Making Your Money Work

This website can help you:

  • Use your money more wisely.
  • Save for what you really want.
  • Manage your loans, insurance, super and retirement saving.

The ADF Financial Services Consumer Centre and the Australian Securities and Investments Commission (ASIC) want you to be well informed and confident about financial decisions. This website can start you off on the right foot with general tips and explanations. ASIC’s ideas may not apply to your particular circumstances. If you want personal financial advice, you may need to see a licensed financial adviser.

Key tips for managing your money

  • Decide what you really want, and focus on your most important goals.
  • Start saving now: you can start small and increase your savings gradually (they’ll grow with interest, too).
  • Always check the facts: ask questions and get professional advice. If you aren’t comfortable or don’t understand, don’t go ahead.

Throughout this website we have used tables to work out budgets and so on. Copy them and add your own details to see how our suggestions might work for you.

How are you going now?

Taking stock of your financial situation is the first step in managing your money. Ask yourself two important questions:

  1. Are you better off today than a year ago? Look at what you own and what you owe.
  2. Are you saving any money? Look at your income and your expenses.

Are you better off today than a year ago?

Write down what you own and what you owe today and a year ago in a table, like the one in our example opposite for Nat and Sam. It’s fairly easy to make a few estimates, and then use your mortgage, credit cards, bank accounts and superannuation statements to fill in the blanks.

A year ago, Nat and Sam bought a home and a new car. Now, their home is worth more, their super has grown and their car loan is coming down. Unfortunately their credit card debt has gone up, and they don’t have much saved for unexpected bills or time without work.

If Nat and Sam were 25 years old, they’d be pretty comfortable, because they have plenty of time to pay off their mortgage and build up their super. If they were 55 years old, they’d be facing some serious problems with so much debt and so little super, even if they kept working till 65. When you draw up a similar table for yourself, first look at what changes have occurred. Then think about your age and how much longer you expect to work to see if you are likely to be comfortable or if you face some serious issues.

What Nat and Sam own and own
Value today Value a year ago Change
What they own
Home 342,000 320,000 Up
Car 10,000 15,000 Down
Superannuation 55,000 45,000 Up
Total owned 407,000 380,000 +27,000 up 7%
What they owe Debt today Debt a year ago Change
Mortgage 246,440 250,00 Down
Car loan 10,345 15,000 Down
Credit cards 3,000 1,800 Up
Total owned 259,785 266,800 -7,015 down 3%
Nat and Sam’s net worth 147,215 113,200 +34,015 up 30%

Are you saving any money?

Record all your income and expenses for a month, as we have for Nat and Sam in the table opposite.

List each loan repayment as a separate expense, then convert everything into monthly figures.

Nat and Sam, who both work and have two children, are doing well to save $230 each month. However, their debts take up a lot of their money, and $230 won’t stretch far. There’s also not much room for them to put extra money towards paying off loans or building up money for their children’s education.

Looking at your own income and expenses is a first step in budgeting, and shows if you’re making progress, standing still, or going backwards.

Income and expenses Converted to monthly amounts
Sam’s take home pay $1,572 fortnightly $3,417
Nat’s take home pay, works part time $960 fortnightly $2,087
Family Tax Benefit $2,352 yearly $196
Total income $5,700
Home mortgage repayments $1,843 monthly $1843
Car loan repayments $463 monthly $463
Credit loan repayments $492 yearly $41
Car running costs $4,356 yearly $363
Food and groceries $250 weekly $1,083
Holidays, entertainment $100 weekly $433
All other costs (school, clothing, medical, insurance, repairs, rates, water, electricity) $1,244 monthly $1,244
Total expenses $5,470
What Nat and Sam save each month +$230

Planning your finances

Your own plan will help you control your money. If you set some goals, make a plan and stick to it, you can make progress even with ups and downs along the way.

What do you want to achieve?

Would you like to:

  • Pay off your credit cards?
  • Buy a new car and pay it off quickly?
  • Buy a home and pay it off quickly?
  • Save for your children’s education?
  • Put some money aside for your retirement?

These are some typical financial goals. Others include paying off personal loans or saving up for a holiday. Write down your own goals as the first step in your plan.

How long will it take to reach your goals?

