Ask Janne: Please Provide Advice on Saving Options
I am in my forties and earning a good income ($200,000+). I have a nice life and can do what I want when I want. My concern is retirement. I spend each pay and never manage to save any money. Does it really cost that much to live on the Northern Beaches, or is there something I am doing wrong? I would be interested to hear your thoughts.
Name withheld, Collaroy...
You raise a valid point. If being ‘comfortable’ means being able to have ‘what we want, when we want it,’ what does it cost to maintain this lifestyle? At least one hundred and fifty thousand dollars a year according to almost half (48%) of research participants. Furthermore, three in five (59 per cent) believed that being worth $1,000,000 does not mean that you are rich in Australia today.
When it came to priorities, owning your home ranked as number 1, followed surprisingly, by the ability to live off one income. The mortgage and the cost of living are our biggest commitments but also our greatest financial burdens. Three quarters (76 per cent) said that their mortgage has a big impact on their lifestyle, while (83 per cent) agreed that the cost of living is much higher than the cost of living ten years ago and almost half (44 per cent) agreed that the cost of living where they live makes it difficult for them to maintain their standard of living.
When it comes to goals for the future, maintaining standard of living and paying off the house were ranked as the most important. So too does an early retirement, more frequent international travel and home renovations.
These are the dreams of many of us, but are they that essential that we give up on our future just to achieve these goals. Paying off the house makes sense as a mortgage in retirement does not work. Is there an opportunity that we are missing – to have a slightly lower standard of living now to ensure the retirement of our dreams. To have an income that puts us in the top three per cent of the population and still not be able to save tells me that there is some room for movement.
Here are some things that you may like to look at to ensure a future that matches your present:
Salary sacrifice to superannuation: this is more important since the proposed budget changes. $100 per week (pre-tax) to super would mean $51 less per week in the pay packet. This could be funded by a few less lunches or coffees (if that is one of your expenses)
Income protection Insurance: this will ensure that your income can continue if you are unable to work – it is also tax deductible
Set retirement goals: this is best done with a professional adviser. Have a plan and stick to it. If you slightly reduce the amount you spend each week it will only hurt for the first few weeks and then you will get used to it. Remember a time when you were a bit short on cash flow and you managed with things that you previously saw as essential.
Pay all your bills and set aside your savings first: once you have done this, you can have a lovely time spending what is left. When you earn good money, there should be quite a bit left.
If your mortgage is taking too much of your income, look to see if you can get a better interest rate. I recently dropped the interest rate on my housing loan by 0.5 per cent with one phone call. I just asked for the payout figure on my loan and told them I was looking at refinancing.
The best strategy is to obtain professional advice. Please see your financial planner or call me on 9452 7871.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
Plan Protect Pty Ltd
Phone: 02 9452 7871