The new year might be well underway but it's certainly not too late to take control of your finances and make sure that 2015 is a positive year for your wealth.
If you're still wondering how best to approach the task of implementing an effective strategy that will see you grow rich and retire comfortably, consider the following steps which were recently suggested by the Australian Securities and Investments Commission (ASIC).
- Set a financial goal: One of the best things you can do when you're starting out on your journey of wealth accumulation is to take the time to discover the benefits of compound interest. Utilising a compound interest calculator can be useful as it will help you determine the amount of money you need to save and the rate of return you need to achieve to reach your goals. Make sure you set realistic goals, take a look at the long-term track records of highly regarded fund managers such as Platinum Asset Management Limited (ASX: PTM) and Argo Investments Limited (ASX: ARG) to get a feel for the returns that top quartile investors have historically achieved.
- Take stock of your net worth and consider diversification: The age old advice to 'not keep all your eggs in one basket' still holds true today for most investors.
- Control your debts: There is a reason banks love offering you more credit cards and credit limit increases – these are amongst the highest margin products that banks sell. It's hard to grow your wealth if you're swamped in debt and especially if you're paying circa 20% credit card interest.
- Get to know your super: Most superannuation websites will provide you with plenty of details about your account. It's certainly worth spending the time checking that your hard earned dollars are being invested in the right strategy. For example, if you're young, you may want to consider a high growth fund; while the older you are, the less you may be able to afford (or stomach) a drop in value and hence a more conservative fund may be a better option.
- Pay extra on your mortgage: Like your credit card debt, there's little point in making the banks rich at your expense.
- Review your insurance cover: Statistics generally show that most people are underinsured – this doesn't just refer to property insurance but also includes income insurance. Obviously the loss of a home can be a huge financial hit but so too is an accident which impacts your ability to earn a wage. Protecting against these types of unexpected events is a sensible part of your overall wealth accumulation strategy.
