Women often focus on others and take on the carer role for family, so it is important for women to value themselves. Here are five tips to make the most of your finances so you can reduce stress, reach your goals and enjoy life.
By Mary Campbell, Principal Financial Planner at Gold Leaf Financial Services
1. Cash and savings
The foundation to your finances is how much money you have set aside for a rainy day. Setting up an automatic transfer the day after you get paid, from your normal bank account to another savings high interest account (with a different bank) will mean the money is out of sight so you will not miss it. Experts recommend having three months’ income in savings, meaning you will have money should your car break down, if you lose your job and it takes a few months to find another or, if you have to travel interstate or overseas due to illness or death in the family.
If you sometimes struggle to pay the larger bills when they are due, you can open another savings bank account for bills, work out how much you need to put aside from your pay and set up an automatic transfer so you have the money when the next bill arrives.
Many people are unaware of exactly what they spend, and this is where a budget can help. There are tools to make this an easier process these days, from phone apps, bank websites, excel and of course pen and paper. Once you record your income and expenses, often you will be surprised by how much you spend on some things or activities and how little you spend on others. From there, you can make choices and spend money on what is important to you and save for your short, medium and long term goals.
2. Protect your lifestyle and family
Most people know someone who has had cancer, been in a car accident and needed time off work or passed away at a young age. Have you considered what would happen if you or your partner became ill or disabled and were not able to work? Would you still be able to pay the mortgage, school fees, as well as potentially additional medical care? The idea of income protection insurance, medical trauma insurance and disability insurance is to help you financially so you can focus on what really matters, getting better and giving you and your family the best quality of life. Life insurance can help if you or your partner passes away. You may have some insurance cover already through your super, however, it is worth checking if this is enough to live a comfortable life should something happen.
2. Ethical investment and superannuation
What world would you like your children and grandchildren to inherit? Are your investments and super contributing to creating that world? If you have worked in Australia you have superannuation (super), and that means you have investments. Do you know what your super and investments are supporting? You may be surprised to find your super, shares or funds are invested in tobacco, armaments, coal seam gas and companies with human rights concerns. More and more people are choosing to invest their super and money in line with their values in areas such as education, healthcare, renewable energy and recycling.
The latest research from the Responsible Investment Association Australasia (RIAA) shows ethical investments perform well financially over time. In fact, the RIAA research found Ethical Investment (also known as Responsible Investment) Australian shares funds outperformed the market across one, three, five and 10 years¹.
4. Grow your wealth
Compound interest, where you earn interest on interest, can make a huge difference to your wealth over time. This means the sooner you start saving and investing the better and it is never too late. These days you can start investments with small amounts of money, for example you can set up a regular direct debit from your bank account to invest $100 each month and watch this grow over time.
5. Add to super
Superannuation is a tax effective way to save for retirement. Small contributions now can make a big difference to your super balance and savings for retirement. Did you know the average Australian woman retires with $92,000 less than the average Australian man?² Time out of the workforce, combined with part time or casual work while looking after children, elderly parents and other family members can significantly reduce the amount of money women have at retirement. According to research by Glassdoor³, Australian women on average earn about 83 cents for every $1 a man earns, which also means a lower dollar amount is going to super for each hour a woman works.
By adding a small amount of money each fortnight, you can boost your super. For example, if a woman at age 35 adds $50 per fortnight to her super, this could add up to an additional $122,7994 available at retirement. You may consider salary sacrificing to super, which may save tax and boost your super at the same time. Women on average live longer than men, so by adding to super now you can help fund a comfortable retirement.
To learn more about budgets, super, investing, borrowing and managing money, check out the Australian Government Moneysmart website www.moneysmart.gov.au.
Disclaimer and references
Any advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.
Mary Campbell and Gold Leaf Financial Services are Authorised Representatives of GWM Adviser Services Limited trading as MLC Financial Planning, Australian Financial Services Licensee.