Lets Talk Goal Setting!

It sounds honestly like the most boring topic ever, however, it is actually super important. While you don’t have to sit down and write out a goal for each month or year, it is important to have in mind what you want to achieve with your money in the short, medium and long term!

Ideally you want a SMART goal:

SPECIFIC- A money goal shouldn’t just be ‘save as much as I can’, having a specific number in mind will help you achieve that goal.

MEASURABLE- You need to be able to measure it so that’s means actually making sure you track your savings goals and know your numbers. This can be on a spreadsheet or just going through your bank statements/online banking.

ACHIEVABLE- It needs to be right in that sweet spot of difficult enough that it’s challenging but not too hard that there is no way you will reach it. You also don’t want it to be too easy, pushing yourself will be way more rewarding.

REALISTIC- The goal also needs to be realistic and relevant to you and your values.

TIME-BOUND- This is where our short, medium and long term time frames come into it.

Short Term Goals

I’d say a short term goal would be in that time frame of six months to two years. This may be saving for a holiday, house or even just an emergency fund. These savings would be ideally best kept in a high interest savings account or term deposit. Less than two years is probably not enough time to be investing in shares as they are quite volatile and this would be quite risky.

Medium Term Goals

These goals should be ones that you want to achieve in the next 2-5 years. These can be a variety of things depending on your values and what you want to achieve. These may be buying a house, starting to invest, or even progressing your career to increase your income.

Long Term Goals

Your long term goals will be any that are more than five years away. I find that these probably don’t have to be as specific as your short term goals, but having a rough idea of where you want to be in 5, 10 or 20 years can definitely shape what you do today!

My Money Goals

Short Term
  • Continue to invest in the stock market- $200 a week + a third to a half of every OT shift payment also being invested. No concrete number as this number will vary.
  • I am on a part time contract now, so I will aim to complete one overtime shift a month to supplement my income if possible (this will depend on work vacancies).
  • Other OT money to be transferred to my savings to eventually buy a new car- planning to buy in May next year.
Medium Term Goals
  • Continue to invest at least $200 a week over the next two to five years to continue to build my investment portfolio and to help increase my passive income. I am expecting my income to change in the next few years so if I can make this a priority I can continue to grow my wealth despite these changes.
  • Convert my home to an investment property.
  • Invest in myself- learn, complete extra training, do what I can to make myself more employable.
If I continue to invest $200 a week without any extra invested, I will have $63,680 invested in 5 years.
If I can complete an OT shift a fortnight, I will be able to put an extra $100 into investments on top of my $200, leaving me with $95,500 after 5 years.

(Both of these are assuming a return of 8% per year, you can play with this calculator here: https://moneysmart.gov.au/budgeting/compound-interest-calculator)

Long Term Goals (5-10 years)
  • Buy a primary place of residence (PPOR) in the place I want to live.
  • Ramp up my investing once I have a more stable income and am settled in a career I love.
Long, long term goal (10 years +)
  • Have a large enough investment portfolio bringing in enough passive income that I can work part time or work doing something I absolutely love rather than doing it for the money.

Summary

As I said earlier, I swear people automatically yawn as soon as they hear goal setting. If you have read this far, I am honestly super impressed. I’d encourage you to at a minimum, have a think about what you want in life and how you are going to do that. Having a rough idea of what you want in the future, will allow you to make better decisions now. Goal setting doesn’t have to be a strict process of sitting down and writing the exact date you want to achieve something by. Instead, it should be something you have thought about in some depth and you have a plan of how to get there. These goals don’t have to be concrete either, as you change, your goals will too, and there is nothing wrong with that!

Cryptocurrency

As of writing this, Bitcoin had surpassed it’s all time high of approximately $87,500 AUD or $66,000 USD and has only just cooled down to approximately $80,000 AUD. Bitcoin has been an absolutely ride over the last few years. In 2018 it rose to a then all-time high of approximately $20,000 before crashing back down to less than $5000 per coin. It has been on the rise again this year, now reaching all-time highs of above $80k AUD, with some expectations for it to rise to 100k. Despite all the hype, there are many that are wary of the cryptocurrency and argue that it isn’t all its cracked up to be.

What is Cryptocurrency?

“Cryptocurrencies, also known as virtual currencies or digital currencies, are a form of electronic money. They do not physically exist as coins or notes. A cryptocurrency unit, such as a bitcoin or ether, is a digital token. These digital tokens are created from code using an encrypted string of data blocks, known as a blockchain.”