Some goals may be urgent, for example getting credit card debts under control and paid off. Remember how Nat and Sam’s credit card debt had gone up? Paying almost $500 each year for just $3,000 (16.5% interest) is very expensive, so they would probably need to fix this soon.

Longer term goals, for example buying a home or saving for retirement, can be just as important. Because they cost a lot of money, the sooner you start working towards them, the sooner you can achieve them, even if you can only spare a small amount of money. It can cost a lot more to do these things later.

In the table on the next page, based on Nat and Sam’s situation, we have:

  • drawn up some financial goals
  • estimated how long they may take,
  • and noted some things to do to get started.

Using your own goals, you could draw up a similar table for yourself. If you’re not sure about some of the things you need to do, come back to them after reading the ideas in this website.

Nat and Sam’s financial goals, time needed and how to start
Goals Time needed Their strategy
Pay off credit card In two years
  • Stop using the cards. Instead, use a card that debits their savings account, so they spend their own money, not pay to use someone else’s.
  • Check how much they need to pay monthly to get rid of the debt within 2 years, and stick to that amount each month.
Pay off new car In three years
  • Work out how much they can afford to pay per month, including the cost of insurance.
  • Choose a model within their price range and shop around for the best price
  • Make the biggest deposit they can
  • Shop around fro the best loan, as well as the car. Maybe extend their mortgage, so long as they pay off quickly the extra they borrowed.
Buy a home and pay it off Long term
  • Work out how much they can afford each month, and look around in their price range.
  • Shop around for interest rate.
  • Make payments fortnightly and pay a bit more than required each time.
  • If it won’t cost more in interest, a redraw or offset savings account can let you put any extra money you may have, including your pay cheque, on your mortgage.
Save for children’s education Medium to long term
  • Set up a long term investment account that they won’t touch. Check personal finance magazines about suitable long term investments.
Put some money aside for retirement Long term
  • Put more money into superannuation (more on super later).
  • If their funds offer investment choice, consider which option best meets their needs.

How much will each goal cost?

The next step in planning your finances is to estimate how much your goals may cost, and compare that cost with what you are saving. Then you can see if there’s a gap to close.

Estimating costs is fairly straightforward for the goals you have already started, such as loans you are paying off. Useful internet loan calculators can show how much a loan will cost, and how your repayments are affected by shorter or longer term loans. To estimate long term savings and investments, we will show you some calculations for Nat and Sam, which you could use or adjust. Later we’ll offer some extra figures on super and saving for retirement.

What Nat and Sam’s financial goals will cost
Nat and Sam’s goals On track? Cost / month How they worked this out
Repay a $15,000 car loan in three years Yes $463 Borrowed more against their home loan at 7% interest, and increased their payments by $463 to pay the car off in 3 years.
Pay off $3,000 credit card debt in two years Yes $148 Interest is 16.5%. Stopped using the cards immediately.
Buy a $320,000 home, pay it off in 25 years Yes $1,843 Borrowed $250,000 at 7.47% interest. (Their families helped with their deposit of $70,000 plus $15,000 for costs.)
Save $21,000 towards children’s tertiary education in 10 years. Not started $120 Invest an initial $2000, and contribute for 10 years, earning 5% after tax each year.
Make extra super contributions Not started $363 ‘Salary Sacrifice’ an extra 10% of salary.
Total cost per month $2,937

A gap between your goals and your savings?

Is there a gap between what you can save each month and the cost of your goals?

1. What’s the total cost of Nat and Sam’s goals each month? $2,937
2. Subtract the total amount they are already paying for what’s on track -$2,306
3. Here’s the cost of what they have still got to pay for $631
4. Subtract what they are saving now -$230
5. Here’s the gap between their savings and the cost of all their goals $401

The gap between Nat and Sam’s savings and their goals are shown in the table here. Nat and Sam’s goals cost more than they can spare from the $161 they save each month. They can’t afford to start everything today, but they can afford to do some things that will close the gap within a fairly short time.

Suppose they grit their teeth, stop using their credit cards and use what they save to pay off their cards in two years. Around the same time, they will also have paid off the car. Their costs then drop and so their savings increase to $665 per month.

So in two years, there’s extra money to pay off their home loan faster and put some money aside for the children’s education. They can achieve their goals if they make a start, even if it takes two years longer than they would have liked.

