SMSFs (Self-Managed Superannuation Funds) are a great way to dip your toes in the share market, invest in property and learn how to increase your wealth.
You need to transfer 9.5 percent of your income into superannuation every year. But for a lot of people, these funds just sit in an industry or retail fund until they turn 60. (And if the government has their way, that preservation age to access that money could go even higher.)
SMSFs are a great way to learn about how to grow your money slowly.
Many people are simply not aware that your super is a source of capital that you can control and manage yourself. They are a great way to become more disciplined with your money and learn the highs and lows of investing.
We ‘millenials’ often just sit on the bench to wait and see how our wealth will grow. But growing up in such an information-rich environment means we have the greatest opportunity to build wealth using our super.
And if we can get it right in super then we can get it right outside of super.
Supplementing our income with passive investments is going to become more and more important as the costs of living rise. And if we’re going to play in this field we need to learn how to use our money sensibly, and how much risk we should take.
To maximise our wealth, we need to start using super as early as possible. Unfortunately, this sometimes leads to a major blunder: having multiple industry funds. You may think you’re spreading the risk, but the fees and administration costs of each fund can quickly dilute your money pot. Even if you don’t head down the self-managed space, you should still consolidate your super to maximise your reserves for retirement.
Fortunately, Gen Y we have time on our side. And the strategies are simpler to execute.
We need to shift our investment focus from risk-based to objective-based. We need to pursue realistic money-making goals, and understand what risks we should take and what money we need to commit now to make us better off later in life.
We can’t afford to be conservative and here’s why. Let’s say you’re 30, and want to retire at 60 with an income of $60,000 per year—the same as you’re earning now. For that to happen you’ll need about $2.9 million in your superannuation fund. But if you’re only contributing the 9.5 percent minimum, you’re looking at a shortfall of about $1.8 million.
To maximise our wealth, we need to change the way we think about it. Thanks to our current tax system, we can no longer rely on the income you get from your day job. We need to look for other ways to not only simplify our finances but also drive growth.
We need to pursue more realistic money-making goals. And the SMSF space is the perfect place to start. We can balance our investments (both in and out of super), and even explore negative gearing to suit our tax needs.
And with today’s technology, we can easily see how quickly our wealth is growing.
So don’t just sit there and wait for someone else to grow your money. Get active with superannuation, so you can then learn how to invest outside of super to make life more comfortable.
Because no matter what your budget is, having passive investments that deliver capital growth and income streams is the only way you will ever bridge the funding gap.