News

AVOID FINANCIAL TRAPS

There are quite plenty of financial traps in the marketplace that has been existed and evolved for years. For most of the people dealing with these issues, they neglect their due diligence, therefore resulting in an unfavourable position for them. Or on the other extreme, even though some people are aware of the mechanism of these traps, yet they choose to ignore and consume it anyway with an excuse of “everyone else is doing it”. The myths have brainwashed their minds for a long time and they have been living in these financial traps, snuggling comfortably inside the bubble, without wanting to get out of it.  

Here below are just some examples of financial traps that have become parts of our livelihood, created by the authorities to govern the low-income society. To avoid them, we need to learn more about the myths, knowing that mostly they do not have any base of knowledge, the foundation of facts and result. In understanding that those myths will not take you anywhere, you clear the first step in forming a new mindset that focuses on the financial freedom/goals and will therefore help to improve the livelihood of yourself, your family, friends or the people around you.

1. Buying a home is a great Australian dream

Many media companies oversell this marketing jargon so that the large part of society can consume the visualisation of owning properties in Australia. 

Currently, there is about 67% of properties are owner-occupied (Source https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-home-ownership/proportion-investment-housing-relative-owner-occ-housing.html).

Note that all the property-related expenses incurred would have to come from the owners’ pocket. Not mentioning the piles of taxes that have been charged to the owner by government, such as council rates, land taxes, and any kind of property tax as a testament that the lands are still owned by the government. Regardless of the land status terms such as “strata title”, “Torrens title”, or “community title”, the government still without question, owns the lands in all parts of Australia. If someone says “Your home is an asset.” It depends on whose perspective that we are talking about.

2. University or college loans

Student loans or university loans are viewed by some as having the same characteristics as hidden shark loans. 

The rate for student loans in 2020 is between 0% to 10%per annum (Source: https://studyassist.gov.au/paying-back-your-loan/loan-repayment).

Compared to property loans, there is no possibility of earning the Capital Gain with student loans. Even those people with multiple degrees from the big universities in Australia or around the world could not get a guaranteed job straight out from the university. 

If we look at the origin of the university, we should realise that universities do not sure-fire produce entrepreneurs or multi-billionaires. The only types of income earners that universities generate are employees or self-employed in which most of whom occupy the largest group of taxpayers in the country (between 40% to 60% if GST item purchases are included). Business Owners and Investors (who pay tax from 0% to 20% annually) usually the ones who learn from the “street”, through overcoming the challenges and as a result, successfully build the multi-million-dollar empires through their knowledge, skills, and experience. Note that Mark Zuckerberg, Steve Jobs, Bill Gates are drop out students who follow their dreams and set up goals around it (please also note that in another perspective, the billionaires mentioned are the dropout students of prestigious universities in which are famous for the quality of the grades of their students and graduates).

3. Saving money in the bank

There are a lot of older generations (baby boomers) who still believe in the benefit of “saving the money” method to accumulate wealth. Since 1971, the money game has changed in the financial industry. Unused/idle money has become debt or liability. In the past, the value of money used to be backed up by commodities such as gold (real asset). Now, it is not backed up by assets anymore.

There is never be a real asset behind the currency that we hold. The money that we hold only as valuable as the government stamp to make society believe that cash is an asset. As cash does not have any real asset backup, it can be deemed as worthless. That is why saving with less than 1% interest in the bank is a liability. Compared to the inflation rate (between 2-3% annually), the inflation rate is killing the buying power of society who save their money in banks. 

4. Superannuation

There is plenty of belief system that revolves about retirement. People are sold on the idea of their dream life begins when they retire with plenty of money, a big house and to be able to travel anywhere they like.

The seldomly spoken cold truth is most Australians (aged 65+ or over) within the retirement age, they could not survive in today’s life.

The average retirees only have superannuation around $207,000 (Source https://www.anz.com.au/personal/investing-super/superannuation/super-guides/baby-boomers-this-is-the-average-super-balance-for-your-age/).

If they still live for another 20 years, retirees would not survive 20 years with $207,000 only. Not to mention the possibility of pension fund support cut that looms the retirees any day, any time. There is no guarantee that the government would keep contributing to the pension funds that keep declining year by year.

So, the main key to avoid these myths or financial traps is to keep yourself educated. 

The more educated you are, the better your financial planning is going to be. There is no one else that is responsible for this matter other than yourself. Only the ones that invest in equipping themselves with all the financial knowledge in today’s era, can overcome the challenges of money game evolution. 

Unfollow above steps are like your “NOT TO-DO” lists, and you will start planning for your correct to-do list.

About the author

Relative Posts