Your Eight-Step Guide To Financial Freedom

Financial freedom is a term that is thrown around in financial circles but what does it actually mean for you?

Financial freedom could mean having enough money to not have to worry about what bills are coming in, or it might mean being able to travel more, or work less, or simply to have more choices available to you.

No matter what your goal is or what financial freedom means to you, it will require a solid understanding of your current financial situation and steps to invest in your future. In this article, we walk through the key basics to help you begin your journey towards achieving more choice.

Step One – Understand your goals

What are you working towards? One of the first steps towards achieving financial freedom is understanding what that looks like to you. By understanding how much you want to have by a specific date for a specific purpose, this will help to guide and frame your investment options. Learn how you can form your own investment goals.

Step Two – Determine if you’re ready to invest or might continue to save

How do you know if investing is right for you and which option would best suit your situation and end goal? It’s important to consider your tolerance for risk and investment timeline to decide which investment vehicle could suit your situation best. There’s a wide range of resources and tool to help you analyse this and break down your goals. In this article with a financial advisor, we look at how one can decide whether to keep saving or start investing.

Step Three – Pay attention to your superannuation

Whether you realise it or not, you’re already investing your money through superannuation which is why it is important to take stock of how your money is working for you and what this could mean for your retirement. There are five key steps you can take to ensure your super is invested to maximise its potential as we explore in this article.

If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.

Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group specified above.

Step Four – Leverage the Power of Compound Interest

Compound interest has been labelled as the eighth wonder of the world, and for good reason. If you’re ready to start investing, you’ll need to open an online share trading account for brokerage. There are many factors to consider which platform might be right for you, as we can help you assess below.

Step Five – Diversification can be simple with Exchange Traded Funds

Exchange-Traded Funds (ETFs) are becoming more and more popular – and for good reason. When you buy into an ETF, you are effectively purchasing and getting exposure to a range of shares included in that fund, instead of one share. This allows you to easily diversify our portfolio at a lower cost than buying individual shares. To learn more about how ETFs can work for you, see our full guide which covers the basics through to helping you invest at each different stage of life.

The table below displays some of the International Broad Based ETFs available on our database with the highest three-year returns (sorted highest to lowest by three-year returns and then alphabetically by provider name). Use Canstar’s ETF comparison selector to view a wider range of products. Canstar may earn a fee for referrals.

Step Six – Consider diversifying further through property

If you’re comfortable with managing a property, considering an investment for portfolio diversification could be worthwhile. Residential investment properties have averaged a strong return in Australia over the last decade, and investment property home loans may be a way to get into the market if you don’t have the equity to purchase a property outright. The first step could be learning how mortgages for investment properties work compared to those on owner-occupier loans.

Lowest interest rates for 1-year fixed home loans

The comparison table below displays some of the 1 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Lowest interest rates for 3-year fixed home loans

The comparison table below displays some of the 3 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Lowest interest rates for 5-year fixed home loans

The comparison tables below displays some of the 5 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Step Seven – Avoid the common mistakes investors can make

Beginner investors can become overconfident in some aspects of their investment strategy with many expecting never to lose any money. If your investment choices become emotional, it’s time to review and invest logically to avoid mistakes in managing your portfolio. Read more here.

Step Eight – Knowing when to buy and when to sell

Deciding when to sell shares can be just as important as picking which shares to buy. As the saying goes, ‘time in the marketing is worth more than timing the market’, but what happens when you hold onto a bad stock for too long and how should you go about selling? We spoke with three stock experts to learn from their experience.

 

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