Building your Wealth | February 17, 2016
Financial advisors see it all. They have an insight into their client’s spending, saving, earnings, and investments, and have the chance to get to know the people behind them: their ambitions, fears, priorities, and where they need to know more. But, today we thought it would be nice to get an insight into three of CFB’s advisers and hear about their favourite personal tips concerning a particular topic; growing wealth.
This article looks at tips and ideas about building and growing wealth to help you on the path to good money management and a bright financial future. The information is intended to help you develop or re-assess your plans for managing your money and achieving your goals. While the information highlights some factors to consider, it does not replace the need for ongoing financial planning advice that takes into account your personal situation.
Many Australians delay taking control of their finances because they don’t have the time, find it too overwhelming or simply just don’t know where they should start. The reality is though, the sooner you step up and take charge, the sooner you can achieve better results, particularly in the long-term. For most people, wealth doesn’t come in a windfall, but instead gathers gradually as a result of years of hard work and diligence. So, we asked CFB’s Financial Advisers Kyle Thompson, Graham Campbell and Zach Webber “Personally, what’s your favourite tip to start growing and building wealth?”
Partner and Senior Financial Advisor at Complete Financial Balance
Take the time to focus on your personal objectives and what you’re really trying to achieve. Making your goals personal and tangible will result in better outcomes then simply promising yourself to save a particular percentage of your income.
Goals, both short and long-term, are an important step in building wealth. If you don’t set yourself personal financial goals, then how do you know what you’re trying to achieve financially? The reality is that most people do not think about what their goals really are, or the finances needed to achieve those goals. And if you don’t know where you are heading, then how do you know how to get there? Remember it is important to be specific and make your goals measurable so you can see the results. Making your goals personal and working towards your passions helps you work towards the balance between paying the bills and doing the things you love, which is the ultimate challenge.
Director and Senior Financial Advisor at Complete Financial Balance
Pay yourself first by putting money away in savings and investments and enjoying the rest.
Saving can be tough. It’s easy to get used to spending money on the things we want and not necessarily need. But it’s easier not to miss something you didn’t think you had in the first place, and savings becomes easier if you commit to putting the money aside at the start of your pay period and spending what is left, rather than trying to limit your spending and saving the amount left over. From a psychological perspective, you are able to greater enjoy spending the money left over after a savings deduction because the tough bit is done and the stress of making a saving is gone. Save first; enjoy the rest!
Financial Advisor at Complete Financial Balance
The earlier you start, the easier it is. Begin by putting away small amounts periodically and ensuring that this is left alone. This will help you form good habits, and you will naturally put more away over time as you see this amount grow.
If you want to have a comfortable retirement, it is important to being saving early and maximise the benefits of compounding. Consider two hypothetical savers Kate and Roland:
Kate starts saving $2,000 every year, starting at age 20. After 10 years, her $30,000 total contributions are worth $47,000 (at an annual growth rate of 8%). At age 30, Kate stops saving and makes no further contributions. She just lets the money grow at an 85 annual rate of return for the next 30 years, until age 60. At age 60, the $47,000 will have grown to $472,000.
Kate’s brother, Roland, waits until age 30 before he starts saving $3,000 a year. Unlike Kate who stopped saving after 10 years, he doesn’t stop saving. He saves every year for 30 years, from ages 30 until 60. At age 60, his account is worth only $367,000.
Starting to contribute late is better than not starting at all, but take note of the difference starting early can make. By deferring his savings program for 10 years, Roland never catches up to Kate. Roland saved three times as long and three times as much. Yet, his account is worth less than 80% of what Kate has at age 60 – all because he waited 10 years to start saving.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.
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