To all the thirty-somethings out there, now’s your time to shine! These are the years that will shape the rest of your life.
If you’re looking for a bright future—that’s not held back by financial worry—here’s five simple tips to start building wealth now so you can chill later.
As Warren Buffett once said: “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
1. Consider long-term investing
Having time on your side—one of the great benefits of being in your 30s—can mean a great deal in the investing world.
Why? If you invest with a long-term plan, you’re less likely to be affected by short-term volatility.
With growth assets like shares and property, your chance of a negative return gets lower the longer you invest. In your 30s you’re in a better position to use that pattern to your advantage – to take on more risk to generate higher returns, if you choose to.
Generally speaking, shares outperform many other investments over the long term.1
There’s also the benefit of dividends. If you invest in companies that pay dividends, you’ll benefit from part of the company’s profits paid to shareholders (generally twice a year). That can be handy income – or reinvested to keep growing your capital.
Owning an investment property may be another way to generate a good income stream – with tenants paying you rent. This income may also help to pay off your mortgage so you can capitalise on another investment later in life.
Like shares, Australian residential property has delivered strong long-term returns.2 While less volatile than shares, it’s important to note property values do change depending on supply and demand in the market.
2. Gain control of your debt
Debt management is a crucial skill when it comes to managing money, saving and planning for the future.
Whether it’s a credit card, personal loan or a mortgage you’re paying off, setting priorities and keeping track of your expenses/income to identify potential savings may help to pay off debts sooner. And the sooner you pay off your debts, the more money you can invest for a better lifestyle in future.
If you have more than one outstanding debt, consider working out how much you can repay on each, based on the minimum repayment owing.
Alternatively, if you’re able to repay more than the minimum, look at prioritising your debts. You’ll need to think about the type of debt you have—an investment loan or personal debt—and how much is owing. If you only have personal debt, you could prioritise repaying debts with the highest interest rate first, given these will be costing you the most.
Keep track of expenses and income
Having a clear picture about what you earn versus what you spend can highlight areas where you could save more. Whatever income you’re able to save can then be allocated towards your debt.
There are budget planners and phone apps you can use to track your spending. Alternatively, you can simply download your bank statements and keep a record of your receipts.
3. Add more to your super
Super is one way to generate wealth over the long-term due to compounding returns. Compound returns is the way your balance increases if you give your investment time for the growth you got this year to grow again next year – and the year after that and the year after that.
In your 30s you’ve got time to get compound returns on your side. One way to maximise this benefit is to contribute more into your super on a regular basis. You can do this using your before or after-tax income and there may be tax benefits that come with this too.
For example, if you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction.
Be mindful of contribution caps though. They limit the amount of super contributions you’re able to make each year if you want to avoid paying tax at your marginal tax rate rather than the concessional rate of
4. Seek professional help
Getting independent advice from a financial adviser can help you design a financial plan to achieve the goals you want in the future whether that’s investing long-term, cutting debt, or putting away cash now to make life easier later on.
If you would like to receive competent advice at reasonable costs, please email us on firstname.lastname@example.org with your contacts, for an exploratory meeting, at our cost, not yours.
1Livewire: Australian sharemarket wins
gold – 5 March 2019 https://www.livewiremarkets.com/wires/australian-sharemarket-wins-gold
2ASX: 2018 Russell Investments/ASX Long Term Investing Report- June 2018 https://www.asx.com.au/documents/research/russell-asx-long-term-investing-report-2018.pdf