Develop an investment plan

You’ve heard it before, but when it comes to investing your money wisely, it really pays off to have a plan. This means choosing smart investments that are right for you, and developing strategies to ensure your money goes a long way. If you have a plan that outlines your goals, timeframes, and risk factors, the work is already half done!

Be clear about your current finances: The first step is to get an accurate idea of your current finances. Working out what you own, what you owe, your net income and gross expenditure are all vital to this process.

Confirm your goals: These goals will be the backbone of your investment plan, make sure you write them down and have a timeframe for each goal.

Understand risk: Have a clear idea of how much risk you are willing to take to achieve your investment and saving goals. The course you take will be shaped by where you are now, where you want to be, and how long you are willing to take to get there. High risk options can be high reward, however they can just as easily go the other way

Planning for a short-term goal (1-3 years)

Drawing up a budget for your current finances will help you work out how much you can afford to save, and how often. Once you know this, set up a direct payment to a high interest savings account. This can be done directly through your employer by redirecting where part your pay goes, or you can do it yourself through your lender after each pay packet.

Your budget will also ensure you are putting your money towards the most important things first, and saving a fixed amount each pay period. Paying off your credit cards and personal loans first will reduce how much you spend on interest, freeing up extra cash to invest.

Choosing a cash investment with stability, security, and easy access is a great option. These can be anything from a high-interest savings account to a term deposit.

Planning for medium-term goals (4-6 years)

Have a look at your superannuation plan – does it have a balanced portfolio? Assess whether salary sacrificing would suit you and your needs. Salary sacrificing is something high or middle income earners can greatly benefit from, as contributions come out of pre-tax earnings. For lower income earners, after-tax contributions that attract government co-contributions can be highly beneficial.

Many people also have a mortgage of some form. Typically, it will be more valuable to pay off an owner occupied  mortgage, rather than competing investment alternatives.

Regardless, a balanced or growth option will grow your money more quickly in the long term, provided you are able to sustain your balance lowering every so often.

Planning for long-term goals (7+ years)

When thinking about an appropriate investment choice for your superannuation, take into account how long you have until retirement. If your super is inaccessible for more than 10 years, it is worth considering a growth investment option, helping you turn your average retirement into a great one.

If you are saving for a goal you want to achieve before retirement, you will need to find investments outside your superannuation fund to have access to your funds when needed. A suitable investment could be a balanced or growth option, in a low cost managed fund.

Planning for retirement income

A great financial plan outlines your needs and goals, while setting the best strategies to achieve them. After you;ve developed your investment plan, the next step is choosing your investments.

In most cases, it is wise to have a mix of investments, or a diversified portfolio. Your options can include government bonds, equities or managed funds, property, and cash investments. Most advisers will recommend investing the greatest percentage of your portfolio in stable assets that give an almost guaranteed return. The trade-off is often a low, or lower returns provided by these low-risk assets.


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