September 1, 2026 • 44 mins
Chats about super are slipping by the wayside, so we’re running it back for all the baddies who are ready to salary sacrifice for their retirement.
On this week’s Deep Dive, Bec and Victoria are discussing the power of your superannuation to completely transform your wealth today (as a lucrative tax vehicle) and well-into the future. The gang explains what superannuation is, how salary sacrificing works, and how you might work your wealth to better support your long-term investments.
Tune in to hear about the First Home Super Saver (FHSS), the relevant contribution caps for the current income year FY27 and why your accountant keeps bugging you to make top-up payments to lower your tax bill.
SUPERCHARGE YOUR SUPERANNUATION: There’s a playlist to help you do it over at https://open.spotify.com/playlist/4TDg1Pe0xmTbSlY3lD5p41?si=-ZIwE0GCTD-5MxixtVaaaw.
SUPER 101: More of a scroller? Peep this blog on how to get your superannuation sorted. Search superannuation 101 at shesonthemoney.com/blog/.
SCHEMIN? But, of course. Here’s more info about the First Home Super Saver scheme. Thanks ATO! https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme
New here? Follow us on Instagram (@shesonthemoneyaus) for Q&As, bite-sized advice, daily money inspo... and relatable money memes that just get you.
Acknowledgement of Country By Nartarsha Bamblett (nartarshabamblett.com.au)
The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708, AFSL - 4451289
See omnystudio.com/listener for privacy information.
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Speaker 1 (00:00):
She's on the Money.
Speaker 2 (00:02):
She's on the Money. My name's Tatasha Bamblet.
Speaker 3 (00:11):
I'm a proud First Nations woman and I'm here to
acknowledge country. Hello, beautiful friends, we gather on the lands
of the Aboriginal people. We thank, acknowledge and respect the
Aboriginal people's land that we're gathering on today. Take pleasure
in all the land and respect all that you see.
She's on the Money podcast acknowledges culture, country, community and connections,
bringing you the tools, knowledge and resources for you to thrive.
Speaker 1 (00:32):
Hello and welcome to another deep dive episode of She's
on the Money, the podcast that helps you feel more
in control of your financial future, even if that future
seems years or even decades away. I'm back side and
enjoining me today is the brilliant Victoria Divide to discuss
the topic that affects us all, well, everyone living in Australia.
Of course, I'm talking about super annuation, super annuation, super annuation.
Speaker 2 (00:55):
I say superannuation, but there's no innuation, but there's no
B superannuation graduation.
Speaker 1 (01:01):
When I say super annuation.
Speaker 2 (01:03):
I mean you you enunciated correctly.
Speaker 1 (01:06):
Oh that's the first time've ever well.
Speaker 2 (01:08):
Done, well done. I don't know if that's the right way,
because you know, like how some words, I know? Yeah, anyway, advertisement,
so that's a different story, or like some American states, Yes,
I can't, I can't anyway, too.
Speaker 1 (01:24):
Many pronunciations or potential What about superannuation? Okay, so well,
more specifically, how one might get their super to work
harder for them in the long run through salary sacrificing
a sexy because if we've learned anything it's that we're
often rewarded for the duration of our investments, not simply
the amounts we contribute.
Speaker 2 (01:43):
You have learned a lot. I obviously I am obsessed
with superannuation. I love talking about it. I love being
involved in it. I love being able to calculate at
the end of our financial year how much additional I'm
able to contribute to like make my cap which which
is just really fun but it's an absolute privilege to
(02:03):
be able to do so. But at the same time,
right now, money is really hard for people. Yeah, and
I'm finding that conversations about superannuation are slipping and we
need to be bringing them back to the forefront. Because
if you've got no cash and you've got you know,
a really strict budget and you're just really scraping by
getting your super in order is something that you can
(02:24):
usually do for free to put future you in a
better financial position so that you don't have to be
as stressed and you're still making money. Yes, like you
can still make your money work for you irrespective of
the situation that you're in right now.
Speaker 1 (02:37):
That's so true, and knowing that kind of makes you
feel really empowered, even if you are kind of living
paycheck to paycheck. So well, I feel like we've discussed
superannuation a few times on the podcast, but I'm not
sure if we've covered just how impactful salary sacrificing can
be depending on when you start. And I know a
bunch of people in.
Speaker 2 (02:52):
Our community will want to know how it works exactly,
And I think I'll be really honest with you here.
When I first started Ches on the Money, I was
not in the financial position to be able to salary sacrifice.
In fact, once I went out on my own and
was a sole trader, I wasn't even paying myself any superannuation,
even though I was on the podcast saying small business
owners need to be paying their super because it's more
(03:14):
of a do as I say, not as I do moment.
Like I knew I was doing the wrong thing at
the time, but I also didn't want to tell you
that because I didn't want to give you the permission
to be like, oh, it doesn't matter. But I think
in hindsight, it's important to talk about this stuff too,
because if you're a small business, or if you're a
sole trader, or if you're not able to salary sacrifice,
(03:35):
I knew just have a salary and pay as you
go job, and you feel bad about it, you shouldn't. Yeah,
because we're all going through different seasons of life, and
sometimes it's harder and sometimes it's not. But I know
unequivocally that the time and the energy and the effort
that I spent researching and understanding my super and learning
about it helped me build the investments that I have
(03:58):
today and helped me be able to identify when I
was in a good position to actually be able to
contribute to that, because if I didn't know, and I
just kept putting off these salary conversations and these super
conversations until you know, maybe I had enough money. How
do you know when you have enough money? Yeah, if
you haven't already done the research and understood and waited
for a period of time where it's identified itself.
Speaker 1 (04:20):
Right right.
Speaker 2 (04:21):
So even if you're listening to this and you're thinking, Victoria, divine,
I do not earn enough, or I don't have room
in my budget, I can't be adding to my super.
Stop putting pressure on me, girl. I'll take the pressure off,
I don't mind, just by listening to this episode and
seeking out different ways that you could potentially do it
when you do have some extra casholder, you're already investing
in your financial future. You're already putting future you first.
(04:44):
And that's really sexy, that's really cool. So I guess
like research is part of the decision making. So how
deep are we going to go today? Okay, So firstly,
we're going to break down exactly what salary sacrificing is,
what it means, how it works, why it's so lucrative,
and how much you might want to be investing now
so that you can end up with maybe having a
(05:05):
million dollars in your super by the time that you retire. Crazy,
but before all of that, miss becksay ed, Yes, a
tiny coffee break, if you will I will welcome back
to my friends. Now. I do not want to tell
this community how to suck an egg, but I do
know a fair bit about finance. In fact, you could
(05:27):
say it's my hyperfixation. You could say I'm obsessed with it.
Speaker 1 (05:30):
You could say, yeah, like I live.
Speaker 2 (05:32):
And breathe money, but more specifically helping our community get
rich and that's really fun. But I feel like it
might be helpful if in this episode we just go
back to basics and I explain what salary sacrificing is
from the top. I think a little refresher would be good, good, good,
(05:53):
all right, So Beck, the second you get your job,
first job, you're signed up to a super fund. I
think we all remember the first job that we got
and being handed a stack of forms and most of
them not making sense. But what you probably understood was
which bank account do you want the cash holder to
go into? And you were like, this is a money win. So.
