Why you may be suffering from financial stress

If you haven’t heard of The Pareto Principle, it is the law of the vital few - it’s the 80/20 rule.

The Pareto Principle originated in Italy in 1906 by an economist who observed that 80% of the land in Italy was owned by 20% of its population. To put it in simple terms, the Italian economist identified a financial truth; 80% of the wealth is owned by 20% of the population.

Therefore 20% of the population are not average people. How do they differ? - They are financially educated and they know how to attain real wealth.

Many people believe that the best financial advice that they’ve ever received is; go to school, get a job, work hard, save money, buy your house (it’s your biggest asset), live below your means, get out of debt, pay contributions to your superannuation, retire and expect the government will support you in retirement and you’ll live happily ever after.

Sadly, that’s not going to happen and your retirement will not be the one you’ve dreamt of.

In this day and age the best financial advice is; never stop improving your financial education. Those who have accepted this reality are the ones who have learnt that smart investments are the only true way to ‘future proof’ your financial future. Many of these people are the smart property investors you envy.

Smart property investors invest in properties where 80% of the market can afford to rent, they invest for cash flow and not capital gain, and they rely on the tenant to support their lifestyles and not the other way around.

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• Expert advice

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