Not many people actually know what Financial Advisors do. My friends and family often think I’m some form of accountant, or just some guy who knows about tax and is really passionate about the share market (which is partially true).
In their simplest form, Financial Advisors help people achieve their goals, whether that be having a holiday in the Maldives and sipping Mojitos in two years’ time, or helping a single mother afford to send her kids to school so they can get an education.
So, to help you get an idea of how you can achieve your goals, I have outlined how strategic financial planning can help you achieve 3 of the most common Australian dreams.
Travel Around the World in First Class
Is your heart full of desire to travel the world? Great! Then put your money into your superannuation. Truth is, of everyone that I know, retirees travel more than anyone else. They have the time and, if you build up your superannuation, you can have the money to do it in first class.
The biggest and most misunderstood idea behind superannuation is that it’s only something you have to worry about when you’re 50. Wrong! The sooner you start caring about your super, the better. Compounding interest was described by Albert Einstein as the ‘eighth wonder of the world’.
The true power of compounding interest is often understated. For the sake of simplicity, let’s consider an example:
Steph contributes $5K to her super every year for 10 years, from age 15 to 25, then she stops. However, Tom contributes $5K a year every year from age 25 to age 60. Who has more money in the end, the one who started early but only saved for 10 years or the one who started later, but saved for 35? In this example, Tom would have an impressive $1,645,000 when he retires, however, this pales in comparison to Steph’s awe-inspiring $2,709,000. With compounding interest, less really can be more.
Retire at Age 35
Do you set 4 alarms in the morning in an attempt to give yourself motivation to go to work? Do you typically refer to Friday as Fri-YAY? Then maybe you should consider retiring.
Believe it or not, retiring at 35 is actually completely possible (and you don’t have to sell protein shakes on Instagram to do it either). All it involves is our old friend compounding interest and a willingness to take your fist step into the share market. Despite what you may have heard, the share market is not that scary and the old excuse “but I don’t have enough money” no longer applies.
There are now a variety of investment options that can help you compound your wealth over time in a simple way where you can invest in hundreds of shares at once, which saves the problem of staring at the ASX top 50 and thinking “so what’s good?”. Exchange Traded Funds, or ETFs, are becoming an affordable and efficient way to start investing with little starting capital required. There are even apps that you can use to round up the cost of your Monday morning coffee purchase and relay this small amount into an investment account linked to an ETF fund.
Have a Kid Without Going Bankrupt
Three things are certain in life: Death, Taxes, and kids are going to cost you money. So how can you afford the nappies, the parties, and the Fortnite skins? Two main tools – education and budgeting.
It’s best to start with budgeting. I can already imagine your eyes rolling at the mere mention of the word, and fair enough, budgeting is infamous and despised by anyone who wants to buy a new pair of shoes. The truth is, it’s not you; budgeting is too hard! It’s convoluted and the system is basically made to fail.
For the majority of us, when money is put in our hand and we have the option of doing the boring thing of putting it in the bank, or alternatively going skydiving, we won’t even consider the former option until we have already jumped out of the plane. So how do you fix this? Easy, just don’t see the money. Instead, set up several bank accounts and automatic withdrawals so the moment that you get paid, a portion of your funds are already being transferred to different accounts which are not linked to your main spending account
The next important tool is education. By the age of 3, most kids will understand the basic concept of money. By 7, money habits have started to set. It’s therefore important to help your kids understand the value of money. One great way is to get your kids involved with the family spending plan and have them come to the supermarket and help pick products while remaining under the spending budget.
So why do you need a Financial Advisor? Because achieving your financial goals now and into the future is not impossible, and with the right guidance you can make your dreams a reality. Importantly, it’s about finding a Financial Advisor that will work with you to achieve YOUR goals, and not simply about hitting THEIR benchmarks. LBW’s Financial Planning division want to help you achieve your goals, regardless of how unrealistic you may think they are. To find out more contact us.
LBW Financial Planning is an Authorised Representative of Lonsdale Financial Group Ltd ABN 76 006 637 225 | AFSL 246934
This article is of general nature only and is not intended as personal advice. It does not take into account your particular investment objectives, financial situation and needs. Before making a financial decision, we recommend consulting a professional financial advisor who will assist you