When you access your super at retirement your super fund may ask you to sign a declaration stating that you intend to never be employed again. But there may be compelling reasons why someone would subsequently return to work.

According to the Australian Bureau of Statistics (ABS) the most common reasons retirees return to full or part-time employment are financial necessity and boredom. Regardless of your reason for returning to work, there are certain rules you should be aware of.

What are the superannuation retirement rules?

You generally will only be able to access your super if you’ve reached your preservation age and retired, ceased an employment arrangement after age 60, or turned 65. If you’re thinking about returning to work after retirement, there are rules about super you may need to be aware of depending on your circumstances.

We look at some of the common situations below.

I have reached my preservation age but am less than age 60

If you’ve reached your preservation age and wish to access your super, you would usually be required to declare that you’re no longer in paid employment and have permanently retired.

If your personal circumstances have since changed, it is possible for you to return to the workforce, however your intention to retire must have been genuine at the time, which is why your super fund may have asked you to sign a declaration previously stating your intent.

I ceased an employment arrangement after age 60

From age 60, you can cease an employment arrangement and don’t have to make any declaration about your future employment intentions.

If you happen to be working more than one job, ceasing just one will meet the requirement and you can continue working in the other.  You can choose to access your super as a lump sum or in periodic payments (which you may receive via an account-based pension).

If you’re in this situation, you can return to work whenever you like as you wouldn’t have needed to declare permanent retirement before accessing your super.

I’m 65 or older

When you turn 65, you don’t have to be retired or satisfy any special conditions to get full access to your super savings. This means you can continue working or return to work if you have previously retired.

What happens to your super if you return to work?

Regardless of which of the groups above you fall into, if you have begun drawing a regular income stream from your super savings, you can continue to access your income stream payments whether you return to full or part-time employment.

If you haven’t actually accessed your super but have met one of the retirement conditions of release (and advised your fund of this) then your super will generally remain accessible if you return to work.

Meanwhile, it’s important to note that any subsequent super contributions made after you return to work will generally be ‘preserved’ until you meet another condition of release (unless you are aged 65 or over).

Can I access my super at 55 and still work?

In the past, Australians could access their super from as young as 55, but the preservation age is gradually increasing to age 60 and only people born before 1 July 1960 reached their preservation age at 55.

Regardless of your preservation age, you must meet certain criteria before you can access your super, as outlined above. However, if you’re age 60 or over, these criteria simply mean you need to end an arrangement under which you’re gainfully employed.

Rules around future super contributions

Your employer is broadly required to make super contributions to a fund on your behalf at the rate of 9.5% of your earnings, once you earn more than $450 in a calendar month.

This means you can continue to build your retirement savings via compulsory contributions paid by your employer and/or voluntary contributions you make yourself.

However, if you’re aged 65 or over, and intend on making voluntary contributions, you must first satisfy a work test requirement showing that you have worked for at least 40 hours within a 30-day period before you are eligible to make voluntary contributions in a financial year. Voluntary contributions can’t be made once you turn 75 and the last opportunity is 28 days after the end of the month where you turn age 75.

Effects of withdrawing super on your age pension

If you’re receiving a full or part age pension, you’d know that Centrelink applies an income test and an assets test to determine what you get paid. Your super or pension account will be included as part of your age pension eligibility assessment.

Any employment income will also be taken into account as part of this assessment, so make sure you’re aware of whether your earnings could impact your age pension entitlements.

For those eligible for the Work Bonus scheme, Centrelink will apply a discount to the amount of employment income otherwise assessed.

No-one expects you to understand how superannuation works on your own, take the time talk with the JBS Financial team to go through all your questions.

Source: AMP, 2019

In the cooler months we spend a lot more time getting cosy inside. Now that spring is officially with us it’s time to give your finances and future plans a little love?

Dust off your budget

Has your budget been gathering cobwebs? Or maybe you haven’t made one in a while, if at all? There’s no doubt that making a budget is easier than sticking to one, so it’s easy to lose sight of our best laid plans. Block out some time to review your budget and see where you’re killing it or where there’s room for improvement. Bucket budgeting, which involves setting up multiple personalised accounts for different types of spending and saving, is a popular tool that many Aussies are using to keep their budgeting on track.

