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How to plan for your future

Whether you want to own your own home, an investment property or prepare for retirement, planning ahead is key.

Here are a few tips to help you properly plan for the future.

 

Debt and savings goals

First, work out your debt. If you've borrowed money on a high interest rate, aim to pay this off as soon as possible. Then you can prioritise your savings.

Short term goals such as saving for a holiday can be achieved in a couple of years, while long-term goals have a life-span of five or more years. Balance short and long term goals carefully.

Consider your income and fixed costs (eg mortgage repayments or insurance) to work out how long it will take to reach these targets.

Write down your goals and display them prominently - the fridge is a great spot - so you are motivated to achieve them.

Your first home

You'll need a deposit for your first home and the bigger it is, the less you'll have to borrow. Even if you can't afford mortgage repayments now, you may be able to in the future - so start saving earlier rather than later.

Lenders will calculate your loan-to-value ratio (LVR), which is a figure expressed as a percentage. For example, if you have a 10 per cent deposit, your LVR would be 90 per cent. LVRs of 80 to 95 per cent are considered a high lending risk, so you'll need Lenders Mortgage Insurance to get a loan.

Set up a savings plan and stick to it to stump up a deposit. You could set up a salary splitter that automatically channels funds into special savings accounts. What you don't see, you won't miss!

Buying an investment property

If the value of your home increases, the equity does too. You can tap into the increased equity through a mortgage refinance and buy an investment property.

Borrowing to invest is called gearing. Positive gearing is a less-risky option - this is where income outweighs any costs (eg property maintenance).

Work out how you're going to save and follow the same strategy as for any home purchase - set up a savings plan and stick to it! Consider a self managed super fund investment and make the most of the lower tax rates.

Your first home

You'll need a deposit for your first home and the bigger it is, the less you'll have to borrow. Even if you can't afford mortgage repayments now, you may be able to in the future - so start saving earlier rather than later.

Lenders will calculate your loan-to-value ratio (LVR), which is a figure expressed as a percentage. For example, if you have a 10 per cent deposit, your LVR would be 90 per cent. LVRs of 80 to 95 per cent are considered a high lending risk, so you'll need Lenders Mortgage Insurance to get a loan.

Set up a savings plan and stick to it to stump up a deposit. You could set up a salary splitter that automatically channels funds into special savings accounts. What you don't see, you won't miss!

Buying an investment property

If the value of your home increases, the equity does too. You can tap into the increased equity through a mortgage refinance and buy an investment property.

Borrowing to invest is called gearing. Positive gearing is a less-risky option - this is where income outweighs any costs (eg property maintenance).

Work out how you're going to save and follow the same strategy as for any home purchase - set up a savings plan and stick to it! Consider a self managed super fund investment and make the most of the lower tax rates.

Key savings tips

Set up payments that go into a savings account at the same time as your salary comes in. You'll avoid the temptation of spending money in your everyday transaction account and earn a higher interest rate.

If you can cut back on nonessential spending (eg meals at restaurants), consider making voluntary payments to top up your regular contributions.

Image credit: SeniorLiving.org

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This information has been prepared without taking into account your individual objectives, financial situation or needs. You should, before acting on this information, consider its appropriateness to your circumstances.

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