I’ve sorted my super and grown my savings. What should I do next?

I have started investing in exchange-traded funds (ETFs). I’m not super confident yet but I’m getting there. I’ve optimised my super, I’ve got my savings going well. I’ve ticked all the boxes. Now what?

If you’re looking for your next growth opportunity, there are two main steps you can take once your finances are optimised and you have a strong long-term investment plan. The first is looking outside ETFs into other asset classes. The second is increasing your income.

Moving outside ETFs

Here you’re basically looking to start upskilling in a new class of investment product. Some people move on to dividend stocks or property to add some diversification to their portfolio, and in the hope of above-market returns beyond what ETFs are giving them.

It’s important to keep in mind that every class of investment product has its own learning curve. There are some baseline skills that are transferable, which is why I am a big fan of starting people on the ETF road because you’ll learn plenty of transferable skills in that process. But, even so, there is a lot to learn that is specific to each investment product.

So if you want to add more investment products to your portfolio, my recommendation is: go in intending to become a confident investor in that specific class of products. Treat each investment product as an area to master.

Usually, the area you’re spending ‘too much time’ on is the one that has become a comfort zone.

You’re almost a confident ETF investor. Are you then interested in becoming a confident investor in property, or dividend stocks?

It’s important to remember you don’t need to become an expert in every asset class to be financially successful. The recipe for financial success is simple: you need (at least) one strong source of income and (at least) one asset class to invest that income into.

You can choose to keep your strategy simple and stick to ETFs and superannuation if you want, and that would be enough to create a very comfortable financial future (provided you invest enough money consistently). This brings me to the second point.

Increasing your income

Once you have a strong long-term investment strategy, the fastest way to grow is to actually add as much fuel to the fire as you can (i.e. add as much money to that portfolio as possible).

Most people focus on increasing income first. But without a streamlined financial system or a clear long-term investment strategy, income increases often don’t translate to increased wealth. They often go into lifestyle upgrades. This leads to the common frustration of working hard but getting nowhere; increasing income but not getting any further ahead.

That’s why I like to suggest people focus on fixing their finances first, then on increasing income second. When you do it in that order, you are in a fantastic position – because you have the skills, systems and confidence to efficiently convert those income increases into wealth (assets) through investing. This creates exponential growth.

Now, you can do both (increase your income and expand beyond ETFs), but generally my recommendation tends to be that most people will be better off focusing on increasing their income first.

This is because the majority of people are not skilled or interested enough to become active investors chasing that extra 1 per cent on their investment returns. Statistically, only a relatively small percentage of investors (including professional investors) are successful at beating market returns. So it can end up being a lot of work for not a lot of gain.

On the other hand, there are infinite ways to increase your income. That is far more within your power than chasing higher returns. For many, this route can be easier because they can find income opportunities they find more enjoyable than hunting for higher investment returns.

The trick is getting the balance right. Most people spend too much energy on one thing. Some spend too much energy increasing their income without learning how to convert that money into wealth effectively; others get hyperfixated on optimising every inch of their finances when they could spend that energy increasing their income.

Either way, you’re leaving money on the table, and you’ll end up feeling like you’re doing a lot of work but not seeing a lot of growth.

Usually, the area you’re spending ‘too much time’ on is the one that has become a comfort zone. High-earners focus on earning good money because they’ve become good at it. Those who have built their financial capability continue to focus on optimising their finances because that is now familiar territory.

So, it takes a bit of self-awareness and tolerance for discomfort to work on the area you’re less comfortable with. But you’ve already been through the discomfort of learning how to be good at something before you can do it again.

Paridhi Jain is founder of SkilledSmart, which helps adults learn to manage, save and invest money through financial education courses and classes.

• Advice given in this article is general in nature and 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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