Weed out bad spending habits

Now that you’ve busted out your budget and know where your trouble spots lie, it’s time to have a look over your credit and debit card statements to work out exactly where you’re overspending. A lot of overspending habits come down to convenience and being on autopilot. Sometimes, it’s easier to grab takeaways on a Friday night than cook or you’re just in the habit of picking up that daily latte on your way into the office. Once you’re aware of the things that trip you up, you can focus on building new behaviours that set you up for success, such as doing a weekly meal plan and shop.

Toss out old debts

If you don’t already have a debt payment plan in place, now’s the time to get on top of it. There’s nothing like defeating debt to give you newfound financial freedom. Some people make a list of all of their debts and what they cost, and then prioritise based on how much they can afford to pay off. If you are not sure, you should consider getting independent financial advice.

Polish your savings plan

Okay, now it’s time to get creative about how you can boost your savings. Side hustles are all the rage these days. Besides being a nifty way to make extra cash they can also allow you to explore a passion or hobby on the side. Whether it’s making and selling jewellery on Etsy or taking on jobs for extra cash via sites such as Airtasker, there are a host of ways to make extra income outside of your day job (just remember a second income stream could impact your taxes, so always check with an accountant to be sure). It could be as simple as doing a big clear out and selling the excess on eBay or Gumtree.

Gather your game plan

It’s much easier to stay on track when you have a clear view of your financial plan to keep you motivated. Sit down and really have a think about which financial goals are the most meaningful to you and why. Perhaps there are some you set previously that actually don’t hold as much weight for you anymore and can be de-prioritised? A solid financial plan will encompass all of your goals from the short term (saving for your next holiday) to the long term (thinking about your super) with milestones along the way to help keep you on track.

If you need help weeding out the bad habits and getting your game plan together, chat to the JBS Financial team so we can help you get started. Get started here…

Source: ING, 2019

In the simplest terms, investing your money means buying an asset with the expectation of earning returns from ownership of that asset. If you own an investment property, for example, you can expect to receive rent as income. But if you then sell the property for a higher price than you paid, you’ve increased your returns from your asset even more.  This is known as a capital gain – the growth in value of an asset over time.

Different types of investments are grouped together into asset classes – a group of investments with similar characteristics, such as term deposits, bonds, property or shares/equities. When it comes to choosing between different investment options, they generally fall into two broad categories, defensive and growth assets.

Defensive assets offer less opportunity for growth, but more stability and security for your original investment. A term deposit is an example of a defensive asset – the interest you’ll earn is fixed but you’re guaranteed to get your original deposit back at the end of the term. Growth assets, such as shares, carry more risk but offer more potential to grow your wealth over time.

Why diversification is important

When choosing growth assets and defensive assets to invest in you’re looking at how much you can expect to earn compared with the risk of losing some of the original sum invested. Diversifying your investments can be a good way to strike a balance between risk and reward. Because different asset classes behave differently at different times, spreading your money across a number of assets can help you earn more stable investment returns overall.

Investing costs

Every type of investment comes with costs. For buying and selling shares, you’ll pay brokerage fees for each transaction. When you buy and own property, there are upfront and ongoing costs such as stamp duty, agency fees and maintenance costs. Plus, you’ll be liable for tax on the income from your investments and on any capital gain you earn when you sell assets. These are all things you need to take into account when looking at different investment options.

Should you invest in a super fund?

You can invest in all sorts of assets outside of super, either directly or through managed funds. Most super funds will also offer a wide range of choices for investing your money, including their own blended investment options, such as growth, conservative (defensive) or balanced.  So should you be investing your retirement savings in super or look elsewhere?

A key benefit of investing through your super fund is the potential savings on the tax on your investment income. Any investment earnings in your super fund are taxed at a maximum rate of 15%, regardless of the marginal tax rate on the rest of your income. The main drawback of investing in super is the money you invest and the investment earnings are locked away until you reach your preservation age and/or meet a condition of release. If you need access to the money you’re investing in the short or medium term, then your super fund isn’t the right place for it.

What about SMSFs?