(06:15):
Surbnuation is a compulsory system that was originally set up
in nineteen ninety two to help provide Australians with financial
support during retirement and to reduce Australia's reliance on the
aged pension. So Before this, lots of people were retiring
and just relying on the government to pay them an
(06:35):
income to live. Right, But because of population growth, because
of how much our community is expanding, that reliance was
increasing so significantly that we were going to run out
of all of the money. So we needed to find
a better way, and subnuation was introduced. Right. So, back
when I got my first job, it was nine point
five percent. Since then it has increased to twelve percent.
(06:59):
So basically, every single pay that you get, beck a
little portion of it that twelve percent, to be exact,
goes towards your post retirement self. And this is the
superranuation guarantee. So superranuation guarantee is the minimum amount that
needs to be contributed to your superfund from an employer. Right.
(07:20):
But salary sacrificing is when you choose to have an
additional contribution directed from your income, so you say to
your employer, please put some more money into my super
before tax hits. What this does is a number of things.
Obviously you're contributing more to your retirement, but it does
lower your overall taxable income, and the amount that goes
(07:44):
into super is only taxed at fifteen percent instead of
your marginal tax rate, which most people in our communities
sit on about thirty percent. So obviously that's some nice
initial savings. But essentially superanuation is not an investment, Beck,
and you would be like, wait, what didn't you just
say it was an investment, of Victoria.
Speaker 1 (08:05):
That's what I'm thinking.
Speaker 2 (08:06):
Yeah, Like, are you, you know, contradicting yourself, Victoria. No,
because superranuation is just the vehicle, right, So you have
to put your money into some form of superanuation like
a car. You could buy a Toyota, you could buy
a Hianda, you could buy a Mercedes. It like, they're
just different brands of car, right, Yeah, but what you're
(08:28):
putting in the car and how you get from A
to B is going to be different. So superranuation is
the system, and then in the system you take that
money and you invest it. So your superranuation isn't the investment.
Your supranuation is the tax vehicle, and then the investment
is what happens in the car and who you collect
(08:48):
along the way. Okay, yes, so that tax vehicle can
be used to help reduce the amount of tax that
you pay on your income, which is arguably I don't know,
a little bit sexy. Yeah, less tax in my head,
more better.
Speaker 1 (09:01):
So thousand dollars outside of Like, let's say you put
a thousand bucks in salary sacrificing and go straight to
your SuPAR fifty percent tax of that. Yeah. Then if
you don't do that and it goes straight into your
bank account, that's thirty percent. It's tax. Yeah.
Speaker 2 (09:14):
So on one thousand dollars, that would be three hundred
dollars tax that you pay if you were to have
it hit your bank account, so you would only get
what's seven hundred dollars, but you would get eight hundred
and fifty inside the superannuation environment.
Speaker 1 (09:28):
God, that's good. Okay, So can you run me of
the tax we're paying at some of the lower brackets.
Speaker 2 (09:34):
So according to the current income year, which we are
now in the twenty twenty six twenty twenty seven financial year.
But if you earn less than eighteen thousand, two hundred
dollars in one year, you meet the tax free threshold
and you don't earn enough money to be paying tax.
So you'll get all of those dollars into your account, right, Yeah,
(09:57):
But if you earn more than that, but under four
five thousand dollars, your income will be taxed at a
rate of fifteen percent, So that's the same tax rate
that's inside superannuation. If you earn more than that, but
under one hundred and thirty five thousand dollars per year,
you will be taxed at thirty percent, which is where
(10:18):
most of our community see it's based on everything that
I've surveyed them on, right, so you can kind of
see how stashing extra money in your super becomes a
little bit sexy, right, especially with the more money that
you earn.
Speaker 1 (10:31):
Yes, absolutely so, if you've already been taxed at thirty
percent or more, why not put some of that money
towards your super? Where are we taxed it less? And
also help you in the future.
Speaker 2 (10:41):
I think it's a good deal. And benk, you might
find that by salary sacrificing something like just five percent
of every pay could benefit you in the immediate future
by lowering your tax rate without crushing your cash flow.
But you really need to be working that out based
on your earnings and your tax and your contributions and
what your financial see situation looks like. And this is
(11:02):
like a point in time where I really wish that
I had listened to my dad, because growing up, my
dad said, Victoria, always save five percent of your income
and pretend it didn't exist. And this is something that
I'm going to be teaching my kids as they get
a bit older, Like when they get their first jobs,
(11:22):
I'm going to be like, let's pretend you didn't even
get that five percent, and it either goes straight into
an investment, straight into savings, or straight into your like
super because if I took five percent of you from
the very beginning of your working life and you always
just operated on the basis that you were earning five
percent less than what you actually were, you never actually
ended up spending that five percent, Yes, and you're consistently investing.
(11:46):
And like, had you done that to me at fourteen
years and nine months when I got my first job,
I would be in a significantly better financial position than
I am today in saying that my dad did tell
me that at fourteen years and nine months, and because
I was fourteen years and nine months, I knew better, right,
So I think it's it doesn't matter if you did
(12:08):
or you didn't. But like if I was teaching kids
about money, or if I had some you know, free
cash flow, and I really wanted to set myself up
for success. And I was like, oh, well, I am young,
and you know you're in this situation. Beck, if I
started taking five percent off you, I just know that
you'd adjust your your like your living situation and like
the way that you spend without compromising your lifestyle for sure.
(12:31):
So I'm kind of like, well, if I was in
a financial position to do that, maybe I would choose to.
So I think it's important that if you could change
your situation, you think about what you can do for
future you as well, even though it's like not that
sexy because there's no immediate like whill I just got
a new shoe, Like, do you know what I mean? Yeah?
Speaker 1 (12:49):
I know you mean, I know what you mean. So
is there like a ceiling? Like what if you do
earn more than one hundred k year? Yeah, can you
just throw like fifty five thousand dollars into Suva if
you happen to have that extra money so you end
up reaching a lower tax bracket.
Speaker 2 (13:03):
I love that You've just been like, well, if you
earn more than one hundred grand a year, you would
just have fifty five grand laying around obviously my queen like,
that's crazy amounts of money, but also very good question.
And as of this financial year, the most you're allowed
to contribute in addition to your compulsory payments is thirty
(13:24):
two five hundred dollars okay, So like, if you want
to make an extra payment, it is capped so that
you can't basically put your entire salary in there. And
the Australian tax system that's why they are doing that.
And they're also like, well, we want you to be
well off in retirement, but we also don't want you
to take the mickey out of the tax system. So
(13:45):
let's say that you haven't hit the cap in the
last five years as well. And this is something full
transparency I took advantage of in the last financial year because,
as I said, everything else in my life has been
a already, Like when my husband and I were saving
for our first home, contributing extra to my super didn't
(14:05):
make sense because I was like, well, i'd have less
money for the house that we're purchasing, and in this
economy back absolutely not. And then for a lot of
my working life or for the last i'd say five years,
as much money as possible has been going back into
my businesses. So like, I think a lot of people
would be surprised at how much I don't take out.
(14:26):
They'd be like, oh, well, we thought you would have
this stupidly high salary. And I mean, beck, I earn
good money, but where I can, I'm leaving as much
money as possible in the business so I can hire
new people or invest in different resources and like grow
and sustain my businesses. So my superl is looking a
little bit sad, sure, And so I sat down and
I spoke to my accountant, and I said, how much
(14:48):
carry forward have I got? So let's say that you
know you haven't hit your cap in that last five
years like I hadn't. You might be able to carry
forward any of your unused cap amounts okay, and then
make higher contributions as like a once off situation. But
your superbalance has to be under five hundred thousand dollars
to do this, and mine was too, Like mine was
(15:10):
not looking as good as it definitely could. And so
I was able to take some of out like Steve
and my savings and put it into my super because
I was like it, now's the time for me and like,
as much as I want access to my cash, I
also need to make sure that future me is really
looked after.