Closing the gap means finding ways to free up cash that you can devote to your financial goals. Usually the top priority is paying off high-interest loans. When you achieve that goal, you can channel the extra money you save into your next goal, and so on.

Budgeting and dealing with unexpected events

What if you’re not saving any money, not saving enough or unexpected events throw your finances into disarray? Budgeting and being prepared for unexpected events can change things for the better, often without too much pain.

Budgeting: what you need, and what you want

The best tool for finding extra money is a budget, much like Nat and Sam’s record of income and expenses. Look at the things you need – the essentials, such as housing and food – and those you simply like to have, or want. When you need to trim the budget, cut back on the ‘wants’ first – things that aren’t essential for everyday life. Don’t cut out all the wants, because if your budget’s too tight, it’s not going to work.

How can you save more?

The best way to save is to put money away as soon as you are paid and before you spend.

Savings tips
What you can do Potential savings How it could work
Have and easy access cash account for everyday needs, with a debit card attached Reduces needs to use credit card; earns interest Get your pay deposited into this account
Save or invest a fixed amount of money every pay in a separate account More for your future goals, and an emergency source of money Get your employer to pay direct to your account or have a fund manager direct debit your bank account
Save your pay rises, bonuses, special payments or tax refund Savings build up significantly over time as you continue to live within your existing budget Increase your automatic savings amount.

Immediately invest your extra money

Pay your mortgage fortnightly, and pay an extra 5-10% extra on your mortgage every month Saves interest costs and pays off your mortgage sooner Get your lender to deduct your mortgage and extra payments fortnightly
Budget a specific amount for fun, leisure & personal expenses Controls impulse buying Makes it easier to stick to your budget
Put your change into a savings jar at the end of each day Creates a little pot of ready cash Use this money for small personal expenses
Make extra superannuation contributions More money for retirement and less personal income tax paid Discuss with your pay office, but make sure that you can afford to make extra contributions
Tips for cutting costs
Ways to cut costs Potential savings
Pay by cash or EFTPOS instead of using credit Encourages saving because you use your own money (which is limited) instead of borrowing it. Saves interest on credit cards
Pay credit cards off in full each month Saves 16% per year on your outstanding balance
Use lay-by for Christmas shopping or save small amounts over the year $25 per week would mean $1,300 in Christmas cash, avoiding high credit card bills in the New Year and interest payments
Combine multiple accounts, such as cheque and savings accounts at the bank, and separate superannuation funds Saves fees and charges
Use internet or phone banking May save bank fees
Take your own lunch to work If you save $4 per day, that’s $1,000 a year
Save for your next car and choose a lower-priced model A big deposit reduces the total purchase price, and you may also get savings on borrowing and insurance costs
Use pre-paid cards for your children’s mobile phones Make your kids top up the card themselves if they spend too fast
Use self-catering holiday accommodation Saves on eating out at cafés, hotels and restaurants

What if you can’t pay your bills?

Stay calm and work out what you can reasonably pay each person to whom you owe money (your creditors), considering both your living costs, rent or mortgage, and all your debts. Not-for-profit financial counselors can help you.

Contact your creditors promptly and tell them you are having financial difficulties and want to discuss repayment arrangements. This is especially important if creditors hold security over your home, car or other assets. Offer only what you can reasonably afford to pay, and offer something to each creditor. Try to cover interest or charges applying to the debt. Ask if the creditor will agree to reduce the interest on the debt until you can get back on your feet. Confirm any agreement in writing.

What if a family member gets retrenched? Before your family member makes any decisions, takes any money or signs any documents, find out the legal entitlements and the best way for your family to deal with any money received. Centrelink’s Financial Information Service conducts seminars on retrenchment and financial issues and can offer face-to-face interviews so your family member can find out about all of the options.

It’s always sensible to ask someone who understands the terms of employment and the superannuation benefits, how much tax needs to be paid and what makes the best sense financially. If your family member belongs to a union, they may be able to get free advice.

What if you get a windfall?

Above all, go back to your personal goals. Consider paying off all personal debts first and then your home mortgage. If there’s still money left over, consider making a personal contribution to superannuation, a contribution to your spouse’s superannuation or starting to invest. Windfalls can easily disappear through unplanned spending or hasty investments. For large sums of money, you may need the help of a financial adviser.

