Did You Invest Your Tax Savings?

In case you forgot, many of you received quite large tax breaks, some of you smaller tax breaks, but either way, almost all workers got some tax relief (money in our pockets). Now as you might remember, these tax breaks were (and still are) an opportunity for you to do something great financially for your future self. These types of opportunities don’t come along often, and taking action when these opportunities do arise is a big part of what separates financial winners from those who want to be financial winners…

We’ve previously given you several ideas as to what you may wish to consider doing with your tax savings. But given we all want to invest, and invest well, we thought we should illustrate what an investment portfolio could one day look like IF you were to take action and use your tax savings to invest.

To help illustrate this, we’re using a nice clean chart courtesy of Vanguard. Vanguard are one of the biggest index fund managers in the world, and you’ll find some Vanguard in almost every Australian super fund portfolio. The below chart illustrates what’s happened in investment markets over the last few decades.

We want you to spend a minute or two looking at the chart. It shows three things:

• What has happened to $10,000 invested in Australian shares since 1980
• The same $10,000 investment with $250 added each month
• And the same $10,000 investment with $500 added each month.

Then imagine you had taken action all those years ago by simply rediverting your tax savings from your bank account to a high growth investment portfolio like Vanguard offers…

You could be a multi-millionaire!

There are a few ifs and buts here, like where do you get the $10,000, or perhaps your tax savings do not add up to $250 per month. That’s okay, as this is your journey, and it doesn’t need to be a mirror image of the above.

The take away we want you to see is this: Despite some ups and downs along the way, investing for the long-term, has produced amazing results, and adding little amounts on a regular basis is how you can super charge things. You have been given extra cashflow via tax breaks, and depending on your situation, you might now be in a position to take action.

You don’t have to invest directly into Vanguard. You might salary sacrifice into super, you might pay down the mortgage, build your Rainy Day fund, or perhaps a little of all of these strategies.

Remember, investing really is so much easier than most people think. You don’t need a huge pile of money to invest. You don’t need any fancy investments. The key is to get started when you can I.e., use money from tax breaks! And then combine the power of low fees with diversification via index funds, invest regularly and let time do most of the work for you.

And there’s pretty much everything you need to know about investing in one Money in Minutes!

If you want to take action but are still unsure, please shoot us an email.

Cheers,

Dan and Dave