At work, we’re forever talking about how to help young people get established financially, but it was listening to Daryl Braithwaite singing “The Horses” at Great Keppel which inspired this article. I’ve never thought much of it as a song but seduced by the crowd participation, the theatre and a few beers, I drift into considering the lyrics:
“That’s the way it’s gonna be, little darlin’,
We’ll be riding on the horses, yeah,
Way up in the sky, little darlin’,
And if you fall I’ll pick you up, pick you up”.
While it seems that the song was originally written as a promise to a dying daughter, it could just as easily be interpreted as a promise of fairytale love. Well-meaning obviously, but naïve, and because I have no heart my message is to first avoid the fall, and second, pick yourself up. Here’s how:
Take an interest in your superannuation. Log in at least twice a year, and check that your employer has been contributing the correct amount (it is illegal not to do so). Have a look at the investment returns, your investment profile, and also whether the arrangement includes life and/or income protection insurance. With this information, you can start doing some sleuthing of your own, or at least be able to talk to someone knowledgeable about such matters.
Investing in shares is a great way to start accumulating wealth. Using an online broker, the costs are very low and you can start small and gradually build. Unlike property, you can sell off a small portion of a portfolio if you need the money. Buying and taking an interest in even a few shares will open your mind to market volatility, dividends, franking credits, dividend reinvestment and takeovers to annual general meetings, all sorts of knowledge about large companies and the environment they operate in.
Property is the word on everyone’s lips right now. Following the real estate advertisements in the printed press is a good way to get a handle on what’s going on. There’s also a number of websites with price histories of individual properties, and also lots of background data including the land area, easements and other information relevant to value. Banks will provide lots of information regarding lending parameters. You can look up the way stamp duty is applied on the Office of State Revenue website.
Insurance is a wide-ranging and complex area. First up and regarding motor vehicles, young people need to understand the difference between CTP, third party property and comprehensive insurance. Second, life insurance is often a focus, but trauma, total and permanent disability and income protection are generally more important when you are young. Super funds are no longer allowed to automatically insure people under 25 so you need to check if you are covered by your super fund. If you are not, it might be your parents who pick up the tab for injury caused by falling off your bike, diving into the surf or any number of totally normal things that young people do every day. Structured properly, insurance might not be as expensive as you think.
Understanding income tax will save you money. Read up on how the tax system works. Don’t fall for the idea that you’ll lose half your pay in tax if you work overtime. That would only happen if you are at or close to being on the top marginal rate anyway. You might pay more tax in one particular pay, but it’s all squared up when you submit your tax return.
Do you know that the government will often pick up part of the tab for things that benefit you, especially as regards generating additional income and wealth? Interest on money borrowed for investment purposes is one example, but generally speaking, work related education and training are tax deductible and you can use that to increase your earning power. Say you are a bookkeeper, why not undertake a diploma in accounting to step up a couple of notches? What about a labourer? A forklift, heavy vehicle or other tickets will make you very employable, and also help protect your ability to earn income as you get older. There are also overseas conferences on just about everything so go and learn something, make contacts and get a tax deduction for it.
And now we’re back to The Horses. Marriage is the biggest investment anyone will ever make. Many people focus on the risks of shares or superannuation, but they’d be wise to consider the losses associated with a failed marriage. Often deeply emotional, people are sometimes left so gutted that they never regain their old selves. No one can promise endless happiness, so look beyond the fairytale and choose someone who can and will capably share life’s challenges with you. Don’t make the investment thinking you’ll fix glaring imperfections later. That is a red flag that he/she is not really your type in the first place.