How to reduce spending after a job loss
By Robert Wright /May 08,2020/
How to reduce expenses after a job loss and get back in the driver’s seat of your finances.
With many thousands of Australians experiencing job losses and reduced hours as a result of the COVID-19 (coronavirus) pandemic, many will need to take a look at their expenses to continue living within their means.
The average Australian household spends almost $75,000 each year on living expenses, excluding major expenses such as rent or insurance. That adds up to between $1,100 and $1,700 per household each week that’s spent on personal care, pampering our pets, transport, alcohol, fashion and more.
The good news is that there are some simple ways to cut back on these expenses. Whether you need to slash your costs significantly or simply tighten up your spending after a job loss, here’s where to start.
- Know where you’re spending money
The first step is to evaluate where your finances stand today. If you already have a working budget, use it as a starting point, but expect that you may need to make some adjustments if your financial circumstances have changed. Itemise your monthly expenses as much as possible and separate out essential needs like housing, food and utilities, versus “wants” like entertainment, takeaway meals or online shopping. This will help you to see where you can realistically cut back, find cheaper alternatives and help save extra money.
- Cut back housing expenses
When you need to make immediate changes to your budget, starting with the largest targets can have a big impact. For many of us, this means housing costs – either a mortgage or rental payments, as approximately 20% of Australians’ gross household income is spent on housing. If you’re paying off your home, many banks are offering “mortgage holidays” to clients experiencing financial challenges.
If you’re ahead on your repayments, there may be other options, including reducing repayments or using your offset or redraw facilities to get access to additional money. You might also consider temporarily switching from a principal-and-interest mortgage, to one that’s interest-only.
Paying off only the interest will instantly reduce your repayment amount. However, it may also take you longer to pay off the mortgage as a whole. Speak to your financial adviser or lender to discuss which options are right for your circumstances.
If you rent and have been impacted financially you may seek a rental reduction. The Australian government has agreed to a six-month moratorium on at least some evictions. The Tenants’ Union is posting up-to-date information about landlord obligations during this crisis, as well as pointers for how to negotiate with your landlord.
- Save money on your phone and internet
Next, cast a ruthless eye over regular utilities like phone and internet bills. Many telco companies make it easy to bundle all your devices into a single plan, which can work out cheaper in the long run. If you and your family have separate mobile and data plans with different providers, look at whether consolidating them can help you save.
On the other hand, you might find you’re still paying for old devices that are attached to a bundled plan. Take a close look at all your plan inclusions and get rid of any phones or tablets that are sitting unused in a drawer.
You may also discover that you can get by with less data on certain devices, because you’re using them through your home network rather than being out and about. If you’re out of contract, talk to your telco about how much you can save by cutting back on your wireless data.
- Trim the costs on food
Until recently, Australians were spending around $11.7 billion a year at restaurants and $10.6 billion on takeaways. While you’re probably not eating out right now, takeaway food can still make a hole in your budget, so use the extra time at home as an opportunity to get into the kitchen.
Take a savvy approach to home cooking by adding more vegetables and legumes to your diet, and staying away from expensive cuts of meat. Avoid shopping at the grocery store when you’re hungry, buy home-brand products where possible and always take a shopping list. Try cooking bigger batches of food so you have enough for a couple of meals, without doubling the cost (and always eat the leftovers). Be mindful of waste at home, the average Australian household throws away almost 300kg of food per person each year.
- Find value in your lifestyle
Now is an opportunity to consider what you value most. By looking closely at your current spending, you’ll probably find ongoing monthly payments for expenses that are really not important to your household: music lessons for a child who hates the instrument; subscriptions to publications no one’s regularly reading; apps and software that are on auto-renew payment.
More than 14.5 million Australians – that’s over half of us – have at least one pay TV subscription in their home. If you still keep returning to free-to-air, it’s time to reassess. Cutting out things you don’t use or value is painless and gives you extra money that you can better use elsewhere.
There will also be areas where you can get the same value for less money. You hold a gym membership to be healthy, but while they’re no-go zones, freeze your membership payments and look for inexpensive or free at-home workouts instead. The same applies to beauty treatments like hair colouring and manicures, which can be done at home.
- Forego any guilty pleasures
In tough times, it can be tempting to find solace in an occasional treat or guilty pleasure. But when you look at the expense, those seemingly cheap thrills could be costing you a lot of money. For example, Australians spend $14.9 billion each year on alcohol and $21.5 billion on clothing and shoes.
Be honest about where you’re most likely to splurge and remove any triggers like email newsletters (hit unsubscribe) or social media (unfollow those too-tempting accounts).
FOUR TIPS FOR WOMEN TO TAKE CONTROL OF THEIR SUPER
By Robert Wright /March 22,2019/
Faced with average lower earnings, possible time out from the workforce to raise children, and longer life expectancy, it can be a struggle for women to save enough money in their super. According to the 2017 HILDA survey, Australian women are retiring with an average superannuation balance of $230,907 while men are retiring with about twice this amount.
But if you’re a woman earning an income, it’s never too late to play catch up. Looking at your super and taking action now could make a difference over time to how much savings you have in super for retirement.
1. Get to
know your super better – it’s your money
Superannuation, or ‘super’, is money set aside while you are working so that when you stop working it will provide you with an income in retirement. If you are an employee, your employer should be making super contributions to a superannuation fund on your behalf. These payments, known as super guarantee contributions or concessional (before-tax) contributions, will be equivalent to 9.5 per cent of your salary or wages.
