All wise financial advisors know the importance of investing for your long term future with regular reliable instalments. It is best to arrange this by direct debit because without that, life gets in the way and the regular payments are not made. It is common for five years to go past in the blink of an eye without a cent being saved. Without a specific plan the money never gets set aside.
Say you were aged in your mid 30’s and commenced a $2000/month contribution to your superannuation. After one year, you would have $20,400 invested (that’s $24,000 less 15% contributions tax).
The magic of compounding begins slowly, then becomes ever faster…..until it’s almost supersonic.
In such a case, more than likely by age 40, you would have $150,000 invested.
By age 50 it would be $619,000.
By age 55 it would be $1m.
By age 60 it would be $1.6m.
By age 65 it would be $2.5m.
By age 70 it would be $4m.
See how sharply the rate of gain increases over time.
Also see the damage caused by just a 5 year delay in starting. You don’t merely lose the little bit of money your would have contributed in the first 5 years, you lose the $1.5m extra you would have made at the end, between age 65 and 70. Starting late takes the money off the end, not the start.
THERE IS AN EVEN BETTER WAY
Imagine at the very outset, on day one, in your 30’s, if instead of depositing your first $2,000, you bought an investment property for $600,000 – using equity, not your own cash. This way, from day one you have $600,000 growing rather than your first $2000. This is how it would look.
Age 40 – $1.2m
Age 50 – $2.4m
Age 60 – $4.8m
Age 70 – $9.6m
We know that looks silly, but it always comes true over time. It looks silly beforehand, but clever after the time has passed.
Now imagine what would happen over time, if you add other properties along the way – e.g. every 3 to 5 years……even if you add just one more property half way along.
And with a Canterbury investment property, you don’t need to find $2000/month. It should pay it’s own way – and then give you monthly profits from the ever increasing surplus rents. You could even put these surplus rents into your superannuation – and get a tax deduction for doing so.
You also could do the above superannuation plan alongside the property plan. It’s not a case of one or the other, it could be both.
These are the sorts of things we can talk to you about.