It’s important to review your wealth creation strategy and here’s why

Creating wealth is not something that happens by accident. It takes consideration, patience and above all, action.

Some people see wealth creation as an opportunity. Others see it as a hassle — an inconvenience. At the end of the day, if you fall in either of these two groups, you can still benefit from having some professional help. After all, this is why people engage companies like Pillar in the first place. To let someone else do the hard yards, coordinate, chase documents, and ensure the right processes are followed to give a wealth creation strategy the best shot of succeeding.

You may be surprised to know that many people still believe that having a wealth plan is a ‘set and forget’ scenario. No need to go through the trouble of making more decisions, or indeed, changing the direction of the original strategy if that’s what’s called for. This approach is not only unproductive, but also wastes valuable time (that can never be regained).

But why is reviewing a wealth creation strategy so important?

A change of circumstances

Life has a knack of throwing cricket balls straight at our heads sometimes. Maybe you’ve had to change your job for a lower paid one. Perhaps your partner has had to stop work due to injury or redundancy. Maybe you’ve had to take out additional debt due to an emergency like having to replace a car or do some much needed repairs to your home.

On the other hand, you may now be earning much more than you were earning when your strategy was first formulated and you’re paying way too much tax. Or perhaps you’ve had a major financial windfall and you need some good financial advice (before you spend all your newfound coin on a big holiday, expensive clothes or a new sports car that you don’t really need).

Giving too much to the tax man

A major incentive for property investors is the ability to divert some of your hard-earned dollars away from the ATO and towards improving your financial future. In simple terms, over the course of a ten-year period, you may have lost as much as $100,000 in tax benefits. Wouldn’t you rather have something to show for this money?

Giving too much to the bank man

It’s astonishing to see how many people neglect their home loan. Year in, year out, they simply make the required minimum repayments without really understanding how much they are paying in interest. Most people don’t realise that interest is calculated on a daily basis. For instance, $20,000 sitting in an offset account against your mortgage could in-turn save you $1000 per year in interest repayments. Left unchecked, this simple strategy could end up costing tens of thousands in unnecessary interest repayments over several years of the home loan.

Then there’s out of date bank loans with prehistoric interest rates. Again, you could be saving as much as $5,000 – $6,000 a year or more by either renegotiating your mortgage terms or by changing to a lender who offers better rates, cash incentives for ‘jumping ship’ and an overall more favourable banking experience for you and your family.

Missed opportunities

In the middle of the pandemic, those in the know where growing their wealth by acquiring more investment properties, investing in shares, setting up Self Managed Super Funds (SMSF). By the time the pandemic had ended, some of these people had nearly doubled their money. Others had made significant gains as the markets around the world bounced back with a vengeance.

But we don’t need to wait for the next pandemic, GFC or housing crisis to look for opportunities – they’re always there. It’s just a matter of asking the question and taking action.

Take a look at the following example: Say you had the opportunity to pick up an investment property for $500,000 but you decide to ‘wait and see if prices drop’. In the next twelve months, that same property goes up in value by $50,000. The real cost of the missed opportunity is considerably more than just the $50,000 price difference. You’re now paying more in stamp duty, having to borrow more from the bank and relinquished 10% in equity gains.

Improved debt position

Reviewing your financial game plan can also help you wipe off some of that bad debt faster. Many of our clients going through the review process are able to shave several years off their home loans whilst also paying much less interest on personal loans. This can be a significant ‘game changer’ for many people bogged down with personal debt that carries no financial benefit.