“Cryptocurrencies are used as payment systems to execute contracts and run programs. Anyone can create a digital currency, so at any given time there can be thousands of cryptocurrencies in circulation.”
– Government Money Smart Website

For more information on how these currencies work and the technology behind block chain- head to the Reserve Bank of Australia’s website which is linked below:

https://www.rba.gov.au/education/resources/explainers/cryptocurrencies.html

How Can I Invest in Cryptocurrency?

There are a number of different platforms you can use to invest in cryptocurrency. The one you choose will depend on what you are looking for and what suits your personal situation.

Some online Cryptocurrency exchange platforms available are:

Amber:

https://amber.app/au/

Binance:

https://www.binance.com/en

Coinspot:

https://www.coinspot.com.au/

Swyftx:

https://swyftx.com/au

I personally use Swyftx as I found that the best for my situation. Most of these platforms have web based platforms as well as mobile apps making it super easy to get started.

How do I store my Cryptocurrency?

Cryptocurrency differs to other types of investments in the way that it needs to be stored somewhere. Unlike shares, where you buy them and they are registered to your name in a national registry, crypto you have to store in an ‘digital wallet’. This digital wallet can either be hardware based or web based. There are pros and cons to each and again it is up for you to decide what works for you.

Web-based Wallet

Storage based online on a phone, computer desktop, or exchange platform.

Pros:
– Easy to access

Cons:
– Can be stolen by hackers
– Requires additional online protection/security installed but even then is not completely safe.
– If you lose your privacy key that unlocks the wallet, you won’t be able to access your coins.
– If you use an exchange platform, the platform holds the coins in your name. They do not offer reimbursement if the funds are stolen, so you will lose all your money.

Hardware based Wallet

Storage that is offline, based in a hard drive or offline ledger.

Pros:
– Can’t be stolen
– More secure

Cons:
-If you lose the hardware you lose your crypto.
– The hardware may break & you lose your crypto.

Most crypto-users/experts (if you can call them experts? god knows) say that any large amounts of crypto should be kept in an offline, or hardware based wallet. The risks of keeping your cryptocurrency online is way too high, especially as that balance grows. They liken it to like an everyday account and savings account. Your online wallet would only hold your spending money, and any extra would stay safe in a savings account. This is the same for cryptocurrency. While you may keep some in an online wallet, any large amount should be kept safe in a hardware based wallet.

They also say to be wary of keeping large amounts on exchange platforms. The platforms are not required to pay you anything if the coins are hacked and stolen. Therefore, if the site is hacked you could lose all your money. What may be safer if you don’t want a physical wallet, is to have another online wallet not tied to the exchange but may still be online. You will have private keys that you use to access this wallet, unlike exchange platforms who hold the keys and hold the coins for you. There is a term they say- not your keys not your coin. If you have the ability to, it may be worth removing your cryptocurrency from these exchange platforms to your own personal wallet.

How Much of My Net Worth Should I Keep In Cryptocurrency?

I would say, as would many others, that cryptocurrency is extremely speculative. This basically means that no one really knows where its going and if it is going to be part of our future or not. Therefore, it very much is a gamble at this point. For this reason, I would be hesitant putting large percentages of your net worth into cryptocurrency. Because it is speculative, it is also very volatile, meaning the price fluctuates so much each day. If you have a low risk tolerance and couldn’t handle large price crashes, I can’t imagine it would be worth you investing in at all. The most important thing when it comes to investing in anything is to do your own research to see what suits you and your risk tolerance. For me personally, I have dipped my toe in the water with crypto to avoid FOMO, but have less than 1% of my total net worth invested in this speculative, highly volatile investment.

Good luck and happy investing!

Resources

https://moneysmart.gov.au/investment-warnings/cryptocurrencies-and-icos

https://www.rba.gov.au/education/resources/explainers/cryptocurrencies.html

https://www.investopedia.com/news/bitcoin-safe-storage-cold-wallet/

https://trade.swyftx.com.au/register/?ref=madelinewormald

Credit Card Hacks

WARNING: If you can’t use credit cards responsibly, please do not read on. Only for those who can use a credit card without spending more than they normally would and can pay it off each month.

Credit card hacking can be a great way to earn additional rewards on top of your everyday spending. Most of the time, these rewards are aimed at Qantas Frequent Flyer Points! Almost every credit provider will have a credit card that gives you a certain number of Qantas points per dollar you spend on the card. Problem is, the conversion rate is often very low and almost not worth the hassle unless you are already spending big amounts. That’s where credit card hacking comes in! Finding deals that give you bonus points is the best way to start really racking up the points. Often these deals also come with zero fees for the first year, but also come with some spending criteria before you can earn those bonus points. It’s important to read the criteria before you sign up to make sure its worth it for you.

