How to create a game-changing Net Wealth position
There are different ways to think about wealth and where you want to be in the future.
Be it five, ten or even fifteen years - especially if you're considering property as an investment vehicle.
Where to start, what to aim for and what to expect are all key questions and concerns you may have when focused on building wealth.
But what exactly is net wealth?
Simply put, net worth is what's left when you subtract what you owe from what you own.
What you owe, called liabilities, includes things like debts (like home loans and credit cards) and bills and taxes you have to pay.
What you own, or assets, includes the money in your accounts, the value of things like stocks or bonds, your house's worth, and your car's market value.
Your net worth is what you have left after selling everything you own and paying off all your debts.
In other words, your net wealth could be considered your retirement fund.
To better understand net worth, let’s look at a professional couple in their 30s with a home in Brisbane valued at $650,000 and an investment portfolio with a market value of $50,000. They both own a car and the value of their possessions are valued at $175,000.
Their current debts include a home loan balance of $450,000 and a car loan of $15,000.
To calculate their net worth:
[650,000 + $50,000 + $175,000] - [$450,000 + $15,000] = $410,000.
Real wealth isn't just about how many properties or how much money you have. It's also about the things that stay with you even if you lose all your money – like your health, family, friends, beliefs, and how you help others.
It's about having a good life.
Photographing the 'Big 5' in Africa, watching time pass by on the Rocky Mountaineer as it winds through British Columbia or having more time with your grandchildren - true net wealth is about creating a lifestyle.
This idea helps you see that being rich is not just about having a lot of stuff but also about having time for the things that matter.
But to have the freedom to use your time how you want in retirement you need to plan when you will start to slow down at work or retire.
By having a strategic approach to retirement planning you will have a life rich in things and experiences that matter to you.
Rich vs. Wealth
Let's get into a critical truth: having lots of money doesn't automatically mean wealth.
Many leading financial experts say that even though rich people might have a good amount of money, they often work hard to get it and spend a large portion.
On the other hand, wealthy folks enjoy financial comfort without working all the time. They usually reach this point through hard work in business or successful property investments.
The main difference is how they think about money – the wealthy don't stress it.
At the same time, the rich often do, spending most of what they earn without saving enough for income-generating investments.
Real wealth is how long you can maintain your lifestyle without working.
For example, if your monthly expenses are $7,000 and you have $30,000 in savings, your wealth can last about 4.2 months or 128 days.
Essentially, wealth is measured in time rather than just dollars.
Embrace a strategic approach to becoming wealthy
Many people can achieve financial success through intelligence and professional accomplishments, but the journey to true wealth requires
When receiving pay raises or promotions, a common tendency is to seek instant satisfaction by purchasing new cars or larger homes instead of
wisely investing windfalls into valuable assets.
This behaviour often leads to an ever-increasing lifestyle that matches rising incomes, a trend likely to persist throughout their careers.
In contrast, the wealthy pursue a different approach by allocating a portion of their income to real estate or stock investments.
Rigorous research or professional guidance ensures their investments align with financial goals, bringing them closer to lifestyle freedom.
They aim to avoid chasing income and make their money work for them.
While money can solve many problems, only a small percentage of Australians achieve self-funded retirements, showcasing their financial intelligence in making wise investments throughout their careers.
On the other hand, a significant portion may face challenges in their later years, realising that their accumulated wealth has little to show for extravagant spending on modern luxuries such as overseas holidays and the latest cars.
This sharp contrast emphasises the crucial difference between being rich and being wealthy.
Property power: Building lasting wealth
Investing in real estate is crucial for establishing enduring wealth.
Property investment becomes a cornerstone in your journey towards financial independence when approached strategically.
Unlike the rich, the wealthy recognise real estate as a tangible and appreciating asset.
Australian property values typically show a historical tendency to increase over time, and rental income can ensure a stable cash flow, contributing to the investor's financial stability.
The key lies in acquiring properties aligned with long-term financial goals. Thorough research, understanding market trends, and seeking
professional advice are essential for successful property investment.
Patience and compounding accelerate wealth creation
The wealthy understand that true financial success demands patience and a commitment to the long game. Reinvesting returns and allowing investments to compound over time can expedite your journey to wealth.
This contrasts with the rich, who may prefer immediate gratification through extravagant spending, overlooking the compounding benefits of
For those entering property investment, continuous education is crucial. The wealthy invest money and time in staying informed about market trends, legalities, and financial strategies.
Utilise educational resources like attending property investment seminars and reading trusted articles and books.
Learning from others' successes and challenges provides invaluable insights, contributing to a more informed and confident approach to building lasting wealth.
Unlock your net-wealth potential with a property plan
We can help grow your net wealth during your core working years to unlock lifestyle freedom during retirement.
To start with a personalised strategic property plan, contact one of our Ramsey Property Strategists today to see how we can help you.