retirement income

The latest statistics on superannuation balances shows women’s superannuation balances, on average, are 40% lower - the average super balance for women is $92,000 compared with $154,000 for men.

Why is this so?  As I see it, the main reason why women accumulate less is because generally they take more time off from work to have children and some never return back to work, they are on lower average incomes and they mostly retire earlier.

So how much would a person need in retirement? The Association of Superannuation Funds of Australia (ASFA) keeps statistics on the retirement living costs and according to them a couple seeking a comfortable retirement lifestyle will need $55,249 per year. Their definition of “comfortable retirement styles” is: one that enables a healthy retiree to get involved in a broad range of leisure and recreation activities including domestic and occasional international travel

I have seen other statistics, which show this figure to be only $31,675 per year – my conclusion is that may be this estimate is for those wanting a “modest retirement” e.g. better than Age Pension, but still let's a retiree only afford fairly basic activities.

Unfortunately, for me both definitions may roll off your tongue, they don’t really reflect the reality of ongoing price increases. Just consider these 3 increases in the last 12 months:

1. Over the 12 months food costs have increased by 2.5%.
2. Electricity costs went up, on average, by 0.6%
3. Health services increased by 3.6%. Interesting fact: statistically, over the longer term health services tend to have higher increases n prices than any other category of goods and services.

So can you live on those amounts yourself?

Let me tell you: RETIREMENT is a tough business. If you think you are struggling now while working just think about retirement and the fixed incomes waiting for you.

It may be an opportune time for you to re-visit your own superannuation plans so you start planning for the retirement - it will come before you know it.

Con artists

Con artists are everywhere and they have been around for many years. Recently the Internet has brought many new players with many new schemes, reaping millions of dollars from every day Australians.

Some of you probably may not believe how gullible some people can be and you will probable swear that this will never happen to you. But BE CAREFUL - sooner or later your desire to make quick money can make you vulnerable to these schemes.

Here is an example of what happened in America few years back:

Mr Conman approached investors and offered them an opportunity to invest in one of his "money making" investment plans, guaranteeing returns of 50% within 60 days. The only small problem, as he explained to the potential investors, was that because his investment ventures were so successful he could only accept maximum of $5,000 from each person.

At the expiration of the 60 days, Mr Conman sent to all investor a cheque for $7,500. So basically he delivered what he promised. And in the minds of the investors how good was this? 50% return in 60 days! Wow!. You wouldn’t dream about it, would you?

About a month later, Mr Conman contacted the same investors with a phone call to thank them personally for supporting him in the previous campaign. After the pleasantries were over he made them another offer to make 50% return – but this time he told them that as a special thank you he has removed the maximum limit of $5,000 and the investors could invest as much as they liked.

So what do you think the investors did? Did they refuse him? Did they decline him? No, of course. And why would they suspect anything when they had just earned 50% in 60 days.

The story goes on to say that Mr Conman the second time around, after he earned their trust collected just over $46m and disappeared. Eventually, he did get caught and he ended up in jail

The moral of this story is that unfortunately the process of “investing” is all about “emotions”. We like to hear about things that sound good rather than analyse them for they are worth. ASIC continues to advise that “if it sounds too good - the chances are it is too good to be true”.

A famous investor once said: “There are no successful short term investments but there are plenty of people who will take your money if you believe that there are.

gambling and investing

If you gamble, the chances are you will lose. 

And if you invest the chances are you may not make money. 

I will be surprised if many people would disagree with these two statements ? But what is surprising is that too many people ignore the very simple rules and either gamble or make investments that they shouldn't. I am not qualified to make comments on the problems of "gambling" but I have been around long enough to see many clients make bad investment decisions, be it in shares or property.

When it comes to investing in shares, I am yet to meet anyone that has done so based on sound knowledge of the market. My experience is that most people buy shares based on recommendation from friends (mainly the brother-in-law) or mates at work.

IMPORTANT RULE - don't follow or accept tips from people that are not in the business. Share investing is a sophisticated game and there are many things you need to take into account about the company, its management, future plans etc before you can decide if it is a good share to buy.

Interestingly, before the Global Financial Crisis (GFC) share investments by ordinary Mums and Dads was at all time high. Why? because at the time the share market was a "feel good story" and generally most people like good stories. But when the crash took place they sold, took the losses and got out. Of course there was no need to panic and get out of the market - the market eventually did bounce back and most investors would have recovered any "paper losses" they may have incurred during the GFC. Remember! paper losses are just that - in paper.  

IMPORTANT RULE with all investment - you should buy low and sell high. Yet, what did most people do? they all bought high, just before the GFC and sold low after the GFC. So if you, like me, hear someone complain that they lost money on the share market - just ask them "did you follow Robert's rule of buying low and selling high? or did you do the opposite buy high and sell low"?.

Clients losing money is NOT because the share market is not  a good investment option!. Clients lose money because they don't know how to invest.

If you want to invest but don't know how - simply seek advice. Few dollars you will spend getting this initial advice can help make money in the future.

50-40-10 rule

Earning money is quite a standard and easy process for most of us. We get up, we go to work and at the end of the week we get paid. That's the easy part - but then comes the hard and difficult part - how to spend it.

Don't get me wrong - we ALL know how to spend money - spending is a much easier and pleasant task then making it but what I am talking about is spending it WISELY. And this is a very difficult thing because as a rule we are not really taught anything at school about how to look after money because the education system (at least it did when I attended Fitzroy High School between 1968 and 1972) was designed to teach us about American History or Geography or even about the chap with the bucket on his head - what was his name? Oh, yes Ned Kelly. Now when was the last time knowing what happened in 1863 helped you deal with your financial affairs.?

Luckily for you I am here. Over the years I have developed my own set of rules that I am confident will help you learn how to successfully deal with your finances and it is my  50-40-10 rule:

The first 50% (or half) of what you bring home to be used for your everyday cost of living. Things like bills, food, car expenses and entertainment.

The next 40% of what you bring home is for short to medium saving. These savings will be for holidays, investments or just simply for rainy days. It can include investment properties.

The next 10% of what you bring home is for long-term investment. Generally, this would be superannuation. If you are working the chances are that your employer is already contributing the minimum 9%. If you then contribute 10% of your money either as a salary sacrifice, which has some tax benefits or simply as after-tax contributions then that's all you need to worry. Remember! the younger you are the more you will accumulate for retirement.

And that's it! This is all you need to know about finances my 50 - 40 - 10 rule.

Last year I developed a coaching program called FixMyBudget, which takes clients through a step by step process, teaching them how to make up a budget and more importantly how to stick with it. I started it with 22 clients but sadly I only have 14 left - most of those that dropped off found it difficult to work with budgets and they were happy just to go back to what they were doing before. But the ones that stuck with it are reaping the rewards because for the first time they have all saved money.

If you are having difficulty with budgeting and handling your finances I can help you.

In the meantime, my challenge to you is this - give my 50-40-10 rule a go for say 6 months and let's see what happens.