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The Fierce Girl's Guide to Finance

Get your shit together with money

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super

The ultimate ‘get started’ guide to investing (and stuff)

So, you’ve made the decision.  It’s time to put on your serious-lady-suit (Romy and Michelle style) and get busy with money.

Whether daunting, exciting – or both – you need to start somewhere.

And that’s where it can come undone. What do I choose? How do I choose? What should I ask?

All very good questions. I can’t promise I will answer all of them, but let me give you some starting points on your journey.

I want to invest in ETFs

Exchange-traded funds are a popular, low-cost way to invest in a range of asset classes, from shares to bonds. I’ve written more about them here.

If you’ve done your research and want to get started, first thing you need is a broker. As the ‘exchange-traded’ name suggests, ETFs trade on the Australian Securities Exchange. While the days of guys shouting at guys on chalkboards are over, brokers still need to do the trade for you. There are lots of well-known online ones like CommSec, but the nerds in the forums I hang out in reckon Selfwealth is the cheapest.

Speaking of brokers – a great opportunity to appreciate Leo in Wolf of Wall St

If you don’t want to go down that road, you can consider an app like Raiz or a Roboadviser (see below), and they do that part for you.

In terms of choosing which ETFs, you really need to spend some time with your friend Google.

I want to invest in a Managed Fund

Rather than buying or selling units on the ASX, like with an ETF, you apply for units in a managed fund, directly to the company. There is usually a form to fill in (online or paper), you give them money and they give you units in the fund.

There is also an ASX service called mFund, which allows you to bypass the old form-filling grind. It does require a broker or financial adviser though – so if you have neither of those, probably not worth the effort.

In terms of how to choose a managed fund, it’s kind of like saying ‘how do you choose a dress?’. Do your research, have a clear idea of what you want, keep a keen eye on prices (fees), and get recommendations from friends. There is a handy tool on the mFund site to get you started.

Pretty sure Gaga did some solid research on this dress.

I want to get Financial Advice

First up, be clear on what you want and how much you want to spend. (This post may help).

Money Coaching – this is the mani-pedi of the advice world. It helps you with goal-setting, budgeting, cashflow, saving, and everyday money goals. It’s more like a life coach, in that it’s not regulated by ASIC and they can’t legally tell you what to do with your savings – they mainly help you accumulate the money. Sometimes they have affiliated services to take you to the next stage.

I see a lot of people who think they want financial advice, but really want money coaching. It’s way cheaper because there isn’t a bunch of expensive compliance sitting behind it.

People like Vivian Goh are leading the charge in this area.

The most iconic manicure of them all

Robo Advice – Let’s call this the fractional laser treatment of advice: yay technology!  These services use powerful algorithms to give you an investment plan. You tell them your goals, and the friendly robot builds a portfolio to achieve them. Stockspot and Six Park are two of the bigger players in Australia – they have lots of helpful articles on their websites, with more information.

Comprehensive Financial Advice – This is the full day spa treatment of advice with a price to match. It looks at your whole financial picture: goals, retirement planning, risk tolerance, tax issues etc. But it takes a lot of time and compliance on the adviser’s side, so you’re looking at upfront fees or $3000-4000 or more, with the option of ongoing service (and fees).

How to find an adviser? Check out this post. 

I want to sort out my super 

Sorry but this is the only pun that makes super interesting

So, you want to merge multiple accounts, check your insurance, review your investment options or generally find out WTF is going on with your retirement savings (yeah girl!).

Call your main super fund. If you want to roll multiple accounts into one, the fund will do the heavy lifting for you. If it’s other questions, they are generally pretty helpful and can often provide ‘limited advice’ at no cost.

Don’t know which one you should pick? The big-name industry funds are pretty solid, but you can also check out this website for more information.

New year, new you: how to up your game this financial year

If I ran a fitness blog, I’d have to wait til January 1 to share good intentions and resolutions with you. Luckily for me, this is a finance blog and I can do it now.

It also requires no activewear or bikini shots, which is a relief, because I have been hitting the red wine and winter comfort food a little too hard.

So, while I commit to no booze and lots of tuna salads for the foreseeable future, you could commit to a few good habits for FY18/19.

