One of the keys to financial success is to adopt the right strategy at the right time. As you move through the stages of life here are some tried and tested financial ‘secrets’ that will help you build and protect your wealth.
Teens and young adults
Time is on your side so get saving. Through the magic of compound interest, a little bit invested now can grow into a big amount over time. If a 15-year-old starts saving just $10 per week now, their total outlay of $26,000 when they turn 65 will be $116,000 by the time they’re 65 (after fees and tax) in 20 years’ time. Contributing those savings to a tax-favoured vehicle such as superannuation may provide an even higher final return.
Single life
Saving is still a key strategy as careers are established, but usually with a shorter timeframe and a specific purpose in mind, i.e buying a home. This is when savings strategies can be brought undone by the allure of desirable things and the ease with which one can go into debt. Take care not to indulge in too many luxuries. Avoid taking on any high-interest debt, such as credit cards. Rather, commit to the rather boring, but highly effective ‘secret’ of working out a budget and sticking to it.
Family focus
The time of kids and mortgages is also the time of peak responsibility. It’s likely that your most valuable asset is your ability to earn, and illness, disability, or death could deprive you and your family of that income. The financial consequences of each of these possibilities are manageable. This is with a blend of income protection, total and permanent disability, trauma, and life insurance.
Preparing for retirement
With offspring launched into the world and earning capacity often at a peak. It’s sure that a wealth of opportunities open up for pre-retirees. By all means, enjoy some lifestyle spending, but don’t forget to supercharge your super in anticipation of a long retirement. For additional tax benefits, look at making salary sacrifice contributions, perhaps combined with a transition to a retirement strategy. A recommendation In times of normal interest rates is using surplus income to pay off any outstanding home loan. However, when interest rates are very low, investing spare income into super and leaving debt repayments may deliver a better outcome.
Golden years
Australians are up there with the leaders when it comes to enjoying long and healthy retirements. That means retirement savings need to last. So a): don’t go too hard too fast in spending your hard-earned super, and b): don’t invest too conservatively, particularly in times of ultra-low interest rates. On the plus side, if you’ve employed the above financial secrets in each phase of life, you should be in good shape to enjoy a long, financially comfortable retirement.
Whatever your stage of life, there are many things you could be doing to secure your financial future. To find out more, talk to your financial adviser.
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