When Is The Best Time To Start Saving For Retirement?

Well, my answer is always “yesterday”. Yet I’m very aware that the reality of saving for your future is never so simple. What you really need when making decisions about your superannuation contributions, instead of a date by which you should have started saving, is clear guidance based on your particular circumstances.

An excellent article by Christopher Niesche published in the Sydney Morning Herald in August, focused on the recent reduction to $25,000 of the concessional superannuation cap. Contribute more than this amount to your super fund under the concessional cap in any year and an additional tax will be payable.

Niesche asked a series of experts from ING, BFG Financial Services and ANZ on their view of the impact of this change. While they all agreed this reduction should bring forward most people’s plans to contribute to their super, it was not entirely clear when the optimal time was for individuals to start bumping up their super contributions.

To me, the big question raised (yet not answered) by this article is: At what age and life stage is it more prudent in the long run to increase super contributions rather than paying off the mortgage, and vice versa?

And before you put this question into the ‘too hard basket’ I’m pleased to advise that as part of our Personal Ontrack program, we do have software designed to provide you with an accurate and actionable answer to the question.

The program determines whether your money is better off being invested in super, or paid off your mortgage, or simply saved by taking into account your age, tax bracket, mortgage rates and potential investment returns and other parameters unique to you.

By giving you a clear recommendation on when your super contributions need to increase, based on your individual situation, Personal Ontrack can help you make wise and informed decisions regarding your future.

Take the guesswork out of your superannuation plans and contact me, or one of my team to discover more about putting certainty into your financial future.

That nasty 'B' word – Budget

There are many aspects of our industry (Financial Planning) that really amaze me, but the #1 simply has to be the number 17%.  This is the number of Australians that have received advice from a Financial Planner (by Richard Cornwell).

The reasons behind this number are plentiful but without doubt the comment I receive the most after going through the financial planning concept with clients is always, “we wish we had come to see you earlier”.  To be honest so do I.  The most important start to our relationship with clients is to get an understanding of cashflow.  How much is being earned (normally easy to work out) and how much is spent (not so easy), to be able to know how much we can save!

That nasty 'B' word

So until you realise that you really do need advice and while you are still comfortable being in the non-advised 83%, the one thing I’d love you to do is a budget.

Whenever I ask new clients whether they have a budget, the answer is no.  Excess cash flow or monthly savings are the building blocks for any good financial plan.  But how do you know how much can be saved without knowing how much you are spending.  Once you have a budget you can then save first and spend the rest.  Much better option than what I see all too often, spend first and save whatever is left, which is normally nothing.  How often does that pay increase or bonus simply get eroded away by run of the mill expenditure? Imagine if you had saved every bonus or pay increase how much better off you’d be today. 

There are a couple of ways of doing a good budget.  

1. Create a list of all expenses, then guess the daily, weekly, monthly, quarterly and annual costs associated, total them, divide by 12 and you have a monthly budget.  You can do this by using this easy budgeting calculator: Budgeting calculator.  Too many of these are not achievable, because you have no idea of what it is you’re spending your money on.
    
2. I prefer to get clients to take their last 3 months bank statements then itemise their actual spending by category and create a budget this way.  Much more realistic.

There are also some great apps that can be used.  The government on their money smart website has recently launched one called TrackMySpend 

An easy-to-use app, TrackMySpend shows you what you are spending your money on and puts you in control.

• Track personal expenses on the go

•  Find out where you can save

• View your spending history on screen or export to a CSV file

 Here are a few others that you can investigate:

1.    iXpenseIt: This is a really useful app that simplifies the budgeting process. You can record expenses anywhere while getting easy to understand reports.

2.    iReconcile: This app allows all your financial data to be viewed quickly on the go. It is streamlined for quick entry at the checkout counter. 

     So until you feel the need to seek advice please get an idea of exactly what it is you are spending your hard earned income on and be disciplined around your budget!

Are you playing to win or simply not to lose?

On Wednesday morning, Sally Pearson won gold and took the Australian gold medal tally at the Olympics to 4.  Well-done Sally! At last the gold medals are flowing after what was a very poor first week.  Is it just me or were most of our silver medals behind team GB.  It is good to see the host nation doing so well but my next ongoing advice and review meetings with some English born clients will not have the Olympics on the agenda.

During these past two Olympic weeks I have been thinking about the hard work that these athletes have put in, the training, the sacrifices, early morning practice sessions, psychology sessions etc. etc. I know that these athletes are playing to win.  How many of us can say the same in our financial lives.  Are you playing to win or simply not to lose? 

Here is a quick look at what an athlete goes through in preparation, judge yourself against these and decide whether you deserve a medal, let alone a silver or gold one.

Research

Great athletes know what options they have because they have spent most of their lives getting ready for this event. They know what their own bodies are capable of and have closely matched their skills to their chosen sport. They have put a lot of thought into the options they have and the best way to achieve their goals. We should also be researching what our financial options are and be aware of what is happening in the financial world to best match our abilities and resources to our goals.

Goals

They are goal orientated years out from the Olympics and they know exactly what times they need to be swimming, rowing, sailing or running to be competitive. A gold medal financial athlete will have clear goals and have a plan for achieving them.  They will know how much they need at retirement, more importantly they will know exactly when they can make that choice as well as how much they can spend comfortably year on year.  Do you know? 

Coach

These athletes have a coach who is an expert in their sport. They also understand the athlete very well and know what they are capable of and how far they can be pushed. Coaches benchmark to a standard that the athlete should be performing to. Do you have an expert on your side who knows your financial situation better than anyone and can help you achieve your goals?

Sally Pearson with coach
Sharon Hannan -
together for 13 years

Support team

Top athletes have a team of support experts around them ready to help them when they need it. Their team includes a masseuse, a physiotherapist, a manager and a nutritionist. Your team should include your Financial Planner, your Accountant, Risk Adviser and your Mortgage Broker. The quality of your team has a huge effect on the quality of the success in achieving your goals. 

Our role is to put all the pieces of the puzzle together so you can confidently say you are Financially Ontrack! We do the background research for you and analyse the options. Together goals are set that are achievable and realistic yet may challenge you. We can be your coach and can refer you to our support team members who can provide you with expert advice in the areas where you need it. 

Don’t just avoid losing the game, PLAY to WIN!