Are you focusing too much on your retirement fund?

Posted On November 19, 2014| Leave a reply

In America it’s all about topping up your 401K or Roth accounts, matching employer contributions and the like. In Australia it’s superannuation and salary sacrifice. We all know that the sooner you start contributing the better off you’ll be in the long term but life can thrown a curve ball or two and keeping all your investments in super is not always the wisest or most profitable choice.

Life is unpredictable. It’s impossible to tell when you’re going to need extra access to your funds tomorrow or in forty years and if you’re topping up your retirement funds and neglecting other investments you might be doing yourself a disfavour. Retirement may be a tax effective saving strategy but you don’t know where you’re going to be financial in 5 years let alone 20 or 40. So why put all your eggs in just one basket?

Whether you’ve just entered the workforce or have been at it for several decades you still need investments that you will have access to should the need arise. An emergency fund is great, so is having trauma, TPD and income protection insurances in place, but an investment portfolio outside of your retirement savings can add to your nest egg.

By all means top up your retirement savings, compound interest is magical and the sooner you get started the better off you’ll be. But if you also want to enjoy the fruits of your labor before you’re too exhausted to make the most of them, there are other investment vehicles worth considering.

Managed Funds
The benefits of owning managed funds include having someone else make the investment decisions for you in terms of which companies to invest in and being open to a variety of products from Australian and International markets to fixed interest, property and cash.

If you opt for managed funds, find one that has no entry or exit fees and low management fees. You can begin your investment portfolio with as little as $5000 and then contribute even just $100 per month via BPay. Reinvest any dividends the fund might pay and after ten years of solid investing you could have a substantial sum. Vanguard funds are very popular in both Australia and America. Just remember to do your own research.

Direct Shares
Investing in the share market is probably one of the riskiest investments you can make other than not investing at all, but the gains can be significantly higher than if you were to keep your money in a savings account. While you’re unlikely to beat the index, investing in quality companies that pay dividends can provide you with passive income.

When purchasing shares look for companies that have a good track record, low debt levels, good income, and a prospective future. You can also opt for index funds and purchase them directly on the share market that way you’re exposed to the market as a whole rather than a few individual industries.

With shares you pay a brokerage fee when you buy and when you sell at a percentage rate of the purchase price while online trading through Commsec or Etrade will set you back around $19.95 per trade. Remember, in Australia, if you hold shares for over 12 months you get a 50% discount on any CGT payable. So if you purchase $1000 worth of ANZ shares and sell for $1500. Your profit is $500, if you’ve held onto the shares for over 12 months you’ll only be paying capital gains tax on $250.

Your Mortgage
Add money to your mortgage and you will save in interest more than you would make in a savings account. If you have a 30 year $300,000 mortgage at 6% interest, your monthly repayments will be around $1800. Pay an extra $50 per month and you’ll pay off your loan 2.2 years faster and save yourself almost $30,000. An extra $500 per month can save you over $160,000 and 12.4 years of loan repayments. A paid of mortgage gives you a loan free asset down the track that should you require, you can sell. In Australia your primary place of residence is CGT free which means $0 tax on any profit you might make whether it’s a dollar or a million.

Investment Properties
Have you considered being a landlord? Property investing can be a great tool to increase your wealth right now. If you buy the right property with the right potential you could make big bucks within a few months or better still hold it long term while the tenant and the tax man pay off the mortgage.

Purchasing an investment property is a little different to purchasing your own home. It’s vital to take your emotions out of the equation and make your decision on the basis of the sums. It should be a sound business decision and result in profits from day one whether it’d be through cash-flow or equity. While any interest and expenses that go towards owning your property are tax deductible you should still aim to reduce the loan principal as quickly as possible to maximise your gains and eliminate debt.

Investing outside of your retirement nest egg can give you options throughout your life should an emergency or opportunity arise. Having the extra asset beyond your emergency fund and your retirement savings will ensure that you are prepared for the unexpected, regardless of whether it’s an opportunity or an emergency.

Do you invest outside of your retirement account? Which investments are your favourite and why?

*Please note the opinions in this article are my own and are for informational and entertainment purposes only. Make sure you consult your financial adviser before making any financial decisions.

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15 Simple Ways to Save This Week

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1 – Forget grocery shopping, finish everything that it’s in your fridge and pantry, even if it means having a can of baked beans on toast for dinner. So much food goes to waste that doing this once a fortnight or even once a month can ensure that you never waste food again.

