How to build wealth over the long term

When you talk to someone about what they want in their 50s or 60s, most would say they would ideally like to retire early, enjoying life and being in control of their time.

However, the reality for many people is that they may well be working for life.

Research has found that couples aged between 50 and 70 years have the highest median net worth at nearly $900,000, while singles aged between 30 and 40 years have the lowest median net worth at just $50,000.

Of this, the vast majority of that wealth for older Australians is likely going to be coming from the family home. For most people, they go down the standard path of buying a family home, having kids and working for 30 years to pay it off.

What happens is they do build some assets through the family home, but if they want to use those funds to live on, they likely have to sell the property and downsize and hope there is something left over. They will also probably have some super, but overall, it’s not as much as you would probably hope for.

In retirement, if you have $1 million and you’re able to earn 5% on it, that’s only $50,000. That’s enough to live on if you own a home already, but it’s not much to enjoy your later years.

In contrast, if you’re younger and you want to get ahead, you should be looking at ways that you can grow that asset base so you’ve got more options. The way I choose to do that is through property.

If you’re able to purchase a property every 3-4 years, over the course of a 30-year period, you’re going to be able to own around 8 properties. That’s going to translate into a far higher asset base than if you simply own only your family home. That might be $10 million in todays dollars and a whole lot more when factoring in inflation.

While that might seem like a daunting prospect to own 8 homes, most people could do that if they simply took a long-term approach. It’s more achievable than most people think.

It all comes down to buying the right assets, holding them for a long period of time and not getting shaken out by the noise we hear around property prices on a daily basis. It’s also having the confidence to start. That’s what slows a lot of people down.

Many people start overthinking things and worrying about factors that they probably shouldn’t be. A lot of people are fearful of losing their jobs. In reality, if you’re experienced and are good at your job, then the odds of securing another job quickly are very high.

It’s the same with serviceability. While you might not have the serviceability to keep growing your property portfolio after buying 2-3 properties, that isn’t the end of the story. In time, your rents increase and so do your wages or your income from your business. Just keep thinking long-term.

Stop worrying about all the things that might be slowing you down. Worry more about what your life might look like if you never start.

Are you going to be happy in 30 years, with one house and your superannuation fund? How would your life change if you owned 8 blue-chip properties when you hit 50?

The difference between the two is what you do today.

If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.


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