Hi Tammy, how will I ever buy a home in Sydney? If I rent, I can’t save. Will I be living at home forever? Help! Joe, Manly
Hi Joe, this is a common concern for younger people today. The key is not to let it discourage you.
It is important to have a plan. Decide on a wealth creation strategy and work out how long it will take to achieve. Starting early, being consistent, tracking your progress and regularly reviewing your strategy will help you keep on track.
Consider how you can make the best use of your most valuable asset – you! Can you earn more money by improving your skills and education? Can you work a second job after hours or on weekends? The more effort you put in, the faster you will get there.
Consider how you can reduce spending to maximize saving. Do a budget, track your spending and review it regularly.
The more conscious you are of your spending, the easier it is to change these habits.
When investing, it is easier to start small. You need to step on the first rung of the ‘wealth ladder’ to reach the top.
The first rung may be building an emergency cash reserve, the second step may be starting a regular investment plan.
You may initially buy a cheaper country property with good rental yield, before upgrading to outer Sydney where you can live while renovating. Your steps will be personal to you, but each step builds wealth towards your goal.
Consider borrowing to invest, a strategy known as ‘gearing’. You can start small with shares or managed funds using a margin loan and instalment gearing.
Gearing works by increasing the amount you have invested, thereby magnifying your potential return (or potential loss!). Positive gearing is when the income earned is greater than the cost of the loan, it pays for itself.
You can also use the first home Super saver (FHSS) scheme to save up to $50,000. These funds can only be drawn to buy your first property, which you live in for at least six months in the first year. This can be a tax-effective, but advice is essential.
Quick Tips: With negative gearing the cost of the loan is greater than the income earned. So you may save tax, but you need cashflow to fund the shortfall.
Any questions, please speak with your financial adviser, or call me to discuss on 8376 0350.
Regards, Tammy
Financial planner Tammy Marshman of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au.
This is general information only, as in preparing it we did not take into account your personal objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your personal circumstances. Although the information is considered reliable, we do not guarantee that it is accurate or complete and you should not rely upon it.
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