Speaker 1 (15:28):
Gotcha. It's like rollover data.
Speaker 4 (15:30):
Yes, yes, it is literally like rollover data for your SUPER.
Speaker 1 (15:33):
I see, I see. Okay, So hypothetically, if my super
balance is that seventy k yeah, and I've only just
started salary sacrificing, you're saying I might be able to
put an extra forty thousand dollars into super this year
because I haven't hit the cap leading up to it. Yeah. Absolutely, Okay, I'm.
Speaker 2 (15:50):
That crash, like absolutely, and I mean not everybody is
contributing to their super to the max amounts, so it's
definitely worth working out. And on a lot of your
superranuation website, you'll be able to log into your account
and have a look at what carry forward you might have,
so you might not even have to talk to an
accountant or a financial advisor. Your super website might actually
(16:11):
have the calculator there for you because they have all
the information on your financial situation.
Speaker 1 (16:16):
Right right right right Okay. So and besides like paying
less tax and putting money towards retirement, are there any
other benefits to salary sacrificing.
Speaker 2 (16:24):
Besides it being a very sexy tax vehicle.
Speaker 1 (16:27):
That's all these beautiful leggs.
Speaker 2 (16:28):
The first time super Savior scheme. So if you're looking
to purchase your first home, there's actually a scheme that
exists in every single Australians superranuation already and it is
the first time super Savior scheme, which is a mouthful
but a very cool scheme. So basically, you can contribute
up to a maximum of fifteen thousand dollars every year,
(16:51):
up to a total of fifty thousand dollars across all
years to this scheme. And what that means is that
you will be able to put that money into your
super and benefit from that tax offset. So instead, and
you know how we went back to that thousand dollar example.
If you're saving for your first home, every couple one
(17:13):
hundred dollars matters, right, But if you put one thousand
dollars into your personal savings and you were taxed at
that thirty percent that you and I were talking about before, yeah,
seven hundred dollars into your savings, true, true, true. If
you put that into your first home super Saver scheme
eight hundred and fifty dollars into your savings and if
you're really clear on your goals and you're like, well, Victoria,
(17:34):
I really want to buy a house. Which one makes
more sense mathematically?
Speaker 1 (17:40):
Genius?
Speaker 2 (17:40):
Which one? Are you going to end up with more
cash in? Well? And obviously that extrapolates out for every
ten thousand dollars that you save, instead of it being
seven thousand dollars in your savings account, that's eight thousand,
five hundred in super.
Speaker 1 (17:57):
Yes.
Speaker 2 (17:57):
True, So like genius, the more that you get, the
more impact that it has. And if you're going to
do this properly, like you're going to end up in
a better financial situation. And like not all of us.
I don't know many people, especially in the she's on
the money community, that are actually saving more than fifteen
thousand dollars per year towards their first home in this
(18:18):
economy for sure, So like I feel like that's reasonable totally.
Speaker 1 (18:22):
And you get also the super that remains once you
take out that money that you've put in. Yeah, it
gets all the interest that.
Speaker 2 (18:29):
That costs exactly yea. And I mean I am all
for championing a woman buying a house on their own,
but hypothetically if you're buying with a partner, that fifty
thousand dollars cap becomes one hundred thousand dollars across both
of your your supers, so you've got one hundred grand,
which means you could be much better off financially if
(18:49):
you use the system, And if you're going to do
it properly, please just I'm just all about dotting your
eyes and crossing your t's because technically any additional contribution
that you make to your super fits this scheme, but
every super fund is different, right, So if you're going
to do this, please just like call your super fund,
have a chat with them, or log in online and
(19:10):
request what's called a first Home super Savior scheme determination
before owing and like planning for the property. So all
you have to do to get the money back out
of your super is feel in a form and it
might look different for different super funds, but feel in
a form. They will release the amount and then you
buy the property.
Speaker 1 (19:28):
God, that's so good.
Speaker 2 (19:29):
And you can like talk to your bank about where
your like home deposit is sitting, Like you can come
and talk to a broker and be like, yeah, I'm
using the first Home super Savior scheme, and we can
see that in the same way that we can see
your savings. It doesn't change anything. That's so so good,
isn't it sexy? Yeah, that's really helpful. It actually blows
my mind when I get first home buyers, you meet
(19:51):
the criteria who are like, no, I can't be bothered.
I'm like, babes, free money, free money, that's so good,
makes so no sense, Like are we not meant to
be using everything to our own advantage?
Speaker 1 (20:03):
Absolutely?
Speaker 2 (20:04):
At least what's there for? Well, that's what I thought.
Speaker 1 (20:07):
Well, I mean like technically it's going toward your future,
and arguably having shelter might help you continue to earn
money until retirement exactly.
Speaker 2 (20:16):
And there are some other circumstances where you might need
access to your super early beck so like knock on
wood that this never happens to you or anybody in
our community, but you might need to access your supernuation
on what they call compassionate grounds to pay for medical
treatment for you or a dependent, or if a dependent
(20:37):
passes away, super can be accessed to pay for like
funeral costs, or to prevent the forced foreclosure of a
sale of a home. That sort of thing. So those
things suck, But like, how good that we can lean
on that cash if we really need to, for sure,
and it can also be accessed during times of extreme
financial hardship. But there are a whole bunch of things
(21:00):
that need to happen before you're legally allowed to access
this money before retirement. And just because I said, oh,
like financial hardship, like you could access your super and
you might like have some bells dinging, like oh I
could access that, no worries, Like if you can not
do that, it's way better, Like I would be trying
to avoid it at all costs. Yeah, but at the
(21:21):
end of the day, like if it is extreme financial hardship,
I'm very glad that you have access to that.
Speaker 1 (21:26):
Absolutely, And from memory, you have to be on sendling
for like six months beforehand, you have to be in debt.
Speaker 2 (21:31):
I know.
Speaker 1 (21:31):
It's a whole thing.
Speaker 2 (21:32):
Yeah, there's a whole, very thing.
Speaker 1 (21:34):
Yeah, long list of things you got to tick off.
Speaker 2 (21:35):
So yeah, and like I think some people look at
it and go, oh my god, like I would love
to do that, and it's I don't know, it's like
your financial future. And don't get me wrong, in the
short term, it feels like it's like a band aid
and you just rip it off and you take it
and it like it just is what it is. But
there are so many people who during COVID took money
out of their superannuation because they made it much easier
(21:56):
to do so. And don't get me wrong, lots of
people ben fitted from it in the way that that
scheme was intended to be benefited from. Yeah, but a
lot of people were like, Oh, I can get cash
out of my super. I'm just going to do that
and now deeply regret it.
Speaker 1 (22:13):
One of those people, that's for sure, but.
Speaker 2 (22:15):
Like it wasn't And that's just like a whole side conversation.
I feel like they're marketing around that. The conversations around that,
they weren't like, hey, Beck, are you aware that like
this is a really like negative thing to potentially do,
like you basically saw it, and they were like, did
you want Like the way that it felt from my
perspective was, hey, Beck, do you want ten grand out
(22:35):
of your super? And you were like sure, and they
were like great, no worries, all you have to do
is feel out this form and you were like, oh easy, thanks.