More information? Download FIDO’s budget planner from

Managing your loans and your mortgage

Getting into debt is far easier than getting out of it. If you shop around and manage your loans, they won’t make a mess of your finances.

When should you borrow?

Look at the total cost including all the interest before you borrow. Only borrow if you are sure you can afford the repayments.

For things you just want, such as a holiday, it’s cheaper to save up for them. For example, Nat and Sam’s $3,000 two-week holiday, paid on their credit cards, took them two years’ hard saving to pay off, and cost them an extra $534 in interest. Even for things you may need, such as a car, it’s cheaper to save if you can.

If you do borrow, pick the shortest repayment period you can afford, especially for anything that you use up quickly, like a holiday, or that loses value, like a car.

For a home, almost everyone has to borrow because it’s hardly realistic to save up for one. In this case, it can make good sense to borrow, because a home could increase in value, perhaps even faster than the interest rate you will pay.

How much should you borrow?

It pays to be cautious. Lenders may offer you a bigger loan than you would feel comfortable with. They may increase your credit card limit without asking and without checking if you really can repay higher debt. Interest rates could go up, and if you borrow too much even a small rise could get you into trouble.

Do a trial run before you borrow. Try saving an amount equal to your loan repayments each month, or saving the difference between your rent and home loan repayments (include the one-off costs, such as stamp duty and moving house).

Could you afford to do that for the full term of the loan, maybe for 20 or 25 years?

You may be overstretching yourself if:

  • your total loan repayments cost more than half your take home pay
  • your home loan repayments cost more than a third of your take home pay.

What’s the best loan?

Usually it’s the loan with the lowest interest rate. This is often the single most important thing to get right, so shop around. Even small differences in interest rates can make a big difference to the total amount you will pay, especially with long-term loans. Extra features that cost you more in interest rates may just waste money.

Look for the ‘comparison rate’ which takes fees into account. ‘Honeymoon’, ‘introductory’ and ‘low start’ loans may sound appealing, but once the honeymoon ends, you could end up in a more expensive loan.

Check that your loan allows you to make extra payments, and if there are any fees for doing so.

Loans with fixed rates may:

  • not allow extra payments or, if they do, will commonly limit the amount you can repay over the life of the loan
  • charge very high extra fees for paying out the loan early.

Where to find loans

The CANNEX website at is an excellent place to start. Magazines and newspaper columns also give a good idea of current rates.

Do consider all types of lenders: credit unions, building societies, banks and non-bank lenders. Loans with the lowest rates of interest may not be the most heavily advertised. Mortgage brokers may not offer all the low interest home loans available.

Which loans should you pay off first?

Pay at least the minimum amount due to every lender on time. If you can afford extra payments, start with the loan charging the highest interest. Only put extra into other loans once the most expensive one has been paid off. The lowest-priority loan is one that has tax-deductible interest – for an investment property loan, for instance.

Why pay loans and mortgages off faster?

Paying off your loan faster can save you thousands in interest payments.

One simple way to get ahead is to pay your loan fortnightly instead of monthly. In effect, you make the equivalent of 13 monthly payments a year instead of 12. Fortnightly payments will cut four years off a 20-year home loan of $200,000. And if you can pay an extra $100 per fortnight, you will cut seven years off your loan.

If you have some money to spare, consider reducing your loan balance. Paying $1,000 off a credit card charging you 16% interest obviously beats putting the same money into a term deposit earning 5.5%. Also, remember the effect of tax. Paying $1,000 off a loan charging interest of 6.5%, saves a full $65. Even if you could invest the money somewhere else that earned $65, you would then have to pay tax.

Be careful about claims that refinancing will pay off your loan faster. You can only pay off loans faster by paying more money. Only refinance if you are sure the savings outweigh the costs.

Protecting yourself, your family and your property

Why insurance really matters

Insurance helps cover the costs of unfortunate events, such as losing your living because of illness or disability, or your home in a fire. It protects the financial safety of you and your family, and your property.

