We all know the saying “money doesn’t buy happiness,” but being able to pay the bills sure helps! Right now, as we stare down the barrel of an impending recession, households around the country are reassessing their financial future. Do you have a plan to ensure that you will be comfortable over the next ten years, through to retirement and beyond?
Review Your Superannuation Risk Profile
With the economic downturn that has accompanied COVID-19, many people are concerned about the negative impact on their super fund. The news has been full of reports detailing the fall of the share market, which impacts many people’s retirement savings. But you don’t need to panic – history has shown that stock market crashes at times of crisis are generally short-lived.
If you have concerns, you may like to adjust your risk profile to protect your portfolio. Financial planners or SMSF accountants will be able to advise you on the best move depending on your age and risk tolerance.
Invest A Little Extra
If you are financially stable and comfortable, now is the perfect time to invest. You could take advantage of the dip in the share market to buy stocks at a bargain price. Alternatively, investigate the slowing residential and commercial real estate markets.
Property experts predict that house prices could fall between 10 and 30 percent in the coming months. Whether you are a first home buyer, considering a move, or buying as an investment, it looks like it will be an excellent time to dive in.
Pay Off Your Mortgage
Ideally, you want to be mortgage-free by the time you retire, so take a look at how long you have left on your loan. If you pay off your mortgage early, you can save yourself a significant amount of money.
For example, if you have a 30-year mortgage at 5% interest with a loan amount of $500,000, by paying an extra $500 a month, you will save $152,900.75 over the life of the loan. Plus, you will be mortgage-free eight years and eight months early!
If you can’t spare a lump sum each month, try switching to fortnightly payments. By paying half of the monthly amount every fortnight, you will end up making an extra month’s payment each year.
Diversify Your Investments
Investing all your money into one area, such as real estate, is what’s commonly known as “putting all your eggs in one basket.” By diversifying your investments, or choosing to invest in multiple areas, you spread your risk over different markets.
Even if your entire portfolio is in the share market, you can diversify by investing in numerous industries. This way, if the retail sector goes down, then your shares in other areas will prop up your portfolio.
Know Your Priorities
One of the secrets to being financially secure now and in the future is to figure out what brings you the most pleasure in life, and only spend money in those categories. For example, you may love holidaying with your family, and be content to sacrifice ordering takeaway each week to save towards that goal.
Maybe you’re happiest when you are outdoors. If so, consider an investment in a climbing frame for the backyard or bikes for the family. Most of us can’t afford to do everything, so you need to work out what sacrifices you’re happy to make to spend on the things that bring you joy.
Remember, the earlier you start planning, the more freedom you will have down the track.