Change one bad money habit – It doesn’t have to be outrageously ambitious. You don’t have to makeover your entire financial life. It just needs to be specific and actionable.

For example, you want to control your spending better. My friend Cara gets paid monthly and has a bad habit of ‘making it rain’ the first week, like Drake giving money to poor people. Then she lives like a monk the week before payday.

If you have a similar issue, your goal is to set a weekly spending budget. Look at how much your normally spend (I know: a painful yet necessary step in and of itself. But get out your bank statements and come clean with yourself).

Decide what’s an appropriate ‘discretionary’ budget – lunches, nights out, new shoes, Priceline sales etc. This should be close to what you already spend, otherwise you’re not going to stick to it. Maybe trim a cool 10-20% off it, but don’t go for the diet equivalent of Optifast shakes when you’re used to 2000 calories a day. Now, take that figure and divide by 4. Simples!

Then it’s a matter of putting in place the mechanism for sticking to the weekly budget. Perhaps you get that much cash out, then you see how much is left. Perhaps you have a separate account with weekly auto-transfers of the set amount. Maybe you check your bank account every few days and see if you’re tracking.

Whatever works for you, find a way to put boundaries in place, and automate some of it.

All of this advice is clearly not rocket science. I’m no behavioural psychologist. It’s about intention, action and habit.

Decide what to change, think about a solution, then make it as easy as possible to keep up the habit.

Check out my homeboy James Clear if you want to know more about changing habits – he is the guru.

Other bad money habits you might want to overhaul:

  • Paying too much for convenience: unplanned and expensive groceries, too much Uber Eats, buying a full price dress for a wedding next week etc.
  • Wasting food: throwing out what’s in your fridge, not putting it away properly in the first place, forgetting to eat leftovers – you know the drill. Make a plan, use your freezer and buy some Tupperware FridgeSmarts
  • Dipping into savings for everyday money – you need to re-do your budget, set a mindful spending manifesto, and get an account with a different bank that’s harder to access

Sort your superannuation once and for all – I know, I go on about super and it’s everyone’s least favourite topic. But how about you spend an hour or so on it now, and have thousands more when you retire in a few decades?

I have a deep-dive post about it here, but in short, there are a few basic things that make all the difference:

  1. Find your lost super – That crappy retail job you had for six months? You probably have a super fund for it. If you’ve had more than a couple of jobs there’s a good chance you have a tiny little super balance from it, sitting around in the ATO’s accounts, doing nothing. Get hold of it and put it to work! Some tips here.
  2. Ask your super fund to roll your accounts into one – Your main super fund probably wants to do this lost super thing for you – they often have a rollover service to find your multiple accounts and sweep it into your main one. Let them do the hard work!
  3.  Check your insurance – We get given life insurance without asking – but that doesn’t mean it’s either the right amount or free! Check what you’re covered for, if it’s too much or not enough, and how much it costs. I have a really exciting post about this here (because, let’s face it, the only thing more exciting than super is super AND insurance!).
  4. Review your investment option – Chances are, you’re in the same investment strategy as that 50-year-old bloke on the train wearing a too-tight shirt. Which isn’t ideal if you’re young. As a general rule, younger savers can tolerate more risk for higher returns (they have longer to smooth out the ups and downs). Most super funds will be able to give you advice on what’s right for you. Personally, I will be in high-growth until about the time I need to get botox.

Get a better deal on your boring bills – Once a year, it pays to go through all those dull fixed costs and see if you can cut them down. Are you in the right health fund? Who knows – do some Googling, or call one of those iSelect, ComparetheMarket type services.

Could you be getting a better deal on your phone? Probably, if you’re not already on a contract. They bring out better and cheaper plans all the time, so it’s worth shopping around. The tight-arse circles I hang out in online have  been raving about Kogan.com.au – not an endorsement from me, but can’t hurt to look.

Same goes for your car insurance, power bills and any other painful ongoing cost. Spend a bit of time once a year, and reap the rewards.

Learn about basic investment and finance concepts – Obviously being on this site is a great start. If you’re relatively new here, this post is a good primer.

But if you’ve put off ‘understanding compound interest’ to another day, that day is today.

If you’ve ever thought ‘I’ll look into share investments at some point’, that point is now.