2 – Turn off the lights. Electricity bills are skyrocketing. It’s not unheard of for a family of four to be paying $600+ a quarter just on electricity. That’s ridiculous. Make sure you turn off your lights if you’re not using the room. Turn off the safety switches.

3 – Stop leaving your TV on standby. It’s still using power. The same goes for your radio, CD player, IPod dock, and computer.

4 – Take shorter showers. Water bills are on the rise. In QLD the average water bill hovers around $500 a quarter. You don’t need more than 4 minutes to wash your hair and body.

5 – Use the economic wash cycle on your washing machine and your dishwasher. If you have a short cycle use that. Unless you’ve been rolling around in mud or manure a 20 minute quick cycle will wash your clothes just as well as a 50 minute one.

6 – Stuck with a mortgage? Put an extra $20 to your monthly repayment and you’ll save over $12,000 in interest over the life of your loan and repay it 11 months sooner. If you can afford $100 more per month you’ll catch your loan down by almost four years and save over $50,000. (Figures based on $300,000 loan at 6% over 30 years).

7 – Line dry your clothing. Dryers use up a lot of energy and could increase your electricity bill. If it’s sunny outside your clothes can dry in as little as two hours. If you’re living in a cold climate hang them up inside next to a fire place if you have one.

8 – Finish all your products before you shop for new ones. It’s amazing how many more washes you can get out of a shampoo just by adding a bit of water the remaining bits. The same goes for liquid hand soap, and dishwashing liquid. Cut your toothpaste tube open and scrape the rest of the toothpaste before opening a new packet.

9 – Do you have babies? Forget store bought meals in jars. Unless they’re 100% fruit or veg and you need them when you’re out and about. Steam some carrots, zucchini and sweet potato and freeze in zip locked bags.

10 – Walk or cycle to work if you live within a reasonable distance. It might take you longer but you can save on petrol and parking and not worry about being stuck in traffic.

11 – Meet up with friends for a run or walk in the park. You’ll save cash and get a workout at the same time.

12 – Avoid going in to the supermarket or shopping centre for an entire week. Even if you’re just intending to window shop you can be tempted to spend a few dollars here and there. If you don’t go, you won’t be tempted to spend.

13 – Pack a picnic basket, a soccer ball and don’t forget hats and sunscreen, and head to the local park or beach for the afternoon. You’ll spend time together, get active, and soak up a bit vitamin D while having a fun family day out without spending a cent.

14 – Take your lunch to work every day. It’ll save you money and probably taste better too.

15 – Bypass the cafe made latte and make your own coffee at the office and at home. Whatever you’d normally spend chuck in your money jar. Do the same with your lunch money.

Check out 300+ more ways to save money every day at SuperWomanMoney.com.au. #315 is an interesting one.

What are you doing to save this week?

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Tomorrow is Melbourne Cup: Is your gambling under control?

Posted On November 3, 2014| 1 Reply

The Melbourne Cup has been around since the late 1800’s, the first official race being in 1861 with only 4000 attendees and around 170 pounds in prize money. Today, more than 100,000 people attend Flemington Racecourse each year and there is over $6 million in prize money with the winner receiving over $3 million. Not bad for a 3200m horse race.

Around the country businesses stop to bet, luncheon and watch the race that stops the nation. Cafes and restaurants offer three course menus, turf clubs in major cities gather for their own races. Offices organise functions for employees. The mornings are spent betting, then there’s lunch, and the famous race. It’s a day that should be a public holiday for all, but is only so in Victoria.

In 2012, more than $60 million was expected to be spent on betting alone around the country on the first Tuesday of November. But are you betting with your head?

Gambling is a favourite pastimes among Australians. From blackjack and pokies at casinos to horse racing, boxing and football, Aussies like to have a punt. And there’s nothing wrong with that as long as you’re using your head and gambling with only what you can afford to lose. With around 70% of Australians participating in some form of gambling it’s no surprise that spending of almost $20 billion were recorded in 2008-9. Yes, twenty billion.

Gambling is an addiction and like any other addiction it can have detrimental effects putting strain and stress on your relationships, work, health and life in general. Remember, the house always wins.

