Whether you are a retiree who is planning for the future or a young person who is preparing early, it is important that you have the appropriate financial information available. The best way to prepare yourself would be to pay close attention to the following 7 SMSF planning tips. They will help you gain a better understanding of the process and ensure you have a positive investing experience.
1. Seek Professional Help
While the idea behind this investment type is the fact that you are managing things on your own, that does not mean that you should ignore this. This is actually one of the most important of the 7 SMSF planning tips mentioned here. It is very likely you will have questions along the way and you should not be too ashamed to ask them. Your money is on the line, so admitting that you are having trouble and need assistance would be the wise thing to do. Put your pride aside and reach out for a helping hand.
2. Don’t Use This To Avoid Taxes
There are definite tax benefits associated with setting up an SMSF. With that said, that does not mean you are released from all tax responsibility. Many people falsely believe that they can start this type of account and avoid paying taxes as a whole. You are ultimately responsible for all the fees associated with your investment. Failing to understand and make tax payments accordingly means that you can end up in a huge pot of boiling water.
3. Get Educated
This is another one of the 7 SMSF planning tips that are absolutely essential. There is no way that you should consider this type of investment if you have not done your homework. Whether you do independent research as a way of educating yourself or you would prefer to try one of the many online tutorials that are available. This is certainly not a step that should be skipped. While this means it will be a little time before you can officially get started, you will be far more knowledgeable walking in the door.
4. Having No Investment Strategy
This is a big no-no and it should be avoided at all costs. Just as you would with anything else important in your life, you should have a definitive plan. Trying to navigate this arena without one is probably the worst thing you could possibly do. Anyone who wants to do well should create a solid strategy before getting started.
As far as strategy is concerned, this is something that you have to give ample thought. It is even advisable to write things down to make sure that you don’t forget anything along the way. This is also a great idea since things sometimes seem great in thought but make very little sense once they are written on paper.
Your strategy should include a step-by-step process. There should also be some insight into your future plans and goals as far as your SMSF is concerned. If you believe that this is a fruitless task, consider the fact that no one would ever construct a building without having solid plans available to them.
5. Making Time Is Essential
Since you have decided to invest in a fund that is self-managed, you should not be surprised to find out that you will need to invest time in order to ensure things run smoothly. This includes taking classes, speaking with experts, creating a solid strategy, performing research tasks and completing tax-related forms at the end of the year. If you know that you do not have time to invest, then you should definitely consider a different type of investment option since it is not likely you will do well with this one.
6. Estimate The Cost Correctly
Starting an SMSF requires considerable start-up costs. Not only will you need to have a hefty sum to invest, but there are several fees that are associated with starting and maintaining an account. The things that you will have to pay for include accounting, setup fees, independent audits and paying for expert advice. You may try to save money by eliminating the last item mentioned on the list, but you will regret that later. If anything, advice, education and research are the areas where you cannot skimp. Trying to do so means that you will not have a very positive experience.
7. Starting An SMSF And Walking Away
This is not one of those investments where you can toss your money in and sit back while you wait for it to grow. You will have to be hands-on in order for things to turn out positively. If you believe that an account that requires little to no effort is more your speed, this is definitely not an option you should consider. There are so many other options out there for people who would like a more hands-off approach. Look into one of those before wasting your time on this.
Now that you have all of this information at your fingertips, you can safely say that you are prepared to get started. While it may seem like a lot to digest, you should consider each point carefully before moving forward. In case you are concerned that you will forget something, you should print this out and have it available in case you need it for reference.