If you’ve pondered ‘how much will I need to retire on?’, then it’s time to do some research.

A great resource is the government-funded http://www.moneysmart.gov.au – it’s designed by financial literacy experts so that anyone can understand it. And it covers a huge range of topics.

And that’s it.

Gosh that was a lot of information for a wintry Sunday morning huh? But you only have to do one thing to make a difference.

And none of those things require diet, exercise or bikini body transformations. So how good is that?

The lazy girl’s guide to making money

One of the burdens of modern life is choice.

Choosing how to spend your time (Facebook, or read a damn book?). How to spend your working years (I’ve spoken to three friends this week about their career dilemmas). How to spend your emotional energy (obsess over 3% body fat gain, or not?).

And nowhere is this more prevalent than deciding how to spend money. So many things seem pressing or important.

We buy stuff because we are used to the instant gratification of retail therapy.

The pressure to look hot, young, thin and hair-free  sees us scooting into salons to address our perceived shortcomings.

And the social groups we move in demand a certain level of spending, on everything from dinners out to expensive hen’s days.

No judgement about any of these things. We are all at the mercy of these forces. (God knows I think far too much about botox on a bad day.)

A very tempting – and understandable – response to this is to minimise the choices we make. In other words, choosing not to choose.

This is not an ideal plan. 

You know the 80/20 rule, right? AKA The Pareto Principle. It says you get 80% of your outcomes from 20% of your efforts. (Nice easy summary of it here). Like, 20% of your wardrobe gets worn 80% of the time; 20% of the people in your company do 80% of the work. And so on.

The same applies to your money. Not in an exact ‘whack out your calculator’ way, but in a general sense of doing a few things right can have an outsize impact.

So, here I offer unto you: the lazy girl’s guide to doing the right thing with your money.

Tip 1. Start retirement saving early – The magic of compound interest means the earlier you start, the greater the gains and the less the pain. I know, super is boring and you have to pay of home loans and HECS debts and stuff.

But here are some amazing numbers. Laura is 30 years old and already has $30K in super. She’s earning $75K annually, and putting the standard 9.5% of that into her super. If she works for 30 years, she will end up putting just $213K of her own money into that nest egg.

But she will end up with over $1.1 million!

That’s because most of the money comes from compound returns – the light pink bars in the graph below. This is a simplified version of retirement saving: in reality, her salary will go up and down, and her rate of return will too. But it gives you the picture.

Now, if Laura puts in just a little extra – say 12% of her salary – she will end up with $1,321,429 – an extra $212,000! That’s a lot you can spend on a round the world retirement trip, just by putting away a couple of hundred extra every month.

MoneySmart.gov.au Compound Interest Calculator

 

 

 

 

 

 

 

 

On the downside, if Laura takes four years off work to have some kidlets, then she only has 26 years to work that magical compound interest. So, her total nest egg goes down to $791,566. Yep, instead of $1.1 million.

Again, that’s simplified, because the amount would actually depend which years were taken off, and where in the savings cycle she was up to. But it illustrates the reason there is such a huge retirement savings gap between men and women (like, close to 50% I’m sad to say).

So, the action points here:

  • Add a little extra to your super as early as possible – ask your payroll peeps about salary sacrificing.
  • If you are off work or going part-time, your spouse/partner can make contributions into your super and may get some tax benefits too. (Nice summary here)
  • Another option, if you’re on a low or part-time income, is to make an after-tax contribution of up to $1,000 to super and the government will contribute 50% to match it – up to $500. More on that here.
  • For goodness’ sake, please roll all your super into one account! Paying multiple fees and insurance policies is like standing in the shower tearing up hundred dollar bills. Most funds do it all for you these days, so pick your fave fund and get in contact. The difference at retirement could be tens of thousands of dollars!

Tip 2. Pay down debt faster – This applies to all debts, from credit cards to car loans. But I want to talk about the biggest, hairiest debt: your mortgage.

A quick play on an Extra Repayment Calculator shows that on a $400,000 home loan, paying an additional $250 per month would mean:

  • You save almost $52,000
  • You pay off the loan 5 years and 7 months earlier[i]

 

Think you can’t afford that extra money? I challenge you to find it.

