Budget got you riled up? Take a deep breath, and consider this

In case you aren’t quite yet over hearing about the budget, today I’m sharing my thoughts in response to questions I’ve been asked over the last week.

How my views on wealth strategy changes – or doesn’t

The approach I usually talk about doesn’t change: optimise your super and contribute extra where appropriate, build a core portfolio of low-cost ETFs/index-funds, aim to have a fully paid-off home by retirement, and increase your income where you can.

The fundamentals don’t change. What might change is how much people allocate to each of these components. You might see people putting more into superannuation or their home than investments outside superannuation – for the tax benefits.

However, tax minimisation should never be the main thing you are optimising – because taxes will constantly change. At best, it’s a bonus. Factor it in as and when you can, but don’t build your entire wealth strategy around it.

This is also why I talk a lot about understanding the core investing principles, because they don’t change. When you design a long-term investment strategy based on the core principles of investing, your strategy is more resilient to market movements and economic changes.

It is tempting for the “haves” to believe that they just worked harder than the others. In some cases, this might be true.

I’ve also always cautioned against viewing investment property as an easy ticket to wealth. Too many people jump in, hoping that if they just hang on long enough, they will eventually come out ahead.

But ask anyone with an off-the-plan apartment that has stagnated in growth for the last 10 years – they’ll tell you, it’s not so simple.

My views on the proposed changes

Every economy needs to balance protecting the fundamental quality of life for all whilst also encouraging growth. Ideally, you don’t want to go too far in either direction.

If the private sector is let loose, you end up with an overly capitalistic economy where individuals seek to maximise their own profit. This can lead to serious inequality, as the “haves” generally don’t have enough of an incentive to care about the “have-nots”.

It is tempting for the “haves” to believe that they just worked harder than the others. In some cases, this might be true. Maybe you’ve put in the work to learn how to save, invest and build wealth, while others have not.

However, to some extent, you were also in a position to make those choices. If you had a disability or chronic illness, or didn’t get the education you did, would you still have had the opportunity to make those choices so easily? Maybe not.

This is where some level of public sector intervention is required to ensure there is some baseline standard of living for everyone – regardless of what circumstances you were born into.

However, going too far in the other direction isn’t ideal either. If taxes on businesses are too high, people won’t take the risk of starting a business, or they’ll move overseas and take their taxes and jobs with them. If taxes on investments are too high, this erodes the incentive for people to save and invest in assets that will help them create a more secure financial future.

Everyone benefits from public infrastructure. Everyone also benefits from a thriving economy, where businesses fuel job creation and people aren’t spending all their money or hoarding cash.

So, it’s complicated. For example, removing the CGT discount could help cool the property market. But it could also make it harder to build wealth for many everyday Australians – young people who are investing in shares to help them afford a home in the future, people relying on their investments to help fund retirement or a career break, or small business owners whose retirement plan was to sell the business they’d spent years pouring all their savings into.

What’s my personal take?

I’ve previously shared why I choose not to resent paying taxes – not because I always agree with tax policy, or because of moral views on wealth redistribution, but because that negativity doesn’t serve me. It doesn’t hurt the government, or my accountant, it just hurts me.

Good investors stay calm – through doom-and-gloom headlines, market crashes, and tax policy changes. They ignore the noise, focus on their strategy, and stay the course.

Here’s what I keep in mind: Australia consistently ranks in one of the top countries to live in. This is, in part, thanks to the taxes we pay. Out of 8 billion people across 195 countries, I’m part of 0.33 per cent of the world’s population that gets to live here. Isn’t that a lottery win in itself?

So, if the budget got you riled up this last week, take a deep breath, go for a walk, count all the things your taxes have paid for: the road, parks, clean streets – the list goes on

And remember: billions of people would still happily pay a premium to live here.

Paridhi Jain is a money and mindset coach who combines practical strategies with mindset transformation to help clients create more freedom and fulfilment in wealth, work and life. Find Paridhi at: skilledsmart.com.au

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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