CAN MONEY REALLY MAKE US HAPPY?
Someone said to me the other day that money might not buy happiness, but they would prefer to be rich and unhappy than broke and unhappy!
I tend to agree with this sentiment, but would go one step further and say that rich and happy is my preference. Whilst this is rather a flippant viewpoint, there is some truth to it, because whilst we all might like to be rich and happy, most of us would simply be content to feel in control of our finances.
Not having to worry every time a bill comes in and having enough money to fix items that need repairing or replacing those that break, would make most of us very happy indeed.
In fact, what makes us happy is a topic that was recently investigated by Australian Unity, who, in 2015 found that what we want most in life are good relationships, a sense of purpose and to be control of our finances. But how much money is enough?
How much money do we need to be happy?
The Australian Unity study found that just a modest increase in income makes most of us very happy. More specifically, for someone earning less than $30,000 per year, giving them an extra $18,750 would make a very big difference to their level of happiness!
On the other hand, someone on $200,000 a year wouldn’t do a happy dance for $18,750, but they would for an extra $147,000. Whilst this means that it takes more money to make a rich person happy than a poorer person, it doesn’t mean that rich people are greedy.
What it means it that when the extra money is enough to relieve our financial stress – we feel happy. It just takes more money for people on higher incomes to relieve their financial stress, than it does for people on lower incomes.
Measuring financial happiness
Since feeling in control of our finances makes us feel happy, ANZ decided to find out what factors actually contribute to this control. They discovered the following three factors: the ability to pay our bills, having enough money to enjoy life, and being able to deal with unexpected financial emergencies. Using these three factors they created a happiness score that reflects how we feel about our finances.
It might come as no surprise to you that the average Aussie scored only 59/100; men scored 61/100 and women scored 57/100. Paying off your mortgage increased this score to 74/100, people who were raised to take care of their finances scored 67/100, whilst those with less than $1000 in savings scored 34/100.
The ANZ study also found something that is really worth remembering, which is if you are financially savvy, you don’t need a big income to feel happy.
Tips on boosting your financial wellbeing
Not everyone is lucky enough to have a pay rise or windfall, so most of us have to look to other avenues to increase our finances. The study by ANZ Bank found that people who actively save money, as well as those that don’t borrow for everyday expenses have a bigger sense of happiness than people who don’t share these behaviours.
MAKING SURE YOUR SUPER IS ON TRACK
For most of us, it is our super that will make a big difference to the quality of our retirement, so we need as much money as possible in our super funds! This means that you can’t be complacent when it comes to your super and you should at the very least, take a good hard look at your statements.
What to check first on your super statements
First of all, you need to make sure that your contact details are always up to date, particularly if you have moved recently. Then you need to take a look at the balance and make sure that it is what you expected, confirm that your employer is making your super contributions and if you have been making additional contributions yourself, that these are all correct as well.
Are your fund’s fees too high and your returns too low?
Always check to see how much has been taken out of your account to pay for the fund’s fees. It will pay you to compare your fund’s fees with other funds, but always keep in mind that there’s no point in changing to a fund with low fees if they underperform every year. You can find a list of comparison sites on the ASIC website, so please take the time to confirm that your fund is right for your needs and if not, make a change!
A good rule of thumb is to expect to pay 0.8% each year on admin and investment fees for your fund, so if you are paying anything substantially higher than this rate, it might be time to look around for a fund with lower fees.
Also, give due consideration to the type of investment options you have selected for your money, because some of these options outperform others. Always remember however, that options that provide higher rates of return also pose greater risk, so either split your contributions between different options or speak to a professional who can help you decide what investment options are best for your situation.
It’s fair to say that our needs change over time, so when we are young we might be happier with higher returns and higher risks, whereas for those of us near to our retirement age, we might prefer a more conservative approach with lower risk.
Do you need life insurance with your super?
Most super funds offer life insurance which can take a big chunk out of your investment funds. If you already have an insurance policy with another provider, then consider whether you really need this additional insurance. After all, you don’t want to pay for something you don’t want, but if it suits your circumstances, then make sure that it provides the cover you need.
Don’t forget your beneficiaries
If you haven’t filled out this section on your fund’s website yet, it’s best to do so now. This is because your super can’t be included in your will, instead it must be given to someone you nominate, otherwise the trustees will decide who receives your super if something happens to you.
For help understanding your super statements and for advice managing your super, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.
WORKERS' COMPENSATION VERSUS INCOME PROTECTION
If you are relying on the Workers’ Compensation scheme as adequate cover against becoming disabled, you may be compromising the financial wellbeing of your family.
Workers’ compensation is designed to protect employers from employee workplace related claims. It’s not an all-purpose income protection cover as most illnesses and injuries occur outside the workplace and if you’re a sole trader or in a partnership you are unlikely to even be covered by workers’ compensation.
Where do illnesses and injuries happen?
75% of injuries in Australia happen outside of work# and from those that do suffer an injury at work, 36% do not receive any financial assistance*.
Over 2.6 million Australians aged under 65 are living with a physical disability^, with many including conditions like cancer, stroke, heart disease and depression that in most cases will not be covered by Workers Compensation.
Income Protection Cover
Income Protection cover can pay benefits of up to 75% of your income to help you and your family meet the cost of living if you are injured or ill. It is usually tax deductible, provides 24/7 cover, and whether the illness or injury happens at work is irrelevant.