  • It’s  you and your partner not buying a coffee every day (yep, for realz – $8 x 30 days = $240).
  • It’s cutting your grocery bill by shopping in bulk or somewhere like Aldi (did you read this post?).
  • It’s getting your hair done differently so you go every three months instead of every six weeks (I did this and it changed my life).
  • It’s putting on your big girl pants and not buying shit you don’t need, three times out of four (the fourth time, well, hey, we are all human).

Whether it’s a hundred bucks or a thousand, looking for ways to chuck extra money into your mortgage puts you so far ahead. You can either get out of debt faster, or leverage the equity you build up to invest in another property.

Find a better deal – On the loan mentioned above, you’d save $33,683.69 over the life of the loan, by moving from an interest rate of 4.04% p.a. to a loan at 3.63% p.a. (yes, these loans exist).

Plus, you’d be paying almost $100 less as the minimum repayment each month. That’s money you could either have in your pocket, or ideally, pay off as an additional amount.

Yes, refinancing means a lot of paperwork, but get a good broker and they do the hard work for you. Whatever you do, don’t pay the ‘lazy tax’ by staying in an expensive home loan.

Use your offset or redraw – These work in slightly differently ways but have the same effect: they reduce the amount that your interest is being calculated on.

If you think about it, 4% of $100,000 is much less than 4% of $150,000. So, you want to be paying interest on a smaller principal amount.

Redraw – this lets you access any additional funds you’ve paid above the minimum repayment. Say you’ve paid an extra $5000, you can get it out in an emergency (a real one, or ‘I need a holiday before I kill someone’).

Offset – the balance “offsets” the interest charged on your mortgage.  Say you have $10,000 in an offset and $300,000 on your loan, you only pay interest on the equivalent of $290,000.

It’s similar to the redraw but a bit more dangerous because it’s easier to access. Often a redraw takes a day to process, whereas you can have an offset mixed up with all your normal bills and banking.

Even if you don’t have a mortgage, you can apply a lot of this thinking to your saving.

For instance, look for better deals on the interest you get paid – or even look at other types of investments depending on your timeframe and goal. (Check out this post for some tips).

Track your money and expenses so you can find extra savings. And always pay yourself first. Just like you pay your mortgage repayments before everything else, your savings should go into a different account before you even see it, hold it or think about spending it. Ideally in a different bank!

Start early. Pay off debt. Sounds simple huh? It is in theory, but can be hard in execution. If you’re not convinced you can do it, maybe part of the challenge is to tweak your attitude to money.

May I recommend one or two posts I’ve prepared earlier?

Mindful spending – what it is and why it matters:

https://fiercegirlfinance.com.au/2016/08/28/mindful-spending-what-it-is-and-why-it-matters/

What’s holding you back from being Fierce:

https://fiercegirlfinance.com.au/2017/05/01/whats-holding-you-back-from-being-fierce/

That’s it. Now go forth and be fierce.

Daddy Lessons: 3 tips from a Fierce Girl father

While support for this blog from the sisterhood has been fantastic, I’ve also been delighted by the number of men who have got behind it.  My dad is one of these honorary Fierce Guys, and because I am studying for my last exam, he offered to do a guest post. What a legend.

So, here are some tips from a guy who lives the ideal retirement lifestyle, after a long and intense career in the corporate world.

A Fierce Girl dad chips in – by David White

I’d better fess up at the outset.  I’m one of those baby-boomers.  You know, the ones who got a free university education, lucked out in the property market, got the best out of the super system.  What could I possibly have to say to the Gen Ys and Xs who have to live in a much less opportunity-rich environment?

Trust me, I know how lucky I’ve been and the media keeps reminding me if I forget.  But I think there are a few rules applicable at any time, which is what my Fierce Girl has been trying to tell you.  So that you don’t have to listen for too long to an old bloke’s pontificating, I just want to suggest three ideas you might consider.

Your super

I know it’s getting hard to trust the system when they keep tinkering with super.  Do you really want to put your money into a game where the goalposts keep moving?  Here’s the thing, though – even this penny-pinching government won’t change the rules backwards.  They had a go recently and their own hard-arsed conservative mates forced a backdown.  All the rule-changing has confirmed this  – every bit you can get into your super account before the next bit of tinkering is a bonus that will pay you back later on.

