Steps to improve your investing and savings in new year

If you try to do a little bit of google search for the best steps one should take to make your money go further in the New Year, this is what you will mostly find:

1. Pay off your credit card

2. Do your budget and track your spendings

3. Save on bills

4. Refinance your mortgage

5. Review your insurance

Those are all the fantastic ideas and essential steps to take, so I will quickly go over those points from the perspective of preparation for a successful retirement. But I will add to that list also other steps that are essential for this stage of your life, so you can start the New Year on a positive note with a solid plan for a successful year.

Let’s start with the previously mentioned points:

1. Credit Cards – use them smartly and always pay them off by the due date – you can learn more: Credit Cards Shocking truth – I honestly think you should make all members of your family read it, especially youngsters that are just starting their lives, not to fall into the credit card trap.

If, however you use a credit card in retirement and you cannot repay your bill by the end of the billing period, you should destroy the card and never ever use it, repay the debt in full, even if this means withdrawing funds from your super or other savings, and just use your own savings and any earned income to cover all your living expenses.

2. Do your budget and track your spendings – Budget should be included in every household, especially if you spend more than you earn. On my website to this link you can find the budget calculator for retirement, if you wish to compare your spendings with the ASFA comfortable standard of living in retirement.

3. Bill savings – I think being on a fixed income in retirement teaches you few smart steps to take to save money when shopping, how to make a dollar go further on everyday items.

But the truth of the matter also is, that in retirement you have more time then while working, so you can allow the time for longer shopping, so you can compare the prices between stores, for using discount vouchers, or going to the restaurant during special “pensioner” hours.

And this is a great way to save extra money on necessities and use your savings for enjoyment, holidays or any planned bigger spending.

4. Mortgage – If you have retired and you still have a mortgage outstanding, please just sell the house, it is close to impossible to meet mortgage repayment in retirement.

This is the time when you should be mortgage-free, and all the income should be used for you living needs and your enjoyment, and hopefully some savings, but not paying off loans.

In the situation of the investment loan, this is really case by case situation, so I won’t be commenting on that, but I am a huge believer, that loan repayments should not be part of your retirement budget. Review my article: Good Debt, Bad Debt in retirement and Age Pension to fully understand the consequences of getting it wrong.

5. Insurance – When it comes to general insurance contracts, such as home, car, boat or caravan, if you have any of those items, those policies are essential. We constantly hear horror stories of families losing their home due to fire or floods and lack of insurance, or insurance that did not include those essential covers. In most cases this is because people always think:

“it will never happen to me so why should I spend so much for that cover”.

Well, for retirees insurance policies are a big expense, but they are essential, however you can still find ways to reduce the premium to a more manageable cost. I will prepare a separate video to go over ways for general insurance costs reductions. 

And now, let’s look at steps to improve the start of the New Year that are more “retirement specific”

1. Increase contributions to your retirement accounts and automate it – let’s be honest, most of us are terrible with the budget and if the money sits in your bank account in most cases we manage to spend it, often not knowing when, how and for what. The best way to remove that temptation is to transfer money where we have no access to funds, unless some kind of an afford is required.

That teaches us two things: creating a very good habit of ongoing savings and after a while appreciating long-term investment returns.

2. Check your super – this is a big task but a very important one, after all super for most of us is most likely the biggest financial asset we have after the family home, so it requires some attention, maintenance and care. To help you with this task, I’ve already created number of article such as: “How to choose super fund” or “Fees you pay in super” or “11 steps to check your superannuation statement” So please check them out to learn more.

3. Understand different types of super contributions – this topic is more technical and actually requires some knowledge of tax system in Australia, superannuation rules, contribution limits, issues of death benefits and many other.

To help you out a very good starting point are my videos such as: “Salary Sacrifice”, “4 reasons to make personal tax-deductible super contributions” “Catch-up contributions” “Downsizer contributions” or “Bring-forward contributions” 

You can benefit from specific super contributions a lot, but you need to know when to do it, how much, which type of contribution to utilise and who is supposed to receive the money.

4. If you own a business, create a business owner retirement plan – I haven’t really been talking about business ownership and how retirement planning should fit into your overall business planning, but at this point, I just want to underline.

Never, ever use your business as your only “retirement form of savings” It is a high-risk strategy and it is essential for you as a business owner to diversify your savings and your investing, and superannuation should be an important part of your business planning.

5. Understand if Age Pension eligibility is within your reach – I believe this is a very important part of planning, as different strategies will need to be implemented based on the outcome of this calculations.

6. Don’t wait until it is too late – if you are in the pre-retirement age, please don’t wait to the last moment. The order in which you deal with your financial goals and tasks could make a huge difference in the outcome of your financial position at the time when you are ready to retire, so please don’t wait, but get the best financial advice you can.

It will provide you with the step-by-step pathway what needs to be done year after year and which strategies are the most beneficial for you over the longer term.

Obviously this is not an exhaustive list, but it is a great starting point.  

If you wish to organise the time to have a private consultation with me, on each page of my website there is a button: BOOK A MEETING that will take you to my personal calendar where you can choose the suitable time for the both of us so I can answer the questions that are specific to your situation.

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement