finance

"Don't be afraid of debt." The 5 things every financial advisor wants you to know.

As a financial advisor, I know there are a lot of misconceptions people have about money

How much you earn has very little to do with your financial potential. It has everything to do with how much you know about building wealth. 

I’m often surprised by the money beliefs people hold on to, the same beliefs that hold them back from their financial potential. But a little financial know-how can make a big difference in your bank account.

Watch: 5 money lessons your parents told you, that you should probably forget. Post continues below.


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These are the things every financial advisor wants you to know about money:

1. Not all debt is bad.

'Debt' being a dirty word is one of the most common misconceptions people have when it comes to financial planning. 

Don’t be afraid of debt. It’s not always a bad thing.

When it comes to owing money, you want to avoid high interest debts, for example credit cards and high interest loans. You’ll also want to avoid anything that funds a depreciating asset if you can, for example a car lease. 

If you do decide to take on a debt, always make sure it’s for an investment, like an investment property. And don’t be afraid of a mortgage. You’re paying for a property you’ll own one day instead of renting and paying someone else’s mortgage. 

2. You don’t need a lot of money to have a financial advisor.

This is one of the biggest myths about financial planning. Contrary to popular belief, you don’t need a lot of money to work with a financial advisor. 

Many people think, "I don’t have much money, there’s not much a financial advisor can do for me" but the truth is, we can set up a financial plan to help you build wealth. 

As a financial advisor, my job is to create a financial blueprint that will help you achieve your financial goals. Want to buy a home in two years? Ready to take six months off work? A financial advisor can design a plan to help you do it. 

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3. Financial planning isn’t always about cash.

A lot goes into financial planning, but it doesn’t always involve cash. Take your superannuation for example. 

Most people treat it as an afterthought because they can’t access the cash. While it may not be funds you can access right now, what you do with it in the present can affect your future. 

As a financial advisor, I often suggest my clients organise their superannuation as their first step to getting their finances in order. This means making sure your superannuation provider is generating healthy returns and putting all your super in one place. 

Another thing you’ll want to look into are the management fees and benefits. For example, are you paying a superannuation fund for insurance you don’t really need? Often all of this is in the fine print. 

Side note: do you have toxic money habits? Find out on What The Finance, Mamamia's podcast all about money. Post continues below.

4. Be cautious with new trends.

Crypto may be the buzzword in the finance world at the moment, but like every trend, it fades. And when it comes to your money, that’s a lot of risk to take in. 

It may be tempting to dip your toes into crypto when your friends are claiming to make a 100 per cent return on their investment, but the crypto market is volatile. 

For beginners, it may be a big risk to take. Take caution when you hear about new investment strategies.

5. You don’t need to earn a lot to have a lot.

Your net worth has very little to do with how much you earn. So don’t let your salary dictate your wealth status.

Regardless of your salary, you should always aim to save or invest 20 per cent of your earnings. I know that with the high cost of living, this isn’t always possible. 

But if you’re serious about building wealth now, and if you don’t have a lot of discretionary income to invest, try to find ways to earn more money on the side. 

The earlier you start, the better off you’ll be in the future. It’s definitely worth investing in. 

Gerry Incollingo is the Managing Partner of LCI Partners, a firm that specialises in accounting advisory, lending, wealth, property, insurance and legal.

Feature image: Mamamia/Canva.