I would say to you, stuff every bit of left-over cash you can manage into your super account, while the rules let you still contribute.  Do it to the point where it hurts you just a little bit.  In 20 or 30 years’ time you will love yourself for it.

One thing you need to remember, though, is that your super balance (even though you might not be able to get your hands on it for decades), is counted at its face value as part of your total asset pool in some cases.  So if you find your Mr Darcy, and he turns out to be Mr Wickham, all your hardscrabble super would fall into the pot to be divided between you.  It will hurt you to have to give that creep anything, when he’s been out putting new gadgets on his four wheel drive and drinking fancy single malt Scotch while you’ve been sensibly trying to assure your financial future together.  And now he wants some of your super!

But think about this if that shit happens to you – what you have in your super can never be replaced if you have to trade it away as part of the split, because of those changing rules.  Maybe let that freeloader have a bit more of the hard assets, and hang on to as much of the super pie as you can.  Down the track you ‘ll be feeling smug when all he can afford is Johnny Walker Red and a secondhand Hyundai.

Don’t buy a Porsche

That may be the wankiest piece of advice you will ever get in the Fierce Girl’s Guide.  But there was this one time, late in my career, when for the only time ever via some fluke in the market, the company had a great result and we maxed out our bonuses.  The executive team did particularly well out of it (yeah, I know, fat cat bosses).  Out of the seven of us, the car park count was:  two of the most expensive Harley Davidsons you could buy; two Porsches; one BMW.  One of us (a girl of course) put it towards the house she was in the midst of buying.  Being the tight-arse I am, I paid off my last bit of debt.

Now I’m never going to have another chance to buy a Porsche.  But every time I see some grey-headed dude drive past in one, it reminds me that I made a good decision.

What should you do if a bundle of cash falls unexpectedly into your lap?  I would apply the 80-10-10 rule.  With 80% of it, do something boring and sensible:  pay it off your mortgage, invest it, stick it into super.  With 10%, blow it on yourself and get something you’ve really lusted after but couldn’t prudently afford.  Then give the last 10% away, to your family, to charity, to some cause you’re passionate about – it will feel amazingly good.  You’ll end up with a triple shot of self-esteem, instead of that hangover feeling after you pissed the money away.

It’s not all about you

Without wanting to contradict all the good advice you get from this Guide, I want to suggest that you don’t button yourself down so much financially that you might be hurting people you love.  I asked my Fierce Girl if I was too much of a tight-arse when she was growing up.  She said, “It wasn’t too bad, but you should have taken us to Disneyland.”

She’s right, I could have afforded it, and going to Disneyland in your thirties just isn’t the same. Thus my unrelenting financial prudence was in some ways not so clever.  Precious memories can give just as good a return on investment as bluechip shares.

So, you go for it, all you Fierce Girls.  It’s a hard world out there, but you can do it.  Oh, and remember your dads love you, and we’re proud of you.

Note from Belinda: If you haven’t seen Beyonce sing Daddy Lessons with the Dixie Chicks, do yourself a favour and go here

Also, my dad and I have blogged together for ages on http://www.lifein500words.wordpress.com if you’re interested. #nerdfamily

Fierce Girl Action Plan: Part II – Super fun!

Things I like talking about: hair and make-up; weightlifting; The Bachelor; superannuation. Weird huh?

I know it sends most people to sleep – but please, stay with me! Let’s do a deal. I will jazz it up and break it down for you.  You will spend five minutes reading it. And then you then can go straight back to your important tasks like scrolling through Insta.

The thing is, you need to love super early in life to get the most from it. The earlier you start, the easier it is. (Magic of compound interest, yo!).

So here are the things I absolutely want you to know.

Choose a super fund. And give them all your money. 

You could just stay with the fund you’re in, or the one your employer chose for you. But there are two reasons you might choose your own:

  1. If you have several funds, you need to pick one to roll all your money into.
  2. You prefer to make your own choice, not what some employer chose (I don’t even trust mine to pick the Friday arvo wine without my input).

So, let’s pretend you’re at a make-up counter. That’s way more fun huh? You’re looking for a foundation and your comparison points are texture, colour match and moisturising potential. Well it’s the same for a fund. You want to look at:

Performance (over at least 5 years, not 1 year, because this shit is invested for at least 30 years). All funds have to publish their performance figures, and you can find comparison tables here.