Common risks and how to insure against them
Common risks Insurance product What can reduce your insurance premiums
Damage or loss to a home building and fixtures Home building insurance Adequate maintenance, smoke detectors, sound electrical wiring
Loss of home contents Home contents insurance Window and door locks, burglar alarms, smoke detectors
Damage to someone else’s vehicle or property Third party property insurance An accident free driving record
Loss or damage to your motor vehicle Comprehensive insurance Security devices
Death and total and permanent disability Increased life and total and permanent disability insurance through your superannuation fund or a personal policy Using your super fund if the policy suits you
Sickness and temporary disability Income protection insurance (this is tax deductible)

Private hospital medical insurance

Trauma insurance

Check if your super fund offers suitable insurance
Unemployment Generally you can’t insure against unemployment Not applicable

How much cover do you need?

If you make a claim, the maximum an insurer will pay you is the amount of money, or ‘sum insured’, in your contract. That sum has to cover everything.

Most people underestimate the value of what they own and ‘under-insure’. If you under-insure, you won’t get enough money to cover the total cost of your loss. For example, the ‘sum insured’ for your home must be enough to cover all your costs if your home were destroyed, including rubbish removal, alternative housing and rebuilding costs.

Check your cover regularly, so that your sum insured keeps up with building costs and any renovations. Increasing your sum insured won’t necessarily cost a lot of money. Shopping around, or choosing a higher excess, could get you more insurance at about the same cost as your current policy.

Although many insurers have internet calculators to help you work out a reasonable sum insured, not all calculators are the same. Use a calculator that asks you lots of questions (up to 30) about your home, because you’re much more likely to get a more accurate sum insured.

How do you get the best cover?

Shop around and get a few quotes. To give you a quote, the insurer will ask you various questions. Answer all questions fully and honestly. You must tell them all the facts that could be relevant, otherwise the insurer may be entitled to refuse or reduce payment on a claim. You may save on insurance premiums by agreeing to pay an ‘excess’.

If you can afford to pay for the first $500 of damage to your home or contents, you may get a reduced premium. Packaging several insurance policies with one insurer may also save money.

Compare the actual cover offered in each quote. Go through what the policy covers and what it excludes with a fine-tooth comb. Many people find out only too late that something was not covered. Insurance covers only what’s defined in the policy and nothing else. A cheap policy that doesn’t cover what you need could be worse than a more expensive policy with unnecessary features. If you have special needs, seek expert advice before you take out insurance cover.

Getting the most from your super

Your superannuation can be a safe, low-cost and tax-effective way of saving for retirement if you make the most of it.

Super’s for retirement, not before

To get your superannuation, anyone born after June 1964 must be over age 60 (reducing to age 55 if born before July 1960). You can continue working part-time, using part of your super for extra income. Only in cases of severe financial hardship or compassionate grounds can you get any money earlier. Otherwise, early access to your super is illegal.

Will your employer’s contributions be enough?

Possibly only if you join a fund in your early twenties, take no more than a year or two out of the workforce and work until you retire at 65.

In reality, many people may have longer breaks from the workforce, and so employer contributions by themselves may not give you a comfortable retirement.

Should you contribute more?

Contributing a bit more to your superannuation will make a real difference to your retirement savings. If you contribute extra from your after-tax income, you don’t have to pay contributions tax on those extra contributions, and they get more favourable tax treatment when you retire. Also, you may receive a co-contribution from the government.

For example (see table below), Nat has $20,000 in super at age 35 and a gross salary of around $29,750, so is eligible for the co-contribution. Nat’s thinking about contributing an extra $1,000 after-tax, and here’s the difference this could make.

Nat’s superannuation account balance in today’s dollars*
After 10 years After 20 years After 30 years, at age 65
Employer’s 9% contributions only $55,000 $107,000 $182,000
Employer’s 9% plus an extra $1,000 after-taxcontributions, with $1,500 co-contribution $82,000 $169,000 $291,000

*Using the ‘FIDO superannuation calculator’ on ASIC’s consumer website, and assumed Nat was in a typical ‘industry fund’. See Your guide to the FIDO super calculator for our assumptions and reasons.

For higher income earners, if your employer allows you to contribute extra from your pre-tax income, you can also benefit. (If you are eligible to receive a government co-contribution, you may be better off making after-tax contributions. This applies if you earn less than $58,980 each year.)

