Most of us know the importance of saving for retirement, but it can be hard to figure out how to invest for this important event.
However, when we reach the middle of our lives, it seems that there is nothing else to pay other than bills, bills and more bills. Oh, and the kids’ schooling.
Here’s how to save for superannuation as you juggle family bills.
The power bill has come in, got to pay that right away. OK, time to check if you have extra money for superannuation. Oh wait, there’s the internet and mobile bills as well – best pay those first.
This scenario happens monthly for most Australians paying regular household bills, making it difficult to save money at the same time. According to MoneySmart, a couple with kids could spend between $1,400 and $1,700 per week on bills and costs, including food, clothing and transport.
So how do check all of these off your list, but still have enough to put towards super?
The power bill is a big source of income loss in many households, though simple tricks can reduce what you spend. For example, remembering to turn appliances off at the wall, avoiding using a dryer for clothes and taking shorter showers could cut down on the regular bill without costing you a thing. You could also check the insulation in your home, to see if you need more in areas such as the roof (which can leak heat at quite a high rate during winter). And if you’ve got devices to charge or water to heat, why not set them to operate during off-peak times?
Budget, budget, budget
Creating a monthly budget may also help. Writing down what you can and can’t spend on could make all the difference. It’s easy to ignore an idea in your head, but a lot harder to shun the big, bold letters on a whiteboard or spreadsheet.
If you uncover the little things you are spending money on regularly, you might see areas to improve. For example, do you drive short distances that you could easily walk, or purchase small food and drink items on a regular basis? Both of these things could be candidates for cutting out of your life, saving your wallet (and possibly your health).
Consider the cost of a daily cup of coffee (in this example, we’ll say it costs $5). After a week, you’ll have spent $35. After a month, make that $140. After a year? Over $7,000.
Think about how beneficial it would be to put $7,000 a year extra into your super account, rather than your stomach.
Buying your first home … and paying it off
If you’re looking into purchasing your first home, or have already done so, you’ll likely be aware how expensive this can be. Not just at the outset, but as you pay off the mortgage, too.
Financially, a house could be a long-term investment. Emotionally, it could provide security and comfort for your family. But you don’t want to let its current costs derail your plan for life after retirement.
So the question remains: Do you put your extra money towards your mortgage or your super?
Thankfully, the Australian Securities and Investment Commission (ASIC) has created a helpful tool to answer this very conundrum. It will allow you to analyse how much you earn, how much you have extra per pay cycle and the details of your home loan, to decide whether a smarter strategy would be to pay it off sooner or throw your extra cash into the nest egg.
If you are thinking about options for Super, you may wish to consider Virgin Super and see if it will suit your needs.
What are your retirement saving strategies?