Keep your Financial Seesaw Balanced
A sound and sustainable financial strategy is a balanced one. The largest asset so far for most Australians is their own home, home mortgage is non-deductible debt, pay it off as soon as possible if you could. The second largest money asset is the superannuation, however you cannot touch it before retirement. In addition to these two financial assets, the money management strategy you can apply to the resources left is not really complicated at all and we call it a financial seesaw – on one side of this seesaw is your wealth protection strategy, on the other side is wealth creation strategy, and the rule of thumb of achieving a financial success is to keep this seesaw balanced.
On wealth protection side, it’s insurance. For people with young kids and mortgages that yet to be paid off, setting up adequate personal risk insurance is terribly important. It’s the foundation of your entire wealth building. Without it, you are taking your personal risk on your own shoulders while travelling your wealth creation journey. You are like an acrobat who is walking on a rope high up in the air without any security strings. The good news is personal insurance only costs small money, by spending this little money you will get a long term peace of mind.
On wealth creation side, it is investment. Whether it is property, share or managed fund, the bottom line is you have to find an investment vehicle that you are comfortable and confident with, and you have to invest and keep investing until the income from your investment has reached a level that can sustain your lifestyle to become financially free. Property is a proven wealth creation vehicle used by many people successfully. Property also ranks No1 in terms of the annual return in last 10 or 20 years compared with all the other investment classes, such as shares, funds etc. Australia has one of the best real estate markets in the world. In the long run, Australia is still going to attract a lot of people from all over the world to come and live, and we need good quality people to build this country stronger as well. In the meanwhile, we only have a handful of cities where can accommodate the future populations. As the population grows, labour cost increases and depreciation works, the prices for properties will go up despite the short-term volatility. The critical part of this wealth building process is to get the first one, because once you have bought your 1st property, you will have the chance to build up your portfolio by taking advantage of the equity. As a result, you start to have the money that not only comes from your physical work, but also from the capital growth of your assets.