In our example below, Sam’s colleague Alex, aged 40, earns a gross salary of $70,000 and has $50,000 in super now. Alex’s thinking about contributing an extra 5% in pre-tax salary, and here’s the difference this could make.

Alex’s superannuation account balance in today’s dollars*
After 10 years After 20 years After 30 years, at age 65
Employer’s 9% contributions only $137,000 $263,000 $346,000
Employer’s 9% plus an extra 5% pre-taxsalary contributions $173,000 $351,000 $469,000

*Using ‘FIDO superannuation calculator’, and assuming Alex’s in a typical ‘industry fund’. See Your guide to the FIDO super calculator for our assumptions and reasons.

Extra money you contribute must stay in your superannuation until you retire, so only contribute extra money that you can set aside until then. Otherwise, consider investing some money outside superannuation.

Why do fees matter?

Every dollar paid in fees, especially in ‘ongoing’ fees, reduces the final payment you get. If you can, choose the lowest cost fund that meets your needs. In a fund with higher fees, you need a higher return just to come out even.

Sam’s choice of funds
Sam’s superannuation account balance in today’s dollars*
After 10 years After 20 years After 30 years, at age 65
Sam’s current fund (0.55% of balance plus $52 fee each year adjusted for inflation) $99,000 $192,000 $327,000
Sam’s alternative fund (2% of balance, no $52 charged) $90,000 $162,000 $254,000
Effect of fees $9,000 $30,000 $73,000

*Using ‘FIDO super calculator’. See Your guide to the FIDO super calculator for out assumptions and reasons.

Suppose Sam’s about to change jobs and deciding whether to stay in the current fund or switch to another one. In our example above, Sam’s current fund charges around 0.55% each year in ongoing fees plus another $52 each year. Another fund charges 2% each year and offers about 80 different investment options and Sam can switch between options daily.

Sam’s got $35,000 in super now. Let’s assume both funds earn the same return before fees and taxes, so you can just compare the effect of the different fees. Especially over a long time, just 1.3% extra in fees can make a big difference. So Sam has to consider carefully if the extra features are worth the cost. Most industry and corporate superannuation funds will cost you less than retail funds, although retail funds may offer services, choices or other features you may want. Higher fees do not guarantee higher returns.

Which investment strategy?

You may be able to choose how your superannuation is invested.

Before you make a choice, read about the risks and returns for each investment strategy you are offered.

Consider your personal circumstances. If you are close to retiring age, and plan to draw on your superannuation money as soon as you retire, you might choose a low-risk, low-return fund. If you have much of your working life ahead of you, or you might retire without drawing on all your superannuation, you may accept a greater risk to increase the chances of growth.

Historically it has proved extremely difficult to beat rises in the cost of living without investing in assets like shares and property. That means accepting the risk of losses in bad years. Professional advisers would expect most people, even those who have retired, to invest in some riskier assets, as well as in cash and fixed interest.

Rate of return for 20 years, reinvesting all returns Start with Finish up with
4% per year $10,000 $22,000
6% per year $10,000 $32,000

Even small differences in returns over a long time add up to a lot of money, see our example in the table above. In this case, compounding an extra 2% over 20 years earned another $10,000.

Retiring: How much money will you need?

How much will you need each year?

Look at your current expenses and work out how they would change if you were retired.For example, if your mortgage will be paid off by the time you retire, you can cancel out this amount. If your children will be independent, you may need less for living expenses.

The table below shows our example of expenses for a couple with two children and a mortgage, who want a retirement income of $34,000 a year. Allow for any continuing or new expenses in retirement. You may need to save more if you:

  • plan to retire before 65
  • pay rent for your home
  • still have debts to pay off
  • cannot do any part-time paid work once you retire (for instance, because of ill-health)
  • have extra expenses, such as special health care needs
  • want to travel
  • will have to pay for a car, computer or mobile phone that your employer pays for now.
Example of expenses for a couple with two children and a mortgage, who want a retirement income of $34,000 a year
Expense Current yearly expenses Retirement yearly expenses
Mortgage $16,000 0
General living $33,000 $30,000
Insurance $7,000 $4,000
Education expenses $10,000 0
Total $66,000 $34,000

How much will you need to save?

