Focus on the key things you need to do to achieve your goal
If you peel back the layers on the different diets, there is one common thread. Don’t consume as many calories as you expend.
Likewise with growing your wealth. Don’t spend everything you earn and invest the rest in a tax-effective and diversified way.
How financial advice can help – a case study
A 49-year-old couple I recently helped put together a plan had $1.2 million invested with two different fund managers, they were going to buy an investment property through a property buyer’s agent, and they were starting to actively trade shares by following an online investment adviser. At the same time, they weren’t putting anything beyond the employer’s compulsory contribution into their super (they each had around $250,000) and they had just left their super in the default investment option in the fund their employer set up for them more than 15 years ago.
Firstly, we went through their goals. While they wanted the ability to stop work before they were 60, they were happy to keep working up until then if necessary. They were happy to invest in assets that are more volatile knowing they generally provide greater returns – as this would be the best way to fast-track their retirement date. They didn’t need to put any money away for their teenage kid’s education, as this could easily be funded from their paid work over the next 5 years.
By looking at various cashflow scenarios, we worked out that when their investments (including their super) were worth $3.0 million, they would have more than enough to be able to stop work. This would give them enough to live the life they wanted and help their kids get started on the journey to adulthood.
We then reviewed their current investments and found that the investment funds they had were not appropriate (both were too conservative) and they could achieve their goals without borrowing to invest (which is what the property buyer’s agent and mortgage broker were recommending).
We put in place a plan that included:
- moving their super to a fund that has more appropriate investment options with lower fees (and would allow them to transfer their insurance)
- cashing out their investment in the two managed funds (there were minor capital gains tax implications)
- $300,000 was invested in a diversified Exchange Traded Fund with all dividends re-invested.
- they each put $440,000 into their super (this was non-concessional contributions across different financial years)
- they would continue maximising their concessional super contributions and make $30,000 of non-concessional contributions.
As a result, we expect they can stop working at 55 and use the $500,000 in their Exchange Traded Funds to fund their lifestyle until they can access their super; by the time they are 60 they are likely to have the equivalent of $3 million in super, that once converted to a pension, the earnings would be tax-free.
We specialise in helping professionals put together a financial plan that helps them live their ideal life. If you are interested in getting an independent financial plan that helps you achieve your goals, book a chat via the button below or contact us at firstname.lastname@example.org.