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Financial fitness

Young Australians must approach financial fitness like a gym workout, says Hewison Private Wealth

Andrew Hewison
Managing Director
20 Jun 2012

Young Australians eager to ‘get rich quick’ may be disappointed to hear that wealth creation can be as tough as achieving washboard abs, but those who attended a Young Investors Wealth Forum, hosted by Hewison Private Wealth, in Melbourne last week were in for a reality check.

Andrew Hewison, Director and Advisor at Hewison Private Wealth is a firm believer in applying the same discipline he uses in his CrossFit training, to his financial and investment strategies. He says the financial vs physical health analogy is a useful way to equip the next generation of investors with the tools and resilience to make informed financial decisions.

“Understanding that the approach you take to building your wealth is very similar to the way you build your physical fitness will help you achieve realistic goals and compound your wealth with a long-term strategy,” Mr Hewison said.

“You don’t expect your body to be able to perform at its best without months of training and hard-work, and the same can be said for your finances; it takes months and years of diligent saving and budgeting to reap the rewards. However, just like running a half-marathon for the first time or bench-pressing your body weight are great achievements, being able to afford your first home, start a share portfolio or pay for a trip to Europe, are the type of results that far outweigh the sacrifice,” he said.

The Young Investors Wealth Forum also hosted celebrity nutritionist Lola Berry, who believes taking the same 80/20 rule to your physical and financial health is a realistic way to achieve balance.

“I am a firm believer in adhering to healthy living 80% of the time but allowing yourself to enjoy the things you love; like a wine or two without feeling guilty. The same principal can be applied to your finances: don’t beat yourself up if you allow yourself to enjoy some of the finer things in life,” Miss Berry said.

Mr Hewison says there are four key areas young investors need to understand to build and maximise long-term wealth:

  1. Budgeting and Saving

Although budgeting may seem obvious and a little boring, Andrew Hewison says it’s essential to track your expenses for a three month period, set a goal and budget accordingly.

“Direct a portion of your salary into a separate savings account each pay cycle and if you have a short term savings goal it might be worth looking into secure assets like a high interest account or a mortgage offset account. If you’re after growth asset options, think about starting a share portfolio or a First Home Savers Account that allows the government to contribute on top of what you deposit,” Mr Hewison said.

  1. Property and Your Home Loan

Mr Hewison says many young investors are looking to purchase their first home or an investment property and should aim for a 20% home deposit as a general rule to avoid Lenders Mortgage Insurance (LMI). And although a fixed interest rate home loan provides certainty, it should not be used to try and “win” the market.

“I recommend setting up a budget for your property to keep track of expenses and while you’re young and have extra disposable income, before the responsibilities of having a family set in, find an extra $100 per week as it can help shave eight years off your loan and save you hundreds of thousands of dollars in interest costs,” Mr Hewison said.

3.   Superannuation and Tax

Superannuation can be a clever investment structure for young investors to compound wealth early on and prepare for a comfortable retirement.

“I know many young people see super as something to think about later on in life, but I personally use my superannuation as a strategy to lower my taxable income through salary sacrifice and utilise its low tax rate of 15%. I am also using this investment instrument to build my wealth for my retirement, as I know I can’t touch it and I know that putting a little extra away now will leave me with a lot more later on,” Mr Hewison said.

5.  Investing in shares

Mr Hewison says it’s important for young investors to remember that shares are a long term investment of at least five years.

“I always advocate sticking to quality, blue chip companies and if you’re unsure about where to begin, start with investing in a Listed Investment Company (LIC) like AFIC, which offers great diversification given it invests in a range of other companies. Just remember you own a small part of that listed company and cash flow is king – so look for good dividends,” Mr Hewison said.

Hewison Private Wealth has committed to running a series of events tailored to Young Investors throughout 2012, to promote financial literacy and wealth accumulation strategies.

“There is a real gap in the market for advisers who are willing to spend time educating young investors, given the focus is often skewed towards higher net worth clients. However, young Australians are our future investors, and the children of our current clients, so it’s important we help them get the foundations right from an early age,” he said.

Ends –

About Hewison Private Wealth:

Hewison Private Wealth is one of Australia’s largest independent wealth management firms, specialising in high end financial planning and investment advice to Australian individuals and families, portfolio management, and Self Managed Superannuation Fund administration. The firm manages around 900 individual client investment portfolios currently valued at $340 million, of these investment portfolios 410 are Self Managed Superannuation Funds.

Hewison Private Wealth is a fee based firm which does not accept commissions of any kind. It pioneered Individually Managed Accounts in the early 1990’s and its clients’ investments portfolios are structured in this manner with investment portfolios consisting predominantly of direct investments diversified across the five main asset sectors.

Established in 1985, the firm has over 25 years’ experience in providing clients with unbiased and strategic advice tailored to their individual requirements and for the ongoing management of their financial affairs.

For more information visit: www.hewison.com.au.

Download article Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.