If you’re anything like the rest of the human beings on this planet, you might be starting to think about next year, and how it could look a little different to the past year. Some of you will be checking out your finances, or doing a bit of research to see how you can do things differently to make real impact. If this is you, pay attention to the following three items. If you get these three F’s right, we know you’ll have a happier financial journey in front of you!
- Fees : Yep, as you may have been suspecting for some time, there’s a chance your fees are too high. Legislation, introduced on the 30th September 2017 requires super and investment funds to disclose all their fees, including related entity costs which many funds have used for decades to hide the truth from their members. The new requirements have some funds squealing from the attention, much like someone would who has been exposed when the tide goes out and we find they’re swimming without bathers. An investor who pays an additional 1% in fees, than what they need, can be short hundreds of thousands of dollars at retirement. This can be the difference between living comfortably and living, while trying not to lose sleep. Higher fees rarely translate to better returns so stop what you’re doing right now, and check what you’re paying.
- Fears : It’s one of the strongest emotions we can experience, and we all know what it feels like. Fear can motivate you (FOMO, anyone?), paralyse you, distract you and, at times, make you completely and utterly irrational. We all worry about something at some stage. And worry that our finances will be, negatively affected, ruin the future or destroy the hard-work-to-date, ranks up there with the best, or worst, of them. Market volatility is nothing new but when it swings in the opposite direction to what you want or expect it can terrify the most stoic of us. The fact is, fluctuations in markets are as normal as droughts, floods and fires. We don’t like them, we don’t want them but they happen and the way we react to them can have greater impact than the events themselves. Share Markets often have 20-year returns close to twice that of the average investor and the only reason for this is our fear emotion. When markets are rising we fear we’re missing out, so we buy in at the top. When they’re falling we fear we’re losing money, so we sell out at the bottom. Crazy, right? Aren’t we supposed to buy low and sell high? So remember, master your fears, don’t panic in times of turmoil and don’t praise yourself when markets are performing well. Markets don’t care for your emotions and they’ll leave you behind if you pander to your fears. All you need to know is, these are feelings, not facts.
- Fricking around : Do you want to know the single greatest reason why people don’t have enough money in their bank when they hit retirement? It’s not because the Government didn’t mandate a higher Super contribution rate, it’s not because the GFC hit or because Super wasn’t a thing for most of their lives. It’s because procrastination took over and instead of making small sacrifices early in life, they were forced to make major sacrifices, with limited savings, at retirement.Act now and save more!
We know, it sounds simple but it’s not always easy. 20% of your household income is a great figure to aim for and will give you greater choices in the future.If you can’t reach that in one hit work on reaching it using the Step Up method which is where you start small – say 1% – and then increase in small 1% increments every six to 12 months. If you do it this way the changes will be so gradual you’ll hardly notice the difference to your paypacket.
Allowing fees, fears and procrastination to get away from you will restrict you to a poor retirement and a stress and worry-filled life. Get on top of them now to increase your knowledge, raise your confidence and grow your personal financial wealth.
If you want more advice on living a richer life, don’t hesitate to reach out to us for a chat. Remember, the coffee’s on us.