New strategies post APRA

Bro...
Compound Interest is KING!

Doesn't sound like there is much to understand about super.
You salary sacrifice up to $25k.
The 10-20% is forced savings rate, as per table below:



I've stated previously my savings rate is quite high.
Once you cover your base costs, the rest is cream.
More cream, more to invest, more that compounds.
Start young. More magic happens.
Also leaves a buffer for mistakes. Boy have I made mistakes.

The OP was wanting to know how to get ahead.
Easy.
Do as Joe Hockey says: "get a good job that pays good money".
Go hard when you're young so you have a lot compounding before you have the big life expenses come your way.
Otherwise... you get stuck.

How did you reduce your mobile cost? Lebara? I haven't figured that one out.

Food (incl. cook) + cleaner + bills + accommodation, costs me $250/week combined.
All quality.
Market rate for my room is $400-450/wk - which I charge when I travel.
I spend a lot on travel - I don't back-pack. 45 countries so far.

BUT

When you get married/have kids, that's when most peoples illusions of what's possible gets shattered. Putting aside $100/fortnight is easy, when you earn an extra $20k/yr. Literally a blip.

I'm pushing so that our quality of life goes UP not down, whilst maintaining our savings rate.

How do you maintain $26k between the 2 of you? What's your rent? How's your quality of life? That's very impressive.

 

This is it, what Pape nails is he uses language which is understandable. It's pretty rare for people deep in the financial game to remember how to speak the non-financial language. I get the same in my science background, I could explain something as simple as day to a non-science person and their eyes glaze over. Even the language used in this thread is hard to understand, a lot of short jargon sentences that is barely perceptible as english.

But I push this back to a previous post, educating the masses is actually making it more difficult for the individual to differentiate from the average as this broad advice lifts the average. We live in a ranking system, raising all our money by a factor of 4 just raises the cost of life by a factor of 4. You want to do well, outpace the average.

 

You're not paying attention

You can't salary sacrifice up to $25k, you can only top up your employer compulsory contributions.

Take the example of our person on $90,000 with a Superannuation Guarantee Rate of 9.5%. The employers Superannuation Guarantee contribution is $8,645 per yer or $332.50 per pay.

The maximum our friend will be able to salary sacrifice is $16,355 per year, which is $629.04 per pay. Even though that only reduces their take home pay by $409.04 per pay, their take home pay will still go down from $2,614 to $2,204.96. I understand a lot of people would not manage that. But how about $30 a week after tax? I am arguing that more people could afford that than think they can. Let's see if it actually makes a difference.

The employer contributes 332.50 per pay but 15% of that is tax paid by the super fund leaving $282 per fortnight. At 5% compounding annually over 40 years, it adds up to total super of $885,704. That's not going to be enough for anyone.

Let's kick in an extra $100 per pay salary sacrifice. $15 of that is tax paid by the super fund leaving $367 contributed per pay. At 5% compounding annually over 40 years, it add up to total super of $1,152,671. It's not amazing still but for $30 a week they will have an extra $266,967 in their super.

People can do this, they just don't realise they can. My mate just got a job with the state government and they get an automatic pay rise every year for the first 6 years, taking his salary from $67,165 to $91,345. That's without a promotion.

Like I was saying, people spend what they earn, so what if my mate salary sacrifices half his pay rise every year, in addition to the $30 a week he is already contributing. It's an extra $93 per pay before super contributions tax ($79) after. This is just from not taking the full pay rise. Adding that into our calculator, it boosts super to $1,400,794. That's still not enough but you get my point that these small changes add up over time.

This is the calculator I am using. Compound interest calculator | ASIC's MoneySmart

Exetel. $15 per month, unlimited calls and texts, 2.5 GB data. I don't go over that. Good for Optus.

For people who need Telstra, Aldi and Telechoice are supposed to be good.

Most people don't even try to track what they earn or spend. Like my mate with his $150 per month mobile bill or the people on 'Eat well for less" who were spending $37,000 on food per year for a family of four. The show stepped in and saved them more than $17,000 in a year.

Assessing their pantry, McKinnon and O’Donoghue swapped products without the Maioranos knowing — and even taught them a few tricks on how to prepare food in a way that was restaurant quality. The 36 swaps — including switching pre-packaged chicken tenders for a DIY version, and a yoghurt flip for a version that could be made at home — saved the couple more than $17,000 in a year.

How a few simple swaps saved this family thousands at the till

This is the reality of middle Australia. $17,000 per year saved on food. Remind me again how these families can't find $30 a week?

Now imagine they switched to lower priced but still full service:
- mobile phone plans
- internet
- car insurance
- home insurance
- energy providers
- home loan

They would have plenty of spare money to put into super. And that's all I'm saying. They don't actually have less, they just pay less for the same thing and invest the difference in their future. This does not impact quality of life.

Shop smart, spend smart, save smart. I can't speak for my flatmate but my quality of life is fantastic. I pretty much live exactly how I want to live. I can't think of a single area of my life where I desire to spend more money except travel. I have the money to travel but need to wrap up 2 investment projects so I have the time.

 

Yes, top up. I was aware. I need to re-write half my stuff as I write in a hurry. Thanks for pulling me up on it.

Great example too, with facts and figures. That's what I love to see.

I was using BASIC cost of living in my figures. With $17k fat to cut out, I'm doubtful they were on BASIC living.

Anywho. Been a suuuuuuper slow work week. I appreciate the dialogue.

 

All good.

I doubt it too but if one family of 4 can save $17k per year by shopping smarter, what can everyone else do? And imagine if they invested that $17k per year compounded over 40 years? Now you are talking serious dollars.

I'm on a bit of a crusade about this after watching that show and visiting my parents and finding out for 2 mobile phones plus internet they were paying $300 per month! Eye watering!

 

Language matters a heck of a lot.

Good property managers say 'owner' not 'landlord' as it is less aggressive to the tenant.

Indeed when you study say the world of banking/complex finance, you find the jargon/professional language is designed to act as a protection barrier both for their wages & the nature of their work.

 

Wrong - yet again.