The earlier you retire, the longer you will have to live on your savings – you might have to support yourself for more than 30 years. As a rough guide, multiply the annual income you want at age 55 by 19; at age 60, by 17; and at age 65, by 14.

Savings needed to get a retirement of $34,000 per year, until age 85
If you want an annual income of $34,000 and you are retiring now at Multiply income by* Estimated savings needed
Age 55 19 $646,000
Age 60 17 $578,000
Age 65 14 $476,000

*Assuming current market rates for buying a retirement income (an allocated pension), with your retirement savings earning 6% after costs.

The table above shows our example of the savings needed to get a retirement of $34,000 per year, until age 85.

What about the age pension?

Many people get some age pension once they reach 65, if they can satisfy means and assets tests. The maximum age pension today is about $14,000 a year for singles and $23,000 a year for a couple. If you want more than this, you will need to rely on your own retirement savings. (Please note that Centrelink revise pension rates in March and September each year, and the figures quoted are based on Centrelink payment rates effective from 1 July 2007. For current figures, go to the Centrelink website information on age pensions, or contact Centrelink on 13 10 21).

Do your own retirement checklist. Superannuation, tax and social security benefit rules are complex, and will affect you. Do your homework and get professional advice.

Our retirement checklist below will give you some suggestions for working out what you will need in retirement and how to organise it.

Your retirement checklist How to find the answer
How much will it cost to maintain your current lifestyle in retirement? Prepare a retirement budget.

Include regular living expenses as well as one-off costs, such as a new car, home alterations, and travel.

Plan to clear all debt before or as soon you retire.

What retirement benefits and choices does your superannuation fund offer? Ask your fund administrator.
Will you be eligible for government benefits? Discuss with a Centrelink Financial Information Service officer, even if you do not expect to claim a pension.
Tax concessions? Get Australian Taxation Office publications and talk to your tax adviser.
What financial products and services would suit you in retirement? Your superannuation administrator may have information.

Your tax adviser might be able to help.

Centrelink’s Financial Information Service can also tell you about products and services in the market, though they can’t recommend products.

Consider seeing a licensed financial adviser if you have more than $100,000 in superannuation and personal investments.

Starting Your personal Investing

You can invest your personal savings in many ways, and you may not want to put all your spare cash into superannuation. Here are some tips about a large and complex subject.

Before you invest, read more on ASIC’s consumer website FIDO, in personal finance columns and investment magazines, and in books by licensed Australian advisers.

It can also be worth getting initial advice even if you intend to start small. Centrelink’s Financial Information Service can give you information about investments face-to-face, though they can’t recommend particular financial products.

When do you start?

Start now, no matter how small the amount you have. The longer your investment has to grow, the better the results. Even if you can’t afford to invest a large amount, you may be able to start a small but regular investing program.

Investors What they plan What they hope to achieve in 10 years*
Nat and Sam $500 at the start and $150 each month. (Total investment $18,350) About $25,500
Greg $10,000 at the start and nothing more About $17,000

*Based on earning 6% each year after fees and taxes, and reinvesting their investment earnings.

Above are two examples showing how Nat and Sam hope to invest, compared with their friend Greg who can afford to invest a lump sum now.

What do you invest in?

That depends on:

  • how long you can invest the money for,
  • and how comfortable you feel about different investments.

Investments are usually divided into two main types: income and growth. Income investments like cash management trusts and government bonds give you an income from earning interest, but usually little or no capital growth – your original investment doesn’t increase in value. Growth investments like shares or property may give you capital growth over the long term, so that, as well as earning income, your original investment may increase in value.

Investment time frames and appropriate investment choices
How long can you spare the money? Common investment choices
6 months to 2 years Aim to earn interest with little risk, for example in term deposits and cash management accounts
2 to 5 years Aim to earn mainly interest, possibly adding some growth assets, such as property and shares
5 years or more Aim for capital growth as well as income by including more shares and property

How can you invest?

You can make your own investments directly, which gives you control of all the decisions. That means working out your own investment strategy, and keeping up to date with your investments and what’s happening in the market through company annual reports and the financial media.

You can also invest indirectly through managed funds. Your money is pooled with money from other investors, and a professional manager makes the decisions for all the investors. You don’t have to worry about day-to-day investment decisions, but you do pay fees for the manager’s services. Do still read your fund’s annual report. Either way, you might still seek advice from a licensed advisory business.