Here’s an example of a card that is on sale right now:

The ANZ Frequent Flyer Platinum Card

Receive a bonus $70,000 Qantas Points & $0 annual fee in the first year.
All you have to do is spend $2500 on eligible purchases in the first three months from approval.

Things to consider:

– Will you spend $2.5k in 3 months or will this cause you to buy unnecessary stuff just to reach the figure? If you wouldn’t normally spend that much in three months it probably isn’t worth doing, or at least wait until you do have some big expenses coming up that you can use the credit card for. These cards are designed to make you spend more money, so it is important that you are only using these cards for money you would spend anyway.

– After the first year, the annual fee becomes $295. This is quite expensive and would require you to spend A LOT of money to make the points worth the fee. Therefore, it is super important to make sure you cancel the card before the end of that free year to ensure you avoid the fee. My advice would be to cancel the card as soon as you have received the bonus points so you don’t forget.

– Some cards may have other special terms and conditions that aren’t made obvious at the beginning. It is important that you do read all the T&C’s before signing up for any credit card.

– Have you owned a credit card before and potentially let it get the best of you? If you have a knack for spending and you think having a line of credit may be too tempting for you, it is definitely best you steer clear of all of this. I’d hate to see you try and get a bonus 70,000 Qantas Points only to end up in thousands worth of debt. Not worth it.

Check out the Points Hack Website for more info, they have some of the best comparisons of cards out there!

I luckily am more of a saver than spender and therefore don’t find it hard to refrain from spending on my credit card. I use these offers when I have a holiday coming up I need to pay for or any other big expense. Please consider your own situation and habits before doing this yourself! However, if you think you have the self control then it can be a great way to hack the system and enjoy some rewards.

Superannuation

Yawn. (kidding.. kind of)

It is important, our super. We aren’t taught about it in school, and even when we enter into the work force, it really isn’t explained. If we never learn to take an interest in it, we could really be sacrificing a comfortable retirement. So while it isn’t the most exciting topic, it is an important one, and I would encourage you to read on. The main points I want to get across is that you know what company you are with, what type of fund you are in, and how the fund is performing. It is also important to make sure your employer is paying you the right amount of super, and it is also worth considering making additional contributions. If there is something that you don’t know in that list of things, hopefully this post will give you the tools to find out.

Superannuation

Superannuation is the retirement scheme here in Australia. Our employers are obligated to pay their employees superannuation, and people can also pay into their own super as well. This cannot be accessed until preservation age, which currently is set at 60.

You are eligible to receive super contributions from your employer if you earn $450 or more in a month and are aged 18+. It doesn’t matter how you are employed- part time, full time, or casual, you are entitled to super payments from your employer. If you are under the age of 18, you must be working more than 30 hours a week to earn super.

The “super guarantee” is the minimum payment your employer must pay into your superannuation. Up to June 30 2021, this super guarantee was 9.5%. As of July 1 2021, that guarantee is now 10% and will be increasing to 12% over the next few years.

How Can You Check Your Super?

To see how much super your employer is paying, it should be on your payslip, otherwise you can access it via your myGov account or through your super account. If you aren’t getting the right amount, talk to your employer. If your employer isn’t paying you super- that’s actually illegal and it’s important you report them to the ATO. If you don’t know who your super is with or how much you have in there- you’ll want to find out.

If you don’t know who you are with, and can’t find any paperwork, I would go back to your first employer and find out who they set you up with. Or go onto my.gov.au and head to the Australian Taxation Office section and you will be able to find your fund details there. If you still don’t have a myGov account set up, I would encourage you to do so as this is where you will find information on your tax, super, Medicare & your covid-19 vaccination records!

What Fund Should You Be In?

It is important you are in a fund that is right for you. If you are still with the default company you were signed up with when you got your first job and have never looked at it since, it is probably worth going back and seeing if it is right for you.

Things to consider when picking a superannuation fund include:

  • The job/industry we work in
  • Investment options
  • Fees
  • Features
  • Performance

At the end of the day, the super fund that you choose should work for you, it isn’t up to anyone else. What you value and prioritise will be what you look for in a super fund. Whether that is finding an ethical fund, a fund with low costs, or one that has consistently performed well over a long time, the choice is yours!

Another thing to consider is the investment style you are in within that fund. Super funds will have a few different portfolio options you can choose from, generally ranging from cash/defensive, to balanced, to high growth options. Again, the portfolio you choose should be personalised to you and your risk profile.

A general rule of thumb is that the further away you are from retirement, the more risk you can take on. So when you are at the start of your working life, you can afford to take more risks as you have time to ride out volatility and bounce back from any losses. As you get older your risk should be decreasing as you will need that money sooner and don’t have as long to recoup. While this is a general rule, it will need to come down to how you feel about risk. If you can’t sleep at night knowing you are in a high risk/growth option despite being in your early twenties, then this is probably not the right option for you. On the other hand, if you are comfortable taking on risk and think it is worth the return when you are in your fifties, a high growth option may still be for you.