If you’re looking for more flexibility in your choice of investments than you can expect from a super fund, a Self Managed Super Fund (SMSF) could be the answer. However, there are significant costs involved in setting up and managing an SMSF so your freedom to invest super savings in property or collectibles, for example, comes at a price. It’s important to have the right investment strategy and structure in place for you when establishing an SMSF.

Your superannuation investment strategy

There’s no one-size fits all when it comes to investing. Whether it’s your investment strategy for retirement or another purpose, there are lots of personal circumstances and preferences to think about. Some of these include your investment time frame, your appetite for risk and how much you already know about different types of investments.

What’s the right investment strategy for you? To find out more you can contact the JBS Financial team for help…

Source: FPA Money & Life

Want to boost your financial wellbeing without giving up completely on being spontaneous?  Get on top of your finances and enjoy life more at the same time with our five step guide to living in the moment while saving for the future.

Don’t be a slave to your savings

Mastering money starts with a budget and there’s no doubt that feeling in control of your money is linked to your overall wellbeing. But you might be reluctant to set a budget when it makes you feel like all your money is spoken for. Life can seem very limited if you’ve already decided on the exact destination for each and every dollar.

So instead of becoming a slave to saving for the future, here’s a five-step approach that keeps your options open for doing some spontaneous spending once in a while, without losing out on your future financial stability as a result.

1. Get cash flow savvy

Figuring out just where your money is going right now night seem like a hassle. But it’s absolutely necessary if you’re going to achieve your goal of saving and also spending a little just for the sake of it. Understanding your spending habits and patterns can shed some light on where you’re spending more than you need to, so you can start to make better choices with your dollars in step 2.

Doing this weekly makes it much easier to take control of cash flow. A week of overspending can be balanced out quickly in the following week simply by making a few small sacrifices.

2. Budget based on what matters

Now it’s crunch time for making good on those cash flow lessons you’ve been learning. By looking at where your money has been going, you’ve got the knowledge you need to stop spending on things that are less important. This frees up more dollars for your savings and what you really value.

Let’s take dining out for example. If you have your heart set on an overseas holiday once a year, ask yourself if weekly restaurant meals are as important?  By cooking at home for three out of every four Saturdays and saving that money towards travel instead, you’re directing your budget towards what matters to you.

3. Limit fixed commitments

Having more to spend in the present also depends on limiting how much of your income is already spoken for. Mortgage and loan repayments, utility bills, insurance premiums, memberships and subscriptions are all regular payments that can add up to a big chunk of your outgoings. While some of these are essential, avoiding buying things on credit or using a loan can reduce your ongoing costs and free up money to save towards your goals or spend spontaneously.

4. Automate your savings

Whether it’s saving for a new car – so you won’t have that long-term commitment to paying off a loan plus interest – a holiday, or just a rainy day, setting up separate accounts for these goals helps you see that you’re making progress. And making automatic deposits from your income into these accounts is the ideal way to ensure you’re making regular contributions towards your goals.

5. Plan to spend spontaneously

As these savings balances start to grow, it can bring a sense of freedom in your current and future spending choices. Knowing your goals are getting closer allows you to spend money freely and still be financially responsible for your future. And if you want to look forward to a guilt-free splurge, think about dedicating one of your savings accounts to spontaneity.

With a pot of cash on hand to spend at will, you can enjoy ‘live in the moment’ experiences now and again without your future goals or cash flow taking a hit.

How can you get to a stage where you can live your dream today and tomorrow? Speak with the JBS Financial team to help you get started…

Source: Money & Life January 2019 

Is a SMSF right for me?  An interesting question and one that we often get asked when people come to see us.  There are so many features and benefits that we love about a SMSF BUT a SMSF is not right for everyone.

There maybe a time where you might have had a SMSF for years, but due to a variety of reasons you would be better off closing it down and moving your investments into a retail or industry fund.

So I hear you ask when and why should I close down my SMSF? 

A key reason for a lot of our clients to set up or run a SMSF is the desire to own property, and within an SMSF this can be an effective strategy.  But when the time comes where you might want to sell that property, perhaps consider your super options also.  There are a number of good options available especially now with so much fee pressure being applied to the larger platform providers where you can still invest and own your favourite shares, but without the compliance burden and paperwork of running a SMSF.

