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I am 25 years of age and think it is time that I got my money life sorted out. I earn $60,000 a year and still live at home after being overseas for a few years. I think my parents will cop me for a few more years, though I could move in with my girlfriend this year. What advice do you have for me?

Start by asking yourself what your goals are? This is what a financial planner does with their clients. At your age you need to get a wealth-building strategy in place and then you simply let time work to your advantage. Let me give you a simple example to prove my point. Imagine someone gave you $20,000 at age 25 and you invested it in a house, shares or super and your return was 6 per cent per annum after tax. By age 37 the money is worth $40,000. By 49, it’s $80,000 by 61 it’s $160,000. Time and 6 per cent has turned $20,000 into $160,000 over 36 years. If you made 9 per cent instead by the time you are 61, your $20,000 becomes, wait for it, $480,000! Time plus better returns make a big difference to your wealth. Once you identify your goals, you need to develop a plan that will give you the return to make those dreams come true. While all of this is about the future, there’s something you can and need to do now — it’s called a budget. I know it sounds boring but a budget brings exciting results. List all of your income each year and divide it by 52 to get your weekly income. Then list all of your bills and spending to get your weekly figure for outlays. If you have, say, car rego, then divide this by 52 to get the weekly figure. Now you can see what you can save each week. Now look at your spending to see what’s wasteful and try to cut these back to pump up your savings. You now know what you are saving and what you can save if you are pushed to make a goal happen. Jack, in your case I would be looking at borrowing sensibly enough to buy a portfolio of shares or to buy a property to rent out, as you say you can live at home. These investments will create tax deductions, which will help you meet your payments. Make sure you buy blue chip shares — at least 10 but I prefer 20 — and hang onto them. If you go for a rented property then make sure it’s one where there a lot of tenants interested in living in the property and the area. Whatever you decide to do, don’t waste time. The quicker you start, the sooner you benefit from time in the investment game.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

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. 

Published on: Friday, December 04, 2009

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