Extra Contributions

If you have some extra money left over and want to invest for your future, it may be a great idea to pay extra contributions into super! There are a couple of different ways you can do this, either pre-tax or post-tax.

Pre-Tax

Pre-tax contributions, also known as salary sacrificing/packaging, allows you to make before tax contributions to your superannuation. You can organise this through your employer or pay roll, who will be able to make a pre-tax deduction for you. These payments are taxed at 15%, which is lower than most people’s marginal tax rate. Salary sacrificing then not only boosts your super but also saves you on tax. There is a limit to the amount you can contribute each year. Including your employer contributions and your salary sacrificing, you cannot contribute more than $27,500 per financial year. It also is probably only worth contributing pre-tax if you earn more than $37,000 per year. Anything less and it doesn’t offer any tax benefits.

After-Tax

As well as pre-tax payments you can also make after tax payments to your superannuation. This can be in regular instalments or in a lump sum. You can contribute up to $110,000 in after-tax contributions each financial year and you also may be eligible for a tax deduction for these contributions. See the ATO website below if this interests you.

https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/claiming-deductions-for-personal-super-contributions/

LISTO

The low income super tax offset (LISTO) is a government superannuation payment to help those earning low incomes save for retirement. If you earn less than $37,000 in the financial year, the ATO will pay a tax offset of up to $500 per year into your super account. They will work out your eligibility and pay it into your super, there is nothing you need to do to receive the tax offset.

Spouse Contributions

Another thing to consider is making contributions for your spouse. Often, women will have lower super balances then men as they take time out of the workforce to have and then care for children. For this reason they miss out on super payments and at retirement can be much worse off than their spouse. A way to combat this is for the working spouse to split their employer super contributions with the one staying at home. This is a great way to ensure the spouse having the time off is still receiving super and the working spouse may also be able to claim a tax offset for these contributions. Again, more information on this can be found on the ATO website.

Final Word

I can’t stress enough how important superannuation is! While it may not seem important now, it really is going to define our life after retirement. As you get older, your capacity to work is only going to decrease, so you aren’t going to be able to just pick up a job to earn some extra income. This is why super is there, and while you can earn that extra income, now is the time to build up that nest egg so you don’t have any financial worries when you retire.

Lifestyle Creep

What is Lifestyle Creep?

Lifestyle creep is a very common phenomenon where as your income increases, so do your expenses. So maybe as you get that pay increase you decide to buy a fancy car, or buy a house that has a mortgage that really stretches your budget. It is lifestyle creep that sees professional sports people that earn millions going bankrupt. Or well paid professionals drowning in credit card debt. It can happen to anyone, and probably happens to all of us at some point in our lives.

Why is Lifestyle Creep Bad?

Lifestyle creep may seem harmless in the beginning. Many of us will experience this when we got from part time or casual work to full time work. This kind of creep is pretty reasonable, as we can’t keep living like poor students or living at home forever. However, if our expenses continue to climb as our income does, it means we will rely on that increased income. This makes it difficult to be flexible with our careers and jobs, as we need a higher income to afford to live.

Lets use an example:

If you are earning 100k p.a. and your expenses are 80k p.a., and you are starting to burn out or want a career change. You don’t have the same flexibility as someone whose expenses are say 40k, as you need to find a job that will pay for your lifestyle. You probably wouldn’t be able to go back to university or go to any other entry level job until you start cutting expenses.

The person that is earning 100k p.a. and is only spending 40k a year will have sooo many more options. Not only will they be able to take a pay cut and survive, but they potentially have additional savings or investments that they can rely on.

How Do We Stop Lifestyle Creep?

The easiest and best way to prevent lifestyle creep is to put any extra income straight into savings or investments. If you get a pay rise, automatically transfer that money straight into another account so it is like it doesn’t even exist. You have already been living without that money until now so you won’t miss it anyway! If this doesn’t appeal to you, maybe use the first bit of extra money as a little gift to yourself, but after that transfer it so it is out of sight and out of mind!

I’ve managed to keep a similar level of expenses to my first year in my job as a paramedic. That has afforded me surplus income to invest in to the share market, buy a home and travel overseas. It has also allowed me to drop back to part time and still afford to live. If I had been living an inflated lifestyle, I wouldn’t have been able to afford this option and would be very burnt out working full time. Having low expenses and no lifestyle creep has given me flexibility and choice in my life. You won’t see any golden handcuffs here!