Many of the costs of SMSF’s are $ based rather than % based. This means that while your balance is larger, the relative % cost to run an SMSF can be relatively low however over time as you draw down your SMSF to fund your retirement your balance may get to a point whereby the fixed costs just don’t stack up.

Your SMSF balance gets to a point where the fixed costs just don’t stack up compared with what you could run a retail or industry fund for.  As your SMSF balance gets smaller then the % to run it effectively increases.  For example when you add accounting, auditing, ASIC fees, administration and investment costs.  You might find that it is cheaper to continue receiving advice around your super and retirement planning, but in a more cost effective vehicle.

As we get older, we often start thinking about simplifying our lives and finances is one of them.  Whilst running a SMSF in your 50’s, 60’s, and 70’s might have been the best option for you.  As you start to get towards your mid to late 80’s an important issue comes up around your physical and mental health.  So before this happens it’s great to start to plan how you will pass control of your wealth to those you care about, rather than having to do it in a hurry.

Often the death of a partner can trigger the thought process and desire to continue running a SMSF, as can a marriage breakdown.  Sadly, one in three marriages end in divorce and when splitting a SMSF into 2, then consideration should be given as to whether one, both or either party should continue to run the fund.

As you can see, there are numerous reasons why you might consider winding up your SMSF. However, we highly recommend getting good advice prior to making that decision.  By working with us we can develop a clear and well-structured plan as to the steps involved as there are many, the pros and cons, the costs, implications of ceasing any pensions may have and the outcome that will be achieved.

For a variety of reasons, over the past 12 months we have closed and opened a number of SMSF’s because of the circumstances of our client.  Understanding what’s right for you now and into the future is a key focus for us to ensure you have the right strategy to take you to where you want to go. Come and talk to one of the JBS team if you have questions around whether setting up, continuing to run or closing down your SMSF is appropriate for you.

While it’s said that most retirees like to SKI – Spending the Kids Inheritance, the real fact is that you might actually pass away before that last dollar is spent.  And if that happens, what’s going to happen with that dollar of yours?

Most of us would hope that it goes to our loved ones but sometimes the reality is that it goes towards unnecessary legal costs or is even given to family and friends that it shouldn’t have. That’s why you need a Will.

While we all know we should have a Will, about 45% of us don’t have one and those that do might actually be surprised to find that their Will doesn’t meet current legal requirements, effectively making it void.  Did you know that if you die without a valid Will, then your assets are distributed according to a legal formula and doesn’t give you any control over who does the distribution?

This might mean that the money you have saved up in your bank account for that big round the world holiday, that you didn’t quite get to enjoy before you kicked the bucket, could be going somewhere you don’t want.  Like being used for legal costs then distributed to your estranged (horrible, jail frequenting) brother, or your unknown sister from a polygamous father, or even possibly an ex-partner if you’re not careful.

Having a valid Will in place makes sure that what you’ve got, goes to who you want, when you know what happens.  But a Will should form part of your overall estate plan, because there are other things to consider, like your superannuation assets.  Did you know that if you have a Binding Nomination on your super, it doesn’t pass through your Estate/Will?  Or you can have a Power of Attorney while you’re still alive?

So why haven’t you got a Will?  Yeah it might cost a bit but it will cost a lot more if your friends or family have to fight an estate claim from people that shouldn’t have got what they got.  And if you’ve got one, when did you review it last?  If hammer pants were in when your Will was drawn up, it may be time for a review!  While your personal circumstances or your wishes may not have changed, legislation around estate planning and Wills may have.

A Will can give you great peace of mind knowing that things will be taken care of how you want but more importantly, it puts your loved one at ease that everything is set up correctly so they can get on with their grieving (and I’m sure not partying) when you’re gone.

You can get a simple Will kit at the post office but really you should see a solicitor to get one done properly.  Contact the team at JBS and we’ll be happy to provide a referral for you and help facilitate the process.

Every generation thinks life will be different – and of course, each one is right – but when it comes to planning for the future, while we’re young we have a habit of thinking there is still plenty of time. After all, when you’re in your mid-thirties or even early forties, retirement is still decades away; later if the government decides so!

