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How just $25 a week could change your financial future

Written by Travis Stanley

What can $25 buy you nowadays? Some older Australians could probably attest to getting a lot more for $25 in ‘their day’; an average dinner out, a city parking spot, a movie ticket with a drink and popcorn. Maybe it would cover some of your monthly phone bill and I doubt it would even fill your car with fuel. $25 simply does not go that far anymore and with inflation, this trend is only going to continue.

Let’s look at this differently. What if you could sacrifice a few movies, a few dinners or a car park or two and put that $25 per week to good use, contributing to your financial future?

Save for an emergency fund: The average cost of living in Australia is $2,835 a month. More for couples and families. The average Australian saves only $400 to $500 per month. Our savings may need to support us if we are unable to work for whatever reason and most of us are not properly insured either. Do you have enough to get you by in case you lose your job or are injured? $25 per week saved amounts to $1,300 per year. That is still less than 1 single Australians cost of living for one month! How does your emergency fund stack up against your own monthly cost of living?

Pay non-deductible debt: Let’s say your emergency fund does stack up and your insurance is in order. Congratulations, but how is that high interest debt looking? Do you have credit cards, car loans or retail purchase debts with exceptionally high interest costs? Contributing an extra $25 per week, which would be $1,300 per year, is an easy way to save money. Let’s look at the amount you could save, based on varying interest rates. At a modest 10% interest rate an extra $1,300 of debt would equal an additional $130 per year in interest payments. At 15%, it would be $195. At a not unusual 20% interest rate, the interest is a whopping $260 per annum! You can see how much sooner you would be debt free by simply paying off that additional $25 per week.

Superannuation contribution: Not to get too technical but your superannuation is a very worthy recipient of your $25 per week for some people. Let’s consider an after-tax contribution of $25 per week, which equates to $1,300 per annum extra to your nominated superannuation fund is made without fail until you retire. Say you are 35 and can access your super at age 60. What would that really mean? At a very modest return of 5% per annum, plus the annual $1,300 contribution and with a starting balance of NIL, this alone would grow to $62,045! By making $25 per week a pre-tax contribution, which almost anyone can easily do, the benefit increases even further!

Invest: Not for the faint hearted but for the individual who is disciplined and wants to ‘get into the market’. Start small by purchasing a parcel of Australian shares for as little as $500, plus a brokerage fee of $50. You can save the $550 by putting aside $25 for just 22 weeks! Another good investment option to discuss with an adviser is a Managed Fund, which can be set up with as little as $2000. Most offer a regular investment option, meaning you can add additional money to your Fund at regular intervals. This is a really effective way to build a substantial investment portfolio.

Educate yourself: More of a personal improvement, but spend some time investing in yourself. By broadening your knowledge and improving your skill set you are investing in your future. You are a very worthy recipient of your $25 per week so investigate short courses and other options that will give you an edge at a job interview or for promotion at work.

 

Financial Adviser
Travis Stanley 

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  • Anne Street Partners provides financial planning and wealth management
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  • © 2018 Copyright Anne Street Partners Financial Services Pty Ltd

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