Tag Archives: Wealth Accumulation

Property investment vs shares

By Robert Wright /February 18,2021/

An age-old question is whether it’s better to invest in property or shares. There is actually no right or wrong answer. It all comes down to your preferences and approach to risk.

Growth investments

Both asset classes – shares and property – are considered to be growth investments. In other words, over time, a quality investment in shares or a property could generate capital growth and also produce income from rent (property) and dividends (shares).

The case for shares

Ease of entry into the share market is a big plus for share or equity investors. You can buy into the share market with as little as a few hundred dollars. In comparison, home and apartment prices in our capital cities could easily cost upwards of $1 million. The transaction costs of investing in shares such as brokerage and transaction fees are also significantly lower than the stamp duty and legal fees you pay as a property investor.

Finally, with a share market investment, you could get almost instant access to your money when you decide to sell. Equally, you don’t have to sell the entire investment to get access to some cash. With an investment property, you can’t sell a bedroom to free up some cash – it’s the entire property that goes to market or nothing.

The case of property

A major appeal of owning a property is its perceived stability relative to the share market, where values can vary from day-to-day as a consequence of how easy it is to buy and sell shares. If you’re approaching retirement, this level of volatility may not be for you.

A property investment, on the other hand, gives you a tangible asset that can deliver a sense of investment security as well as some capital growth and income.

Property buyers have the ability to fix the interest rate of a loan, which is another valuable security measure. This means your mortgage repayments will be set for an amount of time, which could be a good option for someone who prefers stability.

Holding an investment property in a self-managed super fund (SMSF)

It is possible to set up an SMSF primarily to invest in property, but be aware, some rules apply to ensure your fund remains compliant. ASIC’s Money Smart website lists the following rules:

The property must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members.
The investment property can’t be acquired from a member or related party of a member of the SMSF.
The property can’t be occupied by a fund member or any fund members’ related parties.
The property must not be rented by a fund member or any of the fund members’ related parties.

As this shows, there are many reasons to invest in shares and property. For further information about investing in property or shares, or to discuss whether it may be a suitable strategy for you, please get in touch.

Source: BT

How to start saving for your future in your 30s

By Robert Wright /February 04,2021/

Some big life changes – and big expenses – can occur in your 30s. The key to maximising your retirement savings now is making savvy, forward-thinking financial decisions.

This becomes even more relevant when you’re surrounded by the current economic uncertainty. Short-term needs and expenses are front-of-mind and you might prioritise saving more money for a rainy day. Even so, it’s still possible to balance this with preparing for retirement while in your 30s to help make sure you eventually leave the workforce with sufficient financial freedom.

Set a budget – and stick to it

Your budget shouldn’t be static, and it’s a good idea to reassess it at different stages of your life. This is particularly important from age 30, when you’re potentially faced with a lot of large expenses, both expected and unexpected.

Start saving as much as you can

You’re no longer new to the workforce and, with a decade of experience under your belt, you may be in a position to receive a promotion or pay rise.

But just because you’re earning more doesn’t mean you should spend more. In fact, as your income grows, so too should your financial and savings goals. If you developed strong savings habits in your 20s – now’s a good time to save and invest to set aside even more for your future.

Boost your super

It’s time to get serious about super, so your retirement savings are maximised – like consolidating funds where appropriate, choosing a fund that’s in line with your values and understanding where and how your money is generating an investment return, then it’s time to think about these tasks.

Next, if you were one of the thousands of Australians who withdrew their superannuation under the Federal Government’s early super access scheme, start thinking about how you might be able to replenish your super balance. You could do this by making a personal super contribution – you could then try claim this amount as a tax deduction in your tax return or potentially receive a government bonus to your super in the form of a co-contribution.

If you’re an employee, on top of the compulsory superannuation guarantee (SG) from your employer (currently 9.5%) you might also consider salary sacrificing, which is where your employer makes additional voluntary contributions to your super account. You choose the amount your comfortable salary sacrificing, and it’s paid directly from your before-tax income.

Whatever strategy you choose, by setting up payments as an automatic contribution, you’re less likely to even notice them coming out. Plus, putting these tactics in place now means you’re taking a small but vital step toward ensuring your financial wellbeing and a comfortable retirement.