Fees –  There used to a lot more variation in fees, but since the Government brought in ‘MySuper’ (a low-cost default scheme), the differences have shrunk. I am in a slightly higher-fee fund myself, because I have made a conscious choice to pay for ethical screening (see below) which is more work and therefore has a price premium.

Insurance – As we saw in Part I, your super fund usually comes with insurance. Make sure you aren’t losing the stuff you want or paying a lot more for it.

Your values and beliefs – Here’s something that will blow your mind. You may be invested in tobacco companies RIGHT NOW. No way huh? Yep, a whole bunch of super funds use asset managers who invest in tobacco. And coal mining. And armaments (bombs and guns!). And gambling.

How could this be? Well, you might think there are a bunch of besuited, bespectacled boffins at your super fund who invest your money. Wrong.

Most funds have a small group of boffins, who choose which fund managers will do the investing for them. It’s the same as when you go to a pub with no in-house kitchen (I’m looking at you, Darlo Bar). So you order a burger and it goes out to Grill’d. Or you order a pizza and it goes out to Crust. But then the bar-staff bring it to your table and give you napkins. This is how most super funds work. Fund managers get paid way more than Crust staff though. 

So, super funds have a bunch of fund managers who are specialists in all types of investments, such as Australian shares, or international bonds. They award them a ‘mandate’, meaning ‘Here is $200 million – can you invest it for us please?’. This is not a bad thing. It means you have really focused specialists who are (hopefully) awesome at what they do. (Who wants a burger made by Crust?). It also spreads risk – if one fund manager gets it wrong, another one probably got it right (or less wrong).

So I have nothing at all against this model. I know a bunch of these fund managers and they are nice people and passionate about what they do.

However, it means you don’t always know where your money has gone. It could be in a nasty mining company or in a wonderful renewable energy company – you just can’t tell.

So, if you care about this, you have a couple of options:

  • Choose your current super fund’s ‘green’, ‘ethical’ or ‘ESG’ option – if it has one. What that means varies, as there is no official definition, but you can ask them.
  • Choose a ‘core’ ethical fund – That’s what I have done, rolling all my money into Australian Ethical. I should disclose that they are my client, but I would spruik them anyway, because they do all their own investments (no sending out to Grill’d), use a rigorous ethical screen, and have fantastic performance. (Coal is a bad investment huh? Who knew?). I can also tell you that the people who run the fund really believe in what they do. There aren’t really any other funds that work this way, so I can’t give you an alternative to compare it to.  

Roll your money into one fund (aka ‘consolidation’)

Ok, so you have decided which is your favourite fund. Now it’s time to rescue your money from your other, unloved funds. Australians have a ridiculous amount of this unclaimed super – $16 billion! – and it’s legit like leaving $3000 in your winter coat pocket and forgetting about it. Except you’re paying fees to your wardrobe to look after it.  

Or it’s paying multiple gym memberships. Imagine if you joined a gym every January in a fit of new year fervour, got bored of it by February, but you still paid the fees. Then you start a new gym the next year, and so on. If you’ve had several jobs and acquired several super accounts, this is exactly what you’re doing. PLEASE STOP DONATING TO SUPER FUNDS.  They don’t need your money.

Donate it to your future retired self instead. She wants to spend summer in Europe in 2045, looking like Baddie Winkle. (If you haven’t seen @baddiewinkle on Instagram, you have no idea what your #retirementgoals could look like).

So, have you tried to do this in the past and there was a bunch of awful paperwork and then it was all too hard? Good news! It’s now much easier. The last few years have seen the super industry change their back-end systems (hello, 21st century!). 

Also, your chosen fund wants you to scrape up all that spare money and give it to them. So, many will have free and easy ‘rollover’ or ‘consolidation’ services that do it all for you.

Bottom line: this is a low-effort, high-value task that will have a big  impact on your final retirement savings.

Throw in some extra money.

I know, you want to spend that money on a mortgage, or a night out, or a new pair of shoes that you absolutely need and your feet may fall off if you don’t get them.

HOWEVER. Your Baddie Winkle self wants that money too, and she makes a convincing case for it.

