The 3 basic principles you need to create wealth
Remember at the end of the movie Pretty Woman when Julia Roberts gets swept off her feet by Richard Gere and never has to worry about money again?
Forget it, that’s never going to happen.
I’m more interested in her best mate who’s busy explaining to her new roomie that she’s about to start a beauty course and asking, ‘You’ve got to have a goal. Do you have a goal?”.
If someone was to ask you, do you have a goal, what would you say? Do you have a plan, a strategy, to get the kind of property or income or retirement that you want?
For most Australians, it’s crickets. Or at best it’s “pension and super”. The facts are that pension, and super aren’t going to give you the kind of future you want and deserve. But, if done right, property investment can.
There are some basic principles around wealth that can help you understand how investment works and get you started on the journey of financial success.
PRINCIPLE 1: UNDERSTANDING MONEY BUCKETS
Money is ultimately a magnet. Once you understand how money works you can reframe, change and redirect your life almost instantly.
So, what are money buckets? They’re basically how you grow and accumulate wealth. The trouble is that a lot of Australians only have one bucket and only put one thing in that bucket i.e. their wages.
We know that this doesn’t work to create great wealth. No one has ever saved themselves wealthy. We need to have other strategies or assets that accumulate wealth independently. Some good examples include:
Superannuation – money we set aside that accumulates money with very little effort from us. The more contributions we make, the more money we make.
Tax – Most Australians pay too much tax and don’t apply for the deductions they’re eligible for. Get a tax deduction and that’s another top up in your money bucket.
Side hustles – Creating a second income, or side-hustle, is another potential income that will help you accumulate extra wealth.
Shares – Get some good financial advice, buy shares and get a nice dividend at the end of the year.
But the biggest bucket of all is property, and that’s what I believe can change your life in the most beneficial way.
PRINCIPLE 2: KNOWING YOUR NUMBER
While most Aussies would say they want to ‘retire comfortably’, very few actually do the math and work out how much money they need each month to achieve that.
Assuming that a combination of your super and pension will be enough is a huge error.
The pension number for a couple today is $36,000 per annum. The average super balance at retirement is $128,000 if you’re male and $73,000 if you’re female.
It doesn’t take a mathematician to tell us that no-one is living the high life off those numbers.
Work out what you need every month to live the life you want. Find that figure and then start working towards achieving it.
PRINCIPLE 3: LEARNING WHAT GROWS YOUR WEALTH VEHICLE
Let’s be clear, the vehicle you use to create wealth doesn’t have to be property. It can be shares, businesses – whatever you feel you’re good at.
But today we’re talking about using property as a vehicle to create wealth. So, if property investment is your vehicle of choice – and if you’re reading this blog, I’m going to assume it is – you need to understand what drives the growth in real estate. If you know that, you will know where and when to invest.
There are six market drivers that grow real estate value:
- Population growth
- Infrastructure growth
- Supply vs demand
Simply put, if you can see population growth in an area where infrastructure is improving and expanding, where you know that people are going to want to live, that’s a good place to invest.
The basic principle here is get to know what influences and grows your wealth vehicle. By doing this you will make investment decisions based on education and knowledge, not emotions and impulses.
Good property investors are nimble and adapt fast. They stay informed and enrol a team of experts to help them excel in times where others can’t. But most importantly, they start with a plan that is deliberate and based around the goals they wish to achieve.
To find out how you can be one of those people, we’re running a free a property investing seminar.
Here you’ll be equipped with the tools, resources and support to thrive, and most importantly, not make the fatal mistakes that others make when they fail to have a strong plan in place that can properly maximise their potential and the opportunities that are available to them.
Co Founder Positive Real Estate