The financial conservatism life cycle and why you should break it.
What is this you may wonder? Are you looking at the title and potentially believe you could be part of this? Well you could be.
I believe it’s a routine passed on generationally in a family and a large percentage of our population suffer from it. In our twenties we don’t worry about consequences, we don’t really think about finances. If we are lucky some of us may have bought a house.
Come thirties we are still thinking about other things: family, socialising, pools, cars, schooling etc.
Once we get to our forties we start thinking, hang on what’s going here? What’s our plan? Are we going to pay off our mortgage by the time we retire? What amount of super will we have? Will the pension be enough? But we also notice one thing. We noticed at some stage through growth and repayments, we have paid off some of our mortgage. We have equity. Thinking of the future we start to worry about compromising that equity.
By the time we are in our 50s, we are most likely half way through our mortgage if not better, but there is no way we want to risk losing what we’ve built up. You go to presentations to build wealth and expand the portfolio, but you hear a bad story from a friend or you think of the thousands you lost in super and think there is no way you are risking losing that equity.
The sixties are here. Great, it’s time to retire. You have a bit of super, the house loan will be cleared with what little super we have leaving a little bit to play with, maybe even enough to buy a caravan or boat and that will do. Centrelink will look after me, I’m entitled to my pension, i don’t need to think about asset management.
Have you spoken to many people on the pension? They are doing it tough, because for generations they have been following the same path. It’s a low risk and very low reward path, a path with much uncertainty. Considering our hazy future, will we have an aged pension? What will cost of living be like in the future?
This is the financial conservatism life cycle, and we need to break those shackles. With educated decisions, guidance and secure investments this can change.
I want us to back track and go back to our early 40s. Let’s revisit a time where we have accumulated some equity in our property. I want us to open that sliding door and look at another option. Let’s assume of that equity we used some to purchase a rental property. You’re not increasing your debt on your main residence, but you’re borrowing 100% on a new rental. Rental investment following historical figures generally goes through a cycle every 10 years and in that time can double in price. So what happens if you bought two rentals in your early forties? Those rentals were positively gearing and therefore making you income, but saving you tax on paper? Could that extra cashflow help pay off your home faster? Couldn’t these properties add extra wealth to your portfolio? What if by the early 50s the above did happen and they doubled, those two properties made you $100,000 extra in cashflow and on their sale of $800,000 each made you an extra $800,000 in cash!
You’re thinking it’s too good to be true? It’s obviously a lie. Well I’m here to tell you it’s not a lie. Purchasing the right property using the correct rules can create extra wealth with minimal risk. Is this enough to consider enquiring and considering your options? We are here to chat. We would like to help educate you and break the financial conservatism lifestyle cycle. We know not all will have the courage to break the routine, but if you want to discuss the possibility of financial freedom and security please contact us for a no obligation discussion.
We will start at the bottom. We will provide you a free financial health check.
We will look at your mortgage, seek debt consolidation and interest rate minimisation, unlocking your borrowing potential.
We will help in your tax planning, property analysis, dealing with the financial institutions and accessing the Government grants.
With 14 years of finance and property experience, we are here to guide you along the path. We want to succeed with you.