For young homebuyers meeting their mortgage payments is critical to their financial and family security. When a home is first bought that should be the focus. Over time the amount owing will slowly reduce and the home value should rise, increasing the family’s equity in the home.

When should they start investing in other ways? Some people continue to focus exclusively on paying down the home loan until it is fully repaid. They pay every extra dollar they can find off the mortgage.

Some even pay extra on the home loan when they have other debts costing much higher interest rates, such as credit cards and personal loans. This usually isn’t smart. It is best to pay down the highest interest rate loan first as that will result in the least total interest paid.

Investments other than the home should be considered for surplus income. Superannuation has very attractive tax advantages such as reducing personal income tax. However it is inaccessible until retirement after age sixty so may not suit younger people.

Another option is to start a non-super managed fund investment account. They can also have a savings plan attached, so regular monthly contributions are added to them. These accounts offer flexibility. They can be varied or have money withdrawn from them at any time.

The proceeds can be used for children’s future school or university costs, any special needs they may have, to upgrade the home, for that big overseas trip, or to buy an investment property. There are many possible applications.

Life is a surprising journey with many twists and turns. We never know what we might need or want money for. Non-super investment plans give future options.

What if there isn’t any surplus income? Even if this appears the case it is worth trying to save a little into a separate bank account by auto-debit each payday. With discipline and sticking to a small regular instalment, savings will accrue.

Expenses tend to automatically adjust to consume whatever income is available to them. High incomes mean expenses increase miraculously. If less income is available because a savings amount has been deducted, expenses will reduce.

Once a few thousand dollars have been saved the money can be moved to a managed fund. Balanced or growth funds are the most popular. They will earn better returns than bank interest long term and can include a regular savings plan.  

Discipline is essential. Using automatic bank transfers is the least painful way to save. The savings plan is the starting point of the wealth portfolio, leading to a comfortable lifestyle in our future years.