Do you buy Lotto tickets? Put a couple dollars in the pokies? Do you bet on the horses, the dogs or the boxing? It could be costing you hundreds of thousands of lost opportunity.

$100 a month at 7% will net you more than $500,000 in 50 years. That’s $62,400 of your own cash and the rest in interest. That’s a sure way to get rich slowly. Double your investment to $200 and you’ll get there in 40 years.

The chance of winning the Lotto is 1 in 8,145,060, picking the trifecta at the Cup is 1 in 12,144, nabbing the pokies jackpot is 1 in 2,500,000. It happens, I know people who’ve won but the chances are slim. You’re better off putting your money in a growth index fund or straight into your savings account. It might take you longer to strike rich but you’re almost guaranteed to get there.

I enjoy responsible gambling. I enjoy horse racing. Each year for Melbourne Cup I have a budget. $100. That’s what I feel comfortable losing. Sometimes I make money, sometimes I lose, sometimes I come out even. But that’s my limit. This year, given that I haven’t returned to full time work yet, that budget has been reduced to $50.

The first Tuesday of November is always a fun day and it’s not just about the horse racing. There’s fashions in the field, an excuse to get dressed up and wear a fancy hat. It’s an opportunity to get together with friends for a leisurely lunch, champagne and a punt.

Remember, have fun, gamble responsibly, and stick to your budget. The house always wins whether you like it or not. Hot tips will be flying around, excitement will be abound. I’m off for a beach walk in the morning, a small punt at the local TAB, followed by a lunch date with family and friends and then watching the race at 2pm (QLD time). Win or lose it’ll be a fun day.

Do you like having a punt? Have you ever been effected by gambling? Do you like horse racing? Do you have any events that stop the nation? 

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Are you being too hard on yourself?

Posted On October 27, 2014| Leave a reply

For the past few weeks I’ve been thinking about what I want vs what I need and what I’m willing to do to achieve it. The truth is a lot of the time I feel like a complete failure, a fraud. There are two voices guiding me and too often I listen to the naysayer. I’ve written a novel – ‘who do you think you are, that’s a load of bullshit not a novel.’ I want to start a health wellness & travel website based on the area I live in. Health, you healthy? Look at the unhealthy decisions you’ve made in the past. What makes you such an expert? A new job that pays better. Who’s going to want to hire you? You don’t deserve that much money!

Need I go on?

Even here, writing for MMGR, I go through phases of confidence and squirming with embarrassment wondering what ever happened to the courageous girl I used to be. Heavens I’m 31, I shouldn’t care what others are going to think. I should give a toss about people that play no important role in my life. The only people I should be worried about are those I choose to surround myself with, my husband and son, my family, my friends, my colleagues maybe.

The truth is that there is always going to be someone who tries to bring you down. There is always going to be a naysayer, a critic who didn’t like your blog post because it was grammatically incorrect, or you got a fact wrong, or they disagree with your point of view, or they don’t like your name. Pleasing everyone is impossible.

Rejection is a part of life. Deal with it. Move on. Judgement is a part of life. Deal with it. Move on. Life is your biggest exam. Deal with it. Move on.

The state of the current education system worries me. It seems that grading students is stressful. Well sorry to burst the pretty little bubble you live in but life is stressful. People judge. People hate. They reject you because they don’t like the way you smile. They will test your patience, your will, your strength, and your integrity. You might fall a few times but you learn and you deal with it and you move on.

I was going through old report cards of mine whilst searching for old Disney books that I want to read to my son as he grows. He’s six months so I figure it’s the perfect time to start the bedtime stories. He loves pictures. He loves listening to his parents voices. Anyway, I started reading an end of year report from grade 4. This was still a time when teachers wrote report cards by hand for every subject. It wasn’t just a pass or fail or some other grading system. There were comments, long paragraphs for each subject about your efforts, your abilities, your progress.

…you need to stop being so hard on yourself.

Even as a ten year old, I was my own worst self critic. Apparently, I was so hard on myself that a teacher noticed.

So what does all this have to do with money?

Every time I set a goal I bring myself down before I can even test its success. I wrote a novel. Why aren’t I publishing it? I’m scared people are going to hate it. What if they love it? Then I can sell it. So do it. But what if they… stop right there.

What if? What if? We can’t control every scenario. Sometimes we have to let go and let things happen. That’s when luck happens. We put in the hard work, the sweat, the tears, the late nights. We let it out into the world. Then magic happens. Some say you get lucky. Some say you get rewarded for the hard work.