First, she says, you’ll give less to the tax office if you make contributions from your pre-tax pay (called salary sacrifice or concessional contributions. I know, they need a branding intervention).

That means that instead of paying, say, 39 cents in the dollar in tax when you get paid, you pay  just 15 cents. Of course, you can’t access it til retirement, and you may get taxed on some it when you take it out (long story there). But overall, you come out ahead.

Secondly, Baddie says, you will get compound returns. Which basically means putting $100 away today and leaving it for 30 years gives you a far higher return than waiting for another 20 years, investing it in 2036, and then only getting 10 years’ worth of returns.

The key to super is that the longer you have it, and the earlier you start, the easier it is.

Consider taking some or all of your next payrise as a salary sacrifice (just ask your payroll person). It’s money you’ve never had, so you won’t miss it.

Or just  think about how much a month you waste on shit like wine and coffee, and match that amount. It’s like a sin tax.

Choose an investment option. Right now, if you have the default option, you have the same investments as 58-year-old Barry in accounting. Which is crazy, because he is retiring in a couple of years and you have aaaages to go. (Soz). That means you can probably tolerate more risk and get higher returns.

Picking the right investment option for your age is as simple as calling your fund and asking about it. Most of them can give advice on this issue. In general, if you are under 40, look at a growth option. (Although some funds call their default option ‘growth’ – it’s a long story – just frickin call them and ask).

And lastly, check your payslips and super fund statements. This is easy and important. When I joined my last employer, I gave them all the details for my super fund but some bright spark in payroll stuffed it up, and started paying it into their default fund. Because I am a nerd and checked, I spotted it. You need to make sure that you are getting what’s yours.

Also, checking your statement makes you feel like it’s your money and gives you an idea of whether you have enough (you probably don’t).

Ok, so, I probably lied about the five minutes thing. Sorry. I really love super.

But anyway, think about doing just one of these things and tell me what it is. Or ask a question – to me, or your fund! But maybe don’t ask Baddie – she is very busy hanging out with her celeb friends.

Just do one thing: A Fierce Girl Action Plan – Part I

Money is tricky. Debt is distressing. Saving is hard.

And so the easiest thing to do is not think about those things. Sort them out another day. Leave them to your responsible future self.

Unfortunately that future self has all the same flaws as your current self. Damn it!

So there is only one thing to do. Start Now.

“But where do I start? What can I do that will make a difference?”

Well, I like to take life advice from everybody’s favourite nun-turned-governess, Fraulein Maria. She says, “Let’s start at the very beginning”. And I think we can all agree that is a very good place to start.

Financial triage. You know that mean nurse at the hospital emergency room, who decides you wait four hours and that dude goes straight in? That’s the job of the triage nurse: to work out who is most likely die, and who is just there because their arm hurts.

You can do this with your money too. There is no perfect order, and you can do some of them at the same time, but a useful road map will look something like:

  1. Have an emergency savings stash
  2. Insure your most valuable asset
  3. Sort your super
  4. Pay off ‘bad’ debt
  5. Pay off ‘good’ debt
  6. Save for fun stuff
  7. Invest

We will look at each one in separate articles, because there is a fair bit to cover. But here are the first two. And I promise if you spend five minutes reading about insurance, we shall never speak of it again. 

(Well, not promise, as such…)

Emergency savings – This is money you can call on if you lose your job, have an accident, your fridge dies or you suffer any number ofthe disasters that befall us in this crazy little thing called life.

The right amount is different for everyone. If you have a direct line to the parental back-up system, you can get away with less. If you are really doing this adult life thing on your own, then you need at least a month’s salary – preferably three.

You can put it in a plain old bank account (ideally a different bank to your everyday banking, so you don’t see it all the time and mentally spend it on fun things).

Or if you have a mortgage, put it in an offset or redraw facility, so it reduces the interest you pay.

How do you save this amount? Basically, you spend less. Amazing, I know. Check out this post for some tips.

Insure your best asset – No, not like J.Lo insuring her butt. This is about insuring yourself and your earning capacity.

Boring, I know. But like cleansing and moisturising on a daily basis, insurance is a dull but necessary part of life. So what do you need?