Speaker 1 (22:42):
Yeah, it's so true, Like that's what it felt like, yes, exactly,
and you're like, what the hell?
Speaker 2 (22:48):
And now lots of people are like Victoria had I know,
and I wish I hadn't done that, but like, don't
crucify yourself. That's not the end of the world.
Speaker 1 (22:54):
That's very sweet, thank you. So okay, well, you know
that was not good. It was not good. But hopefully
we won't need to access like that earlier than retirement
in the future. Hopefully no more pandemics where they're giving
it away will and nearly exact fingers crossed. No one
needs that that early access exactly.
Speaker 2 (23:17):
But let's also reframe that situation by asking the question,
all right, Beck, how much money do you want to
retire with?
Speaker 1 (23:24):
Yeah, it's a great one, Like I well, I always
think a million, because you have said a million, and
so I'm like, you.
Speaker 2 (23:32):
Don't need a million's that's a very large number that
to be quite honest, most people in Australia do not
retire this Like, that's not normal, Beck.
Speaker 1 (23:41):
Five hundred thousand, Like that's a good goal.
Speaker 2 (23:44):
I mean, you're young and hot and hopefully getting rich.
But thank you, I feel like having a goal of
a million dollars at your age is actually quite reasonable
and puts you in a really good financial position. But
I also am acute aware that a lot of people
will be like, Victoria, that's unrealistic, And I'm like, well,
I is it really unrealistic if people have done it before?
(24:06):
Beck right, right, right, Like if other people can do it,
we can do it. Yeah, Like how are good to
be boys do it?
Speaker 1 (24:12):
Yeah?
Speaker 2 (24:12):
Like that's not that deep. No, But I think the
conversation needs to change around retirement because if we look
at like and we'll get into it, but like, if
we look at what works out to be reasonable, it's
a lot different to what I talk about on the
podcast because like, as we know, the government believes that
(24:33):
the Centerlink income is enough to live a good life.
Would you say that it is? I would say definitely,
not exactly. So, like the numbers that the government recommends
are going to be the bare minimum, if that makes sense.
They're going to be like, Okay, cool, you're not living
in an area that you really want to live in.
(24:53):
You're not putting the food on the table that you
would really want to put on the table, Like, you're
not having a life experience. Is that I believe you
deserve and like that might be the life you want
to lead, and like, pop off, queen, I'm here to
give you options though and kind of help you see
that maybe that might not be enough. But it also
depends really heavily on the type of lifestyle you want
(25:14):
in retirement. And when I was a financial advisor, I
used to sit down with clients and be like, well,
what does that look like? Like, Beck, are you going
to buy a caravan and then you know, drive around
Australia for your retirement and just stay at free camping
locations and you know, put a few snags on the barbie?
Or are we going to Europe every Christmas hour we
(25:38):
you know, skiing in the Swiss Alps? Like what does
that lifestyle look like? Because that's going to determine what
you need. And obviously, if you're just gonna live, love,
laugh around Australia, the income required for that is very
different to someone who wants an international holiday of luxury
every year. So let's get into some research. To the
(26:00):
Association of Superannuation Funds of Australia, for a comfortable retirement,
singles will need to have fifty five thousand, nine hundred
and twenty three dollars a year during retirement. Well, couples
apparently will need seventy eight thousand, five hundred and sixty
six dollars to live a comfortable life. But this, again
(26:24):
I think is outdated because this number presumes that you
own the roof over your head and you aren't making
mortgage or rent repayments.
Speaker 1 (26:32):
True, yes, yes, so like.
Speaker 2 (26:34):
That doesn't make sense in an economy where most millennials
are now struggling to buy property. Most you know, gen
zs are you know, maybe considering not even having that,
so you might need more than that. So if you're renting,
this figure is going to climb by about forty percent
for you to have what they call a modest lifestyle.
So that's not like a life of luxury. That's just
(26:55):
like they're basics, everything's going well and caveat. I really
just don't want this episode to be scary for people,
because you do have so much time to fix things
and so much time to put yourself in the best
possible position. But these numbers are big and you can
instantly be like, but Victoria, I only have thirty two
thousand dollars in super What am I going to do? Girl?
That's why we're besties. I got you. Yeah, Like it's okay,
(27:18):
it's okay, it's okay. That's why you're here, right, because
you want better for yourself and we're like building towards
a more secure financial future. But if you wanted to
look at this total super balance at retirement and you
don't have a house, this works out to be roughly
six hundred and thirty thousand dollars in superannuation for singles
and seven hundred and thirty thousand dollars for couples. Now,
(27:41):
when I say a comfortable retirement, I mean that you
have enough money in order to have some occasional takeaway meals,
maybe to go to the movies, to go to dance
classes if you really want to, because like you know
what happens when people retire, they're like do stuff they've
never done before. Yeah, yeah, I love it. But also
(28:03):
we need to pay for those experiences. It's true, comfortable
means having enough coin to get, you know, a nice
hack up pretty regularly, having a good level of private
health insurance, and having enough money maybe for an overseas
trip now and then. It's definitely not like if I
look at the budgets. It's definitely not every year, but
like you're not not going to have them. So that's
(28:25):
where comfortable is looking. So now I kind of get
why people are always aiming to retire on a million dollars. Yes,
because that figure feels relatively safe and kind of with
a buffer. Yes, seek, And that's why I often pick
that million dollar figure, because I go, I know it's
seven figures. I know it's really scary, but if you
can work towards that, you're going to be quite comfortable.
(28:47):
And if you are retiring with a partner, Beck, two
million dollars do goldwen? Yeah? Okay, So I'm going to
get a little bit further into that and what we
might salary sacrifice to reach that goal at retirement right
after this break, So guys don't go anywhere, all right,
(29:08):
Miss Beck say, ed, have you digested all of the
information that I have thrown at you so far?
Speaker 1 (29:13):
Yes? Yes, I have.
Speaker 2 (29:14):
We have covered the benefits, we've covered the definitions, we've
covered you know why we might be looking at doing
the maths on a million as opposed to five hundred thousand?
Speaker 3 (29:24):
Do you like?
Speaker 2 (29:25):
Okay? I now think that maybe a million is what
I would like to aim for I'm going to aim.
Speaker 1 (29:30):
For it, but I like, hey, shoot for the stars.
Shoot the stars, and maybe you will land on a
moon or something they say.
Speaker 2 (29:38):
I think they say, shoot for the moon and you'll
land among the stars. Oh, which makes a lot more sense.
Speaker 1 (29:43):
Yeah, I guess it does.
Speaker 2 (29:45):
We don't need to make sense, We need to make
money exactly right, all right, back, So let's do a
little example. Let's say that you are twenty four years
old and you might have what seven grand in super
sure you and let's say sixty four thousand dollars per
year before tax, right, good example, your employer makes the
(30:06):
compulsory twelve percent subrenuation contribution. That means that every year,
seven six hundred and eighty dollars is going into your
super Your salary sacrifice that you've chosen might be five
percent of your gross and your income. Do you remember
the difference between gross and net.
Speaker 1 (30:23):
Gross is in total? Yes, why, it's a gross amount
of money.
Speaker 3 (30:29):
Yeah.
Speaker 2 (30:29):
To look at and what you're missing out on and
what you're missing out exactly. Yeah. So like for those
of you who maybe missed that on a previous podcast episode,
I said that the way I see gross and net
when we talk about it is gross amount of money
is really disgusting and gross because that's how much money
we're not going to end up within our bank account,
and the net is like kind of what we scooped
(30:51):
and got to keep in our bank account.
