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A general guide for building wealth

I want to create a financial plan to make me comfortable in my older years. I am 30 years of age and will soon be married. I see my friend’s parents who seem really comfortable in their 50s and I know my parents will have to sell their family home to retire with enough income. The people I look at have not played the stock market but they are really well off. Can you give me a plan, which will work and be safe as well?

This is a tough assignment and as I don’t know your circumstances I will give a general blueprint for building wealth.

First, you have to cut back on wasteful spending and so you have to be a regular saver. Set yourself a goal which is achievable. If you and your wife will take home $2000 a week after tax, then you should be trying to save 10 per cent. If you spend all of your money, then by cutting your expenses by 10 per cent it gives you $200 a week or over $10,000 a year.

In an ideal world, you should try to buy a house in a good suburb. I like the worst house in the best street. You then learn some handyman skills and renovate the place using tradesmen for the hard stuff such as electrical work. This will give you capital gain without tax. You can trade up every five to eight years building wealth with no capital gains tax.

As your income grows, try and put more into super using salary sacrifice, which means your boss pays you less wage but the gross amount the boss retains goes into your super to be taxed at only 15 per cent. Do this for 30 years, earmarking extra income as your family income grows.

If you kick some goals, income-wise, don’t be afraid to look into an investment property but make sure it’s in a highly sought after area for rental properties. All the way along the line, do plenty of homework on salary sacrifice, renovating your home, avoiding over-capitalisation and become an expert of property investment along with the tax benefits of this play.

Treat your investments as a business, watching costs, getting the best borrowing rates, becoming an expert on borrowing and assembling great experts to help, such as an outstanding accountant and a trustworthy financial planner.

Next, make sure you do training to be great at your job, so you get promotions or set your sights on starting a business. However, do it safely, with plenty of homework and experts to help.

If your money life is an after-thought or a punt you’re likely to make mistakes. Get yourself a number of money goals. Work out what has to be done to make it happen. Find out the price of these goals and then pay the price. Two final warnings – don’t be a procrastinator and don’t be afraid to pay for great advice. The successful have often ‘invested’ in advice for their success, either in business or in trying to get richer.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Tuesday, November 30, 2010

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