5 ways to grow wealth

Wed, 06 Sep 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/five-ways-grow-wealth-230647235.html 


5 ways to grow wealth

Luck certainly helps some people get wealthy.

For the rest of us, careful planning and an understanding of markets, investing strategies, economics and finance are vital aspects of going down the path of wealth creation.

There are many aspects to wealth creation and the list below covers just five of those. These are the five characteristics or strategies usually evident in most wealthy people and if you follow them throughout your life, you will probably have more wealth than those who don’t.

Buy a house to live in

Owning your own house to live in is the best way to both meet the need for a roof over your head and to accumulate wealth. House prices were high 30, 20 and 10 years ago. They still are. Postponing the decision to buy a house has proven to be a financial disaster in just about every year since house price records started in the 1800s. Mortgage repayments are not only ‘forced savings’ but even with modest price growth, on such a big asset the wealth gains over a long time frame (think well over 10 years) are substantial. Once you build some equity and wealth in your own house, it can be used, in time, to finance other wealth creating investments.

Look at your superannuation regularly

With compulsory superannuation set at 9.5 per cent of your income, there will be a decent chunk of cash put into your pension fund year in, year out, even when you start working in a relatively low income job.

Make sure the fund that is looking after your savings charge low fees – a 0.5 per cent per annum difference in fees over 40 years of superannuation performance can mean the difference between a comfortable retirement and financial pressure. Also look where the investments are made – high growth but volatile asset classes are good while you are young, but as you hit retirement, safe, low return investments are sensible. In other words, take time to look at and understand your superannuation.

Take some risks

Calculated risks can yield financial returns that boost wealth. Even when borrowing for a house, don’t always be put off by borrowing a seemingly large amount. Wage and house price growth abd your repayments will, in time, make the initial loan look small. When setting up a business, be prepared to spend and invest some money to make some money. It is not a surprise that every company in the ASX top 200 has debt. Other than the uber rich, all other wealthy people have taken on debt to take a risk at some stage in their life.

That said, before you invest in anything, do a lot of home work and scenario planning. The easiest one is to assume interest costs on you borrowing will go up. If they do, you will be well prepared. In not, you will have surplus cash.

Look at your finances

The Australian financial sector is competitive. The banks and other financial institutions that provide mortgages, personal loans, superannuation fund management and business finance are all hungryyou’re your business. To get that business, they often offer discounted fees, lower charges and interest rates so by shopping around and reducing the cost of servicing your loan or fees in running your business, you will save money. On your mortgage, for example, you can currently pay 4.0 per cent or thereabouts or pay the advertised rate around 5.0 per cent. On a $500,000 loan, the difference of 1 per cent per annum is over $400 a month. Shop around and be prepared to change who you do your financial business with. It will be worth it.


Never pay interest on credit cards

Having debt and paying interest are a vital part of any path to wealth creation. For your house, a business loan or other leveraged investment purposes, having debt is fundamental. But, and it’s a big but, never have debt on a credit card where interest rates are oppressively high. Make sure you pay off you credit card in full and on time every month.

Save your interest costs for loans that will enhance your wealth, not every day spending.

There you go.
Remember that most of these strategies are medium term – they will not make you rich quickly. Unless you are lucky, getting rich quickly wont happen. Don’t invest in things you don’t understand.

There are a range of other matters that can be wealth enhancing.

I am one of the speakers at the Money for Life workshop in Sydney on 7 October.This and many other topics about saving, investing and wealth creation will be covered at this event with a panel of top notch speakers. We will be discussing these and other matters in what should be a terrific event.

For tickets, go to quadrant2.net 



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Politics Panel: Australia's intergenerational gap

Fri, 25 May 2018

I was one of the panel members of this podcast which was on ABC Radio National. 25 minutes of interesting discussion.

At this link: https://www.abc.net.au/radionational/programs/breakfast/politics-panel-australias-intergenerational-gap/9798848 

Politics Panel: Australia's intergenerational gap

 With the federal budget handed down and the battle lines emerging for the next election, Australia's intergenerational gap is shaping up as a major political issue.

The Coalition is promising a host of sweeteners for retired voters while Labor is promising to pump more money into education and get housing prices down.
If you're a voter, there's a good chance your view of those promises will be informed by the year you were born.

Do we need to be worried about Australia's economic outlook?

Tue, 22 May 2018

This article first appeared on the Yahoo7 Finance web site at this link: https://au.finance.yahoo.com/news/need-worried-australias-economic-outlook-060611703.html 


Do we need to be worried about Australia's economic outlook?

The Reserve Bank of Australia reckons that the next move in official interest rates is more likely to be up than down. RBA Governor has said so in recent weeks as he talks up the prospects for the economy over the next year or two.

This is disconcerting news for everyone out there with a mortgage or a small business loan, especially in a climate where the business sector is doing it tough and when wages growth is floundering near record lows. The good news is that the RBA is likely to be wrong and the next move in interest rates could be down, such is the run of recent news on the economy. Failing an interest rate cut, the hard economic facts suggest that any interest rate rises are a long way into the future and if they do come, there will not be all that many.

At this point, it is important to bring together the issues that would need to unfold to see the RBA pull the lever to hike interest rates.  At the simplest level, the start of an interest rate hiking cycle would need to see annual GDP growth above 3.25 per cent, the unemployment rate falling to 5 per cent and less, wages growth lifting towards 3 per cent and more and underlying inflation increasing to 2.5 per cent.

This is where the RBA expectation for higher interest rates is on very thin ice.