However, like anything forgotten too long, the years pass quickly and the time we could have used constructively has disappeared. For example, early Generation X is now on the countdown to retirement.

If you want to be different today, plan to be different tomorrow.

Start with your grandparents…

What did their working life and retirement look like?

Let’s imagine your grandparents are both in their eighties. It’s likely that Grandad started working in his teens and stayed with one employer for most of his life. Structured superannuation was available to the very few. He retired at 55. Grandma may not have had much paid employment, if any. Their lives can be broken into three phases – education, work and leisure.

But they didn’t anticipate retirement being as long as it’s turned out to be. They’re still healthy, have outlived their savings and are relying solely on the age pension to fund their frugal lifestyle.

Then your parents…

What did their working life look like? How will their retirement be different?

We’ll envisage your parents are aged in their sixties – typical baby boomers. They were better educated than their parents and both worked; though Mum took years off to raise the kids. They accumulated quite a bit of superannuation; Dad has more than Mum.

Their lives can be broken into the same three phases. Education may have extended into their early twenties or they studied later during their working lives. They worked for a couple of employers and, thanks to technology, ended up in careers they never imagined in their youth.

Whilst they have long talked about retirement, now that it’s almost here they face it with some trepidation. They may consider moving to part-time work that will give them more freedom, keep their minds stimulated and still have enough to pay the bills. After all, now they are independent and the mortgage is paid off, life is cheaper.

It would be nice to have more time to travel and do the things they would like to do. They’re both fit and healthy and if they live as long as their parents that will be 20 or 25 years of leisure.

Will Mum and Dad have enough money to live a comfortable lifestyle for that long?

And what about you?

You and your siblings are not going to rely on one employer or one lifetime career. Balancing life and work is more important as you take time off to travel, do volunteer work or try new adventures earlier in life. And being so versatile, when you resume your career you simply re-train.

What this means is that you will have multiple periods of education-work-leisure in your life, and as you will probably be much healthier than previous generations you don’t see working longer as a problem.

But will you be able to afford 20 or 30 years with no income? That’s a sobering thought at any age.

It’s time to be different now.

Many social commentators class Generation X as stuck in between the two “noisier” and more well-known generations – Baby Boomers and Gen Y – but that doesn’t mean you should fade into insignificance. Be the first generation to truly take control of your retirement at a younger age. Stop the trend and talk to us about the many strategies available to give your retirement savings the boost it needs.

Be different today so you can be different tomorrow.

It’s a great time to fine tune your retirement plan

Do you break into a cold sweat when someone mentions the word “retirement”?

According to the Retirement Confidence Report, only 25% of the 1,500 Australians surveyed over 50 years old believe that they have saved enough for retirement and 38% felt some anxiety about retirement.

If you’re one of this group, don’t despair. Even if you’re close to your retirement age, it’s never too late to start saving. Rather than fear outliving your savings, take steps now to live better later.

Start with the end in mind

You need to know what you want in retirement. For some, it can be that long-awaited plan to travel around Australia, or overseas. To others, it can be as simple as spending time with family. Being able to link these to your retirement goals is the key to feeling in control.
The bottom line is that firstly you need to know your income needs, to then determine, how much capital you need to provide that income, how long your money will last, and what you can do to maintain your lifestyle in retirement.

If you are in your 50s and want a fabulous retirement, here are 7 tips for successful retirement saving on a tight timeline.

