort of place/forum which is evidenced by the perspective of posters, knowledge, attitudes, income levels etc.

As far as a definition for 'financially independent' - for sake of ease and comparison, I'd say it would be fair to peg it at the average full time wage. Yes obviously a lot wouldn't be happy with that but at $50k (is that the average :confused: ) net income from investment - you can say you're indpendent.

PS The average wage wouldn't be sufficient for me either, but it seems like a fair statistic for comparison.
 
alexlee said:
Which is very subjective. Some people may be perfectly happy on $50k passive income, but some might need/want $100k, $200k or $1m or whatever. If I want $500k income to 'live' and my portfolio can generate $100k, I'm not financially free. But if I change my mindset and am satisfied with $100k, then I AM financially free.
Alex
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That is correct Alex. For the purposes of this exercise its what the individual recognizes in their eyes.

Everyone will be different.
 
Under the $50k definition, I am financially independant, but having not been on 50k for quite a few years now, I wouldn't be satisfied with that anymore.

So I don't consider myself financially free yet.

I thought of something else too that might affect different people's definitions of financial freedom. For example, I live on equity, and will continue to do so in some form until the day I die, but I know there are people out there that wouldn't consider (unknown) future capital-growth as any part of a financial independance plan.
 
steveadl said:
I think 20% of active members owning more than 1 IP may be a little low. Generally I'd say it's correct, but SS isn't your usual sort of place/forum which is evidenced by the perspective of posters, knowledge, attitudes, income levels etc.
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I think this is the case. The active members on here, especially those who have been here for a long time would have, I would presume, a much greater percentage than 20% who own more than one IP.
 
skater said:
You are forgetting those who are on the forum while at work.:D
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Guilty :eek:

Just logged on for a quick bit of procrastination. Its amazing how the 80/20 seems to work. Currently sitting on 3 IP's yes it is definitely rare to meet people with more than 2. I am about 8-10 years from being financially free. (unless I raise my expectations substantially in the mean time)

Should get back to work eh?
 
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