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What words of wealth wisdom can I impart?

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I know this is a broad question but I’m 46 and have a 22-year old son who starts work soon after finishing his university degree. I’ve been a single mum for most of his life and we have struggled to make ends meet but I’m proud of his achievements. However, no one in our family has really done that well building wealth and so I’d like to give him some good advice — words of wisdom I never got — about how to get wealthy.

You should be proud of your achievements in leading your son to a uni degree and a good job. And given you’re still trying to lead your son in building wealth, he’s very lucky. By the way, anything I say to him still applies to you, as you still have plenty of time to build up your nest egg too.

Tell him to try to save 10 per cent of his wage each week. Given he’ll have nine per cent of his gross wage going into super, this one big step will instantly put him into a very small group of Aussies.

Most people don’t build serious wealth because they don’t spend enough time being committed to it. Saving your income and then directing these savings into productive investments makes a lot of sense.

Apart from saving, get your son to do a budget to see where he gets his income and how he spends it. It’s good enough for the government, so why not for individuals and families? Then once he has established his saving target – which should be 10 per cent of his net wage – he then should work out where he can invest.

His easy options are an investment property or shares. If he’s living at home, he might be able to afford to buy a home unit, which he then rents out. It could be in an area where he might want to live in five to 10 years’ time, when he decides to leave home.

I’d recommend he finds a good accountant, who will explain how he can use the tax he pays to reduce the slug of paying off a home loan for an investment property. He can also get that info from good websites such as this one.

If he doesn’t want to jump into property just yet, he could start building a share portfolio. I’d recommend trying to build up a group of shares of big name Aussie companies that pay pretty good dividends. The stock market has been battered in recent years so over the next five or six years we should see many of our best companies see their share prices rise. Your son does not have to be a stock market trader to do well out of shares – he simply needs to buy good companies and let time do the rest.

Another way to build wealth is to start a small business and build it. I once did a profile of Australia’s richest people and there was a very high incidence of people who built businesses and invested in property.

One final thing I’d get you to tell your son – he needs to want to build wealth. If he’s half-hearted about it he’ll get mediocre results. Advise him to read money sections in newspapers and magazines. Buy books on building wealth, creating great businesses and on successful people. For example, reading the life stories of business greats such as Steve Jobs, Aussie Home Loans’ John Symond and the likes of Richard Branson are great stimulation for young people.

You have to be hungry to do well and you have to be focused on a great goal. Remember, those who achieve great things are in a minority. Most Aussies have been poorly led or mentored or they refused to do the hard yards to stand out from the crowd.

Robert Frost wrote a wonderful line in a poem called The Road Not Taken which went like this: “Two roads diverged in a wood, and I took the one less traveled by, and that has made all the difference.”

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: Thursday, January 12, 2012

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