A few easy to keep New Year financial resolutions will deliver long lasting benefits, bringing that inner glow that can only come from being more in control of your money.
Industry Super Fund Vision Super has set out five steps to take at the beginning of the year that will reap benefits for many years to come.
“People often take the opportunity at the start of a new year to make positive changes,” Vision Super CEO Stephen Rowe said.
“Many of these changes often have fleeting results. But taking control of your super and finances in five easy steps will set you up for years and years of benefits.
“Our financial advice team helps thousands of members sort out their super and their finances. In just one quarter in 2016, we reunited our members with $5 million in lost super.
“There are many things we know that people can do to turn their lives around financially. Why wait another year?”
Vision Super’s 5 steps to improve your financial health
1. Deal with bad debt
There’s a difference between good debt – like a mortgage, where you’ll end up with an investment that (generally) is worth more than you paid for it – and bad debt – like credit cards that may be charging you more than 25% interest.
If you have bad debt, look at consolidating it into your home loan if you have one, or a personal loan from a bank with lower rates than you’re paying on the card(s).
Consider getting rid of your credit card completely. There are many other payment options around now that use only the money available in your every day bank account. Otherwise, take your credit card out of your wallet and put it somewhere safe to avoid impulse purchases.
2. Check your insurance cover
You might be paying for life insurance or income insurance outside of your super without realising you’re paying twice. Most people have default cover with their super fund.
If you’re paying for cover outside your super, you may be paying a lot more – super funds can typically negotiate lower rates from insurance companies because of the number of members we cover, and we don’t pay commissions.
If you’re paying for the insurance out of your super (taxed at 15%) instead of from your take-home pay (around 24% overall if you earn the average full time wage) you may be saving even more money thanks to the lower tax rate. Call your super fund or check out their website for details (and don’t cancel your other cover until they’ve confirmed they’ll cover you).
3. Consolidate your super
If you have more than one super fund, you’re paying more than one set of fees – and you may even be paying for more than one lot of insurance!
Most Australians have a choice of where their employer pays their super – check things like fees, investment options and long term returns, as well as the level of service your fund offers. There are fund comparison tools that can help you.
Once you’ve chosen the right fund for you, they’ll be able to help you consolidate with just a few steps – but do double check you’re not losing insurance cover you can’t get back, particularly if you’re over 60 or have a pre-existing medical condition.
It might seem overwhelming, but once you start the whole process won’t take long, and your future self will thank you when you retire with a healthier balance.
4. Set up small, regular voluntary contributions to your super.
As little as $10 extra per week from your pay into your superannuation can make a huge difference to how much you have in retirement.
Making voluntary contributions into your super will not only help supercharge the growth of your nest egg, it can also help reduce your tax. Contributions can be made from your pre-tax income via salary sacrificing, as well as after tax.
Talk to your super fund about the best option for you, keeping in mind that caps on voluntary contributions also take into account your Super Guarantee payments.
If entering a salary sacrifice arrangement, ensure your employer pays your Super Guarantee on your salary before your salary sacrificed amount has come out, otherwise it will erode the benefit.
5. Check your investment profile
Your super fund invests your money on your behalf in a combination of different asset classes such as shares, cash and infrastructure. Different types of investment carry varying degrees of risk and return.
Unless you’ve specified, your super will most likely be in your fund’s default super option, which is usually invested in a balance between high and low growth assets.
Depending on your age and risk profile, you might be better off with a different mix of investment options, with a focus on either higher growth/risk investment options if you’re younger, and lower growth/risk if you’re nearer to the end of your career.
Talking to your super fund about the right investment profile for you could make a very big difference to how much you retire with.
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