Married with Children
Children have a profound effect on peoples’ financial lives.
Soon after the birth of their first newborn, first time parents wake up to the fact that they aren’t number one in their own lives any more. It often takes quite some time of adjustment and letting go from the habits and enjoyments when they only had to look after themselves.
Of course it should be a time of great joy and amazing and magic experiences and for those who have planned ahead accordingly and got their financial affairs in order as well, it definitely is.
Unfortunately however, many couples do not consider the implications that arise from being financially unprepared when starting family life and it can be daunting when they begin to awake to the consequences of their new responsibilities.
Changing life style habits, possible loss of one income, increasing costs of funding family needs like general living expenses, housing, schooling, medical, insurances etc., the list all of a sudden seems to become endless.
Financial problems lead to serious differences in many marriages and ultimately are the causes of many divorces.
The point here is that many couples realise that most, if not all, of their earnings are now consumed to finance their family’s needs and that the opportunity to provide for their own futures has almost disappeared or at least has slipped onto the back burner.
Compulsory employer superannuation contributions are now the only means of saving something for their retirements.
But most average and medium income earners learn sooner or later that their super savings will not see them through their retirement years since they will simply not accumulate enough.
Sadly, the topic often ends up in the too hard basket and gets ignored for many years to come.
Many parents in employment constantly chase the escalating costs of their living expenses while their incomes do not keep pace at the same rate.
We have met many families over the years that live from pay check to pay check, no matter how big their incomes might be.
People on higher than average salaries simply spend more on their lifestyle standards and have taken on higher debt levels than those who have to be more budget conscious.
Of course they expect to live more opulent in the later years of their lives as well.
Self employed couples and business owners in turn can use taxation laws to their advantages, pay themselves first and tax on the remainder. They have a direct influence on the size of their pay packets. However, their opportunities of higher incomes are overshadowed by the risks of higher losses through economical changes or business mismanagement and they have basically no ‘job security’.
We have met many business owners who draw good incomes for themselves and live comfortable lives with their families but have not provided much for their futures since they are not compelled to by law.
Of course there are many Australians who have started early enough in their lives to accumulate wealth, have enjoyed head starts in younger years with the help of their parents, received inheritances, earn good incomes, are financially savvy, live comfortable lives and look at a bright enough future.
But let’s be realistic. Apart from the 10% or 20% of people in this country who can count real wealth to their names and don’t have to worry about continuing their living standards in their retirement years, most Australians have the need for wealth creation outside their regular superannuation contributions.
It can never be too early to establish some good strategies or review the current ones, if there are any.
The longer one casts this topic aside the harder it will be to achieve the needed outcomes.
Now the discussion begins whether to invest in the share market or property or any other investment vehicle.
Put the fancy things aside, what’s left are property and financial products.
Extra super contributions are one way to boost the outcome but in most instances will not deliver the desired results unless large amounts of money can be committed.
Other terms under consideration are diversification and leverage.
The latter is an important aspect since many people do not have enough disposable income left at the end of the day to successfully save. Saving is very ineffective because it pays little interest and the earnings are eaten away by tax and inflation.
There is no way around gearing to getting ahead eventually.
This means borrowing against the equity in homes, businesses or other assets.
Gearing and borrowing money are tax deductible and thus make investing more affordable and far more effective than saving.
The Australian tax laws support those who take on responsibility for their financial futures.
Since all our superannuation is invested in share market products, diversification points towards property.
It comes to the age old sayings: never put all your eggs in one basket and high returns mean high risk and lower returns mean lower risk.
Property definitely belongs into the second category and many of world’s riches have been made through bricks and mortar.
RealEstate4U has been founded to help people with property investment.
We need to point out, however, that we have no properties for sale.
What we offer is our expertise around property investment in form of an education, mentoring and coaching program. We help our clients with an investment property purchase only once they understand all details and if it presents itself as the right tool to shaping their financial futures.
One major advantage of property is that it can be insured.
Another advantage of property is that it can be geared at a higher ratio than share market products and property investors won’t get margin calls.
Its income is predictable and regular through rental contracts and property itself is depreciable.
The only downsides of property are that it is less liquid than financial products and that it attracts some purchase costs, like stamp duty and conveyancing expenses.
Investing in property, however, is not just an act of obtaining a loan approval and then buying something to one’s personal liking and aesthetic preferences.
Property Investment is a complex mix of the investor’s financial position and earnings, long term goals and objectives and social circumstances, combined with finance, taxation, ownership and risk management structures.
A Self Managed Super Fund (SMSF), for instance, can be a very suitable vehicle for successful property investment.
All these details need to be considered before a decision about the type and location of an investment property can be made.
Only then will property investment be prosperous and successful.
As everything in life, the devil is hidden in the detail and people make costly mistakes when they are not absolutely sure how all these factors need to be aligned correctly.
RealEstate4U has developed a professional support system to guide the investor along the way.
Contact us and let us show you how our services will save you time, stress, costly mistakes and money far beyond the fees we charge.
We thank you for your interest.
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