Today we're going to be talking about superannuation and being future focussed, doing things for our future selves. I want to talk to you about this concept. I know that this topic is mainly Australian specific because I'm talking about superannuation in Australia and this isn't going to apply as directly to my international listeners. Despite some of the specifics related to Australian superannuation I think a lot of the concepts are applicable in general terms. Obviously you have to work out what applies to you.
I've been seeing this concept of ‘your future self will, thank you’ around on Instagram and I also listened to a podcast recently all about doing things for your future self. I really love this concept. In some ways I feel like I tapped into it before even really being aware of it.
Earlier this year, I decided I wanted to do yoga teacher training for kids. As you know I'm a school teacher, and I just thought, wouldn't it be amazing to be able to bring yoga into the school and teach it to the kids?
When I enrolled in the course, in one of the first emails they sent out they said, you really need to make sure you're up to date with your practice as this will help you with the course.
I immediately thought, whoa, I need to up my game here and I set myself a goal that I was going to do yoga every day in 2019. There is a little technique called the minimum baseline, which I talked about in episode 6 that helped me do that.
One of the things that I found is that in order to fit in yoga every day, I had to get up before my kids. I get up early before my kids and I do yoga before they wake up. I was finding that sometimes, if I had a glass of wine with dinner, I found that it was harder to get up the next day, early enough to do the yoga before my kids woke up. At night in the moment it was a habit to have a glass of wine with dinner because that’s what we do to unwind, right? It’s so ingrained into our culture. But my future self, the next morning was not enjoying the result off what my present self was doing.
I don't think there's anything wrong with having a glass of wine, but getting up and doing yoga was more important to me than having a glass of wine on autopilot. I was realising ‘this isn't actually fitting in with my life and this isn't serving me’. For the things that I wanted to achieve in my life for my future, drinking a glass of wine was not helping me get the result I wanted.
So I started to just I ask myself, how is this going to make me feel tomorrow? Is my future self going to enjoy the result of the actions I’m taking now? The answer was no. When I listened to myself and tuned into what I really wanted. Which, was to improve my yoga practice, it was much easier to not give into my spontaneous lizard brain and instead listen to what my future self wanted. Which, was to wake up early feeling fresh.
I've just been away for a weekend with my family. It was a planned get away. I thought, right, I'm going to have champagne and enjoy myself with my family and it was great. I did that and it was very deliberate. The next day I did feel a little bit fuzzy because I rarely drink anymore but it was fine because it was planned and didn’t get in the way doing my yoga.
The point I'm trying to make here is that I'm making decisions in the present that I want to do for my future self. I'm thinking of my future self like a valued friend that I want to help.
This is a bit of a long story. There is a point to it so stay with me.
If I look at my life now, all the great things I have in my life, such as my job, I can look back to my past-self and say thanks. Thanks for making the tough decision to change directions with your career and return to study to become a teacher. Thanks for doing the hard yards, moving back in with Dad, living on a tight student budget and getting out of your comfort zone to take on a new career. It wasn’t the best of times but I sure am glad my past-self did that for me because I am enjoying the benefits of that hard work now.
What helps me decide the actions I take in my life now, is looking from the perspective of what my future self will thank me for.
The way I like to think about the decisions and actions I take is- ‘What can I do to help my future self?’ ‘What will my future self thank me for?’
Tapping into this concept is what I want you to think about when considering your superannuation.
Superannuation is this money that we have sitting somewhere off in the background. We don't really think about. Money goes in from our employer, and then that money is what we are supposed to live off in our retirement. Because retirement is so far away in the future, often I don't think about it. I get a statement every six months, and it's like, oh, yeah, yeah, yeah, that's my superannuation.
But to have enough money to live off when you retire, you actually have to think about what money is going in there now and that’s what I want to address with you today. Why it's important to look at your super now, and also why you might consider making extra contributions to it if that's something that is in alignment with your other goals.
I want to approach it from the angle that I think it's really easy to dismiss our superannuation, especially when you’re still in your twenties or even thirties. It's so, far away. You're not even going to be able to access it for another 30 years or so.
I'll be able to access mine in 25 years, so it's starting to get a little bit closer. But even then, it still feels like this far off thing that I don't have control over.
In actual fact, it's one of the biggest assets that you will have, and it's something that will provide for your future. So we need to look at it.
Okay, so the first thing that I want to ask you to do is if you haven't done it already, log onto your superannuation account and get familiar with your statements. How much money is being contributed every fortnight or every month from your employer? What fees are you actually paying? Fees play a huge part in your superannuation. If you're in Australia and you watch TV, you might know those industry fund ads that you see where one lady goes up the escalator and the other one doesn't move anywhere because it's to do with how much they're paying in fees. And by switching, the balance of your super it rises. My eyes glaze over when I see ads like that. But actually, when I started looking at some numbers and looking at some data and examined examples, how much you pay in fees actually makes an incredible difference on the money that you have at retirement. Those ads are spot on.
What you think sounds like not much is actually quite a lot. I think I might have mentioned this in the last episode when I was talking about shares, that when you are paying over 1% in fees for an investment, over a period of time, say 20 to 30 years it makes a huge difference in the balance. So get on to your super and find out what your fees are. The lower the better.
And if you can't see what they are or work it out, just call them. All superannuation, companies have phone numbers that you can call and ask these questions.
The other thing about your super that you may not be aware of is the insurance cover inside your super. A lot of supers just automatically put you into their standard insurance. There is life insurance, you can also get income protection in your super, as well as total and permanent disability cover.
What is your money invested in? They just put you in their standard general balanced fund. So if you don't know what your superannuation is invested in, you need to find out. This is actually something that is really important.
