The ActOn Wealth team has more than 50 years of collective experience in advising financial wealth strategies for our clients. Over this time, we have found ourselves imparting financial golden nuggets that apply to so many of our clients, irrespective of their background, age, situation or lifestyle goals. So, without further ado, we’d like to share the seven most salient and successful tips you can take on board to grow your wealth, as well as some additional nuggets direct from our team members.
1. Set realistic goals
It’s a nice dream to want to retire at the age of 40, buy a mega yacht and spend the rest of your life sailing around the world. We’re not here to slay dreams, far from it, but for most of us, that calibre goal is out of our reach unless we win the lottery (not a strategy we recommend relying on!) or come into some kind of inheritance. Financial and lifestyle goals need - and should - have plenty of stretch, but they must remain realistic. Maybe retiring by 50, purchasing a catamaran, and heading on regular sailing holidays might be well within reach. Let’s find out!
If ever we were going to be accused of sounding like a broken record, it is with this goal. And for good reason. Diversification really is key. As Australians, we can all be particularly partial to the idea of investing all eggs into the property basket. Of course, this is a great growth asset class. However, it can be volatile. So, make sure your investment portfolio has a good spread across asset classes, so should one of them not go to plan, you have several others keeping you propped up, on course and, well, sailing towards that sunset.
3. No risk equals no reward
The simple truth is that all investment comes with a degree of risk. In contrast, doing nothing can be equally damaging to your financial goals. So don’t bury your head in the sand and all your money in a savings account as doing so will generate little reward. Indeed, by the time you come up for air, you will be well off target.
4. Follow the lowest risk path to your goals
We’ve just explained that investment always carries a degree of risk. However, never assume more risk than you should. For instance, if you can meet your financial goals with 4% growth per annum from investments, do you really need to consider more volatile asset options? Instead, focus on your goal and the path of least resistance and least risk.
5. Expenses should increase at a lower rate than income
No matter how good life gets, no matter how fat that promotion, avoid the temptation to scale up your expenses in-line with your income. It is only natural to adjust lifestyle in relation to income, but is it always necessary? If you maintained a similar lifestyle despite a fatter paycheque, would you really be missing out on much at all? Especially if the money saved goes towards investment opportunities that will bring greater wealth sooner?
6. Protect yourself
Becoming an investment maverick can be incredibly rewarding, even thrilling. Observing your financial wealth go from strength to strength is satisfying, to say the least! However, it can all come undone very quickly without the proper protection in place. Consider safety nets such as personal insurance. You insure your car, home and contents, right? But your most significant income-producing asset is you. Rely on yourself, respect yourself, protect yourself.
7. Pull together a personal budget
There. We said that B-word! But it shouldn’t cause chills down your back. We’re not talking about turning the heating off over winter, enjoying a Friday night glass of water instead of wine or downgrading the holiday to a tent in the backyard (although that can be fun!). Budget does not have to bring major sacrifices, and indeed, if it causes you angst or disappointment, you will never stick to it. A feasible, achievable budget that still enables you to live the lifestyle you want, but with slightly dialled-down treats, is such a small sacrifice when you see what it can yield. Wealth-growing aside, a budget can be a mind-blowing way to really understand where, how and why you spend money. Often when we help our clients pull together a budget, a light goes off, and they realise just how easy it can be to save if they’re more conscious of how to spend.
Financial advice from ActOn Wealth individuals
We’ve shared above some broader wealth-building golden rules. Now, let’s hear from some of the ActOn Wealth team directly on their number one financial advice.
Salary sacrifice into super
Salary sacrifice an additional amount into your superannuation. Contributing even $50 per week to your super fund would only reduce your take-home pay by approx. $30 per week. However, doing so will significantly increase your super balance over a 10, 20 and 30 year period.
Rely on yourself, not the Government
Put money away for the future and rely more on yourself than on Government support. We often hear that Australia has an ageing population - this reality is now coming into effect with the increasing strain on Government spending. Sadly, the Age Pension alone will not make for a comfortable retirement, so start creating your own strategies instead.
Spend less than 30% of your income on your mortgage
This is a long-standing rule of thumb that our blog will explore soon in more detail. However, with property prices rapidly rising, you might feel it’s out of touch with reality. Not so if you consider 30-year terms, which a large number of lenders now offer. We can do some very specific number crunching for you around options here, so don’t hesitate to contact us!
Have a separate savings account only for emergencies
You should always have a separate savings account that you don’t touch. Use this for emergencies only. A good rule of thumb as to how much you should keep in the account is anywhere between three to six months of your living expenses.
Transfer your pay into an offset account
Have your pay directed into your offset account. Interest is calculated daily on an offset account and can be accessed just like any other transaction account. So, even if the balance goes up and down with your day to day transactions, you'll still be ahead.
Talk to ActOn Wealth today about growing your finances
These financial golden nuggets serve as a terrific backbone to building your wealth. However, the ActOn Wealth team can provide tremendous value with advice and strategies bespoke to you. Contact us for an initial, no-cost catch-up. We can go over your lifestyle goals and understand your situation. As your wealth wingmen, we help you set the groundwork for your wealth strategy and work alongside you to ensure everything stays on track. Introducing you to our nifty budget app, scheduling formal reviews of results and staying nimble to potential twists and turns is all part of our commitment to your wealth creation. Contact us today, and let’s see how we can help!