Identify additional income streams

Help save for retirement in your 30s through a side hustle or by regularly getting rid of the stuff you no longer use. It’s also potentially a fun way to meet new people and spend more time doing the things you love. Consider putting whatever you earn from these side projects directly into your retirement account – you’ll be building funds for your future, while decluttering or getting your creative juices flowing.

Assess your insurance needs

With more responsibilities, and possibly debts, it’s probably a good time to make sure your financial future is protected with insurance. You might consider taking out private health insurance before you turn 31, to avoid paying a lifetime health cover loading on top of your premium.

While it may not seem like something you need just yet, income protection and life insurance are not just for oldies. They’re relevant for Aussies at all life stages, especially those of working age with ambitions for the future. Imagine if you couldn’t work because of illness or an accident – taking out insurance can protect you from having to dip into your savings to pay for unforeseen expenses whilst you’re off work.

Save and invest wisely

This is the decade where you might consider investing more aggressively for your future, however it’s important to make considered decisions with advice from those in the know.

If you’re a newbie investor, there are a lot of factors to take into consideration, including what level of risk you’re comfortable with and how diversified you’d like your portfolio to be. Start small, set clear goals and continually re-evaluate your progress.

Get personal finance advice

Whether you talk to your partner, use savvy friends as a sounding board, or get advice from your parents, it’s good to have honest conversations about personal finance. But it’s also important to understand the value of qualified professional advice. Consider making an appointment to see a financial adviser to help you better understand your financial situation, so you can set and reach your retirement goals.

Source: AMP

How to start saving for your future in your 20s

By Robert Wright /December 04,2020/

If you’re in your 20s, chances are that life could feel like a bit of a rollercoaster right now. The economic fallout of the coronavirus (COVID-19) may have knocked your personal finances for six and at the same time, you could be juggling new expenses and experiences for the first time, such as moving out of home and starting your first full-time job. Learning to juggle competing financial priorities and save for the future is essential.

While these lessons may be confronting at the moment, they can also teach valuable skills that your future self will thank you for. If you do things right in your 20s, you can lay the foundations for a solid financial future and set yourself up for life. Here’s how to put some sound plans in place to give yourself more choices about how you live your life in the years ahead.

Get budgeting

It might seem obvious but getting in the habit of budgeting when you’re young is one of the best ways to boost your future financial wellbeing.

Start by tracking what money you have coming in (your income) and going out (your expenses). It’s important to understand where your money is going and what proportion you’re spending on essentials, like rent, food and utilities, and non-essentials, like entertainment and clothes.

Practise mindful spending

No matter what your financial situation is at the moment, this is an ideal time to learn savvy spending techniques. Practising mindful spending is an easy way to ‘trick yourself’ into saving money. And when you do need to buy a big-ticket item, do your research, shop around and where possible, look out for seasonal sales to help stretch your hard-earned dollars further.

Compound your interest

When you’re in your 20s, your budget is usually pretty tight and there are plenty of other demands on your income. But if you can spare a few dollars from your pay, it can make a big difference later on.

By starting to save in your 20s, you have a great opportunity to maximise the growth potential of compound interest. This means that you not only earn interest on whatever funds you deposit into your savings account, but you also earn interest on that interest. It’s extra money – without the extra effort.

For example, if you begin with $100 in an account earning 2% interest a month, and deposit just $10 into the account every month, in 10 years you’ll have $1,449 in the account – $149 of that pure interest. If you keep doing that for your entire career, say 50 years, when you retire, you’ll have $10,568. Of that, $4,468 – almost half – is pure interest.

Watch your super grow

Once you earn over $450 a month, superannuation is compulsory in Australia for most employees, which typically means you’re in the fortunate position of being able to start planning for your retirement as soon as you get your first job – whether full-time, part-time or casual.

So, rather than thinking of super as a burden, think of it as an easy way to save for retirement in your 20s. It can be tax effective and harnesses the benefits of compound savings.

If you withdrew your super early

If you’ve been affected financially by the coronavirus (COVID-19), you may have withdrawn some of your super early, under the government’s early super access scheme.

While it might have helped in the short term, it’s important to consider the long-term implications of withdrawing any money from your super. Just as compound interest works to grow your retirement savings over time, the reverse is also true, and any money that was withdrawn this year could be worth much more by the time you’re ready to retire.

If you did withdraw some of your super early, think about whether you can commit to a plan for paying it back, once you’re back on your feet. You can do this by making personal contributions to your super.