Speaker 1 (30:52):
Great call, great call.
Speaker 2 (30:54):
Right, So your salary sacrifice is five percent of your
gross income. Okay, makes sense. So that's three thousand, two
hundred dollars a year into your superannuation. All up on
an annual basis, you're contributing ten thousand, eight hundred and
eighty dollars. We then apply our fifteen percent tax on
concessional contributions. That's one thousand, six hundred and thirty two dollars.
(31:18):
Your net contributions for the year then become nine thousand,
two hundred and forty eight dollars.
Speaker 1 (31:25):
Yeah, got you and all.
Speaker 2 (31:26):
So we're doing the maths. Yeah, just a really.
Speaker 1 (31:28):
Quickly recap Concessional means not compulsory, like you don't.
Speaker 2 (31:32):
Like you don't have to, yeah, which is why it's
only like sixteen hundred and thirty two dollars because it's
on the amount that you didn't have to contribute, but
you've chosen to gorgeous, gorge gorgeous, gorgeous. So now we're
at the net contributions because we've taken out our tax.
So you're adding nine thousand, two hundred and forty eight
dollars into your super every year instead of the initial
(31:53):
amount that I quoted, which was seven thousand, six hundred
and eighty dollars. Got you, okay, thishavior is going to
grow your contributions from ninety two thousand, four hundred and
eighty dollars in ten years to three hundred and sixty nine,
nine hundred and twenty dollars over forty years. Oh my goodness.
Speaker 1 (32:15):
That's that.
Speaker 2 (32:16):
Because the average long term growth rate for standard super
funds is typically between seven and nine percent every single year,
this figure not only grows by let's say seven percent yearly,
that growth is compounded. So the money that your money
made then makes money, and that's what compounding is. So
every dollar that you earn then earns you more money.
(32:39):
So remember you had seven grand in your super before
doing any salary sacrificing. So your new total, including your
contributions is sixteen thousand, two hundred and forty eight dollars. Yes, okay,
So that's that initial seven grand that you had plus
the nine thousand, two hundred and forty eight dollars that
you've added in this financial year. Apply that by the
(33:00):
seven percent annual growth, and we always go with like
the lower number. I want to say this is for
illustrative purposes only, just as an example. I'm just doing
some maths. This is not a specific super fund. This
is not a recommendation. This is just me doing some maths.
Multiplied by that seven percent annual growth, that's one thousand,
(33:22):
one hundred and thirty seven dollars. First year, you're going
to have seventeen thousand, three hundred and eighty five dollars,
Year two twenty eight thousand, four hundred and ninety seven dollars,
and year three forty thousand, three hundred and eighty six dollars. WHOA,
So you go, oh, forty grand after three years. I've
(33:42):
been contributing so much. That's so disappointing. It's not like
forty thousand dollars is a lot of money. But over
the long term, this adds up, beck Like, and when
I say this adds up, I mean doing the maths.
On the day you retire at sixty five, which is
the common retirement age. It's also the age that you
can access stuff. You're on track to having one point
(34:04):
two million dollars in your super.
Speaker 1 (34:06):
That's crazy. That's crazy.
Speaker 2 (34:08):
Just by adding five percent, that's so wild, okay, right,
And as I said before, for some people, adding five
percent is not going to change their lifestyle at all.
We're just going to pretend we never had that cash.
Speaker 1 (34:20):
Oh my god, that's a wild okay. So I guess
like in the grand scheme of things, you're only sacrificing
around three thousand a year before tax.
Speaker 2 (34:28):
Before tax, and you get a little tax deduction at
tax time, and so if I say, oh, Beck, do this,
you're probably not going to notice it. And then at
tax time you get some casholder in your account. Deal.
Speaker 1 (34:40):
It seems like maybe you wouldn't be that much worse
off with your take home earnings, but it seems to
all add up in your super. And yes, it doesn't
take things like pay rises into consideration. Exactly, you stayed
on this forever.
Speaker 2 (34:54):
Yeah, exactly. I'm just assuming that you never change your income,
which is what I would want to do because in
my ex financial advice life, I would always want to
underpromise over deliver, Like I'd always want to make sure
that I was kind of like promising you the bare minimum,
and then if you exceeded it, I'd be like, I
(35:15):
knew it, but I also just didn't want to bank
on it, because like, we never bank on stuff like
that because I can't promise it for sure, right, Like
I don't know if your job is going to go,
oh no, no pay rises this year, And what if
I was banking on your finances changing next year to
put you in a better situation. It's terrible. Like that
puts you in such a significantly better financial position, and
(35:37):
I just I'm so excited about it. Yeah, do you
want another example? Sure, Like, do some more maths? Sure,
because not everyone in our community is twenty four pack,
that's true, and they will all be like, but I
didn't start then, and that is cool. So let's say
you're my age, we're aging millennials, we are thirty five
years old, and let's say you have a suberannuation balance
(35:58):
of thirty three thousand dollars. Yes, and then you've got
an income of eighty five grand year, which seems to
be pretty standard for people who are in that thirty
five year age bracket. Right, and this is where we're
doing the maths. Your employer is going to make the
compulsory contributions of twelve percent to your super, so every
year they are contributing ten thousand, two hundred dollars on
(36:19):
your behalf gorgeous minimum. Then let's say you change your
budget and you've told your employer, I really want to
contribute five percent of my gross annual income, so my
total annual income, So that's four thousand, two hundred and
fifty bucks a year that you're going to contribute into
your super. All up, that is fourteen thousand, four hundred
(36:40):
and fifty dollars.
Speaker 1 (36:41):
OK.
Speaker 2 (36:41):
Right, then we do our tax, so that's fifteen percent
on your concessional contributions, which is approximately twenty one hundred
and sixty eight dollars. So then the net amount or
the total amount you end up contributing to your superannuation
that year would become twelve thousand, two hundred and eighty
three dollars. So that's what we're working with.
Speaker 1 (37:04):
Now.
Speaker 2 (37:05):
This behavior beck grows your balance from one hundred and
twenty two thousand, eight hundred and twenty five dollars in
ten years to three hundred and sixty eight, four hundred
and seventy five dollars in thirty years.
Speaker 1 (37:19):
Amazing.
Speaker 2 (37:20):
And that's not even taking into account any kind of
like performance of your superfund. Like that's again just the
bare minimum basics, like the bare minimum mats.
Speaker 1 (37:30):
Right, yes, okay, but we.
Speaker 2 (37:33):
Want to remember that you had thirty three thousand dollars
in your subranuation when you began, before you started salary sacrificing.
And I picked that amount because that is what a
lot of people are like V I only have you know,
thirty grand, or I only have forty grand in super
There are some people in our community who are running
rings around that, as they should, icons but imagine the
(37:55):
power if they added more to what they're already doing.
Speaker 1 (37:58):
For sure, Rich reach rich, Richard Rich.
Speaker 2 (38:01):
But your new total, because you had that thirty three
thousand dollars in your super fund to begin with, so
your new total, including your additional contributions that you're now making,
is forty five thousand, two hundred and eighty three dollars.
Speaker 1 (38:15):
Yes, okay.
