Extras to up your financial game30 Sep 2019 3 min read
Set your financial goals and started saving? Now it’s time to take your financial fitness to the next level by adding some extra moves. In the same way that adopting new approaches to your training and nutrition can help you tweak your program and refine your goals, learning more about the nuances of growing your money will help you build a strong financial future.
Power up your super
Your superannuation is a vital component of your financial success.
“I see a lot of clients who don’t see super as savings because it seems untouchable,” says NGS Financial Planner Deline Jacovides1. “But remember, superannuation is really 9.5% of your salary. Imagine if your employer was short-changing you by nearly 10% – you’d definitely care about that. You need to care about your super, too.”
While you can’t change how much super you receive from your employer, you can do things to boost your balance significantly over time.
- Extra contributions. Putting even a small additional amount into your super each payday can make a major difference over time. You may be able to salary sacrifice, make contributions from your after-tax pay and, under certain circumstances, be eligible for a government co-contribution. You may also be able to contribution-split with your partner. All of these contributions strategies have limits and tax implications, so be sure to check the details.
- Fees. Fees can vary significantly between funds, so look closely at the fees your fund is charging, bearing in mind also your insurance cover and the fund’s returns. There are plenty of resources online for comparing funds – ASIC offers a great round-up of them here.
- Insurance. Some funds charge more than others for exactly the same insurance – compare the cover and premium costs between funds. Also consider exactly what insurance you need for your circumstances. Read more about the importance of insurance here.
- Returns. Look at super returns after fees and tax to determine if you are getting value. If your fees are higher and your returns lower than a comparable fund, that’s a worry. But if both your fees and your returns are higher, then your fund’s management style may be worth the extra fees.
- Investment choice. Most super funds offer different investment options. It’s important to understand your ‘risk profile’ and choose your investment accordingly. Generally speaking, if you’ve got a longer time until retirement, you can ride out investment highs and lows and so may decide to choose higher risk, higher growth investment options. People who are closer to retirement may move into lower risk, lower growth options. If you’re not confident about making these decisions, talking to a financial planner can help.
Investing (in) yourself: the share market
If you’ve got super, you’ve got a share portfolio already. But a lot of people find the thought of investing in shares themselves daunting.
It doesn’t have to be. Today it’s easier than ever to set up an online share trading account and take advantage of a great range of free investing education resources before dipping your toes in and placing your first trade. Plus, you don’t need a lot of cash to get started – and you can build a portfolio over time with a regular investment plan.
Another option is to look at pooling your resources with other investors in a formal investment structure run by professional investors. That way, you get diversification (your investments are spread over difference assets and asset classes) and you may be able to invest in asset classes (such as infrastructure) that you might not otherwise be able to access as an individual investor. Some popular and accessible examples are managed funds and Exchange Traded Funds (ETFs).
One of the most important things to do before you do start investing is to identify your investment profile – your appetite for ‘risk’ will dictate the types of investments that are likely to be more appropriate for you. (You can also balance out risk in your portfolio by diversifying.)
Of course, if you’re not confident to invest by yourself, even after doing some research, but think you’d like to explore your options, you can get professional finance advice. We’ll talk more about that in a future article.