Here are six basic principles that anyone can apply to achieve great results, even if you are starting with limited resources. Remember, without a proper financial plan your good intentions may not amount to much.
Pay yourself first
Make sure that you regularly set aside some of your income before you’re tempted to spend it. Before long you’ll have enough to consider a range of investment options.
Invest for growth
Over the longer term, growth investments such as shares should give you a better overall return than cash-type investments, but are likely to be more volatile. Everyone’s attitude to risk is different so you need to choose investments that are suitable for you.
Too good to be true
Steer clear of investments with unrealistically high returns as most of the highly tax-driven investments that you may read about are often riskier than they appear.
Invest tax effectively
Remember that money invested in Australian shares or managed share funds can earn you imputation or franking credits. These reduce your income tax paid on any dividends or can potentially be received as a tax refund.
Make the most of super
Super is still the most tax-effective form of retirement saving for most people. If your employer allows it, you can implement a salary sacrifice strategy to make additional super contributions directly from your pre-tax salary. This means your super will be increased and, because of the concessional rate of tax that applies to super, you will pay less in tax.
Spread your risk
Don’t put all your eggs in one basket – maintain a balanced approach to investment. It is generally a good idea to spread your investments across a number of different asset classes such as shares and property, fixed interest and cash. Often if one asset class performs poorly, another may perform strongly. A diversified approach can keep your investments growing steadily.
Financial advice makes a difference
Bridges has been providing professional financial planning services to credit union and building society members since 1985. A Bridges financial planner can work with you to develop a financial strategy for the year ahead that suits your circumstances. Call us on 1800 800 225 to make an appointment with a Bridges financial planner. The initial consultation is complimentary and obligation-free.