1. Take an interest

Most people under the age of 40 don’t take an active interest in their superannuation as they cannot touch it for a number of years. Therefore majority of people have their money invested in default superannuation options and have no idea where their superannuation savings are invested.

Employers must pay a compulsory superannuation payment of 9.5% of your salary. This is set to grow to 12% over the next few years. That’s a big chunk of your income going into an investment where you have no control over.

It’s important that you take an active interest in your super to ensure that it is invested for long term capital growth. There are a number of superannuation funds that you can invest into good quality direct shares that provide both tax effective income and capital growth. For example, you could have purchased Commonwealth Bank shares in 2006 for $26. Commonwealth Bank is now trading at over $93 and has paid two fully franked dividends per year along the way. Other types of superannuation funds will also allow you to buy direct property or even to borrow to invest.

2. Consider Tax

A number of superannuation funds only provide basic investment options such as Conservative, Balanced, Growth etc. By using your superannuation to invest into direct shares that pay fully franked dividends you can effectively reduce the amount of tax your superannuation pays and in some circumstances receive a refund.

3. Review your insurance

In your 20’s and 30’s Life Insurance and Income Protection are very important especially if you have debt and or financial dependents. It is important that you review your insurance cover inside super as you may just have a minimal default option.

Life and TPD insurance held inside super is tax deductible where no tax relief is available outside super. Income Protection on the other hand should be held outside super as the premiums are tax deductible at your marginal tax rate.

4. Salary Sacrifice into super or repay home loan debt

For most young people repaying non-deductible home loan debt is the most important strategy. This is a good strategy as it reduces personal risk and improves cash flow over time. As a rule of thumb, it’s best to repay your home loan until your mortgage is less than 50% of the value of your home before increasing your contributions into super.

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

Categories: Borrowing To Invest, Financial Planning, Insurance, Superannuation   |  Posted on
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