If you have any credit card or other high-interest debt, pay that off before you even think about saving or investing. Credit cards routinely charge around 20% or more per annum, far more than you’ll ever consistently earn by investing in the sharemarket.

As for your mortgage, it comes with a significantly lower rate of interest. You should of course aim to pay that off quickly, overpaying each month if possible, but even with mortgage-debt you can start investing.

Build your savings

Compare rates and open a high interest savings account. Set up a fortnightly or monthly direct debit or BPAY into your savings account on the same day you receive your regular salary.

Once you’ve got between 3 months and 12 months worth of living expenses built up, (eg. enough to pay the mortgage, electricity, rates, food, the unexpected car service, school fees etc). you can start investing, remembering you should always keep a cash reserve to cover yourself in the event you lose your job, take on a lower paying job, get ill and so on.

Invest regularly in a low-cost index tracking fund

For many investors, saving regularly into an index tracking fund or index tracking ETF is the only investing you’ll ever need to do. (Say some financial advisors – remember to seek professional advice from a licenced advisor)

Like saving into a high interest savings account, set up a fortnightly direct debit or BPAY. You’ll hardly miss the money, and in 20, 30 or 40 years, you’ll be eternally grateful for the wonderful large nest egg your saving and investing will have turned into.

When it comes to index tracking funds, Vanguard Investments has few peers. The US giant, the largest mutual fund in the world, has been operating here in Australian since 1996.

Their Vanguard Index Australian Shares Fund (ASX: VAS) tracks the S&P/ASX 300 index, investing in around the largest 300 Australian companies and property trusts listed on the Australian Securities Exchange (ASX). PLEASE NOTE – this is not a recommendation to go and invest in Vanguard Index Australian Shares Fund. This is purely an example.  You should do your own research and seek the specialist advice of an Financial advisor to determine which product suits your needs.  We can refer you to some registered advisors if you do not already have one.

For many people, especially those looking to invest regularly, this is the only fund they’ll ever need.

The minimum initial investment is $5,000, and additional investments made via BPAY are only $100. Management costs up to the first $50,000 are 0.75%, falling to 0.50% on the next $50,000 and to 0.35% on the balance over $100,000.  There are other funds that have different levels of investments which may be better suited to your needs so please do your research.

Buy individual shares

You might not be entirely satisfied with investing in an index tracker alone.

Firstly, if you want to beat the returns of the index, and it is possible to do so, you’ll need to look outside a tracker.

And secondly, we suspect you’ll find it’s challenging, fun and hopefully ultimately rewarding by investing in individual companies.

Again you may not feel comfortable in doing this by yourself and an share broker can assist you with recommendations, and purchases and sales.  A financial advisor can also assist you.

So there you have it. A simple and hopefully very effective plan for you to generate wealth, over the long-term.  Give us a call for a referral to a financial advisor , we have a couple of advisors that we have experience in dealing with that we would be happy to refer you to.