Yahoo Lifestyle 5 Money Moves That Could Change Your Life
"I am woman, hear me roar?" It pains me to tell you it's now also, "I am woman, see me poor." Let me be clear up-front: this is not our fault. It's not because, Carrie Bradshaw-like, we're addicted to shoe shopping. It's not even because, as women tell me day in, day out, "My man handles the boring money stuff."
Neither helps, sure. But mainly it's because we still typically earn less than men (17.6 per cent less) and take a "break" to raise children, then we live more than four years longer than our marvellous males. So our super is stuffed.
Yet this threatened new GFC - or Girls' Financial Crisis, as I've dubbed it - could be entirely averted. So here are five (almost) painless money moves that promise women a lifetime of options and opportunities.
Pay your (future) self first
This is the fast - OK, slow - salve for your super: in all periods of paid work, pay in two per cent extra on top of what your employer contributes. Get this whisked out of your salary before tax, so it won't even cost you that much - and before long you won't miss it. In all periods you are not working full-time, pay in whatever you can after tax. And every possible year, collect giveaways like the co-contribution and spouse super contribution tax offset. Google them.
Bottom-line benefit: Boosting your super from a projected average of just half that of a man, and clawing back the $46,000 Rice Warner actuaries say that five years away from full-time work costs.
Vanquish debt fast
This is the next biggest secret to security. Make ditching debt your number-one "investment" priority and you pocket a small fortune. Any money you use to repay debt earns you an effective return equal to your interest rate, risk-free and tax-free. This makes paying off the mortgage a smarter money move than even the best high-interest savings account. And once you are debt-free, all the money that repayments currently consume becomes yours.
Bottom-line benefit: If you do have/ will have a $300,000 home loan and also a $10,000 emergency fund, put it on the mortgage. At current rates, you'll save more than double in mortgage interest what you'd make in interest in a savings account. (You'd save $31,286 in loan interest - tax-free - or make $17,138 in interest in the average online savings account*, and you would then have to pay tax on it.) Plus, you'll repay your loan two years early, so keep two years of repayments for yourself.
Use cash, not credit
Unless you absolutely have to use credit or take out a loan for something, don't - interest means you'll pay extra. What's more, using credit will curtail future purchases because your money's tied up paying for those in your past. Plus, never use credit for holidays or a wedding, for which you'll have nothing to show afterwards but a tan and photos.
Bottom-line benefit: You can go on a fantastic $20,000 holiday if you put $140 a fortnight into a top savings account for five years. But if you get a loan to go on that holiday today, then you will have to fork out a minimum $200 a fortnight to repay it over the next five years, and end up paying more than $4000 extra. And what about good old-fashioned lay-by for consumables?
Protect to prosper
This is so important: buy risk insurance (I'm assuming you've general insurance). Many single people think they needn't bother, but how would you pay the bills if accident or illness stopped you from working? Income protection insurance is a must for all. Life insurance is vital once you have debts or dependents.
Bottom-line benefit: Untold, so get covered.
Have fun!
Money is for spending - just not all at once. The key is to know what you need to spend money on versus what you just want to, and to target longer-range goals that are so sweet you can almost taste them. As I always say, you need strong motivation to resist instant gratification.
Bottom-line benefit: To spread what you make in 40 years of working across, say, 60 years of playing ... and to make sure there's always money for shoes!
It's never been easier to get your finances in order thanks to MoneySmart Week, run in the first week of September by not-for-profit organisation Financial Literacy Australia. Simply visit moneysmartweek.org.au and choose one or more areas where your money-self needs to shape up. You'll receive a free challenge kit with a step-by-step guide to fitter finances.
Nicole Pedersen-McKinnon is founder of themoneymentorway.com and an ambassador for MoneySmart Week. Follow her on Twitter @NicolePedMcK.
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