Success doesn’t happen over night. Unless you win the Powerball of course. Success is a process. But how in the world are you supposed to become successful when you won’t let yourself pass your first road block that is you?

Have you ever been too hard on yourself? Squashed your dreams before they had any hope of becoming real? How did you change your thinking?

Are you looking too far into the future?

Posted On October 14, 2014| 3 Replies

pic14.10Money, money, where art thou money?

I’ve just figured out my biggest money mistake. I’ve been making it for years. Now I sit here dumbfounded and kind of silly admitting publicly.

I’ve been living in the future instead of focusing on today.

What does that mean exactly?
Well let me tell you, I love spreadsheets. I love putting in figures of how much my net worth will be if I do (a), (b) or (c ). I love looking through realestate.com.au and daydream about owning dozens of investment properties. I love thinking now in ten years time I’m going to have x amount of dollars in the bank.

Now there’s nothing wrong with that per se, day dreaming is perfectly normal and evening encouraged. But it also has to be followed by action that is relevant to today.

Do you know what my biggest fear is in regards to money? I have a couple.

1 – Having to work hard in a job I don’t particularly love until I’m 65 just to make ends meet.
2 – Not being financially prepared for a disastrous emergency.

Thinking back to how much money I have wasted over the past 20 years makes me want to cry. Had I used my grandparents as a positive example and the theory of investing I’ve had since I was about 18 and put everything in practice, well, I’d be well into enjoying the fruits of my labour and being financially free.

There’s been plenty of opportunity but instead of grasping it and holding on, I’ve wasted too many to mention. And yes, I want to cry. But I won’t because well that just won’t be cool and it won’t help me in the slightest, ok maybe it might like for just a second.

It’s time to stop just day dreaming and looking towards the future. It’s time to act with what I can now.

Being still on maternity leave has it’s pluses and minuses. The downside is that I’m not earning money and my paid parental leave ends tomorrow which means there’s three months of no guaranteed income. Nada. Zilch. Didly-squat. None. Zero.

Am I screwed?

 Not really. If we stick to our budget we’ll be fine and won’t have to dip into our savings. Yay, clap clap for at least being a little bit prepared.

And did I mention it’s ‘no guaranteed income’? That’s the good part because it also means that I have the ability to get off the couch, stop wasting time and create some income because I have the time. Twenty-four beautiful hours in the day, 16 after accounting for sleep, ok so let’s be fair about 5 hours a day after considering parental duties and every other responsibility that befalls me.

Five hours is huge. That’s like a full days work if you don’t include lunch, morning tea, and the half dozen tea and coffee breaks you have throughout the day or catch up on office gossip at the photocopier.

So it’s no more looking into the future. It’s time to start acting now. With J being at home at a reasonable hour I can leave our precious with him for a couple of hours and get to work. Plus my mum needs nanny practice too as she’ll be taking care of baby J two days per week once I return to work. Huh, easy peasy, that’s plenty of time for me to get my shit together.

What can I do today to ensure my financial future?

1 – Reassess the budget
2 – Limit my coffee dates to 2 per week (that’s my $9 sanity allowance)
3 – No more magazines, go to the library instead it’s cheaper and so relaxing
4 – Finish editing the novel (I’m 55% through – yes I have a spreadsheet that’s counting!)
5 – Source an extra income stream (already being done and will bring me anywhere from $0-500 per month but I’d like another one)
6 – Submit articles and queries to blogs, print magazines, e-zines
7 – Limit surfing the net…i.e. limit reading personal finance blogs to under 1 hour per day (they’re addictive, you know)
8 – Post regularly on MMGR (mymoneygoround)
9 – Approach other personal finance posts with guests posts
10 – Get some feedback on what’s working and what isn’t on my blog
11 – Get social media savvy (or hire someone to do it for me, I hear social media’s the current rage)
12 – Clean house (an organised house equals an organised mind…at least it will be for me)

I’ll try to remember update next month and let you know of the progress and what’s been effective and what hasn’t.

Do you ever look too far into the future instead of focusing on what’s doable right now? What are you doing today that will make a difference for tomorrow? 

  • Do you need a writer for your site? Regular or one off? Interested in writing a guest post on MMGR? Send me an email and let’s see if we can help each other out. 

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