Getting started on your journey to financial freedom
27 September 2021
When Azra Amir first came to meet Findex 15 years ago, she had recently started a new job and had some excess cashflow. But like a lot of people who have established themselves in a career and are starting to earn some decent income, she didn’t really know what to do next.
Financial freedom is what we all desire, but for many people having options with your financial choices can be somewhat overwhelming. Once you achieve some increased flexibility with your cashflow, you may start to wonder whether you should take on more debt or pay off debt. Should you add more to super or buy a property? Is it better to protect what you already have, or take on more risk? What about insurance, or is it a waste of money?
Clearly, it’s not possible to do everything, so instead a lot of people end up ‘freezing’ and doing nothing. But doing nothing just because you’re afraid of doing something wrong can be the biggest financial mistake of all!
The truth is, no-one can give you the answers to these questions without knowing what your current situation is and what it is you want for the future. In addition, the answers to these questions will change over time, depending on variables such as:
Cashflow changes, e.g. through promotions or inheritance.
Changes to your family situation (births, deaths and marriages).
Opportunities that arise in investing or your career.
Longer term goals, such as when you want to retire.
Market conditions and interest rates, which are always changing.
Azra faced the additional challenge of never having heard of several financial concepts. As a migrant from Pakistan, superannuation, capital gains tax and gearing were literally foreign to her! But what Azra had to her advantage was her willingness to start early and ask the right questions.
Helping Azra make her goals of financial freedom a reality
Azra’s wealth creation strategies and focus have evolved as her own situation has changed over time.
Generally, I recommend for younger people to take more risk with their superannuation, as this will be a 30 or more-year investment, so it is less impacted by the market ups and downs along the way.
When we started working with Azra and identified what her goals were, we made recommendations on her modest super balance along with starting a separate instalment gearing strategy outside super. This saw her make an initial investment, to which she added a set amount each month. She also borrowed a similar amount each month to further boost her exposure to growth assets.
15 years later, Azra still has this geared portfolio in place and it has grown significantly during that time. However, she has stopped the additional instalment contributions and borrowing and is using her excess cashflow to reduce the non-deductible debt on her home as this is one of Azra’s main priorities.
Azra is also now more focussed on her super – as this has grown to be a significant asset, due to her aggressive investing style, her ongoing employer contributions and her own extra contributions. She especially enjoys how her own contributions not only increase her super balance but increase her tax refund too, which she then uses to pay down the debt on her home faster!
More recently, Azra purchased an investment property through a buyer’s agent we referred her to. Located in a great growth area, the property has been cash flow positive from day one due to the high rent received and low mortgage rates.
Again, Azra is using this additional cashflow to reduce her non-deductible debt, which is what’s important to her.