Real Living Australia - February 2018

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MONEY MAG’S EFFIE ZAHOS EXPLAINS HOW

WE CAN WHIP OUR FINANCES INTO SHAPE

WITHOUT BREAKING A SWEAT

HOW TO EARN & SAVE

SET UP SOME BUCKETS If you’re one of the millions of Aussies who struggle to balance

the household budget, there’s a simple but effective way to save. It’s called the “60:30:10” rule,

and you basically divide your income into three buckets – 60 per cent for essentials (mortgage,

rent, food, electricity, phone/internet and so on), 30 per cent for things you want or

unexpectedly need and 10 per cent for savings. There are variations on this, such as “60:20:20”.

This bucket system may not work for everyone but by setting up separate accounts and

earmarking them with a purpose, you’re in a much better position to stay on track.

OWN A HOME DEBT-FREE Having a home loan forces you to save. Focus on paying it off by

putting your savings into a mortgage offset account. Not only will you reduce the term and interest on

your loan, you won’t pay tax on the interest earned. And make no mistake, having a fully paid-off

home is the most important strategy for retirees. It’s the only asset not included in the test for a part- or

full-age pension and the only investment that is capital gains tax-free when you sell.

FEED YOUR SUPER

There are probably a million other

pressing money issues you have to

deal with at the moment, but it

pays to take the time now to review

what will be one of your biggest

asset classes in the future. For most

of us, super is still one of the most

tax-effective wealth-creation

strategies. For example, if you

salary sacrifice $1000 into super,

you’ ll pay $150 tax on it,

compared to $390. Why give the

tax office $240 when you can “pay

yourself forward”?

GO FOR GROWTH Leave your money in a bank account and one thing’s for sure: you won’t get rich.

You need to dial up the risk to create wealth, with shares and property your best options. Through a managed

fund or exchange traded fund (ETF), you can invest indirectly in these asset classes with as little as $500. In

a managed fund, your money is pooled with other investors’ and a fund manager buys and sells investments

regularly on your behalf. An ETF simply buys a portfolio of assets that mimic an index, such as the All

Ordinaries index or the S&P/ASX200 index. More details can be found at Moneysmart.gov.au.

SAVE A LITTLE, SAVE OFTEN How much was in your last pay? And

how much of it have you got left this week? We tend to spend all that we earn,

and most of us can justify it. But the secret to building wealth is to spend less

than you earn and save a little, often. Save $2 a day during your twenties and

you’ll have $30,624 by the time you’re 40 (assuming a seven per cent rate of

return). Five dollars a day is $77,000, or $50 per week is over $100,000.

That’s the magic of compound interest. To keep track of what you’re

spending, download the free ASIC’s MoneySmart TrackMySPEND app. R

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