Life insurance – it’s up for debate, but my view is that this is mainly needed if other people depend on you and your income. i.e. if you have kids, or you have a mortgage with a partner. If you’re single or your partner looks after himself/herself, having life insurance is kind of like being on the pill when you aren’t getting any action – a bit of a waste.

HOT TIP: You most likely have some life insurance already, because it comes as a default in super funds. Yes, you are probably paying for it RIGHT NOW. And if the only one who needs your money once you’re dead is the drycleaner, who has half your wardrobe waiting to pick up, you may consider opting out (which you totally can).

TPD – This is for total and permanent disability. Like serious Million Dollar Baby stuff.  You get a payout if you are very seriously buggered up and unable to work ever again. That doesn’t mean ‘I fucking hate my boss and also I hurt my back’. It means you are very, very disabled. Usually physically – it’s often hard to prove permanent mental disability.

Again, this is usually a default option in superannuation, and I would argue it’s better to keep it. If you were, God forbid, in a position to need it, you would be really glad to have it. You may even want more than the default amount.

Trauma – similar to the above, but a lower bar to qualify for it. Say you’re in a really bad car accident and can’t work for months, this will help tide you over and pay for all the crazy costs. It’s generally not included in your default super, so talk to a financial adviser, insurance broker or insurance provider about whether it’s for you.

Salary Protection – This is the underloved but very useful member of the insurance family. Say you’re diagnosed with aggressive breast cancer at age 30 (as happened to a friend of mine. No, not Kylie Minogue, an actual real life friend). You have to take six months off work. How do you live? You can’t rely on social security – that shit is hard and slow to access – you will legitimately be living on the streets if and when you ever get a dollar from the Government.

So, unless you relish the thought of cancelling Netflix, drinking Nescafe and taking goon to dinner parties (uni life!) take a good look at this option. You can often get it through a super fund, where  it comes out of your super payments, but you normally have to ask for it. If you get it outside of super, the premiums are even tax deductible. I once had it covered by a generous employer.

You can get a cheaper version, where you get paid out for two years, or the fancy one where it goes until you’re 65. You can also choose how long it takes to kick in (1 – 3 months usually) and that affects the cost.

But the key point here is: think about getting it.

Health Insurance – Look, the public health system isn’t going to let you die just because you don’t have insurance. But you might have to share a room with a loud, weird or stinky person if you’re in hospital. You might have to wait a couple of years for knee surgery, with really painful knees, instead of having it on-demand. You might not be able to afford IVF if you ever need it.

It’s a lifestyle choice. I personally hate paying it, but do it anyway, because I can afford it and, as my ex-husband once said ‘I’m obsessed with insurance’. (Ha! As if! I don’t even know anything about it!).

But don’t be afraid to shop around for a better deal. I used comparethemarket.com.au to do that, because I like the meerkat. But you could try iSelect or other comparison sites. (HOT TIP: these are free to use, because the winning insurer pays the site a commission).

What’s all this stuff about superannuation? Well by some quirk of history, your retirement savings have become wrapped up with insurance. You generally get allocated default Life & TPD insurance when you join, and pay from your contributions. Salary protection and trauma can be paid the same way but you normally have to request them.

Now, you are under no obligation to use your super fund’s insurance (although it can be handy). You can buy any of these products directly from an insurance company. I’m not here to tell you one is better than the other – just make sure you have looked at what you have.

The bottom line

 The action points around this are:

  1. Check your superannuation statement, (or call your fund,  because I know you can’t find it). Find out what insurance you have, and how much you’re paying for it.
  2. Work out how much you need and where the gaps are. MoneySmart has some good stuff on this. Financial advisers and insurance brokers are also helpful. Australians are generally underinsured, but you may be overinsured too, if you don’t want life insurance, for example. Or, if you have multiple super funds, you could be paying for several life insurance products. Sort that shit out now. Please.
  3. Shop around for a better deal on existing insurance by using a comparison site. But if you do this, make sure you read the fine print, to make sure you’re not giving up something you need. Yes, reading the fine print is an important adult skill!

So, there you go, insurance is “Simples!”

meerkat

Disclaimer: I’m not a financial adviser and this isn’t finance advice. If you think you need professional advice, speak to your super fund or an adviser.

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