One of the most misunderstood concepts in life is debt, but did you know debt or the process of borrowing can actually be one of the greatest tools within your financial system?
A more appropriate term for debt would be leverage; to leverage your assets is a concept that offers you the ability to exponentially increase your assets with only a minimal additional expenditure.
Most Australians, at some stage, will have a mortgage; borrowing money to purchase your principal place of residence is something that has been an Aussie dream for generations.
Investment properties and living off the income of 2, 3, 5 or 10 properties is touted as the ultimate retirement structure, allowing freedom and consistency of income while enjoying your days on the golf course or improving your tan on a sunny beach. However, most Australians have no understanding of how to achieve these objectives, other than sacrificing their lifestyle so they can pay everything off quickly.
Australia is one of the most heavily taxed nations in the world, so it’s important to understand how the taxation system works. When coupled with such concepts as property investing, leverage and other tax structures like superannuation, the tax system actually presents great opportunities.
For example; if paying principal and interest on a home loan for the average household it takes someone in the vicinity of 20 to 25 years to discharge that debt, however under the right circumstances an individual using a leveraged investment property could discharge that same home loan in as little as 15 years*. Most importantly, they could have considerably more cash flow to enjoy their lifestyle than if they had kept paying principal and interest.
It’s also possible to use your employer superannuation contributions to help pay for and purchase the home in which you wish to retire. The concept that your superannuation funds and employer contributions could be utilised to purchase a unit overlooking the beach is something that most people are unaware of.
As individuals we all have our long term goal, our desired result, 5 houses at age 60 all paying rent or $1,000,000 in super living and off the a $1000 a week. No matter what the specific numbers they are all predicated upon one thing, the average – the cost of living. We all want to be comfortable, to have more than the average Joe so we can enjoy life and not have to struggle. We spend years saving and sacrificing so that one day we can breathe the collective sigh of relief and just relax. However, things have changed and dramatically!
Since 2007 legislative changes in relation to investing, taxation, property and superannuation have been unprecedented. They have at times been overwhelming and often overlooked. Many have heard of or believe they understand the changes yet little or no action is taken.
As a whole most do not appreciate the distinct threat this poses. Ignoring opportunities or ignoring changes that directly affect your financial security can lead to financial hardship. Ignoring a changing environment poses more of a threat than potential losses resulting from bad investments. So many of us continue to move forward in exactly the same direction yet expect our results to differ.
It all comes down to understanding the legislative opportunities and how to apply them to your situation.
To help you understand, My Investment Home and The Cube Group are running a series of information sessions, specifically targeting property and opportunities like leverage and superannuation.
The information sessions are run under a workshop environment with real life examples designed to illustrate the advantages that exist in areas such as borrowing for investment and debt discharge, as well as long term goals like superannuation and retirement. Because it’s imperative we all understand these opportunities and how legislation can be applied.
The first information session will be held on Wednesday 18 May from 6:30pm at Carina Leagues Club, 1390 Creek Road, Carina.
For more information or to book visit www.myinvestmenthomeseminar.com.au
*This is an illustration based upon set parameters and not a generalised result.
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