The start of the new year is the perfect time to stop and take stock of your plans and goals. Aside from work, home and family goals, you should also take a look at your finances.
Getting your finances in order doesn’t have to mean baked beans on toast every day next year. Here’s a guide of the top things to do in 2019 to save for your future – without spending any less.
"Think of investment markets as a zero-sum game. If your fund is charging too much or is lazy in investment returns (say, by keeping your savings in their underperforming funds) it may be very good for the fund, but bad for you."
“The biggest problem in superannuation is being in the wrong fund,” says superannuation expert Michael Rafferty, an associate professor at RMIT University.
“Think of investment markets as a zero-sum game. If your fund is charging too much or is lazy in investment returns (say, by keeping your savings in their underperforming funds) it may be very good for the fund, but bad for you.”
“Our research suggests you can boost your retirement savings by about 50 per cent over your working life just by finding a low-cost fund that doesn’t keep all your funds inside the fund. As a pretty good shorthand, this means put your savings in a not-for-profit superannuation fund.”
Not-for-profit funds are those that are run only to benefit members, have low fees and have never paid commissions to financial planners - such as Industry SuperFunds.
Another crucial way to save more with superannuation is by ensuring you only have one account.
“Fees on multiple superannuation accounts erode many people’s balances and overall wealth accumulation,” says Dr Tracey West, a household and personal finance expert from Griffith University’s Centre for Personal Finance and Superannuation.
"The Productivity Commission estimated that a full-time worker could be six to 25 per cent better off by having one low-fee account."
“It’s definitely worth checking your super by registering with the ATO [Australian Taxation Office] via myGov to consolidate your funds.”
University of Sydney Finance Professor Dr Susan Thorp suggests choosing a low-fee MySuper fund.
“The Productivity Commission estimated that a full-time worker could be six to 25 per cent better off by having one low-fee account,” Dr Thorp says.
Ensuring you’re being paid the correct super from your employer, finding any lost or unclaimed super and asking whether you can salary sacrifice (contribute pre-tax from your income to your super account) are other great ways to supercharge your savings.
Don’t be complacent – there are savings to be had everywhere, you just need to shop around.
“Be willing to invest the time to switch providers, whether it be banking, electricity, phone or insurance,” says Dr West.
“Consumers can save hundreds of dollars a year by engaging in this process and overcoming the ‘lazy tax’ that many service providers count on to make their profits.”
The Australian Government’s Energy Made Easy website, for example, can help you shop around for the best deal on gas and electricity in your area.
Associate Professor Rafferty concurs, noting “all the financial expenses and fixed contracts we write for phones and utilities drain our capacity to save”.
“Don’t pay for options in those contracts you don’t use – like unused gym memberships – because these options are costly.”
Save more by choosing a basic bank account that has no account keeping fees, free monthly statements, no minimum deposit amounts and no overdrawn fees.
Alternatively, find a high-interest account that’ll make your money work harder for you. Comparison websites such as Choice can be handy to compare your options, but always read the fine print regarding fees and access to your money.
OK, spending less works pretty well too
While we’re focusing on ways to save “without spending less”, old-fashioned belt tightening – particularly when it comes to luxuries – still fits the bill because it means you can “spend” this cash in future-friendlier ways. For example, multiply that $5 flat white by 365 and ruminate on where this money could be better spent.
“Reducing impulse purchases, planning shopping trips, investing time to find better deals on household bills, and eating at home more are a few ways that can help save money,” Dr West says.
Apps such as ASIC’s Moneysmart TrackMySPEND tool or its Budget planner can be great visual tools to see where you’re currently spending too much money on unnecessary items.
Other measures, which might require a complete change in mindset, include giving homemade gifts to people for Christmas, borrowing books from the library, and buying pre-loved gear from the op-shop. The beauty of these things is they’re environmentally-friendly too.
"Reducing impulse purchases, planning shopping trips, investing time to find better deals on household bills, and eating at home more are a few ways that can help save money."
Ultimately, the money you save from such measures can be “spent” building your future with additional superannuation contributions or by growing your savings account instead.
Associate Professor Rafferty also suggests putting your “savings” on your mortgage, not just your super.
“You can significantly reduce your post-retirement financial needs if you retire owning your home without a mortgage,” he says.
“You probably can’t get a better return and you still have a buffer for any unexpected life course events.”
This article was first published by The Daily Telegraph on 29 January 2019. The information referred to may change from the date of publication and care should be taken when relying on such information.