Speaker 2 (38:16):
Then we look at that seven percent rate of return
that I really like working with. That's about three thousand,
one hundred and seventy dollars. First year, you will have
forty eight thousand, four hundred and fifty three dollars. Then
the year after that you'll have sixty four thousand, nine
hundred and eighty seven dollars. Then the year after that
you'll have eighty two thousand, six hundred and seventy nine
(38:39):
thousand dollars. And you're going, oh, v like, is that enough? Well, yes,
it is, my friend, because if your super fund performs
better than seven percent, you'll end up with more money
money win. But if it doesn't, that's okay, because you
are actually on track to hit a million dollars by
the time you reach the age of sixty seven.
Speaker 1 (38:58):
Wow, that's right.
Speaker 2 (39:00):
While so you'll still hit a million dollars, oh my god, like,
but it's just over the long term. We need to
commit to this. Yeah, And that doesn't take into consideration
any like pay rises, or like any additional contributions, like
if one year your super fund performs by eight percent
instead of seven yeah, or like my superfund which a
few years ago was doing last fourteen percent.
Speaker 1 (39:22):
Yeah, thank you.
Speaker 2 (39:23):
And I mean that doesn't take into consideration as well
the fact that some years your superfund is going to underperform. Sure,
but that's okay because over time it all balances out.
We're not worried about that, not worried about that. We're
not worried.
Speaker 1 (39:35):
Oh my god, that's incredible. It really snowballs.
Speaker 2 (39:37):
It does snowball like, it just picks up and picks
up and picks up, and then all of a sudden,
that's going really fast and crazy. What they say in
subernuation and this is called the rule of seventy two.
And maybe I'll do a whole podcast episode on this
because there's like a really cool, like mathematical concept. I
just said that aloud, and I was like, no one's
going to care Victoria anyway. Essentially, because of the rule
(39:58):
of seventy two, your money will double every ten years. Yes,
so like if you can get to a million dollars
by the time or a million dollars in your investments
by the time you're sixty, and you're like, well, v
I'm sixty, and like seventy is the new sixty, and
like eighty is the new seventy. Yeah, I actually want
to work until I'm seventy. Well, by the time you
(40:19):
hit seventy, you have two million dollars that's insane.
Speaker 1 (40:22):
I can't even just feeling magical, like doesn't feel real, okay, but.
Speaker 2 (40:25):
Like that's why. But that's why compound interest is so
hard for humans to wrap their heads around because it
just genuinely feels fake. So you go compound interest. And also,
if you put your money in today, you're not going
to see the returns tomorrow, Like it'll just be like
sense and you'll be like, what's the point. But you've
got to trust the process. Process, Trust the process, Trust me,
(40:48):
I promise.
Speaker 1 (40:49):
Does every employer do salary sacrificing or is it like
something you just request? It's just something you can request, Okay, amazing,
you can just do it.
Speaker 2 (40:56):
And also if you're like V, I don't know if
in my budget I can afford to do this like
salary sacrificing through my employer, because like you know, they'll
take it out of my pay and like some months
I need it, you can always just literally be pay
money to your super on a monthly basis true, and
then at tax time claim it back. Hell yeah, So,
like it can be really easy. And I think a
(41:16):
lot of people think the second it becomes super it
becomes really complex. But it's not, I promise. So, like,
the longer you do it, the more time it has
to grow back.
Speaker 1 (41:24):
That's so cool.
Speaker 2 (41:26):
So beck, summary, what have we collectively learnt today?
Speaker 1 (41:30):
Okay, so that contributions before tax can not only lower
your tax income, but they can create compounding wealth in
your super.
Speaker 2 (41:39):
So we're going to get rich.
Speaker 1 (41:41):
We're going to get rich, and they're retiring with a
comfortable amount in your super as a personal thing. And
it depends on what you want your retirement to look
like exactly.
Speaker 2 (41:49):
I don't know about you. What does my retirement look like?
It's looking bright, hot, smart, rich? Yeah, girl, exactly. And
maybe your super is actually the key to unlocking that
like really intimidating million dollar figure that we are not,
you know, really feeling comfortable with still, but like salary
(42:09):
sacrificing could help you get there. All right, I feel
like I've used terms like through renuation and earlier mathematical
concept and called it really cool. So I'm calling it time.
I think that that is all we have time for
today in time out. Yeah yeah, yeah, I'm putting myself
in time out. I also really want to do some
maths on the rule of seventy two because I'm wondering
(42:30):
if that could actually be a whole podcast episode, because
through my head it's still cool.
Speaker 1 (42:34):
A couple of your cylinder maths after this.
Speaker 2 (42:36):
I yeah, I'm the daughter of an accountant. Guys, if
you found this episode really helpful or maybe you learnt
something new, please let us know by leaving us a
cute little review. Maybe tell us what you're like in
the Spotify comments, what your five percent contribution could look like.
I would love to see it, and thanks as always
(42:56):
for being part of our gorgeous community. Guys, make sure
that subscribed so that you never miss a deep dive episode.
We will catch you on Friday for another edition of
Friday Drinks. Till then, take care of yourselves and of
each other.
Speaker 1 (43:08):
Bye, guys.
Speaker 4 (43:13):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial.
Speaker 2 (43:32):
Advice tailored towards your needs.
Speaker 4 (43:34):
Victoria Divine and She's on the money are authorized representatives
of money. Sheper pty Ltd ABN three two.
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Speaker 2 (00:02):
She's on the Money. My name's Tatasha Bamblet.
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Speaker 1 (00:32):
Hello and welcome to another deep dive episode of She's
on the Money, the podcast that helps you feel more
in control of your financial future, even if that future
seems years or even decades away. I'm back side and
enjoining me today is the brilliant Victoria Divide to discuss
the topic that affects us all, well, everyone living in Australia.
Of course, I'm talking about super annuation, super annuation, super annuation.
Speaker 2 (00:55):
I say superannuation, but there's no innuation, but there's no
B superannuation graduation.
Speaker 1 (01:01):
When I say super annuation.
Speaker 2 (01:03):
I mean you you enunciated correctly.
Speaker 1 (01:06):
Oh that's the first time've ever well.
Speaker 2 (01:08):
Done, well done. I don't know if that's the right way,
because you know, like how some words, I know? Yeah, anyway, advertisement,
so that's a different story, or like some American states, Yes,
I can't, I can't anyway, too.
Speaker 1 (01:24):
Many pronunciations or potential What about superannuation? Okay, so well,
more specifically, how one might get their super to work
harder for them in the long run through salary sacrificing
a sexy because if we've learned anything it's that we're
often rewarded for the duration of our investments, not simply
the amounts we contribute.
Speaker 2 (01:43):
You have learned a lot. I obviously I am obsessed
with superannuation. I love talking about it. I love being
involved in it. I love being able to calculate at
the end of our financial year how much additional I'm
able to contribute to like make my cap which which
is just really fun but it's an absolute privilege to
(02:03):
be able to do so. But at the same time,
right now, money is really hard for people. Yeah, and
I'm finding that conversations about superannuation are slipping and we
need to be bringing them back to the forefront. Because
if you've got no cash and you've got you know,
a really strict budget and you're just really scraping by
getting your super in order is something that you can
(02:24):
usually do for free to put future you in a
better financial position so that you don't have to be
as stressed and you're still making money. Yes, like you
can still make your money work for you irrespective of
the situation that you're in right now.
Speaker 1 (02:37):
That's so true, and knowing that kind of makes you
feel really empowered, even if you are kind of living
paycheck to paycheck. So well, I feel like we've discussed
superannuation a few times on the podcast, but I'm not
sure if we've covered just how impactful salary sacrificing can
be depending on when you start. And I know a
bunch of people in.
