In most parts of Australia, people strive towards home ownership and while it’s not for everyone, it is one of the most common goals we share collectively. Besides providing shelter and security, home ownership also underpins a comfortable retirement.
So once you have purchased a home, what comes next? This will depend on a number of things, like your life stage, goals, budget and timeframe.
Take a look at some examples below:
Just purchased:
If you have recently bought your first home, then your next step is to work out how much you can afford to pay each week to repay your mortgage as quickly as possible. A home mortgage is non deductible debt (therefore we call this bad debt) and the sooner you repay it, the better. That said, it often takes most people over 15 years or more to repay their home mortgage. Ensure you have some personal insurance (life, TPD and income protection) so that in the event you cannot work due to illness or injury or worse, premature death (side note: everyone thinks this won’t happen to them but if you watch the news each night, it’s happening to someone) your mortgage can be repaid. Also, ensure you have a savings buffer to help meet unexpected expenses on your new property. Your focus is likely to be on repaying and reducing your debt and waiting for your property to increase in value.
Reduced debt:
If you have owned your home for a number of years, hopefully you have built up some equity and repaid some of your debt, you may be ready to consider the next steps in building your personal wealth. Investing in quality assets will help to provide for your future. Perhaps you can retire earlier or work less, maybe you want to live a lavish lifestyle, whatever your goals, the sooner you start to build your assets the better. The common ways people do this include investing in growth assets, typically shares and property. You will need to review your budget to know what level of surplus income you have each month to put towards your investments, as this may help to decide what asset class to consider next. Investing should be part of a considered plan and we strongly recommend you speak to your financial adviser on your options. You should also speak to your tax accountant to ensure you invest in the most appropriate structure if you are also wanting to maximise opportunities to legally reduce your tax too.
Repaid debt:
If you have paid off your home, congratulations but don’t become complacent! That money you used to put towards your mortgage should now be directed towards growth assets. If you are nearing retirement (3-8 years) then superannuation may be worth considering as one of the most effective ways for you to build your wealth and there are some significant tax benefits with this structure. Make sure you are happy with your super fund and the investments it holds for you. If you have a longer time frame, then considering those growth assets likes shares and property are great ways to accelerate your financial position.
As always, we strongly recommend you have a cash buffer available before looking at new strategies and seek financial advice to understand how your investments will meet your goals.
This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs