Ladies (and Gentlemen) it's Time to Invest
International Women’s Day for this year fell on Monday 8 March 2021. We’ve put together a list of action items to spur people forward in their investment journey, and let’s face it, the list applies to everyone!
There are two key practices that all women and men should learn as early as possible to help them map out a future financial plan:
1) The importance of goal setting and your savings rate
Many of us move through life without setting clear financial goals, which can lead to spending every dollar that we earn, and sometimes more. Goal setting is about investing time in yourself, to sit down and think about what you might want at different stages in your life. Ask yourself what needs to happen over the next five years for you to feel you’ve made good progress?
Goal setting will also help motivate you to increase your savings rate. Many people think growing your wealth requires earning high returns, but actually your savings rate (what you retain from your income) is just as important, if not more so.
2) Saving versus investing and getting comfortable with risk
Many people fall into the trap of ‘saving for life’; keeping their life long savings parked in a bank account or term deposit, earning a low rate of interest for decades. Yes, it’s safe and secure but based on current rates, it’s not a lot of bang for your buck!
A smart way forward is to invest your money. If you don’t need to access it in the medium to long term (3 years or more) then put it to work! Investing your money into a low cost, diversified portfolio of investments will help your money to grow within the range of 5-8% p/a over the long term depending on your asset allocation. Set your non-negotiable cash amount (what you’d like to retain access to at all times) and then methodically invest the remainder.
Practical tips to grow your money
Now you’re armed with the foundations, here are some practical tips to help you grow your money at different stages in your life:
20s-30s
Set good financial habits now and learn how to budget
Before investing, make sure you have some savings built up
It can be appropriate at this age to take more risk depending on how comfortable you are with market movements
Always invest into a broad mix of investments like Australian shares, Global shares, and bonds to reduce your risk.
Make sure you’re in a low fee super fund with an asset allocation that’s suitable for the long term. This will mean a high growth option.
If you’re changing employers frequently be sure to consolidate your super to avoid excess fees!
Consider entering the housing market
30s-40s
If you earn a bonus each year or get a salary increase, try to put all or some of it into your investment portfolio.
Consider adding more than the statutory 9.5% p/a of your income into superannuation.
Ensure your asset allocation is still suitable for your risk appetite and time horizon.
Keep a focus on paying down non-deductible debt if you have it.
50+
Pay down any non-deductible debt as quickly as you can with the goal of retiring debt free.
Make sure you have an up to date will.
Maximise super contributions if you’re still working.
Consider migrating investment assets that are outside super into that environment
The average life expectancy is increasing for males and females, so if you still catch yourself with a high proportion of your money sitting in fixed income investments, you still have time to put the funds to work and enjoy capital growth from investing!
No matter your stage of life, it’s never too late to set financial goals and map out a plan for your future. Feel free to get in touch with us if any of the above points are relevant for you.