In this video, I am going to share with you my blueprint for how to Get Rich in Australia. If you follow this advice, you will give yourself the best chance to get rich in Australia. And, by rich, I define this as replacing your current income in retirement.
I run a financial planning business and spend a lot of time talking to clients, implementing strategies that boosts their wealth. Ultimately, this means they can live off their current income in retirement.
Do you hope to fall comfortably into retirement?
Most people do not actively think about retirement and they go through life achieving what they want to achieve, hoping one day that they will fall comfortably into retirement.
From my work in this field, I know that despite our optimism in our working lives, only 5% of today’s population aged 60 to 64 are retiring without any government pension or government assistance.
Why people do not get rich?
The problem is that the average person retiring at say age 64 goes from earning $75K per annum to having about $20 to $25K per annum in retirement simply because they do not have enough income generating assets built up in their working lives to afford a comfortable retirement.
My work is all about helping people with the advice, tools and strategies to improve their income in retirement. Some people want the advice and some want me to do it for them. In short, my job is to give people a pay rise in retirement.
I have recently developed this concept of the Building Blocks to Wealth.
In regularly speaking to clients who are self-funded retirees, most if not all, have used these building blocks to get themselves to retirement in great shape.
Building Block One: Buy your Own Home
Every single self-funded retiree owns their own home. This is the key, the foundation to your financial wellbeing. Many self-funded retiree’s own investment properties too. Only 1 in 7 adults owns an investment property despite the media presenting that everyone owns them.
Building Block Two: Maximise Superannuation
The next step to giving yourself a pay rise in retirement is to make the most of your superannuation. Most people go through their working lives not really looking at their super much. It typically isn’t to about age 50 that it seems to hit people’s radar. Most people seem to take for granted the 9.5% our employers put into our superannuation account each year.
But, let me ask you this rhetorical question, do you regularly put 9.5% of your income into something you don’t really care about?
Super is a generous option given to us by our government yet many people do not take advantage of it.
Many people nowadays are electing to set up their own Self-Managed Super Fund. Yet, I think it should really be called adviser managed super because often people rely on the services of a trusted financial adviser to provide advice and to implement strategies to increase people’s income in retirement.
Building Block Three: Pay Off your Debts Quickly
Debt reduction is an important one and those who are self-funded typically do not have personal debt by age 50.
Building Block Four: Protect your Family with the Right Insurance Cover
Insurance is very important and often under-rated. It is unfortunate that 90% of Australians, will suffer from either a heart attack, stroke, cancer or diabetes. Each of these conditions can either limit our ability to generate income and in many cases can end our life.
If you have adequate income replacement cover and life insurance in place, if something were to go wrong, then yours and your family’s pathway to living a comfortable retirement is not interrupted.
Building Block Five: Diversify into the Share Market
Shares are a great diversification from owning property and I recommend people diversify a small portion of their investment money into shares. Shares are a high growth asset if you own shares in the right companies despite the volatility.
Building Block Six: Stick to a Budget
All self-funded retirees who I know have been great budgeters. Their wealth today is underpinned by a good budget that kept them on track.
By keeping as much as you earn as possible and then putting what you keep into either paying down debts such as your mortgage or investing in income producing assets such as property and shares, they have increased their long term wealth and income in retirement.
Building Block Seven: Minimise your Tax
Those looking for a pay rise in retirement look to minimise their tax with a few clever strategies that come into play ideally once you own your own home. Tax minimisation tools are typically great for people in their 50’s and our superannuation system helps with that.
Building Block Eight: Ensure you have a Will
And it is good to have your estate planning considerations covered off such as a will for anyone that owns property and/or has kids.
The 5% of people who currently enjoy a fully self-funded retirement:
1. Own property
2. Have maximised their super
3. Paid down their debts
4. Protected themselves and their families with the right insurance protection
5. Stick to a budget
6. Diversified into shares
7. Minimised their tax along the way
8. Have a will in place
If you want to get rich in Australia, I would encourage you to consider both the building blocks to wealth that you are doing well and also consider building blocks to wealth that you could give more attention to so you have a plan in place to give yourself the best chance to get rich in Australia.
Dean Mico is a qualified financial planner. Contact Us if you want professional financial advice in the best interest of your circumstances.
The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.