Planning for your future takes discipline and persistence, but the key to any successful investment is knowledge.
It doesn’t matter how much money you have or how old you are, it’s never too early or too late to begin thinking about creating wealth for your future.
The best place to start is by making an appointment with a Heritage Financial Planner
Budgeting
Budgeting is a basic part of good financial management though it is often neglected. It’s the best way to work out where your money goes and how much you can afford to invest. Careful budgeting makes it possible to save money. By regularly investing these savings you can plan for the future and build your wealth.
A well-designed but simple budget helps you:
- Keep your expenses under control
- Manage any unexpected bills or emergencies
- Use your money for things you enjoy
Try our Budget Planner. Enter your annual income and expenses to assess your financial position.
Also, our Savings Plan Simulator may be useful to work out how much you can accumulate over time from an initial contribution and regular ongoing deposits.
Investing money
While investment products change and new products come onto the market, there are some golden investment rules that never change.
Vary your investments
Diversification, which is the practice of spreading your money across a number of different types of investments, is a great way to manage risk. If you have several different types of investments it’s unlikely that they will all perform badly at the same time. Diversification allows you to endure the ups and downs of the investment cycle.
Know the risks
There is an element of risk in all investment types from the simplest savings account through to the international sharetrade market.
Different investments pose different risks and the consequences of these risks can be relatively minor or quite considerable.
The general rule is that the higher the risk, the higher the potential returns. The opposite is also usually true – the lower the risk, the lower the potential returns. So it’s important for you to work out how comfortable you are taking risks with your investment choices.
A Heritage Financial Planner can help you to determine your risk profile by having you answer a number of questions. Financial planners are, in fact, required to determine your risk profile before recommending investment products.
Superannuation
Superannuation is a long-term, tax-effective investment intended to ensure you have money for retirement, so it’s important to have an adequate superannuation nest egg.
Superannuation funds can differ greatly so you should choose a fund and investment plan that meets your needs. Points to consider are the fund’s performance, its investment strategies, fees, and any additional included benefits such as income protection, and death and disability cover.
There are a number of ways your superannuation account can grow:
Employer contributions
These are payments made into your superannuation account by your employer, on top of your regular wage or salary. Each year, your employer must make contributions equal to at least 9% of your gross pay and some employers may contribute more.
Salary sacrifice
Another way to add to your superannuation is to take less salary upfront and have your employer contribute the ‘sacrificed’ amount to your super. This can be very tax-effective, particularly for high income earners, because the rate of tax paid on the superannuation contribution is generally lower than the marginal tax rate you’d normally have to pay on that amount.
Personal contributions
You also have the choice of adding to your superannuation account by making personal contributions from your after-tax income. Depending on your income, the government may also match your contribution. It is also possible for you to make contributions to your spouse or partner’s superannuation.
The amount of superannuation you will need in retirement varies from person to person. As a general rule, experts suggest your retirement income should be approximately 60% – 70% of your pre-retirement income. So you need to ensure you have sufficient superannuation savings to provide this amount for the remainder of your life. Employer contributions alone may not be enough to cover this so you may need to consider topping up your superannuation through salary sacrificing and personal contributions.
There are many rules relating to superannuation contributions and they change from time to time. Before making any decisions about your super, talk to a Heritage Financial Planner.