Speaker 2 (02:52):
Our community will want to know how it works exactly,
And I think I'll be really honest with you here.
When I first started Ches on the Money, I was
not in the financial position to be able to salary sacrifice.
In fact, once I went out on my own and
was a sole trader, I wasn't even paying myself any superannuation,
even though I was on the podcast saying small business
owners need to be paying their super because it's more
(03:14):
of a do as I say, not as I do moment.
Like I knew I was doing the wrong thing at
the time, but I also didn't want to tell you
that because I didn't want to give you the permission
to be like, oh, it doesn't matter. But I think
in hindsight, it's important to talk about this stuff too,
because if you're a small business, or if you're a
sole trader, or if you're not able to salary sacrifice,
(03:35):
I knew just have a salary and pay as you
go job, and you feel bad about it, you shouldn't. Yeah,
because we're all going through different seasons of life, and
sometimes it's harder and sometimes it's not. But I know
unequivocally that the time and the energy and the effort
that I spent researching and understanding my super and learning
about it helped me build the investments that I have
(03:58):
today and helped me be able to identify when I
was in a good position to actually be able to
contribute to that, because if I didn't know, and I
just kept putting off these salary conversations and these super
conversations until you know, maybe I had enough money. How
do you know when you have enough money? Yeah, if
you haven't already done the research and understood and waited
for a period of time where it's identified itself.
Speaker 1 (04:20):
Right right.
Speaker 2 (04:21):
So even if you're listening to this and you're thinking, Victoria, divine,
I do not earn enough, or I don't have room
in my budget, I can't be adding to my super.
Stop putting pressure on me, girl. I'll take the pressure off,
I don't mind, just by listening to this episode and
seeking out different ways that you could potentially do it
when you do have some extra casholder, you're already investing
in your financial future. You're already putting future you first.
(04:44):
And that's really sexy, that's really cool. So I guess
like research is part of the decision making. So how
deep are we going to go today? Okay, So firstly,
we're going to break down exactly what salary sacrificing is,
what it means, how it works, why it's so lucrative,
and how much you might want to be investing now
so that you can end up with maybe having a
(05:05):
million dollars in your super by the time that you retire. Crazy,
but before all of that, miss becksay ed, Yes, a
tiny coffee break, if you will I will welcome back
to my friends. Now. I do not want to tell
this community how to suck an egg, but I do
know a fair bit about finance. In fact, you could
(05:27):
say it's my hyperfixation. You could say I'm obsessed with it.
Speaker 1 (05:30):
You could say, yeah, like I live.
Speaker 2 (05:32):
And breathe money, but more specifically helping our community get
rich and that's really fun. But I feel like it
might be helpful if in this episode we just go
back to basics and I explain what salary sacrificing is
from the top. I think a little refresher would be good, good, good,
(05:53):
all right, So Beck, the second you get your job,
first job, you're signed up to a super fund. I
think we all remember the first job that we got
and being handed a stack of forms and most of
them not making sense. But what you probably understood was
which bank account do you want the cash holder to
go into? And you were like, this is a money win. So.
(06:15):
Surbnuation is a compulsory system that was originally set up
in nineteen ninety two to help provide Australians with financial
support during retirement and to reduce Australia's reliance on the
aged pension. So Before this, lots of people were retiring
and just relying on the government to pay them an
(06:35):
income to live. Right, But because of population growth, because
of how much our community is expanding, that reliance was
increasing so significantly that we were going to run out
of all of the money. So we needed to find
a better way, and subnuation was introduced. Right. So, back
when I got my first job, it was nine point
five percent. Since then it has increased to twelve percent.
(06:59):
So basically, every single pay that you get, beck a
little portion of it that twelve percent, to be exact,
goes towards your post retirement self. And this is the
superranuation guarantee. So superranuation guarantee is the minimum amount that
needs to be contributed to your superfund from an employer. Right.
(07:20):
But salary sacrificing is when you choose to have an
additional contribution directed from your income, so you say to
your employer, please put some more money into my super
before tax hits. What this does is a number of things.
Obviously you're contributing more to your retirement, but it does
lower your overall taxable income, and the amount that goes
(07:44):
into super is only taxed at fifteen percent instead of
your marginal tax rate, which most people in our communities
sit on about thirty percent. So obviously that's some nice
initial savings. But essentially superanuation is not an investment, Beck,
and you would be like, wait, what didn't you just
say it was an investment, of Victoria.
Speaker 1 (08:05):
That's what I'm thinking.
Speaker 2 (08:06):
Yeah, Like, are you, you know, contradicting yourself, Victoria. No,
because superranuation is just the vehicle, right, So you have
to put your money into some form of superanuation like
a car. You could buy a Toyota, you could buy
a Hianda, you could buy a Mercedes. It like, they're
just different brands of car, right, Yeah, but what you're
(08:28):
putting in the car and how you get from A
to B is going to be different. So superranuation is
the system, and then in the system you take that
money and you invest it. So your superranuation isn't the investment.
Your supranuation is the tax vehicle, and then the investment
is what happens in the car and who you collect
(08:48):
along the way. Okay, yes, so that tax vehicle can
be used to help reduce the amount of tax that
you pay on your income, which is arguably I don't know,
a little bit sexy. Yeah, less tax in my head,
more better.
Speaker 1 (09:01):
So thousand dollars outside of Like, let's say you put
a thousand bucks in salary sacrificing and go straight to
your SuPAR fifty percent tax of that. Yeah. Then if
you don't do that and it goes straight into your
bank account, that's thirty percent. It's tax. Yeah.
Speaker 2 (09:14):
So on one thousand dollars, that would be three hundred
dollars tax that you pay if you were to have
it hit your bank account, so you would only get
what's seven hundred dollars, but you would get eight hundred
and fifty inside the superannuation environment.
Speaker 1 (09:28):
God, that's good. Okay, So can you run me of
the tax we're paying at some of the lower brackets.
Speaker 2 (09:34):
So according to the current income year, which we are
now in the twenty twenty six twenty twenty seven financial year.
But if you earn less than eighteen thousand, two hundred
dollars in one year, you meet the tax free threshold
and you don't earn enough money to be paying tax.
So you'll get all of those dollars into your account, right, Yeah,
(09:57):
But if you earn more than that, but under four
five thousand dollars, your income will be taxed at a
rate of fifteen percent, So that's the same tax rate
that's inside superannuation. If you earn more than that, but
under one hundred and thirty five thousand dollars per year,
you will be taxed at thirty percent, which is where
(10:18):
most of our community see it's based on everything that
I've surveyed them on, right, so you can kind of
see how stashing extra money in your super becomes a
little bit sexy, right, especially with the more money that
you earn.
Speaker 1 (10:31):
Yes, absolutely so, if you've already been taxed at thirty
percent or more, why not put some of that money
towards your super? Where are we taxed it less? And
also help you in the future.
Speaker 2 (10:41):
I think it's a good deal. And benk, you might
find that by salary sacrificing something like just five percent
of every pay could benefit you in the immediate future
by lowering your tax rate without crushing your cash flow.