This is what I want to address with you. I really want you to hear this. All these details about our super are the kind of thing that we push aside, right? It's like Yeah, yeah, yeah, superannuation. I'll look at that one day and or I don't understand it or whatever. But think of your future self as your very best friend that you absolutely love and care about and is the most important person. Make a decision today to do something for that person who is your future self, honour yourself in that way.
Take the time to get on top of your super. It doesn't actually take that much time. I don't want to bang on about things because I don't want to sound preachy. But you know what? You have the time. I can speak from experience. I actually don't watch much TV anymore. In the past I used to watch it a lot. I'm the kind of person who could sit down and smash back a whole series of Game of Thrones in one day. You will be amazed at how much time you have if you don't come home and sit and watch TV in the evenings, there's hours, okay, hours. Look it’s not just TV, maybe you don’t watch TV but we can always find the time to do things we want to do.
Do this for yourself. Take the time and look at it not from the perspective of ‘oh I don’t understand it’ ‘Oh I should look at this one day’ but from the perspective of self care. This is me looking after myself. This is the money that is going to provide for me in my future. Think of someone in your life now who's in their seventies. Maybe someone in your family who is important to you and you want them to be looked after and cared for and then put yourself in their place and think that's going to be me. Do I want to look after that person and make sure that they are cared for and provided for? Do I want to make sure they have enough money to live off and have a comfortable life in retirement, without having to scrimp and save, not be having to cut out coupons from the supermarket magazine because you have to watch every penny that you spend?
I guess I am trying to give you a bit of tough love and just say that I think superannuation is this final frontier of finance that is a bit mysterious and a bit overlooked, and it shouldn't be. You should know about your superannuation. You should know what you're investing in, and you should also know how much it costs.
This is what I want you to do. This week at the end of this episode, log on to your superannuation. If you're not on online super statements, get onto it.
You can see what you're invested in. Usually there are a variety of funds you can invest in that range from low risk to high risk. If you're really young, you can afford to be invested in 100% shares, which are the higher risk ones because you have time to ride the ups and downs of the share market. However, as you get older you want to move your money to the lower risk funds as you don’t want to experience the lows of the share market just as your about to retire.
You can change the funds you are invested in within the super. This can usually be done online. When I was in my twenties, I had all my money invested in shares. Now I have almost all of it invested in shares.
The next thing is you can contribute to your superannuation. You can put in money from salary sacrificing, which means you set it up with your employer or it might be with a third party that your employer uses and what that means is money is taken out of your income before you have to pay tax on it.
A very simple example; lets say you get paid $1000 a week and you decide to put in $100 a week into your super. Instead of being taxed on $1000 a week, you would be taxed on $900 a week. That money is taxed at 15%. So there are definitely advantages for that if you're earning a high income.
You can also put in contributions after tax. It is as simple as making a Bpay payment into your fund. There are benefits from doing either method. I've done both of them.
If you are a low-income earner with an income below $53000, (Mum’s returning to the work force part-time often are) you can you make an after tax contribution to your superannuation and the government will make a co-contribution up to $500. It’s called the government co-contribution. It’s scaled depending on what you earn and how much you put in up to $1000.
Now, I don't know about you, but that is pretty good if you ask me, not only are you looking after yourself by contributing to your super you are also getting up to $500 from the government. So good!
I have done this for the last couple of years since returning to work part time.
In the last five years, I have had two kids and was out of the workforce for 3 years. But guess what that means? No money was going into my super and you know what? That makes a huge difference. This is why women have to pay attention to their superannuation because so many of us take time out of the workforce because we have kids. Then when we returned to the work, often we return on a part time basis and this has a massive effect on our super.
Now there are things that you can do about this. Your spouse can make contributions into your superannuation. This is getting a bit more technical, and I don't know all the exact details.
You can also make your own contributions. As a teacher, if we met our professional goals we are able to increment with a small salary increase. This year mine went up about $50. Now I thought, you know what? If I just get that extra $50 in my bank account it is going to get spent. I've been working on improving my superannuation balance and I thought, I'm just going to salary sacrifice that. I spoke to the business manager at our school, I found out that I had to go through an external company. I contacted them and set it up over the phone to salary sacrifice that $50 a fortnight into my super.
I don't even notice it because it comes out before I get paid. I did that straight away when my income went up and I haven't noticed. In actual fact, I'm getting paid a little bit more because I'm getting taxed on that tiny little bit less so these are things to look into that are relatively simple to set up and can make a big difference to your super over time.
All right, I think I've probably given you enough information for today. Lets go over the takeaways from today.
Get familiar with your super fund.
Find out what the fees are.
Find out what insurance you are covered for and what the fees are for that.
I'm going to do an episode in the future about insurances so I will address that in more detail there.
Consider making extra contributions to your super. If you're earning above $50,000 salary sacrifice makes more sense, but there are other factors that come in here. You might be paying off some serious debt or you might want to pay your house down first.
Finally, do this from a place off kindness, love and respect for yourself. Ok sure, I agree looking into your super is not the most fun and exciting way to spend your evening. However, your future self is going to love you for it.
There's an amazing book called How to be a Super Smart Woman: New Strategies for Superannuation by Pauline Taylor. It covers all the information women need to know about their super. She has specific chapters for making your super work for you in your 20s, 30s, 40s, 50s, 60s and 70s and beyond. It is very informative and essential for all women.
I've actually done a little write up on the book that you can access here.
Pauline, if you ever read this, thank you so much for writing this book. It's women like you who we need in this world; supporting other women with information about helping themselves financially.
Did you know there is a Money Mindful Ladies’ club? To join the club and be part of a community of financial femmes who are working towards kicking ass with their money and life you can sign up by clicking below.