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Never have Australian women been in more need of financial education. Everyday a new article appears in the media - property and share markets have tumbled, property and share markets have improved, superannuation returns have taken a dive,
along with everyone's hopes and dreams of a comfortable retirement. General confusion abounds! The important thing for all women is to understand the financial jargon - educate yourself on the following areas and you will be well placed to withstand the current (and most future) financial crises. You may even find yourself in a position to move forward and achieve some investment wins.
Tip 1:
Spend less than you earn. This sounds simplistic but in reality a lot of financial problems are caused by people living beyond their means. Most people don't understand that a credit card is not an additional sum of money to be spent - it is merely a convenient form of paying for goods rather than having to carry cash. When you make purchases by borrowing money from your credit card, you set up a vicious cycle of reducing your future pay packets by the amount you have to repay on those loans. It then becomes even harder to cope, and the situation can quickly spiral out of control.
Tip 2:
Little amounts add up. How many times have you received your credit card bill and been amazed at how easily all the 'little things' you bought added up to a large bill? That's the way that money works, but fortunately it works the same way for investing - lots of small amounts add up quickly. Think about changing the payments you make on your mortgage from monthly to weekly and see the difference that it makes to the interest you pay.
Tip 3:
'Pay yourself first.' Don't try to invest what money you have left over at the end of each month - it's likely to be nothing! Decide on how much you are going to invest and how regularly and then make sure this is the first thing that happens each time you are paid. Put strategies in place to make sure the investment happens automatically and before you know it you'll hardly notice the strategy because it's happening without any effort on your part.
Tip 4:
Investing should always be done for the long term. Get rich quick schemes and speculative investing rarely pay off - if it's too good to be true, then it's usually too good to be true! Use the reverse logic for lending - the longer you borrow a pool of money for, the more you will pay back because you will be paying interest for a lot longer period of time. For example, borrow $5,000 for a twelve month period at 10% interest rate and you'll pay around $300 in interest. Borrow the same $5,000 for 5 years and you'll pay thousands of dollars in interest.
Tip 5:
Use debt wisely. Financially savvy individuals use low rates of interest to invest in growth assets such as property and shares. It's known as good debt and can be subsidised through negative gearing. The important thing here is to make sure that the interest rate works in your favour - you can quickly turn good debt into bad debt simply by borrowing at high rates of interest for items that are worth much less once they are in your possession.
Tip 6:
Use legal and effective ways to reduce your tax liability. There are a number of strategies that can be legally accessed, including salary sacrifice to superannuation and starting a transition to retirement pension if you are over 55.
Tip 7:
Surround yourself with professional and quality advisers. This is critical to implementing a successful strategy - but will only work if you have a good understanding of the basics yourself. Never completely hand over control of your circumstances - always maintain a good knowledge of the fundamentals and you will be better placed to understand and evaluate any advice you are given.
Addwealth for Women have developed a number of strategies that can easily help keep you on track to financial independence.
Why wait to be wealthy? Call Addwealth for Women today on 08 9284 3144 or register online at www.addwealthforwomen.com.au
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