‘I earn good money, I just don’t know what to do with it!’
Does that sound familiar to you?
Typically, the majority of people I see for the first time are singles and couples who are earning a comfortable amount of money. They may have bought a home, which is a great first step, but typically the next question is…….. now what?
Firstly, you are not alone!
Secondly, there is so much noise out there about what you should or shouldn’t be doing, so it’s not really surprising that most people feel a touch overwhelmed.
Should you buy an investment property? What about shares? Someone told me that I am supposed to be doing this salary sacrificing thing? Friends and family will have their two cents worth too based on their experiences. How are you actually supposed to decipher what is best for your situation?
Typically, you need to think about 3 main areas.
Insurance: You are probably thinking, gee thanks guys, sounds totally riveting. Exciting, no, but necessary it is. Why do you need to address this? Insurance can be quite complex, but the underlying reason we recommend insurance is really to protect you and your wealth. There is no point in working on building your money if you haven’t put in place mechanisms to protect it or yourself correctly. The backbone behind everyone’s wealth is their income. Your ability to earn money will likely be your greatest asset, so making sure you have an income regardless of what happens to you is kind of important wouldn’t you say?
Investing: If you have purchased your first home, you now need to consider building an investment portfolio outside of the place where you live. Contrary to popular belief, the home you live in is not an investment. It’s an asset that you live in. You need to start thinking about diversifying your wealth and building it over time. This can and should include shares, property and cash style products like term deposits and bonds.
There are options available to start an investment portfolio with as little as $5,000. That means you don’t have to get a second loan on your home to buy another property before you are ready. Many people believe that buying property is one of the only ‘safe’ ways to invest, and I’m telling you now, it’s not.
Reducing your tax via salary sacrificing: This is a double wammi. Making extra contributions to your super fund will reduce your taxable income, but it will also mean that you are working towards your retirement. If you think you are too young to consider retirement, then think again. If you don’t start thinking about it within your 30’s, then it will get tougher and tougher to make up the difference. Typically, in order to retire at age 65, we are aiming for around $1mil per person to have a comfortable retirement. For most people, your 9.5% super contributions alone won’t get you there. Understanding the rules and regulations around investing within your superannuation fund is very important because if you get this wrong, any tax savings that you think you are entitled to, could be gone, with a hefty fine on top.
If you are earning good money, but aren’t particularly sure what you should be doing, then you need to consider the above 3 points, and you should be seeing a professional for advice. These aspects of your wealth are complex and ever changing with government regulation, so it’s important to get an outside point of view before you make any irreversible decisions.
As a financial adviser, it is my job to guide you through each and every year to make sure that you are doing the right things at the right time in order to 1) make as much money as possible and 2) achieve the things you want to.
If you want to chat about it, book in a free coffee meeting, we are happy to talk about your options.
This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.