Once you’ve got the basics in order it’s time to put your money to work.
In 2023 why not talk to your financial adviser about ways to make your money work harder for you? While a savings account at a bank is safe, secure and easily accessible, it won’t increase in value much because it’s a low-risk investment. When inflation is high it could be that your money doesn’t grow fast enough to keep pace with increasing prices, which means it’s effectively shrinking in value. So, it makes sense to look at other ways to use your money.
Depending on your goals and financial situation your adviser will be able to suggest different strategies that might help you achieve a financial goal.
In the section below, we’ve looked at some of the common methods used to make your money work harder.
1. Buying a home
Buying a home is often one of the most exciting times of your life. The feeling you get from ownership can be exhilarating and it also has practical benefits because you can add value to your home by changing it to suit your tastes and needs.
Your home will probably be your biggest asset and it’s likely that you’ll have to borrow money to buy it. This means you need to consider it as an investment as well as simply a roof over your head.
Depending on your circumstances, some important issues to consider when buying a home include:
- How much can you afford to borrow?
- How much money will you need for repairs and upkeep?
- Will you need to renovate and how much will it cost?
- Are you planning to start a family soon, will that affect your ability to make mortgage repayments?
- Will you need to relocate to another area for work in the short term?
There are several advantages and disadvantages when it comes to buying a home, but generally it’s a positive step that helps you pave a path to building assets that will help you live well in retirement.
You should try to ensure you don’t borrow more than you can comfortably repay, remember a mortgage broker has an incentive to suggest you take the largest mortgage you can afford and that’s likely to be more than you can repay comfortably.
As you get older and reduce your mortgage you should seek financial advice so you can decide whether to devote more money to your super instead of making additional repayments on your mortgage.
To help you explore your best options when it comes to buying a home, speak to your financial adviser. If you don’t have a financial adviser, we can help you find one.
2. Saving for school fees
We can help you create a tailored financial plan that’ll help you save for your children’s school fees
School fees can be expensive, so it makes sense to start saving before your children start school. Deciding on a school is a personal decision that’s often difficult, with fees being only one of the factors you’ll need to consider.
You’ll need any money you save for school fees to be accessible, so putting it into super is not an option because you can’t withdraw it easily until you’re older. Of course, if you’re a grandparent who wants to pay for your grandchildren’s school fees, then saving in super could be an option.
There’s a range of ways you can save money for school fees but the best option for you will depend on your circumstances.
Common methods people use to save for school fees are:
- High-interest savings accounts.
- Term-deposits.
- Invest in shares or managed funds.
- Using an investment bond, like IOOF WealthBuilder.
- Paying school fees in advance (to make them cheaper).
All the methods mentioned above have advantages and disadvantages that need to be considered in light of your own personal circumstances.
School fees should be part of your financial plan
You should discuss paying school fees with your financial adviser who can look at your situation and suggest ways to pay school fees in the future. If you don’t have a financial adviser, we can help you find one.
3. Investing in property
Property investing may seem like an easy path to wealth but there are many things to consider and plan for. You need to make sure you have sufficient extra money to afford insurance premiums and cope with unplanned problems such as not being able to find a tenant.
An investment property – just one part of your financial plan
A financial adviser can look at your entire financial situation to see if buying an investment property could be a good investment strategy for you.
Diversification is important
If you already have a home but do not have any shares or other investments, then you should reconsider buying an investment property because it may mean you have too much of your money invested in property and not enough in other types of investments. Ensuring you have a good range of different investments is known as diversification, which helps reduce risk.
Remember, that while property prices on average perform well, there are some areas where property prices have fallen, so if you bought in one of those areas you would lose money, although it may only be temporary.
Buying an investment property is generally a large financial commitment so you should weigh-up your decision carefully.
Questions to consider if you are planning on buying an investment property:
- How long can you afford not to receive rent from the property for? One month, six months or longer?
- Can you afford maintenance and repair costs?
- Can you afford the repayments if interest rates rise?
- What does your overall investment exposure look like – are you diversified across property, shares, fixed interest and cash?
- How long will you own the investment property for?
- How will it affect your Centrelink entitlements if you retire?
- How does the rent you could get for your potential investment property compared to the rents for similar properties?
Other options?
If you want to diversify into property investment, you can do this without buying an investment property by investing in Real Estate Investment Trusts listed on the share market. If you have a diversified super fund, then it’s likely you already have some exposure to this type of investment.
To find out whether buying an investment property is a good decision for you, call the AMA Financial Services team on 1800 262 346 or email advice@amafp.com.au.
A.M.A. Services (WA) Pty Ltd trading as AMA Financial Services 47 008 671 458 is a Corporate Authorised Representative of Consultum Financial Advisers Pty Ltd. ABN 65 006 373 995 l AFSL 230323.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. You should obtain a copy of the Product Disclosure Statement available from the product provider or your financial adviser and consider this before you acquire a financial product. This information and certain references, where indicated, are taken from sources believed to be accurate and correct. To the extent permitted by the Law, Consultum, its representatives, officers and employees accept no liability for any person that relies upon the information contained herein. From time to time, we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information, please contact our office to opt out.