If you are self-employed, you will need to pay yourself super to provide for your retirement. You can make regular contributions or make lump sums less frequently, to suit your cash flow. To get to know your super better, start by checking your balance regularly, along with the insurance and investment options you have to make sure they are the best fit for your circumstances.
The Australian Taxation Office (ATO) recommends that you check your employer is paying the correct amount of super on your behalf. If you are unsure how much your employer should be paying you can use the ATO’s Estimate my super tool. If your employer is not paying the correct amount you can report this to the ATO online.
Many super funds arrange life and disability cover for their members, for a fee. Having insurance can provide a good sense of security for you and your family. It’s important that you know what cover you have as you might have similar cover under another type of policy. This might mean you are paying for the same cover twice, however you will not be able to claim twice.
your super and save on fees
It’s a good idea to make sure all your super is in the same place. If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about. If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.
3. Contribute more and watch your super savings grow
Want to see your super grow faster? You can make payments into
your super fund account in addition to the Super Guarantee 9.5 per cent that
your employer pays on your behalf. This could really boost your super over
time, and can help you make up for periods when you are not working. Even small
amounts could make a difference.
The different types of additional contributions that can be made to your super fund are:
- Concessional (before-tax) super contributions – these are super contributions you make before you pay tax on them.
- Non-concessional (after-tax) super contributions – these are super contributions you make from sources that have already been taxed.
Be aware that the Federal Government applies monetary caps to these contributions to limit the tax concessions associated with making super contributions. Some types of contributions if made in excess of these caps are subject to tax rates of up to 49 per cent.
forget your TFN, otherwise you may pay more tax
To confirm if your super fund has your tax file number (TFN), take a look at your super statement. If your TFN is not listed, contact your fund and give it to them.
The benefits of providing your fund with your TFN are:
- Your fund will pay less tax on employer contributions (and pass the savings on to you)
- Concessional contributions are generally only taxed at 15 per cent, which means you could lower your taxable income
- You are less likely to lose track of a super account
- You will not miss out on government super payments – for example, the government co-contribution if applicable
- You will be able to make personal (after-tax) contributions to the fund.
Source: Colonial First State, 20 December 2018
How women can build their financial literacy
By Robert Wright /March 22,2019/
Recent studies show that more than two in five Australians lack confidence when it comes to financial decision making.
The Federal Government believes this is largely due to a lack of financial literacy within the community, which is why it has developed the National Financial Literacy strategy. This initiative aims to motivate Australians of all ages, genders and socioeconomic backgrounds to engage more with their finances. In turn, this will help people make informed financial decisions that will improve their economic wellbeing.
What does it mean for women?
As social norms and family structures have changed, financial decision-making is no longer the sole domain of the male breadwinner – these days it’s just as important for women to take charge. Yet women experience higher levels of stress when it comes to managing money, with more than a third saying they find it overwhelming.
That’s why it’s vital for women to build their financial literacy. Becoming more financially savvy can change a woman’s life, by empowering her to be self-sufficient and make confident decisions that will improve her financial situation. Currently only 10% of Australian women retire with enough savings to fund a comfortable lifestyle – so by arming women with strategies to help close the ‘super gap’ at each life stage, they may become less reliant on social services in retirement.
How you can take control
The financial decisions women make throughout their lives can impact their financial position in later years. With this in mind, here are some things you can do to take control at each stage of your life journey.
Generally speaking, the gender pay gap puts women on the back foot as soon as they enter the workforce. Although there may be greater equality between the sexes than ever before, women’s average salaries are still 17.3% lower than those of men doing the same job.
This highlights how important it is for women to be able to budget if they want to build their savings and get ahead.
Raising a family
Women are still more likely than men to take time out of the workforce to raise kids, which means they receive less in employer super contributions during their careers. This leads to a significant super gap – men have an average super balance of $292,500 when they retire compared to $138,150 for women.
That’s why you need to prepare carefully for your career breaks, and top up your super either before or after to make up any shortfalls. The Government’s Parental Leave Calculator and Career Break Super Calculator make it easier to plan your finances around having a family. Visit https://www.moneysmart.gov.au/tools-and-resources to access these calculators.
Paying off debts
If you’re like most women, the largest debt you’ll ever have to pay off is your home loan. Before taking the plunge into home ownership, a Mortgage Calculator can show you how much you can afford to borrow, so you can work out a repayment plan that fits your budget. And if you’re prone to splurging on your credit card, a Credit Card Calculator could help stop your debts from spiralling out of control. Visit https://www.moneysmart.gov.au/tools-and-resources to access these calculators.
Investing for the future
With lower confidence levels and a smaller appetite for risk in their investments, women are less likely than men to choose high-growth investments like shares. This also means they miss out on potentially higher returns. But as women generally retire earlier and live longer than men, they can expect to spend more time in retirement – which makes it even more important for them to have enough money to last the distance. As the first step, make sure your investment mix matches your life stage. That way your super and other investments will have the best chance of growing over time.
Your financial adviser can help
Because women face so many distinct challenges, they need customised solutions – which is where a licensed financial adviser comes in. If there’s ever an aspect of your finances that you’re unclear about, let your adviser know. They’ll be able to explain it in a way that makes sense to you, so you can make wiser financial decisions.
Source: AMP News & Insights.