1. Think twice about paying for HECS debts or money towards home deposits
   Before you offer to pay your kids student loans and helping with property purchase, you need to check your financial position to ensure that you will still have sufficient savings to support you in retirement.
2. Eliminate your mortgage
   One of your largest expense is probably your mortgage. Take aim at that bad boy and eliminate it for good. One option is to make extra payments. If the children are still living at home, get them to chip in for household expenses through boarding payments. The extra funds will help pay your home loan down faster (and will help the kids learn to budget).
   Another option is to consider downsizing to a property you can pay cash for, especially if the kids have left home by now and you don’t need those extra bedrooms or living areas. With immediate effect, you’ll free up thousands of dollars you can use to build up your retirement savings.
3. Build up your retirement savings and reduce your income tax simultaneously
   If your expenses are a bit lower because the mortgage is nearly paid off or the kids have left home, boost your superannuation balance by setting up a salary sacrifice arrangement with your employer. This involves “sacrificing” a portion of your pre-tax salary to superannuation (up to a maximum cap). This strategy increase your superannuation balance, it will also reduce your income tax bill as these contributions are not counted in your assessable income.
4. Review your insurance policies
   As you transition to retirement, your financial commitments may be less as the mortgage will be lower and the kids may have left home. Now is a good time to review how much you really need to cover mortgage requirements and family expenses. Remember to check insurance cover held in your name as well as inside superannuation.
5. Find an emotional motivator to get you to take action
   Any transformation starts with a goal and the persistent pursuit of it. To many pre-retirees, retirement means financial freedom. But when you really think about it, it’s really about building an impenetrable financial wall around you and your family.
   For example, going to the office every single day and can’t wait to retire, then use that as your motivator to get your retirement plan into action. If you don’t have a dream, then you won’t have the focus you need to keep you going. You need to get emotional about your vision for your retirement.
6. Find alternative income streams
   In the new economy, there’s a trend among 50+ to look past their assets and liabilities and towards their experience and years behind them. Some of the entrepreneurial ways they are using to sustain themselves include sub-dividing their property, adding a granny flat to their home, advertising spare rooms on AirBnB, and driving for Uber. Being resourceful and creative in your endeavours means you can potentially build yourself up financially without trading off your preferred lifestyle in retirement.
7. Get some grown-up accountability and get financial advice
   If you’re on course to meet your retirement goal, that’s great! But you’d probably want to have an objective third party who will hold your feet to the fire. You need someone who cares enough about you who will make sure you’re taking retirement planning seriously. Get some professional help from a financial planner to put you ahead of the game and keep you on track.

If you’re still feeling anxiety about your retirement, remember, the most important step is getting started.

Remember, if there’s a dollar sign involved, we can help. Before you make any large decision with your money, talk to someone who thinks about these things every day. We’re here and we’re happy to help.

Handy Tools and Calculators

• To check what budget you will need in retirement, use the ASFA Retirement Tracker Calculator: http://www.superguru.com.au/ExternalFiles/calculators/retirement-tracker/#/

To help you work out what income you’re likely to have from super and the age pension when you retire, use the Retirement Planner calculator from MoneySmart: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/retirement-planner

Growing older comes with a lot of changes, but that shouldn’t apply to your steady income. Here’s what you need to know to keep your retirement on track.

You’ve worked hard for the bulk of your adult life and are looking forward to enjoying the spoils of a carefree retirement. But there’s still some planning that needs to be done to ensure you’re set up for life – regardless of what’s to come. Whether you’re concerned about a possible income shortfall, have a portfolio that suffered in the global financial crisis, or are sitting pretty, it’s good to know your options for securing financial freedom in the future.

How much do I need to retire?

The March 2019 assessment by the Association of Superannuation Funds (ASFA) found that a single pensioner needs to make $43,255 annually to enjoy a comfortable lifestyle. For a couple, that number goes up to nearly $61,061 per year. With increasing pressures to retire and people living longer thanks to advances in medicine and technology – it’s necessary to save more during your career to comfortably support the post-work twilight years.ⁱ

The current system

Australia’s superannuation system was created with a ‘one size fits all’ approach that doesn’t necessarily fit one size now. Currently, nothing prevents someone from accessing their super in a lump sum once they reach the preservation age, which can be problematic for those who aren’t aware that this may be harmful in the long term.

There have been calls for mandated income streams, but this approach isn’t likely to work for a person who wants to decide how and when they spend the money they have accrued over the years. What if you want to make a giant celebratory purchase, such as a trip around the world? There should be a better approach to how and when people are able to access their super. In the meantime, what else can you do to ensure that you have the funds you need – when you need them?

What’s my plan for the future?

