The 5 fundamentals of personal wealth

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Financial Advisory
January 8, 2021
minute read

Creating a smart wealth plan that works for you

When it comes to personal wealth planning, there are so many opinions out there that it’s difficult to know where to start. The experts are constantly offering up new ways to get rich quick, but in reality, there’s a systematic approach you should be following. There are 5 Fundamentals of Personal Wealth that we encourage you to address first, before getting experimental with new fads.

At Liston Newton, we speak to hundreds of ambitious individuals each year about how to get ahead in personal wealth. They are usually in one of two positions:

  • They are reacting to a new fad, like Cryptocurrency
  • They are not acting at all

The core philosophy is much like building a house. We educate our clients to look at how sturdy the structure of the house is first before building a second story. And that’s exactly what we want to cover in this article — how to ensure your future wealth is as stable as possible.

We advise checking in on your personal wealth plan at least every 2 to 3 years to ensure your goals and strategy are still aligned. If you're ready to discuss your personal wealth and make the most of it, get in touch with Liston Newton Advisory.

1. Home loans

Home loans seem to be a product that we all set and forget. We get consumed by our busy schedules and push this part of our life to the side, assuming it’s just something we must ‘suck up’.

This business model is how banks and lenders make a lot of their money. They offer the best deals to new customers, and make the most profit from existing customers, assuming they don’t have time to do anything about the rising fees and interest rates.

We suggest a quick check up on your home loan every three years to answer these questions:

  • Do you have the most competitive rate for your loan?
  • Is it the right product for you at this time?
  • Should you have an offset account? Do you have the ability to make extra repayments?
  • Should you have fixed rates or variable rates, or a mixture of both?

2. Insurance

Insurance is one of life’s necessary evils. No one wants to buy it, and no one gets excited to buy it. But we all need it. At the end of the day, insurance is just a tool that helps guarantee we can get to our end goal. Do we know if we are going to fall sick or get injured? Having a personal wealth Plan B is essentially all we are paying for. This is worth the time and money in our eyes.

Below are insurance types that are often overlooked but should be considered:

  • Income Protection Insurance:  Replaces your monthly income if you get injured or fall ill. Income protection payments can cover you for the short term or right up until the age of 65.
  • Life Insurance: A payment provided to your family in the event you pass away. It should factor in your debt and also your loss of income that will affect your family.
  • Total & Permanent Disability Insurance: Pays out a lump sum if you're no longer able to work again because of an illness or injury.
  • Health Insurance: Coverage of medical and surgical expenses incurred if you fall sick or injured.

3. Superannuation

couple planning supperannation

Like home loans, superannuation is another thing people tend to set and forget. However, dedicating a small amount of time researching your options can be the difference between retiring comfortably and being restricted with retirement living conditions.

When marking a smart wealth plan, we can forget that super is a very generous tax structure. From age 60, you have the potential to pay no tax on income, no tax on capital gains, and no tax on your withdrawals.

Super has two main objectives depending on your age:

  • Ages 20 to 45: Get your super in basic shape — consolidate it and transfer into a fund with a healthy performance and reasonable fees.
  • Ages 45 to 60: Develop a well thought out strategy and invest your time into understanding your options and financial projections.

4. Estate planning

When considering the fundamentals of wealth. estate planning is on everyone’s to-do list, but is so often left until too late. The results can make a hard situation even more unbearable.

A proper estate plan is not just about naming a person to get your assets. It’s about putting in place the best possible protection to ensure your money goes to the people intended.

A good estate plan can help mitigate the risk of your family assets going to the wrong people based on future marriage breakdowns of your partner or children.

To cover all basis make sure you have the below in place:

  • Will: A legal document that outlines the distribution of your assets after death.
  • Power of Attorney (POA) + Medical Power of Attorney (MPOA): legal documents that let you appoint someone to make certain decisions for you (if you lose the capacity to do so yourself) regarding your finances and medical treatment. If you haven't made durable powers of attorney and something happens to you, your loved ones may have to go to court to get the authority to handle your affairs.
  • Guardians: a nominated person/s who becomes the guardian of your children in the event you and your partner pass away.

5. Investing

The most important part of investing is to make a start. You don’t need much, just something to get you off the ground, even if it’s small. The best way to start is to pay your investment first from your salary, rather than hoping you’ll have money left over at the end of the month. This could be as simple as putting money into a high-interest savings account.

Once you have money accumulated, you can look at:

  • Investing in an index fund. Apps like Raiz are a great way to do this.
  • Build an investment portfolio
  • Borrowing against your home to buy shares.
  • Buying an investment property

Following these fundamental steps will help you break down your personal wealth into manageable tasks instead of feeling overwhelmed and with no real strategy.

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