You can reduce risk by investing small amounts regularly and spreading your investments.

How can you manage risk?

All investment involves some risk, but you can reduce it by:

  • investing in small amounts regularly to reduce the risk of investing everything just before the market drops
  • spreading your money across different kinds of investment choices (such as shares, property and cash) to reduce the risk of being in the wrong market at the wrong time
  • spreading your money among shares in different companies, different properties and different industries to reduce the risk of losing heavily on a single investment. (Some managed funds can do this more easily than trying to do it yourself.)
  • dividing your money between two or three fund managers to reduce the risk of picking just one that’s about to perform poorly.

How can you cut costs?

Fees, especially ongoing fees charged as a percentage of your investment, can make a big difference to what you earn. Always make sure you know what fees are charged before you make an investment. (Some investment arrangements, such as ‘master trusts’ and ‘wrap accounts’, may offer extra features and services, but make sure you will actually use them, otherwise you could pay extra fees for nothing.) See our comments on fees in the superannuation section.

What returns are realistic?

For a general idea, compare any investment with what’s happening in the overall market. Returns vary considerably from year to year, so look at performance over as long a period as possible. Over 5-7 years, it may be realistic to expect returns that average about 7% to 9% a year from growth assets such as property and shares. Income investments may keep pace or do very slightly better than inflation, say about 4-6% a year, depending on the risk involved. If you are offered returns even 1-2% above current market rates, you are likely to be taking a much higher risk in investing. Anything above 15% would be very high risk indeed, possibly even a scam.

REMEMBER: If it sounds too good to be true, it’s probably a lie.

What if the market falls?

The market value of investments rises and falls. Falls occur regularly and may present good opportunities for bargain buying. Markets generally recover, but they can take time. It’s important to set your goals and your time frames and stick with them, rather than worry about every change in the market.

Should you borrow to invest?

Once you get your budget, insurance and superannuation savings in place, you might consider borrowing to invest. Borrowing to invest increases the amount of money you have to invest. That means either increasing your gains or your losses. It is a more risky strategy, so weigh up if you’ll feel comfortable and consider your own financial strengths and weaknesses:

  • Will you be able to manage the debt even if your investments perform poorly?
  • Do you have a reliable income with a safety net of cash and insurance?
  • Is your savings history and financial position strong?
  • Could you handle increased interest rates or market downturns?
  • Have you invested in this sort of asset before and understand its risks?

How do you avoid big mistakes?

Do what’s right for you, and don’t let others pressure you into something that makes you feel uneasy. Steer clear of ‘all or nothing’ gambles, ‘get rich quick’ schemes and high-priced financial gurus with the ‘secrets of unbelievable wealth’. Most are a waste of money or outright frauds.

More information? Use FIDO’s managed fund fee calculator, get a free copy of ASIC’sGetting Advice. Read about different products on various fund managers’ websites.

Find out more

See how these organisations can help you gather information and make the right decision. We have listed websites because they are a quick and easy way to get information. Otherwise, you can phone for information.

Organisation What if offers Contact details
Australian Securities and Investments Commission (ASIC) A consumer website, FIDO, with financial tips and safety checks on all financial products and services.

Free searches on ASIC licence holders and bannings.


Free brochures on superannuation (Super decisions) on financial planning (Don’t kiss your money goodbye) and You can complain.


Enforces laws against fraud and misconduct.

Website: Phone:
1300 300 630
Australian Taxation Office (ATO) Tax information

Information about Superannuation Guarantee contributions, lost superannuation accounts and self-managed superannuation funds.

13 10 20
Centrelink Financial seminars, for people of any age about personal finance, retirement planning, and for people facing redundancy.


Free face to face financial interviews if you’re facing redundancy.


Commonwealth benefits and what rules apply.

13 63 57


13 10 21


Organisation What if offers Contact details
Australian Consumers Association (ACA) Free and some pay-to-view website information on money issues affecting consumers. Choice magazine by subscription, and books for sale. Website: Phone:
(02) 9579 3399
Financial counseling services Free help to manage a short-term crisis and plan to prevent a future one. See ASIC’s FIDO website for an up to date list, or call ASIC’s Infoline on 1300 300 630



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