A Personal Spending Check-Up
At a time when investment returns and pay rises are typically subdued, a temptation is for investors, including retirees, to take greater risks outside their tolerance to risk in an effort to keep up investment returns.
However, among the other smarter options is for investors is to look for ways to reduce their everyday living costs that hopefully won’t really sacrifice the quality of their lifestyles.
Regular readers know how Smart Investing consistently reinforces the importance of minimising investment costs – that may seem like another subject yet it is part of the same cost-saving equation.
A recent article in The New York Times– Have a day off? Tackle your financial to-do list – points to how we can potentially save quite a bit of money by attempting to reduce some daily expenses.
Such expenses where reductions maybe possible include phone and broadband, mortgage interest rates, car and home insurance and various subscriptions such as to internet-streaming services.
For instance, keep a close on the latest deals being offered by broadband providers. And, wherever possible, practise and hone your negotiation skills.
As the article’s author Ron Lieber writes: “A long holiday weekend, with its promise of a few extra hours to turn to tackling undone financial tasks. We all have unfinished business and undone financial tasks.”
One place where Lieber suggests starting is to have a close look at your credit and debit card bills in an attempt to identify unnecessary or excessive spending.
ASIC’s consumer website MoneySmart has a useful budgeting tool and tips on how to keep your everyday spending including how to keep your mortgage and your credit card under control – as well as your other everyday spending.
A reduction in your personal spending may provide a means for you to save more – perhaps with higher super contributions. Depending upon your circumstances, a target might be, for instance, to increase salary-sacrificed contributions as much as possible within the concessional (before tax) contributions cap.
For 2017-18, the concessional contributions cap – which covers superannuation guarantee contributions, salary-sacrificed contributions and personally-deductible (where applicable) contributions – is $25,000 for all eligible contributors.
Many retirees already on tight budgets will understandably have difficulty reducing their spending. It may be particularly critical for them to look for ways to spend their money more efficiently if achievable.
Further reading: Meet the non-conspicuous saver and investor, Smart Investing, May 22.
Coming soon in Smart Investing: How to stretch your retirement income by taking a total-return approach to investing and Grey budgeting for retirees.
Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.