Planning – Financially Wise

A Different Type of Easter Egg

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.

New Year, New Money Habits

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.

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Why Kate Winslet is Wrong

Those of you who read the entertainment pages may have seen an interview recently with Kate Winslet about gender pay inequality in response to Jennifer Lawrence’s call for equal pay for male and female actors. Most people, but women in particular should be alarmed by what she said about not talking about money because it was “vulgar”.

However with the average gender wage disparity in Australia across all industries at almost 25% or about $290.90 a week on average, not talking about it does women an enormous disservice. This is a topic that very much needs to be discussed.

Women are routinely not paid the same as men for doing the same job, and it’s astonishing that this is still an issue and still happening in the 21^st century. Surely we should have moved beyond this being an issue.

By not taking about it and sweeping it under the carpet we are tacitly agreeing with this and allowing this to continue. We do need to talk about this disparity, as women are greatly disadvantaged financially in general, but pay inequality makes this disadvantage worse.

Firstly, women have smaller balances in things like superannuation and savings accounts as a direct result of this inequality. In addition, women generally tend to predominantly have lower paying jobs.

Secondly, this is compounded by women usually taking time off from work to be the primary caregiver for children. This reduces their earning capacity and those years of not making superannuation contributions can make a big difference to the final payout figure.

Thirdly, women are also generally worse off financially after a divorce, particularly if there are children involved.

Finally, paradoxically women generally live longer than men statistically speaking, so therefore require more for their retirement, but due to the above factors, usually have less.

Not being fairly compensated only compounds these issues.

Here are some tips for women to try and help balance the equation and to offset this inequality:

Talk about money: Don’t fall into the trap of thinking it’s not the done thing to talk about money or it’s vulgar. This is the 21^st century and this attitude that we don’t talk about money should not still exist. Money is not a taboo topic. Money impacts on every facet of your life, whether you realise it or not, or even whether you like it or not. Include children when talking about money so this attitude doesn’t persist. The best things in life might be free, but it won’t pay your bills.
Empower yourself with knowledge: Look at what the pay range is in your industry or line of work. Where do you sit in the range, salary wise? Discuss this with your supervisor at work and see how you can readdress the imbalance if you feel you fall under the norm.
Boost your super and savings: Consider salary sacrificing into your superannuation or pension fund and set up a separate savings account into which you regularly contribute, but you don’t use for spending. Use this for investing.
Boost your super through splitting contributions: If taking time off work to raise children, consider splitting your partner’s superannuation contribution between both your two super accounts, so that at least some contribution is being made into your superannuation account while you are not working and not in a position to make contributions. This will at least help to offset some of the management fees and hopefully help to increase the balance as well.
Look at creating other income streams: Your job should be just one avenue of income for you. Look at ways you can create alternatives through investments and creating small or micro businesses.
Have a plan: Knowing how much you would like to have upon retirement is a start. At least you will have a figure you know you need to work toward.

Average superannuation balances for women have consistently lagged behind those for men since the establishment of Australia’s superannuation system.

Considering a woman’s longer lifespans, this is potentially disastrous.

According to Ross Clare in the Superannuation Account Balances by Age and Gender report, in 2014 the average superannuation balance for women was $54,916 while for men it was $98,535.

The average retirement balance in 2014 for women was $138,150, as opposed to $292,500 for men, a large discrepancy.

The report also noted that average balance disparities between men and women emerge at relatively early ages. One of the main contributing factors for this is most likely to be gender wage inequality.

Isn’t it time we addressed this imbalance?

Some Superannuation Figures

Gender pay inequality – a case study

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Get organised for Christmas NOW

This may not be what people, especially parents, want to hear just after the September/October school holidays – but it’s best to start budgeting for Christmas, which is now less than three months away.

Christmas could be a stressful time for some people’s budgets, and hip pockets if you don’t prepare yourself for it and give yourself enough time.

Many people, especially parents with younger children, could easily overspend and exceed their budget during the Christmas season if they didn’t plan for it early enough.

If you leave it until the last minute you could end up putting most or all your Christmas purchases on credit card and then suffer from bill shock when the statement arrives in January.

Quite often your ‘friendly’ bank will offer you a holiday reprieve by allowing you to defer for a month the repayment that would normally be due in January.

But don’t be fooled, that ‘bill holiday’ will cost you more in interest and the bank is not doing this to be nice, it will end up as more profit for them.

This is made worse if the whole balance is not paid off at the end of each month; you end up paying interest on your interest. For many people, this is a reality, with many people carrying credit card debt for many years, in some cases long after the item originally purchased has broken or stopped working and been thrown away.

So, ideally, the earlier you start planning for events like Christmas and even birthdays and anniversaries, the better. But with a bit of planning and saving, it’s not too late to get control of your finances for Christmas.

Here are some tips to help you prepare now for Christmas spending:

Prepare lists of what you need to buy: That includes gifts, food and entertainment, postage for gifts and cards as well as tree decorations and holiday plans.
Budget for the costs: Work out the costs of these items to give you a total amount as a guide and add five to 10 per cent for unexpected expenses.
Put money aside: Work out how many pay days you have left until Christmas and then divide your expenses by days – now try to save that much each pay, preferably into a separate or Christmas account.
Sales: Take advantage of sales – if you see an item from one of your Christmas lists on special, buy it when you can.

An alarming number of Australians have an even more alarming amount of debt. A lot of debt is tied up in housing, or so called “good debt”, which is a large risk in itself, should property prices start to head downward.

But a large amount of debt is also consumer debt, or so called “bad debt”, which is also worrisome.

Debt levels have reached record highs with the Australian Bureau of Statistics reporting that Australian personal debt levels are now just under $1.8 trillion for the country – or nearly $80,000 for every Australian.

A recent Barclays survey lists Australian households amongst the most indebted in the world.

It would be good to remember that all or any debt, whether good or bad debt, is a claim on future income for today’s consumption.

If you don’t have a buffer in place or allow for adverse instances should circumstances change, you can be caught short and have to make quick financial decisions which could have devastating consequences and impact you for many years.

Christmas presents