Build Wealth

Have you ever wanted to have a million dollars in your bank account?

Today, I’m going to tell you a wealth strategy by which almost everyone can have $1,000,000 in the bank. So, I know what you’re probably thinking. The only way I’ll ever have $1,000,000 is if I win the lottery, I steal it, or I receive an inheritance from a long-lost relative. Now, this isn’t a get rich quick scheme; it’s a get rich slowly scheme.

Okay, so we’re going to base this on an income of $63,000. Now, $63,000 is about 75% of the average income in Australia, and out of that you will pay about $11,000 in tax. Why can’t you pay yourself the same amount? So, based on a 20% of your net income savings rate, which is what we encourage, $200 a week should easily be achievable. $200 saved each week and invested in the stock market for 30 years at an average annual return of 8% yields $1,300,000. Now why do we need 1.3 million when we only wanted $1,000,000? The answer is tax.

Any investment that you own that increases in value will generally be liable for capital gains tax (CGT). Now, in this example, we have estimated it to be approximately $230,000. That’s based on selling it out in one year, which wouldn’t be a smart strategy, but if you did it anyway and paid the highest marginal tax rate, it’s possible you would still have more than $1,000,000 in your bank.

So, what’s the point of this? What I really want to push home is that normal people on average or below average incomes can still build wealth. Just because you don’t have a high income doesn’t mean that you can’t find a way to save 20% of your income, put it away for the future, and build some serious wealth. At Wealth Factory, we believe in automation, and what I mean by that is automating your bank accounts now by automating your bank accounts.

It takes away the human factor, and that’s important because if you have an issue saving money, you will spend whatever you have. If you take the money away from you first, in the same way that the tax office takes away income tax before it’s paid to you, you won’t spend it because you can’t spend what you don’t have. This type of automated and forced saving can have a remarkable increase in building wealth over time.

To build wealth, you need to start as soon as possible, save consistently, and set some financial goals. If you don’t set any financial goals for your life, how would you expect to achieve them? It’s certainly tough times out there at the moment for a lot of people, but it’s not always going to be that way. For anyone who has had a drop in income or has had to shut down their business when they get back on their feet, it’s really important to consider what you want to achieve for the future and take some measures that you haven’t done before to protect yourself against this type of situation happening again.

While building your wealth, you also need to consider that markets are volatile and run in cycles, and this type of downturn was always going to happen at some stage, perhaps not to the same degree as we’re experiencing at the moment, but there are always going to be tough times when you think things are never going to be good again, and then there are always going to be good times when you think things are never going to be tough again. The truth is somewhere in between.