Get your finances in shape today for a better future
One of the many advantages of building a successful career is the opportunity that it provides to create a better life for the people you care most about. For many of us, helping our children is an important goal – both financially and emotionally. Women tend to approach their finances with a family focus, which often results in their financial goals being centred around things like providing for private education or extra-curricular activities, and funding your first home and family holidays. This often means that traditional goals such as investing or saving for retirement are put on the backburner.
The importance of balance
Women often think that their own financial security can wait until other priorities have been dealt with – and while wanting the best for your family is important, it is possible to look after your own financial security at the same time.
Flexibility is key
It is important to remember that helping your family financially and looking after your own finances are not mutually exclusive. Often the best way to find out how you can provide your family with opportunities is to ensure your own finances are in shape. And the key is flexibility. Having your own finances in order makes options available to help your family as and when they need it, rather than being locked into a fixed financial commitment. These days it is difficult to obtain big tax benefits with any single strategy, or without taking on a higher degree of risk, but small amounts can add up. So what can you do to ensure your finances are in the best shape for the future?
Six steps to a good financial health check
1. Talk to your bank
Most lenders will offer a discount on the standard borrowing rate if you ask or are prepared to take your loan elsewhere. This can be worth around half to three quarters of a per cent off normal borrowing rates – money that can be well directed to support your other financial goals.
2. Restructure any debt
If you have several debts, ensure they are structured so that you’re paying the higher interest/non-tax deductible debts off first rather than making extra repayments on your mortgage while you still have an expensive credit card or personal loan for example. Also look at setting up an offset account with your home loan so that savings reduce your home loan interest rather than earning taxable interest.
3. Prepare for pay rises
It is worth having a strategy in place for future pay rises, rather than just adding the extra money to your disposable income. If you make a conscious decision to direct part, or all, of every pay rise to a savings or investment program, or to reducing debt, you provide yourself with extra opportunities. If you are earning more than your partner, you may be paying unnecessary tax by holding savings accounts in your own name rather than theirs.
4. Maximise salary sacrifice contributions
The maximum limits for concessional super contributions are now $30,000 if you’re under 50 or $35,000 if you’re 50 or older. If you haven’t reviewed your salary sacrifice for some time, you may find you can save on tax and save some extra for when you need it. This is especially important if you plan to take a break from the workforce. Because there are limits on how much you and your employer can contribute, don’t assume you can “catch up” on your retirement savings later in your career.
5. Plan super for breaks from work
Getting the most from super is an incremental game where every dollar you can set aside now really counts. If you are planning a break from the workforce, consider other ways that you may be able to continue building your super during this time. This can include making after-tax contributions or getting your spouse to contribute on your behalf and claim a tax rebate. You can also use the super co-contribution (where the government adds up to $500 to your contribution) if you’re eligible.
6. Talk to a financial planner
Putting together a financial plan can help balance your short-term financial commitments with your longer term financial goals so that you’re prepared for the future (including supporting your offspring). Although there is a fee for the service, a financial planner can provide a holistic approach to structuring your finances so that you meet your own goals and have the flexibility to help out the family when you need to.
While thinking about money may be low on your priority, it is worth putting time aside to control your finances. It is the small things you can do now that can make a big difference later on – both for yourself and your family. It is important to understand how one goal impacts both on your broader financial position and on other goals you may have. You may need to make compromises, but by drawing up a longer term plan for your financial future, you can ensure you have the flexibility to help out your children’s needs when they arise, while at the same time achieving your own goals.