Recently I was watching Sex and the City and as a thirty-something trying to do her best to run a business, live life and prepare for the future I found myself adding up the outfit changes and designer pieces, the apartment and meals, not to mention the taxis.
Sure, I don’t know much about living in NYC, but I know what everyone knows. Something doesn’t add up here, financially. With all this money was being spent on clothes, what happens next? With her money right where she likes it, in her closet, I couldn’t help but wonder, was Big Carrie’s retirement plan all along?
Was marrying money her only plan to take care of herself in her retirement years? And, after years of working for myself, with very little super to show for it, am I relying on the same plan? Though I’m very happy with the husband I have, so maybe the marry rich ship has sailed. Haha. But I’m talking about the STRIKE IT RICH retirement plan. The one where it doesn’t matter what I do and spend now, one day I’ll be rich (through marriage, inheritance or luck) and it will all be fine. It doesn’t exactly sound like a safe bet, does it?
Women and Superannuation in Australia, let’s talk about that.
It makes you think, right? Especially given that stats say 44% of women rely on their partner’s income as the main source of funds for retirement. (the study does not distinguish the sex of the partner). Half of all women aged 45 to 59 have $8,000 or less in their superannuation funds, compared to $31,000 for men (source articles linked below). Let’s break that down a bit.
This shortfall is due to a number of factors including providing care for children, being paid less for work they do and increased levels of working part-time and therefore being below contribution minimums. An estimated 220,000 women miss out on $125 million of superannuation contributions as they do not meet the requirement to earn $450 per month (before tax) from one employer (as many women work more than one part-time job).
I’m not an expert, by any means.
Living in the regional area that I do, with a mother who sold real estate, buying a house was one of the first things I ever did with my money. Chalk that one up to privilege in so many ways. And during my relationship with Kel, there have been times that we were able to own multiple properties at once.
Ultimately, retirement for me right now looks like paying off my house then trying to save as much as possible when I’m done. That’s not advice, but the way, I’m not in any way a professional or in a position to offer advice to you. It’s the reality of my current position. And I’m one of the lucky ones in the sense that I have a home and I’m in a position where I have the means to pay off that home.
For now anyway. What if the worst happens?
Something that women in my position, myself included, need to consider is what we would do if we lost our partner through death or divorce. Especially if that partner happens to be an income-earning male. What happens then? All the articles I read recommended getting quality advice from an accredited professional that you can trust (my brother is a financial advisor, talk about the best of both worlds).
Next is to start saving super early especially if you are able to co-contribute or increase the standard rate. This is where good advice comes in so handy, take your payslips or latest tax return and get advice on how and where you can increase your superannuation savings. Recent statistics show that the gender pay gap is currently at 17.2%, which means females only earn 83 cents for every dollar earned by males so we need to make what we have stretch longer.
And keep in mind, those statistics are based on the Australian Bureau of Statistics (ABS), Cat. No. 6302.0, Average Weekly Earnings – Trend data, February 2011 (released 19.05.11); there are plenty of women, including black women, women of colour and trans women who these figures are even worse for. Whenever and wherever you can safely ask for that raise, support your fellow workers to do the same and call out these inequalities when you see them.
Lastly, it’s important you choose the right fund for you, your income type and how you plan to contribute to your super. I can give you the right answer here, but again, that’s where good advice can come in. It’s also important to consider the type of places your money will be invested and whether that fits with your principles.
My final thoughts
Phew, that was a big one. This post was rolling around in my head for a while and I needed to share it. Mostly because I know that a lot of you are in the same position as me where you are working for yourself, part-time or are in the position where you are caring for others or yourself and not earning an income outside of the home. We are often overlooked in the conversations around retirement and saving money. I didn’t want this blog to be another place that happened.
So, team, I hope this gives you some food for thought and a kick in the bum if, like me, you need it. So, I’ll end this post there, but remember what my mum used to always say if you marry for money and you’ll earn every cent. We need to be standing on our own feet when it comes to the financial aspects of our lives as much, if not more, than in other areas. Financial security is the ultimate freedom, in my opinion, so let’s work together and develop that muscle together.
Some links to read about women and superannuation in Australia
Heading into this post about how to own your own home sooner I checked in with some of the people around me. Some are homeowners. Some give advice on borrowing money or purchasing property for a living. BUT, you should consider your own personal situation before taking on any of this advice. This is general information at best and does not form any sort of financial plan. Got that? Awesome, let’s talk owning your own home sooner.
There has been a lot of talk in the media in Australia about how hard it is to save for your first home and how it’s an endless struggle. As someone who purchased their first home really young, my personal experience of this is certainly different to those in major cities or without the privileges of being raised by real estate agency owners… I mean, politicians with millions of dollars in family money and pensions telling us to lay off the avocado toast is laughable.