Having a clear savings plan that maps out how you will reach the yearly benchmark of $43,255 is admirable, but it doesn’t take into account the possibility of unforeseen illnesses that can wreak havoc on any budget, fixed or not. This is where securities, such as Critical Illness, can offer financial freedom at the most critical times – like when you’re severely ill or injured and need medical treatment.

What about annuities?

Annuities provide a guaranteed regular income stream, much like a pension. Usually they start from a lump sum payment that is then paid out as regular income. While annuities are typically thought of as an income stream for life, you have the choice to set them for a fixed period of time (for example for 5 years, or 10 or 20 years). Other options you have for this financial product include indexed annuities, which protect from the effects of inflation, and deferred annuities, which begin payouts once the policyholder reaches a predetermined age.

Another thing to keep in mind is that if you purchase a lifetime annuity and happen to die young, that leftover money most likely goes to the provider, unless you have a minimum payment term as part of your contract. You can also elect a revisionary annuity, which would pay your spouse in the event of your death.

i https://www.superannuation.asn.au/resources/retirement-standard

Did you know? Close to 3 in 5 Australians are worried about their financial situation and almost 85% say financial stress affects their well-being negatively!

Financial FOMO is real. It’s the virtual equivalent of keeping up appearances. Look around you. Look at your Facebook feed. Many are feeling the pressure to ‘keep up with the Jones’ and show off their lifestyles on social media to look like they’re doing well. And it’s sending many people broke!

Want to get savvy with your finances?

Here are 7 ways to help you get financially fit and eliminate the money habits that sets you back

1. Save 10% of your earnings

If you can’t make more money, doesn’t it make sense to use your existing source of income that you already have? Let’s put it another way, for every $10 that you earn, put away $1. You’ll be surprised that you’ll eventually manage to get by on 90% of your income just fine.

What do you desire the most? Trendy clothes, that expensive watch, maybe that fine dining experience at Heston Blumenthal’s restaurant; things that are quickly gone and forgotten? Or is it that dream home, that piece of land that overlooks the ocean, or that investment property that brings in rental income? The 90% that you spend brings the first. But it’s the 10% that you save that brings in the second.

2. Control your expenditures

Print out your bank statement and have a proper look at your expenses. There’s nothing more eye-opening than going through your statement line by line. Some of us earn more than others. Some have much larger families to support. But somehow, earnings are so easily spent and some have no money left in savings?

It’s an unusual truth that our ‘necessary expenses’ will always grow to equal our incomes unless we intervene. Cut back where you can and watch your savings grow automatically.

3. Make your savings multiply

Money in your wallet is nice to look at and makes you feel good, but it earns nothing. Now that you have saved 10% and cut down on your expenses, it’s time to put your money to work. Start with a high-interest online savings account or a term deposit. Check out some new apps designed to motivate you to save.

Your wealth is not the amount you carry in your pocket but it is the income that it builds that continuously flows into your pocket. This is the magic that is compound interest. It’s how you make your money work for you, even when you’re asleep.

4. Set aside an emergency fund

Sometimes things don’t go the way you want. You lose your job, car needs repair, or the hot water tank blows up. Life happens. You’ll be glad to know that you have some money set aside to deal with it. A rule of thumb is to set aside between 3 to 6 months of living expenses.

5. Start saving for retirement

When you’re in your 30s and 40s, the majority of your income tends to be directed at paying off your mortgage and funding children’s education. We tend to live in the now and not in the future; retirement and old age is hard to visualise. Why put off till tomorrow what you can do today, by making additional contributions to superannuation by salary sacrifice or after-tax income is a form of forced savings. Ask yourself this question: how will you and your family live when you are no longer able to earn?

6. Revisit your overall financial position at least once a year

Are you on the lowest interest rate for your credit card? Is your superannuation account charging too much fees and can you do better?

7. Seek advice from a professional financial planner

Consult the experts. A good financial planner will help you set your financial goals and work with you to create a plan to achieve them. When choosing an adviser, you’ll want to know if they have the right qualifications and experience, that they participate in regular training for ongoing professional development and whether they are a member of an industry association.

Your Turn

If you really are suffering financial FOMO remember not all that glitters is always gold. Be a master of your own destiny and create a plan that will allow you to live the life YOU want to live and forget about keeping up with the Jones’s!