Australians are said to have a not-so-hidden talent at ‘head burying’ when it comes to being savvy in the world of personal finance.
A recent Financial Planning Association of Australia (FPA) study shows 8.5 million of us have unmet financial advice needs and 34 per cent are worried they won’t have enough money to retire on.
To mark Financial Planning Week, Huffpost Australia and the FPA have devised a simple plan to help people learn how to manage their finances for every life stage.
Whether you’re hoping to buy a house, pay off a HECS debt, rid yourself of credit card debt or plan for your retirement…there is a way to achieve your goals.
Youth (20s to mid-30s)
Get into the mindset of paying off big items. Picture: JOHNER IMAGES VIA GETTY IMAGES
Erin Shields, from Dixon Advisory told HuffPost Australia it’s best to switch up your savings mindset and get that car or holiday paid for (without going into debt), or save for that house deposit faster.
Rather than aiming to save ‘what’s left’ at the end of your pay period, set up a regular direct debit on payday for your target savings amount to an account that is separate to your usual transaction account.
Out of sight, out of mind; you’ll be amazed how your spending habits change when the money isn’t available in your transaction account to spend!
Many ‘online only’ savings accounts do not offer access to your savings via branches or ATMs, so the temptation to get money out to purchase another round of drinks on a Friday night, or buy those beautiful shoes disappears!
An added bonus is that they also often offer a superior rate of interest to transaction accounts.
Mid-life (35 to 50 years old)
Enjoy a good lifestyle while being conscious of spending. Picture: BETSIE VAN DER MEER VIA GETTY
Michelle Tate-Lovery from Unified Financial Services:
In this age group there's a lot going on. You’ll need to strike the right balance between enjoying a good lifestyle now, getting ahead on your home mortgage (non-deductible debt), preparing for your kids' increased education and living costs and building a wealth plan for the future.
For many, it will be the first time you are thinking about putting money away for retirement.
1. Understand your cash flow - what you earn, what gets paid into your bank account, what you spend, where the money is currently going. Direct what is left (your surplus) into your financial goals, which have varying time frames.
2. Review your current spending - where you possibly can cut down.
3. Review your current structures - your superannuation to see if you have the appropriate exposure to growth assets. Review your personal and general insurances and your finance structure to see if they are still relevant to your needs and optimal for your financial position.
4. Begin with the end in mind - establish what you ideally would like to have as income in retirement. It's unique to you and it includes everyday living costs along with the extra costs of things you would like to do when you retire. With your current assets available for retirement given the number of years you have left to work, you can then see what the gap is and how much should be directed into long term investment.
It will of course be a trade off as to how much you commit to this goal given your other more short term goals...so you will need to plan carefully.
Pre-retirement (50 to 65 years old)
Get ready for a comfortable retirement. Picture: PAUL BRADBURY VIA GETTY IMAGES
Steven O’Donoghue from Suncorp Advice.
If you are planning for retirement, and are concerned about not having enough money to live this stage of your life comfortably, you are not alone.
The Association of Superannuation Funds of Australia (ASFA) say that if you’d like a comfortable retirement you need to budget for $42,861 / year as a single and $58,784 / year as a couple.
It is never too early to start reviewing your options. One popular option you can start doing to help you prepare for retirement is to look into a transition to retirement strategy.
If you are over 56 years old, you can draw on your super while you continue to work and you can also make extra contributions to your super in the process.
This can be a more tax effective way whereby you can work the same hours and in doing so have more super, adding thousands of extra funds to your bottom line and not reducing your take home pay.
You could also work less hours and maintain your current income, which can take pressure off you when actually retire by easing you into your retirement.
Retirement (Over 65 years)
Centrelink isn't just for young students and families -- many retirees are also eligible. Picture: PORTRA IMAGES VIA GETTY IMAGES
Andrew Geddes from at MIQ Private Wealth.
For those people who are already in retirement, you’ll need to review your investment is essential for long-term ‘peace of mind’. Do you have enough income to meet your day-to-day needs?
Are you eligible for any Centrelink entitlements and are you receiving all that you are entitled to receive if you do? Are your investments performing as explained to you when you started them?
These and other questions need to be asked when you review your situation in retirement. A review every year as a minimum will go a long way in achieving that ‘peace of mind’.