Come oooonnnnn. *facepalm*
This fascination with real estate, the great Australian dream, has pushed prices up and up for decades. My first home was $115,000. You can still buy a generous home in my town for $300,000. But, that’s a long way from where we started, right? Some people pay one hundred thousand dollars for a car. Not me, but some people. Buying your own home, having something to show for your hard work (post-loan payments) is one of those tick the box, living the grown-up life boxes; for most people. And if that’s the case for you, I decided to put together a few ideas for ways to move your savings/deposit amounts forward to get you there sooner.
Simple ways to own your first home sooner.
State-based Grants.
Most states have some incentive to help first home buyers get into the market and being state-based they all differ slightly. The one that catches my eye the most (given I live in the state, relevant) is the Queensland government one.
Currently named Queensland First Home Owners Grant you may be eligible to receive up to $20,000 from the State government towards buying a brand new home or building one. This is particularly interesting to keep in mind if you compare the purchase price of 2 different properties one old and one new for the similar price you would be crazy not to do some extra sums to see if you’re better off with a brand new house potentially you designed yourself to suit your exact needs.
Are you currently renting and struggling to save the deposit you need. Have a happy parent gift you a 5% deposit or use their property as additional security? It may be worth talking to a Mortgage Broker about which banks have a Rental History policy to get around the need to show genuine savings. Just because your bank requires you to save a 5% deposit (or more) before considering you for lending doesn’t mean all bank have the same requirement.
I had a friend recently who was told by their bank a specific “in house” rule was a government rule when clearly to an experienced investor that just wasn’t the case. Remember you are the customer when it comes to loans. YOU are buying their services. Shop around. Don’t give loyalty to your bank for free. Expect more from them.
Consider your options.
For me, owning my first home was possible because I lived in a rural area where my income was pretty in line with what I was going to have to pay for my house repayments. It was also around 2001, grain of salt. When you’re considering your options for buying a property for you to live in, it might require you to downsize your essentials list a little. And I’m not saying you’re unreasonable, there is no millennial bashing here. Take a look at your wish list, are there things there you could live without? Or is there a less ‘trendy/expensive’ area you could live your life in that doesn’t cost as much?
Superannuation savings scheme
This was first flagged in the budget last year, and it has finally come into effect (or at least more info now provided). From the 1st July 2017, You now can add extra to your super (on top of what your employer must put in) as a way to save money for your first home deposit. You can put a maximum of $30,000 (maximum $15,000 per year) into your superannuation towards your first home.
After 1st July 2018 withdraw this money as well as the “shortfall interest” (which is a not too shabby, currently 4.72%) it has earned to put towards the purchase of your first home. Obviously, there are rules around this and best to talk to a financial planner about your specific situation. But this may be a way to save for your first home and lower the amount of tax you pay at the same time. Win-win.What a great place to save your deposit rather than in a bank account. Especially if you’re like me and prone to spending ALL the monies.
Bonus for the kids.
Plus, a person under 18 can start to make the superannuation contributions too. They can’t apply for the money to be released until they are 18 years of age but that works, right? I bought my first home not long after my 18th birthday, with a savings plan and my parent’s connections. Not something that everyone has access to, obviously. But THIS savings scheme is a great way to get your kids interested in saving for their first property, their super and what is happening to it long before they’ll even miss that money.
There you go, team. Obviously, all of this is just to bring you some great options for owning your own home sooner. You should take into account your own personal financial situation before committing to any sort of savings or financial plan. I’m here to direct you towards something you might not know, not provide a one size fits all answer. Got it? Awesome. I’d love to hear from you how you’re going about saving for your first home? Or if you’re in there, what was it like for you? What did it take?
I first heard about Acorns (now Raiz) towards the end of last year. In a conversation about travel, savings and money with my friend, Olivia it came up. Liv is an avid traveler and no year is complete for her until an adventure has been had. To manage this lifestyle with her life and current adult responsibilities, she has become a super-saver.
I am not a super-saver; I am a super-spender.
With her guidance I set up the app and hey presto, I’m making process. I’m on my way to reforming some of my super-spender ways. I at least have some savings. It makes for a nice change. It occurred to me that you could be in the same boat so let’s have a chat, shall we?
{disclaimer: This post is NOT sponsored or in any way affiliated with the app. As far as financial advice goes, I don’t know your situation or your savings goals, so consider this advice of a general nature. Do what works for you and your situation. Results may vary, because that’s a thing they say}.
What is Acorns?
Acorns is an app, but behind that it’s an investment account. Your money is invested in “portfolios constructed using ETFs quoted on the Australian Securities Exchange”. It’s not just a savings account, your Acorns account is an investment account. Meaning there are risks.
And it’s an investment account, some days you are up, some days you are down. At one point my account had generated over $5, a few weeks later it was $2. As with all investments there are risks dependent upon the performance of the markets, interest rates and the economy. I treat it like an easy way to put aside money, any increases from dividends or gains are a bonus.
How does it work?
