Firstly, what is wealth? Simple question, but I believe life should be simple 🙂 ...... the generally accepted definition is the difference between your assets and liabilities.
Wealth though is different to financial freedom, which is basically your ability to live the life you want to live without worrying about money. To do this you don't need to be that wealthy as it all comes down to your individual circumstances and what "living the life you wat to live" really means for you.
Some seemingly wealthy people may not have ANY financial freedom at all! Likewise you may see people who are financially free with very few assets.
Traditionally there are 4 main ways to build wealth, which are:
- Business
- Shares
- Property
- Your salary
Many wealth advisers will recommend a mixture of asset classes, which we agree with 100%, however, we at Niva do believe Property (specifically residential property) is a great low-risk way of accumulating long term wealth, and a method which is accessible to many people.
- Control
- Business income is very flexible from a tax perspective
- Be your own boss
- Build a saleable asset
- Can be very rewarding
- High risk of failure (over 60% of small business closes within 3 years)
- A lot of work to get going and to maintain
- Can be high stress
- Low cost of entry
- Can be very lucrative if you know what you are doing
- Easy to get into
- Most everyday people don't understand them
- High risk
- Can be worth a lot one day and nothing the next
- Hard to borrow money for - if you do borrow money banks can execute a "margin call" if the share market drops and they want their money back; you can very easily lose your money and then some
- Bricks and mortar that most people understand
- Backed strongly by all levels of Government
- Loved by the Banks so easier to get lending
- Employs over 1 million Australians
- Strong track record of annual growth
- Not a get rich quick scheme, only for the patient and those with time
- Easy to buy the wrong property
- Without proper guidance it can be easy to not achieve your goals in property
- Easy, low risk
- Unless you are a major CEO, rock star or sports star, your salary won't provide you the wealth creation you are after
- Alone, your salary won't make you rich
- This is not an asset that you can sell in retirement or leverage after you stop working; when you retire it is gone
- It controls you in some ways, not the other way around
The above post summarises just some of the pros and cons of the 4 main ways to build wealth. Here at Niva Property we believe that investment grade, residential property is a perfect asset class to have in your investment portfolio, however, the best method to build wealth for each person/couple depends very much on your personal circumstances, your age and your retirement goals.
You should seek the advice of a professional Financial Planner to assit you in planning for retirement and determining which asset classes suit you best. If property is one of those please contact the Niva team to see how we can help you.Disclaimer
It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal or financial product. Refer also to our Terms and Conditions.
