Spring has arrived, and for some people this is the time to open windows, clear out cobwebs and freshen up your living space. It’s also a great time to freshen up your finances and get your goals back on track.
A budget is an information source you can use to get your finances running efficiently and keep financial goals on track. If your spending habits have changed or you don’t seem to be making progress as fast as you planned, now might be a good time to check your budget.
A budget calculator can make the budgeting task easier. If you pay for most things electronically, go over your bank transactions for the last few months to get an accurate picture of where your money is going and don’t forget to include expenses you pay less frequently such as car registration or insurance premiums.
Having cleaned up your budget, you should know how much is left each pay to save towards your financial goals. Set yourself at least one financial goal and cost it out, Moneysmart’s savings goals calculator can help you do this. Now you have a reason to save and an idea of how long it will take. Keep savings in a separate account so you don’t accidentally spend them.
With interest rates so low, you may be looking for alternate investments that pay a higher rate of return. If your financial goal(s) are longer term, say 5+ years, you might think about putting your money into shares or property, either directly or through an investment fund, such as a managed fund or exchange traded fund (ETF). You’ll be taking on more short-term risk but should be rewarded with better long-term returns. For more information on this topic see our investing money guide.
Your super may be locked away until retirement but that doesn’t mean you can’t tinker with it now. A 25 year old Defence member with an accumulation fund, like ADF Super, earning $75,000 a year could increase their super balance at age 60 by more than $300,000 (estimated), just by choosing a different investment option now (see graph below). An extra 2% on average, compounded over the next 35 years, buys you a lot more choices in the future.
Even defined benefit (MSBS or DFRDB) members can potentially increase their member and ancillary account by choosing a different investment option.
Another thing you have control over now is whether to boost your balance with personal super contributions. Before tax (salary sacrificed) contributions reduce taxable income, reducing the tax you pay, and grow your super faster. For defined benefit members, salary sacrificed super contributions do not count towards your maximum benefit limits (MBLs).
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