Financial tips to punch above your weight and grow wealth faster

Our swimming and soccer stars do it in sport, and there are ways for everyday Australians to be better than expected with money.

Gee those Aussies did well at the July world swimming championships, smashing the US and the rest of the world like guitars.

And don’t forget our Matildas soccer stars, through to the final 16 nations of the FIFA Women’s World Cup with champion captain Sam Kerr yet to take the field. Take that also-rans Brazil, Italy, Germany and Argentina!

Australians are known for punching above our weight in international sport, especially when you consider our population size and the fact that two of our most popular sports – footy and cricket – are not global.

Punching above our weight financially is another Aussie trait, with an average personal income in the top 1 per cent on the planet and a world-beating median household net worth three times larger than the US.

Go you Matildas! Katrina Gorry and Kyra Cooney-Cross celebrate. Picture: Mark Stewart

But sadly for many, our wealth is unequal. The top 20 per cent of Aussie households earn almost half of all the income, and our average household wealth of $1.04m masks big variations.

Social research group McCrindle says the top 20 per cent of households each have an average wealth of $3.3m – 93 times that of the bottom 20 per cent’s $35,100 and almost six times as much as the middle 20 per cent’s average $588,400.

There are ways to punch above your weight financially. Have written goals, a plan of how to get there, and consider these key tactics.

Power up with property

Owning your own home is the greatest ticket to building wealth, because it’s a tax-free investment you can buy with a tiny deposit – thanks to government deposit schemes – and multiplies in value over time.

It also provides shelter that is not at the whim of a landlord (let’s not mention mortgage interest rates here).

Once one property has grown in value, its equity can be used a deposit for more property, shares or other investments, delivering owners a huge bang for their initial bucks.

Harness compound interest

Einstein reportedly labelled it the eighth wonder of the word, and for compound interest to work its magic you need to start investing as soon as possible, so your financial returns keep growing and earn money on themselves.

The mixed 4x100m freestyle relay was among our gold medals. Picture: Philip Fong/AFP

A simple compound interest calculator can show that $5000 invested every year, based on 7 per cent annual return, grows to almost $80,000 in 10 years.

Then things really get going. After 20 years the balance is $224,000, more than twice as much as the $100,000 put in, after 30 years it’s $510,000 and after 40 years it’s more than $1 million.

Borrow to invest

Financial boffins call this leverage, or gearing, and it simply means using a small amount of your money – and lots of other people’s money – to give yourself exposure to more assets and larger long-term growth.

We already do this with our home loans, buy there are short term risks, because a sharp fall in asset values can see you owing more than you own. I’ve been there, during the GFC with shares, and it lasted for years, but it’s still a great way to build long-term wealth – and all the rich people do it.

Destroy bad debts

You can’t punch above your weight financially if interest payments on debts are weighing you down.

Credit cards and buy now pay later schemes are big culprits and should be paid off quickly, but also aim to get rid of personal loans, study loans and even your own mortgage as fast as possible.

If your only debts are those against assets that produce growth and income, you are climbing the wealth ladder.