INVESTING FOR THE FUTURE
Debt is a dirty word it makes many people's face's pull an expression in likeness to sucking on a lime or lemon. Unfortunately there is no easy way to getting rid of debt. It requires discipline, saving, and a budget. First of all stop borrowing right now! Cut your credit card in half and toss it in the bin. If that method is too quick for you and you feel too sentimental and attached then how about putting it through a slow and painful death, light it on fire and watch it melt into small blobs of smoldering plastic. Start paying down your debt, make sure you are paying more than you owe, else your just paying the interest and thus continuing around in the vicious circle. If you are really stuck, you could try a debt consolidation via a bank as this will usually be a better option with less interest charged per month than other consolidation options out there. Bottom line is in order to start investing you must get rid of debt that you owe.
Invest in yourself
How much am I worth baby? Ok so I don't mean literally placing yourself on ebay to the highest bidder in promise that the older you get the more valuable you become like a bottle of fine wine. Or worse yet if you believe you are like cheese that you become better tasting as you mature and stink out the place.
On a serious note, investing in yourself by savings at least 10% of your weekly income after tax. For example, lets say you earn $500 after tax a week. You could save $50.00 per week, if you did this every week by the end of the month you would have $200 and by the end of the year you would have $2400. This is a good start with this amount of money there are a relatively large amount of options to invest in.
Term Deposits
What is a term deposit? A term deposit is usually an investment of $5000 upwards that you invest for a number of terms (months). In return for investing in a term deposit, you earn interest, usually the longer your term deposit and the larger your initial investment the more interest you will earn. This is a very safe slow and secure way of investing. Although you won't make a large amount of money unless you start off with a massive deposit. This is guaranteed, and if you are the type of person that hates any form of risk then this could be the right way to invest based on your investment strategy. You could how ever have a combination of a share portfolio and term deposit.
Tax advantages of super
Super is very tax effective over the long term. If you make concessional (pre-tax) contributions to your super, it will attract a contributions tax of just 15%.How this works is if you decide to allow a certain amount of your income to go into your superannuation each week by contributing directly, you will end up with more money in your pocket and less of it in the tax mans hands.
Personal contributions made from your after tax salary will not be taxed when they are contributed or withdrawn. The income earned by your super fund is taxed at a maximum rate of 15%. This could be lower than your marginal tax rate.
The amount of tax you pay on your super when you withdraw, will depend on your age and whether you take the money as a lump sum or as an income stream, such as an allocated pension or annuity.
All super can be withdrawn tax free if you are aged 60 or over (except untaxed super schemes), whether you take it as a lump sum or withdraw it gradually through a retirement income stream. If you begin withdrawing your super before you turn 60, you may have to pay tax, although part of your super may still be tax free.
Shares
Buying shares are a great way to invest, yes there is risk some are lower some are higher. The lower risks mean that your potential is not as high in terms of profits reached but still very reasonable and worth it. I'll give you an example and you can ponder for yourself. Lets say that the original $50 a week you were saving to invest and that each time you saved $1000 which would be every five months. Assuming your shares earn 9% a year, in 30 years you will have $442,000. Your original investment over the 30 years would be $78,000. Your profit would be $364000 (not taking into account capital gains tax). This is a great way to increase your wealth. There are many different types of shares to invest in depending on your investment strategies.
Property
Property investment has many advantages. Not only does history show us that property is a pretty safe investment and a great way of having an investment that increases and double every 7-10 years based on the current market data and cycle at the time. Lets face it where else can put down a safe deposit of $80,000 on a $400,000 investment and know that in 7-10 years that property will be worth around $800,000. Some of you might say well where do I get this initial $80,000 well it does require you to save or perhaps you have family members who will decide to invest with you? Maybe you could start off with the previous options above, having a term deposit with what you have saved, or buy shares and hold onto them.
You could do both or have a combination of all three options; term deposit, shares, property. Having your eggs in different baskets allows you diversify and to ride the rollercoaster of life and its predictable and unpredictable situations that arise. As I was saying before there are many advantages to owning property, more so in relation to investment properties. In Australia we have a thing called tax depreciation. For instance if you have bought a brand new investment property you have 40 years of tax depreciation. What is tax depreciation in relation to property? Well it is essentially the expenses as you would have with a business per say. You have management fees that you pay your managing agent, advertising fees, accountant fees, depreciation schedule fees, construction, decline in value of assets, garden maintenance, cleaning, council rates, electricity or gas, sewage and water charges, insurance, interest on loans, internet, land tax, legal costs, pest control, repairs and maintenance, stationery and postage, telephone calls, and travel to your invest property. I might have missed a few but as you can see almost everything can be written off to tax at a certain percentage.