Ditch personal loans and credit card debt

Falling into credit card debt at an early age can quickly spiral into an unhealthy financial future. If you do have any spare cash at the moment, it may be a good idea to prioritise debt repayments.

Write down all the money you owe, then rank each debt in terms of the interest rate on the amount. Payday loans and credit cards generally have higher interest rates, so you should prioritise paying them off first.

Learn to invest wisely

While you’re in your 20s, retirement isn’t just around the corner, which means you have more flexibility with your finances than someone in their 60s who may be planning to leave the workforce in a few years.

With fewer financial responsibilities, you may be in a position to take a few more risks with your investments – the thinking being that if things don’t work out, you have time to fix them.

Start early and consider talking to a financial adviser about choosing a mix of investments that will bring you gains you feel comfortable with, given your financial investment style.

Source: AMP

How to make a financial plan

By Robert Wright /November 03,2020/

A financial plan can help you build wealth over time, aiding the protection of your financial future. If that sounds like a good idea, it could be good to find a trusted financial adviser who can help you on this journey.

Australians are increasingly recognising the value of financial advice with 27 per cent having received financial advice and 41 per cent of us intending to seek the expertise of a financial adviser in the future.

But that’s not all.

According to research by the Australian Securities and Investments Commission (ASIC), Australians are seeking financial advice for a multitude of reasons, including expertise in areas they might not have, their access to investments that are hard to find, as well as their assistance in helping to create a financial plan to build and protect wealth.

A financial plan helps to set out your future goals and outlines strategies to help achieve them. It’s a way to map your financial path to important events such as planning for a wedding, having a family, saving for a house or having a comfortable retirement – to name a few. Regardless of why you’re in need of one, a financial plan will be different for everyone, depending on life stage, priorities or financial goals.

Financial planning building blocks

The first part of the financial planning process is to find a financial adviser you’re comfortable with. A good place to start is the Financial Planning Association of Australia’s (FPA’s) Find a Planner web site, which hosts a range of different options in your local area, along with their specialisation to help you choose what’s right for you.

When choosing which financial adviser you’d like to work with, it’s a good idea to factor in their expertise and costs, as well as references from other clients or testimonials on their website.

Starting the journey

Once you’ve found a financial adviser you’d like to build a relationship with, sit down and discuss your goals, aspirations and attitude to money. This important fact-finding exercise will give your adviser information to help build out your financial plan.

During the financial planning journey, your adviser may give you advice on potential investments, as well as ways to increase your super balance when planning for retirement. They may also help pull together a budget or recommend insurance policies to suit you, and your family’s, needs.

Since that’s a lot to get through, for your initial meeting, it’s good to come prepared with basic information such as details about your salary, the superannuation you have already accumulated, as well as any debts or assets you have. If you can, also bring along your monthly budget and expenses so they have more visibility of your comings and goings.

It’s important this meeting is also a two-way flow of information, so you can ask questions such as:

The adviser’s own philosophy on wealth creation
How they will communicate with you, and, give you information about how your investments are performing
How and when they will review your plan
Any fees or charges.

After this initial meeting, the adviser may prepare a statement of advice, which will include a strategy for how you may be able to meet your personal goals and objectives. This will include:

A summary of your existing financial position and your life goals.
A list of recommended investments and an explanation for why they have been recommended.
Suggested insurance policies
Fees and charges, you will pay to the adviser.

It’s also a good idea to go through this with your adviser so you understand the consequences of accepting or rejecting their advice.

Protecting your position

Part of developing your financial plan is working out how to protect your assets and your income sources along the way. This will often involve taking out different insurance policies including:

Life insurance: to protect you and your family if you die.
Total and permanent disablement insurance: which may pay out should you suffer an injury, accident or illness that means you are unable to work.
Trauma insurance: which may provide cover should you be unable to work due to conditions such as cancer or heart attack.
Income protection insurance: which may replace your wage if you are unable to work due to illness or injury.
Insurance can help you meet your mortgage repayments and other obligations if you suffer an accident or illness or protect you and your family if you are unable to work.

It’s important to consider the right cover for you, your family and your circumstances as part of your financial plan.

Key considerations

It’s easy to assume you don’t need a financial plan because you don’t yet have substantial wealth or assets, or, even because you are too young. But the sooner you start taking control of your wealth, the more confident you will feel about your future and the financial steps you need to take to get there.

Source: BT