After years of scrimping and saving every penny to put towards the mortgage, you have finally paid off your home. So you have cracked a bottle of champagne and celebrated. But now, you are left wondering what to do all your extra cash.
Around one-in-four Australians are said to own their home. Some 41% are paying off their home, and 21% are renting. Research data suggests 80% of Australians who do not own their home have made paying it off a priority.
Studies also indicate that while Australians are optimistic about their future, most do not have much savings. Most Australians only have enough savings to last around three months, beyond this, they would be broke. Australians are also the least confident when it comes to creating a retirement nest egg.
Also, surveys propose that Australians do not budget. Instead, many spend their income on unneeded items such as lunch, coffee and luxury items. Therefore, many Australians misuse their earnings.
However, Australians who have paid off their mortgage are said to be budget conscious. Rather than spending their money on unnecessary items, these Australians make their lunch. They do not buy coffee. Plus, they avoid purchasing luxury items. Many also do not have credit cards so they control their spending. Consequently, over time, many Australians who have paid off their homes have developed good spending habits.
Once you have paid off your home, then it’s time to put the money management skills you have acquired to use. Initially, it’s important to establish new financial goals. Countless people plan for an overseas holiday or purchase investment property. Thus, they are enjoying their lifestyle and building wealth for their retirement. Whatever you choose to invest in, just make sure that you invest wisely so that your reduce your risk.
Numerous people elect to invest in property because they can touch and see their investment. Furthermore, they can track how their wealth is growing. Another benefit is this type of wealth requires minimal capital investment on your part. You also have to pay very little off the mortgage as your tenant pays the majority for you.
Property investment can reduce the tax that you pay using a negative gearing strategy. This philosophy increases your residual income further while you are working. Then, when you are ready to retire, you can choose to sell your assets to fund your retirement. Alternatively, you can sell some of your investment property. The money can then be used to pay off others so you can live off the rental income.
Buying investment property now, when interest rates are low, means you can make your money work harder for you. Nevertheless, many investment advisors suggest having a buffer that covers a least 6 to 12 months of the mortgage. Applying this strategy will protect you against any interest rate rises and also reduce your financial risk.
As many Australian homeowners say there is no secret to paying off your mortgage, it just takes diligence and discipline. Hence, you can also apply this strategy to your investment property so that you build greater retirement wealth. Just remember to plan and set yourself goals before you start buying investment property.
Once you have outlined your plan and set goals, then it’s time to look at what’s available. Traditionally, houses have higher capital growth than apartments. Yet, apartments and units have a higher rental yield. For this reason, many investors choose to buy a mixture of property, as this diversifies their investments. Ideally, you should purchase property that meets your needs long-term.