No time like the present

Many Yahoo!7 readers might be feeling a bit concerned about recent share sell offs here and abroad. However, this is a perfect time to work out what you are trying to achieve with your wealth building aspirations. It is also an excellent time to become certain about your financial plan.

Ah yes, a plan!
What? You don't have a plan? Don't worry, you are in the majority, but it is still not an excuse! Let's be realistic about the majority of us.
Most of us are unfit and many of us carry more weight than we really want to. And most of us are not making enough progress with our careers, our education and, of course, our wealth creation.

Getting into ship-shape
I know someone who has a plan to build up a fantastic collection of shares in a self-managed super fund. He and his wife are in their 50s and their two children are also members of the fund.
The kids are in their 20s and have different profiles for risk as they have at least 30-35 years of work ahead of them. In that time they will get richer in booms and poorer in recessions and market crashes or corrections. But time is on their side.

Sweet success
The parents want the fund to be an endowment for their kids so they will always have something working for them as they age. They have also consciously decided to run a more risky portfolio to turbo change their super as they approach retirement.
They have other investments and a business that will leave them well off, so their plan is to use the high growth super to be the icing on their cake. Note, while this would be a risky play for most 50-year olds who don't have many other investment assets, for them it is a well-considered part of their overall plan.

Make the play
In fact, for a couple like this, if they were more proactive they might sell off their shares now and plonk the money in a 7-8% fixed interest product for a year or two, with the plan to buy many of the shares they now hold when a major sharemarket collapse happens in a year or so.

Slow and steady
On the other hand, they could buy these shares every time there is a market shake out like the one we have seen recently. In previous columns I have pointed out that this is called dollar cost averaging, where by buying your shares at lower prices, you lower the average price of shares you might have bought at higher prices.

Looks can be deceiving
The enduring point I am making is that this couple has a plan and it means they don't get spooked when their shares head south - they either look to their long-term strategy to hold good shares, or they see a share price drop as an opportunity.

Don't shoot from the hip
Right now in Australia, the changes to super laws have seen many baby boomers run out and list properties for sale to put the proceeds into super before 1 July, when the ability to put $1m into super in one go will close. Some of the people will do well out of the play but others, who might sell their assets in a rush and trigger a capital gains tax payment, may actually lose what they could have made by not rushing.
These cases could be classic mistakes of making a plan on the run and could be made worse by the people in question operating with only limited information.

Time to act
The new laws actually allow a couple to put $900,000 into super after 1 July, but I reckon many couples have not thought through all of the changes. That's why a great plan - either done by yourself or prepared by a trustworthy expert - should be on the top of everyone's 'to do' list.

Click here to visit Peter Switzer's website