Did You Know that You are an Investor Already?
Most people know that they get paid superannuation, however most people do not go beyond that. They don’t see it as their money, until they get to the age of 40-50 years old, which is a HUGE mistake!
Your superannuation is YOUR Money and it is really important you understand what you are doing with your money. It can be the difference of between an extra $50,000-200,000, or more even depending on your earnings, at retirement. Which I am sure would go a long way to being able to travel the world when you retire, if that is what you want to do.
Your Superannuation is your first investment, which started as soon as you got a job. As Living in Australia and working in Australia means legally your employer must pay your superannuation guarantee.
The minimum superannuation pay for each eligible employee is 10% of their ordinary time earnings (OTE). However, it's scheduled to progressively increase to 12% by 2025. - ATO (1)
Which means 10% of your income will go towards your super every year, so if you earn $100,000 before tax, you will have roughly $10,000 contributed to your superannuation. The best part, all super contributions made up to $27,500 is taxed at a smaller rate than your wages that get paid to your bank account.
Any contributions that are made are taxed at 15%, which is a lot less than the average 32-37% of your income that gets taxed, depending on how much you earn.
You not only save money by having super, but you also can make a lot of money from the returns your fund will get for managing your money.
Of course, you want to make sure that you have the right fund and the government has even provided a great website that will compare your current fund with up to four other funds that may get you better results down the track based on previous performance.
Check out the Your Super Comparison Tool here
The above comparison tool is great, however it does have some short-comings, which are due to the fact that it doesn’t filter funds based on ESG (Environmental Social Governance), therefore you don’t know where your money is going and if its ethical. As well as the fact it only compares based off of the previous 7 years of annual returns and the annual fees.
Which, in hindsight, if you are 20 or 30 years old, you want your money in a fund that has been able to perform well for much more than just seven years.
However, the tool is a great start to seeing whether your fund is performing well or not and can give you some good insight into how other funds are performing.
The main reason as to why you should not just choose the fund that is the best-performing from the Your-Super-Tool comes down to the fact that every person’s circumstances are very different and depending on your age, you may not want the highest performing fund. Generally speaking, the higher the annual returns, the more volatile the returns can be.
If you have only six years left to retirement and you are in a very aggressive fund, that may affect you significantly if the markets were to have a down-turn.
Hence why it is always best to speak to a professional advisor and work with one to set-up your superannuation.
I believe it is especially important for when you are younger as well, when you get to about 21-29 years old, you should be essentially starting your professional/trade career.
Which means your super contributions will be much higher from your employer than it was previously. There are a whole range of things that you need to figure out due to your increased super contributions that will possibly make you a lot more money than the general fund that your super fund will put you in.
Not to mention there is insurance within super as well, whereby that eats away at your retirement savings, but it may be the only way you can afford to get life insurance, TPD (Total Permanent Disability) and Income protection. Therefore, you want to know what insurance is going to suit you the best and how you may need it to change when you have a baby, build a house etc.
But it is all really hard to figure out all by yourself, which is why using an accredited Financial Planner is the way to go!!
There are so many things that can go wrong if you choose the wrong fund, but there are a few tools at least to get you started.
I hope this has helped and that brings us to the end of our beginner investors guide.
If you have found this guide valuable, I would love it if you shared all ten blogs with friends and family. The more the merrier, as I want to see each and every one of you learn to Take Back Control of your Life-Health-Wealth !
Until next time,
Take Back Control
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