Predominately I use the app to do automatic ‘Round Ups’ of my spending. It will take transactions on any of my linked accounts and round them up to the nearest dollar, investing the difference into my Acorns account. I love this idea, as Liv said when she first showed me the app, you don’t even miss it.
After using the app for a month, I started a $5 reoccurring investment. That just means that every week it would take $5 from my funding account (you select one account to draw all the funds for Acorns from). Since then I’ve increased it to $10 a week. This has been an easy way to bump up the amount of money going into the account. And I figure, $10 a week for 52 weeks of the year is $520. Not much, but more than I managed to save for no other reason than to save than last year.
Some people have asked me why I didn’t just use a high interest savings account. I get that. For some people, a high interest savings account would absolutely be a better option. {reminder: I don’t know your situation, you have to make up your own mind} I’ve never once successfully saved anything in a high interest saver. It’s not automated in most cases and I find it too easy to withdraw and spend from it like a normal transaction account. That said, guaranteed interest is a win that Acorns doesn’t offer. My money is invested, the return {if any} is not guaranteed.
If you join using this link, we will both get $2.50 when you use my invite code. This is something available to all app users once your account is approved. Not, as I mentioned before by arrangement with Acorns. If you’re not comfortable with that, feel free to just search for the app on iTunes or in the Google Play store.
You know what, I think I must say this here. Kelvin and I talked about it at length one night. It’s time to fess up that I had a little ‘thing’ for credit cards when we met. And that little thing had got me in some ‘big’ trouble. By the time we were looking to start a life together, I had almost $15,000 on credit and store cards and had applied for two more online. I thought to myself, why not? At the time, I had a house, was paying down a small mortgage, and always had some job. What’s a little credit card action going to hurt, right?
Wrong, short version.
When I met Kelvin, the super saver, I looked like a pretty good bet on paper. I owned my car; I had a house with at least $50,00 equity, and I was young with decent earning potential and a teeny bit of money in the bank. But that was a lie. Pretty soon, the cards started to back up on me. This one got maxed out; this other went into default and transferred the entire balance to 30% interest.
I started to sink below the weight of the repayments, and then my hours got cut. That $15,000 in credit started inching towards $20,000. I freaked out. Kel, new to the whole credit card situation also freaked out. Rightly so. Despite our plans, borrowing would be almost impossible with the cards hanging over my {our – now} head.
Credit lesson learned.
It took us over a year to pay that money back. Almost two. It took budgets and plans. It wasn’t easy. For me, it was like breaking an addiction. I quit smoking and sugar, and giving up my credit cards was harder. We followed a method commonly found on the internet, in books, and everywhere*.
First, we cut the cards up and stopped using them. Not a single cent more went on those cards. No question, we made the minimum monthly repayment on all cards every month. We transferred balances to low-interest cards with no fees where it makes sense. Then the real work started, and this is how we did it.
First, we took a $200 a week and put it on the card with the most significant interest rate/highest cost, weighing in penalties and all that. It can be any amount you like, we had good jobs by this stage, so we committed more. Every month that meant we were paying $800+ as well as the monthly repayment on that card every month. Things start to move pretty quickly when you can afford that sort of amount.
And soon it was paid down, and the account closed.
Then we took that $800 a month, as well as card one’s monthly repayment and put it on the next most problematic card. It would get paid down that little bit faster and the one after even faster until all the cards were cleared. Closing each account as we went soon, we were left with none. Thank goodness!
Kel now has a single card he used as leverage to open his business last year. A low-interest card made more sense than taking out a business or personal loan. That small card will be paid off this year. Credit isn’t a bad thing; as a real estate kid, I encourage people to borrow all the money for investment purposes.
But the thing you have to remember is that you can only call it an investment if it makes you more money at the end of the day {thanks, Rich Dad/Poor Dad}. And as much as I love my wardrobe, second-hand clothes are worth diddly squat.
So let me get to the guts of sharing all of this. Shall I?
When I show you great clothes, talk shoes and accessories, I want you to consider not buying them if you have to use credit. Consider a wardrobe challenge {shop your wardrobe, you’d be surprised what’s in there if you’re anything like me} or ANYTHING ELSE. Clothes swap, trade, borrow or save up for it. You know, old school. Haha.
I encourage you to start to pay those cards down. Sooner rather than later. Cut those cards up and stick them to your debit card. Only spend the money you have. I think you enjoy the purchases more when you do. Well, I know I do. Just give it a go, and try not to add any more to your account.
Will you accept my challenge? Are you already credit card free? How did YOU do it?
* My dudes, I am not a financial planner. I am not a professional debt consolidator or anything like that. I just slogged my guts out to pay some stinking cards off and wanted to make sure that I tell anyone possible NOT to use them. Like, ever. Also, no judgement if you have cards; there are people out there who maintain them responsibly and use them the way that they should be used {you know, like pay off the entire balance every month or only in emergencies and the balance is cleared soon after}. I’m not one of them.
