Debt Elimination – Financially Wise

So, Easter has come and gone. You’ve enjoyed your four day long weekend, done the obligatory egg hunts with the children, overindulged in chocolate and you’ve just finished your last Easter egg. Now, it might be time to consider a different type of egg. Your superannuation or retirement nest egg.

Most people don’t think about their superannuation retirement nest eggs until retirement is almost imminent.

Many people, particularly young people, are busy living their lives and think that their retirement is such a long way off in the future, so they don’t pay any attention to their superannuation or think they’ll focus on it when they’re closer to retirement.

Because it’s “invisible money”, money that you don’t really see regularly and can’t easily get your hands on, it’s often not on our radar.

But the sooner you start thinking about your retirement and your superannuation or other payout, the more time you have to be able to grow it. You have many options earlier on, but they become more limited as time passes and it’s often too late if you’re retiring in a couple of years.

With many people finding they will not have sufficient funds in their superannuation upon retirement, you might like to think about the lifestyle you would like to have in retirement and ask yourself a few questions.

Do you want better than just the basic lifestyle that some experts say will be the norm for many retirees?

Do you think you might not have enough in your superannuation to last you throughout your retirement?

What is your magic number? That is, how much would you like to receive annually in order to have a comfortable retirement?

How do you envisage your lifestyle? Do you want to travel, around Australia or overseas, or are you happy just to live in your beachside or country cottage? Do you want to live in the city, a regional area or even overseas?

You might not be ready to retire when you reach your retirement age. You could continue working if you wanted to, particularly if you don’t have a lot in your superannuation. Perhaps you could supplement your income by working at something you really love or at something you’ve always wanted to do.

Alternatively, you could volunteer at charity shops or become an official greeter at airports or be a tour guide in your city.

Some things to consider for your retirement:

Your number: Calculate your magic number as per above, or know what lump sum you require to provide you with the income you need. Come up with some ideas on how you are going to attain this figure.

Take an interest: If you have an employer paid superannuation fund, go through your statement every time you get one. How is your fund performing? Could you change to another better performing one, either within the fund or with another provider? How much are your annual fees? Is your insurance adequate?
Boost your superannuation contributions: As soon as you start working, or as soon as you can, salary-sacrifice another one percent of your before-tax salary into your superannuation. Consider increasing this percentage regularly. Now is a good time to look at lump sum payments, before the end of financial year.
Alternative and passive income: Start looking at how you can create alternative streams of income in addition to your job, preferably passive, that can continue after you retire.
Continuously evaluate your fund: There are a number of sites that can compare your fund with other funds so you can monitor performance.

Statistically, an overwhelming number of people will not have sufficient funds in their super fund when they retire, facing the risk of running out funds before running out of retirement.

Considering our extended life expectancies, we will require more money when we retire rather than less. The earlier you can address this, the better.

You don’t want to be in the situation where you’re planning to retire in five years and realise you won’t have sufficient funds in your superannuation account.

As January makes its way into February, it must catch some people by surprise at how quickly the year is passing. How many people set themselves New Year’s resolutions at the start of the year? How many people are sticking to their resolutions and how many have already broken theirs? How many made resolutions to get their finances under control, but are still struggling?

Getting finances in order is one of the most common New Year’s resolutions.

People routinely start the year intending to save more money, pay down debt or to start investing or a combination of these.

But unless they can define what it is they want and have a solid plan in place, it can be easy to let old habits take over and then they’re back to square one and nothing is achieved.

It’s time to give this some thought and put practices and habits in place so you end the year better off financially than how you started it.

Firstly, be clear and know what the end goal is and what the outcome is that you want to achieve.

If you are saving, what is it you are saving for, a house, a car, a holiday or just to have some spare emergency cash?

If you want to pay off your debts, what are they, how many are there, how much extra can you contribute towards paying them off and can you avoid adding more debts?

If you want to start investing, for what is it going to be? If for retirement, how long have you got until then, and are you a risk taker or risk averse? How much can you put aside regularly to invest? Are you prepared for the risk?

When your goals are more defined, your path and the definite actions you need to take also become clearer.

Here are some tips on getting finances in order:

Saving: Set up a separate not easily accessed account and regularly transfer either a percentage of all income or a fixed amount into it.
Reduce or pay off debts: Write a list of all your debts. Work out how much extra can be put towards your debts. Choose the one you intend to pay off first and put the extra amount towards this debt until it’s been repaid. Do the same with the next debt.
Start investing: Are you a risk taker or risk averse? If you don’t like the volatility of the stock market and don’t want the responsibility of being a landlord, or you don’t have a lot to invest you might want to start with a property or equity trust into which you make regular contributions.
Have a plan: What amount do you need to save? What are your total debt repayments? How much will you need to retire? How can you make adjustments without compromising your lifestyle too much? If you answer these at least you will have a figure you know you need to work toward. Break this figure down to annual, quarterly, monthly and then weekly amounts.

Meeting your financial goals should not be a difficult or time consuming task. If you keep it simple you’re more likely to attain it.

You will also be more likely to be successful if what you want to achieve is congruent or resonates with you. If you’re working towards something that you really want, then there’s more incentive for you to continue along the new path you have chosen for this year.

Persist with it, as it’s worth it when you have saved the amount you need for your special purchase, you no longer have any debts to worry about, your financial future now looks more secure or you have achieved your financial goal. That’s a great feeling and one New Year’s resolution you kept and achieved.

But the best news is that this doesn’t have to be a New Year’s resolution, you can start it at any time you like, whenever it suits you.