I am 25 years old and have 230k saved all of which is in savings account earning 5 percent interest. I make about 100k a year. I have very low expenses and save majority of the money I make. I have started putting my recent pay checks into the stock market purchasing shares of IVV, VAS and VGS. Should I continue with this strategy or should I put majority of my savings into the stock market and keep a small emergency fund in cash. Was also looking at the idea of purchasing an investment property in Wodonga VIC? I own no property or other assets
What to Do with Savings
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Plan to own your paid-off home by retirement - this is the strongest determinant of financial comfort in retirement
If you're on $100Kpa, then the amount above $45Kpa is taxed at a marginal income tax rate of 30%
Super is a great tax-saving environment - if you salary sacrifice the max, e.g. $30Kpa, which is taxed at 15%, then this is like getting free money of 15% or $4500pa extra for free
which then grows according to your choice of investment (I chose 'international shares'), and earnings on the investment are again only taxed at 15%pa instead of your 30% outside super, so again a bonus of 15%pa each year, as its value grows over time.
Sure, it may be 'locked away' until a condition of release like age and retirement (I believe folk got funds out during COVID, or during financial duress) but for long term savings I reckon it's a heap of free money that's gotta be worth a lot if you think about it.
https://www.ato.gov.au/individuals-and-families/super-for-in…
https://www.ato.gov.au/individuals-and-families/super-for-in…
And a benefit for super is you're not likely to blow it on a get-rich scam where cash in the bank is always at risk.
So, super is not an investment choice - you can choose what type of investment you want for it - it is simply a low tax concessional environment, and that's worth a lot more than many investments outside super.
Geared properly like 80% loan with 20% deposit, may multiply your returns, and houses tend to grow better (land appreciates, buildings depreciate [lose value over time]) but can be a PITA to maintain with tenants not caring and damaging, dodgy agents, and expensive repairs, even gardening that tenants won't do - not everybody is cut out to be a landlord - I've been doing it for over 40 years and I still have regular problems.
I've been doing it for over 40 years and I still have regular problems.
Do you have any tips for new or soon to be landlords (e.g. OP)?
'any tips for new or soon to be landlords (e.g. OP)?'
choose tenants carefully, and expect them to NOT care for your property like you would care for your home - they typically expect that their rent pays for YOU to fix everything
Also, expect them to NOT tell you about needed repairs as they fear being kicked out if they raise issues, so it's up to you to do regular (suggest 6-monthly inspections) if you want to maintain it in good condition
expect managing real estate agents to promise 3 monthly inspections, then NOT do them - they want to do the minimum work for the most money - agents may have 500 properties on their rent roll, and they ain't looking to watch yours closely unless a serious problem arises.
Freestanding houses on freehold land give better capital gains but require more money and time to maintain - external painting, roofing, guttering, gardening, fencing, and drainage can all be an expensive PITA.
lock and leave strata units give better rent and are less work to maintain - just paint and carpet every so many years - and strata levies pay for common area maintenance so you don't have to spend time thinking about it - but choose carefully as strata committees attract toxic petty emperors who bully others and rule like selfish dictators. If you get on the committee, you can achieve wonderful results to save money and time, and build a great community. If you don't, you can get to wonder why you get regular bills for special levies for repairs that don't get done, or are done badly.
The problem is that housing in increasing by 10% per year. To break even you need to take a risk in order to get a 10%+ annual capital gain (and then their is capital gains tax when you cash it in, so make that 14%+ plus per year).
Can you elaborate please? What's 10% annual capital gain?
If you are referring to an investment property, the only capital gain tax you pay is on 50% of profit when you sell it. Am I missing something?
They are saying that if you buy an IP before buying a PPOR (because you aren't able to decide where you want to live for a longer term), your IP needs to go up by 14% in order to afford the same PPOR later, that you could have bought instead of the IP
At 25, if not done before, I'd spend some money on some good times travelling overseas.
Property is a good choice, though I wouldn't buy in an outer region unless you have done alot of research. Stick with a Metro suburb and you will be OK.
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easy! it's very Captain Obvious but see a financial planner with that amount of coin! you're probably paying a bit tax too that needs a strategy for too. good luck!