There are other types of cover that you may wish to consider too, such as Critical Illness cover and Total & Permanent Disability. All are designed to help you financially if you can’t work due to illness or injury.
Get personalised advice that’s right for you
I would like to offer you a one-hour consultation to help you find the right insurance solution.
# AIHW (2008) Australia’s health 2008, Cat. no. AUS 99, Canberra
*Australian Bureau of Statistics, Work-Related injuries 2009 – 2010.
^http://www.abs.gov.au/ausstats/abs@.nsf/mf/4825.0.55.001/ accessed on 30 August 2012.
DO YOU KNOW YOUR SUPER ENTITLEMENTS?
With the media reporting that the government might raise the retirement age and with some employers not paying the right super for their employees, it’s time that we all checked our super entitlements!
Have you lost some of your super?
It’s amazing how many people have super in accounts that they have forgotten about and even more amazing that this lost super totals around $12 billion! If some of that money is yours, it’s time to claim it and add it to your current fund. Check the ATO website and track down your lost super today!
Is your employer contributing the correct super into your fund?
Employees who don’t need to be paid super are few and far between, so it’s a fair bet that your employer should be paying super into your nominated fund. The problem is knowing how much super your employer should be paying!
Currently, your employer needs to pay 9.5% of your salary as super into your fund and they must make these payments at least every three months. It’s not enough to see your super on your pay slips, you must check your fund account to ensure that these contributions have actually been paid into your account.
If your employer is late paying these contributions into your fund, it will clearly affect your investments, so you need to check your fund account and make sure that these payments are being made regularly. It’s even more important that these contributions are made regularly, because by 2025, they will increase from 9.5% to 12%, helping to grow your retirement fund even faster.
What if your employer is not paying your super correctly?
If you believe that your employer should be paying your super contributions and they actually show on your pay slip, but not in your super account or they don’t even show on your pay slip, then you can contact the ATO and the Fair Work Ombudsman.
Since the ATO has a 12-month amnesty for employers to catch up with unpaid super contributions (starting on 24 May 2018), they are more likely to rectify the situation if you bring it to their attention; otherwise without this amnesty they will be heavily fined.
Employers not contributing the correct amount of super for their employees is an on-going concern for the government, which is why they have brought in this 12-month amnesty. It is expected that when this amnesty period ends next year however, that even larger penalties will be introduced for employer non-compliance. In addition, super funds will be required to report all super contributions to the ATO who will then be aware if the contributions are incorrect, late or not being paid at all. This takes the onus off employees themselves to follow up with their super, which is great!
However, you don’t want to become too complacent believing that the ATO will sort out any compliance issues. You should regularly check to make sure that your contributions are being paid into your account and also whether your fund is living up to your expectations. It is complacency that can turn a poorly performing super fund into a disastrous retirement, so always keep on top of your fund and if necessary, move to one that performs better over the long term.
7 TIPS FOR PROTECTING YOURSELF FROM SCAMMERS
It’s unfortunate that people feel the need to con others, but scammers are becoming increasingly sophisticated in their attempts to gain access to your personal details and your money. All of us are at risk of being scammed, but the elderly are particularly at risk as they often take people at face value, not realising that they are being scammed.
So what can you do to protect yourself and any elderly relatives from becoming the victim of scammers, whether online or via phone calls?
1. Know that scammers exist:
This is especially relevant for our elderly who tend to be happy to chat on the phone, increasing the probability of playing right into the hands of a scammer. So have a serious conversation with your elderly relatives about scammers, suggesting that they treat any emails or phone calls as a scam until proven otherwise.
2. Don’t send money to anyone:
Never respond to unsolicited requests for money or gift card payments online or over the phone and don’t send money or gift cards to anyone. If in doubt, always check with the organisation to confirm their requests.
3. Don’t open emails and attachments:
Emails can be fake and it’s common for forged invoices to be sent to people as email attachments, requesting online payments. Never pay a bill attached to an email, unless you can verify that it’s real, never open unsolicited emails and do not open any attachments in these emails as they can load malware onto your computer.
4. Be careful buying online:
Only make online transactions if the site is secure. Look for ‘https’ at the beginning of the URL in your browser with a small green lock icon, but even then it’s best to think twice and only buy from sites that are well known.
5. Never share information:
If someone asks you for your personal details online or over the phone, for example your bank account or credit card details, do not provide these details. If in doubt, close the site or put the phone down.
6. Don’t feel pressured:
If someone is pushing you to buy something online, send money or invest in a project, never allow yourself to be pressured into a decision. Limited time offers are often used by scammers to prevent you from taking the time to think about it or discuss the offer with someone else. If you feel pressured, put the phone down or close the website in your browser. Legitimate businesses with a good reputation should never use high pressure sales tactics.
7. Change your passwords:
Never use the same passwords on multiple accounts and always use strong passwords that are not easily remembered. Never share your passwords with anyone else and change them frequently. You can save your passwords in a spreadsheet or notebook to keep them safe.
In general, it’s better to lose out on a legitimate deal than to lose your money to scammers, so always be cautious if people ask you for money online or via the phone. If you are aware that scammers exist and that they can sound very convincing, then you can protect yourself from most scammers and remember - if it seems to good to be true, it’s probably a scam!
For help managing your financial affairs, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.