But you really need to be working that out based
on your earnings and your tax and your contributions and
what your financial see situation looks like. And this is
(11:02):
like a point in time where I really wish that
I had listened to my dad, because growing up, my
dad said, Victoria, always save five percent of your income
and pretend it didn't exist. And this is something that
I'm going to be teaching my kids as they get
a bit older, Like when they get their first jobs,
(11:22):
I'm going to be like, let's pretend you didn't even
get that five percent, and it either goes straight into
an investment, straight into savings, or straight into your like
super because if I took five percent of you from
the very beginning of your working life and you always
just operated on the basis that you were earning five
percent less than what you actually were, you never actually
ended up spending that five percent, Yes, and you're consistently investing.
(11:46):
And like, had you done that to me at fourteen
years and nine months when I got my first job,
I would be in a significantly better financial position than
I am today in saying that my dad did tell
me that at fourteen years and nine months, and because
I was fourteen years and nine months, I knew better, right,
So I think it's it doesn't matter if you did
(12:08):
or you didn't. But like if I was teaching kids
about money, or if I had some you know, free
cash flow, and I really wanted to set myself up
for success. And I was like, oh, well, I am young,
and you know you're in this situation. Beck, if I
started taking five percent off you, I just know that
you'd adjust your your like your living situation and like
the way that you spend without compromising your lifestyle for sure.
(12:31):
So I'm kind of like, well, if I was in
a financial position to do that, maybe I would choose to.
So I think it's important that if you could change
your situation, you think about what you can do for
future you as well, even though it's like not that
sexy because there's no immediate like whill I just got
a new shoe, Like, do you know what I mean? Yeah?
Speaker 1 (12:49):
I know you mean, I know what you mean. So
is there like a ceiling? Like what if you do
earn more than one hundred k year? Yeah, can you
just throw like fifty five thousand dollars into Suva if
you happen to have that extra money so you end
up reaching a lower tax bracket.
Speaker 2 (13:03):
I love that You've just been like, well, if you
earn more than one hundred grand a year, you would
just have fifty five grand laying around obviously my queen like,
that's crazy amounts of money, but also very good question.
And as of this financial year, the most you're allowed
to contribute in addition to your compulsory payments is thirty
(13:24):
two five hundred dollars okay, So like, if you want
to make an extra payment, it is capped so that
you can't basically put your entire salary in there. And
the Australian tax system that's why they are doing that.
And they're also like, well, we want you to be
well off in retirement, but we also don't want you
to take the mickey out of the tax system. So
(13:45):
let's say that you haven't hit the cap in the
last five years as well. And this is something full
transparency I took advantage of in the last financial year because,
as I said, everything else in my life has been
a already, Like when my husband and I were saving
for our first home, contributing extra to my super didn't
(14:05):
make sense because I was like, well, i'd have less
money for the house that we're purchasing, and in this
economy back absolutely not. And then for a lot of
my working life or for the last i'd say five years,
as much money as possible has been going back into
my businesses. So like, I think a lot of people
would be surprised at how much I don't take out.
(14:26):
They'd be like, oh, well, we thought you would have
this stupidly high salary. And I mean, beck, I earn
good money, but where I can, I'm leaving as much
money as possible in the business so I can hire
new people or invest in different resources and like grow
and sustain my businesses. So my superl is looking a
little bit sad, sure, And so I sat down and
I spoke to my accountant, and I said, how much
(14:48):
carry forward have I got? So let's say that you
know you haven't hit your cap in that last five
years like I hadn't. You might be able to carry
forward any of your unused cap amounts okay, and then
make higher contributions as like a once off situation. But
your superbalance has to be under five hundred thousand dollars
to do this, and mine was too, Like mine was
(15:10):
not looking as good as it definitely could. And so
I was able to take some of out like Steve
and my savings and put it into my super because
I was like it, now's the time for me and like,
as much as I want access to my cash, I
also need to make sure that future me is really
looked after.
Speaker 1 (15:28):
Gotcha. It's like rollover data.
Speaker 4 (15:30):
Yes, yes, it is literally like rollover data for your SUPER.
Speaker 1 (15:33):
I see, I see. Okay, So hypothetically, if my super
balance is that seventy k yeah, and I've only just
started salary sacrificing, you're saying I might be able to
put an extra forty thousand dollars into super this year
because I haven't hit the cap leading up to it. Yeah. Absolutely, Okay, I'm.
Speaker 2 (15:50):
That crash, like absolutely, and I mean not everybody is
contributing to their super to the max amounts, so it's
definitely worth working out. And on a lot of your
superranuation website, you'll be able to log into your account
and have a look at what carry forward you might have,
so you might not even have to talk to an
accountant or a financial advisor. Your super website might actually
(16:11):
have the calculator there for you because they have all
the information on your financial situation.
Speaker 1 (16:16):
Right right right right Okay. So and besides like paying
less tax and putting money towards retirement, are there any
other benefits to salary sacrificing.
Speaker 2 (16:24):
Besides it being a very sexy tax vehicle.
Speaker 1 (16:27):
That's all these beautiful leggs.
Speaker 2 (16:28):
The first time super Savior scheme. So if you're looking
to purchase your first home, there's actually a scheme that
exists in every single Australians superranuation already and it is
the first time super Savior scheme, which is a mouthful
but a very cool scheme. So basically, you can contribute
up to a maximum of fifteen thousand dollars every year,
(16:51):
up to a total of fifty thousand dollars across all
years to this scheme. And what that means is that
you will be able to put that money into your
super and benefit from that tax offset. So instead, and
you know how we went back to that thousand dollar example.
If you're saving for your first home, every couple one
(17:13):
hundred dollars matters, right, But if you put one thousand
dollars into your personal savings and you were taxed at
that thirty percent that you and I were talking about before, yeah,
seven hundred dollars into your savings, true, true, true. If
you put that into your first home super Saver scheme
eight hundred and fifty dollars into your savings and if
you're really clear on your goals and you're like, well, Victoria,
(17:34):
I really want to buy a house. Which one makes
more sense mathematically?
Speaker 1 (17:40):
Genius?
Speaker 2 (17:40):
Which one? Are you going to end up with more
cash in? Well? And obviously that extrapolates out for every
ten thousand dollars that you save, instead of it being
seven thousand dollars in your savings account, that's eight thousand,
five hundred in super.
Speaker 1 (17:57):
Yes.
Speaker 2 (17:57):
True, So like genius, the more that you get, the
more impact that it has. And if you're going to
do this properly, like you're going to end up in
a better financial situation. And like not all of us.
I don't know many people, especially in the she's on
the money community, that are actually saving more than fifteen
thousand dollars per year towards their first home in this
(18:18):
economy for sure, So like I feel like that's reasonable totally.
Speaker 1 (18:22):
And you get also the super that remains once you
take out that money that you've put in. Yeah, it
gets all the interest that.
Speaker 2 (18:29):
That costs exactly yea. And I mean I am all
for championing a woman buying a house on their own,
but hypothetically if you're buying with a partner, that fifty
thousand dollars cap becomes one hundred thousand dollars across both
of your your supers, so you've got one hundred grand,
which means you could be much better off financially if
(18:49):
you use the system, And if you're going to do
it properly, please just I'm just all about dotting your
eyes and crossing your t's because technically any additional contribution
that you make to your super fits this scheme, but
every super fund is different, right, So if you're going
to do this, please just like call your super fund,
have a chat with them, or log in online and
(19:10):
request what's called a first Home super Savior scheme determination
before owing and like planning for the property. So all
you have to do to get the money back out
of your super is feel in a form and it
might look different for different super funds, but feel in
a form. They will release the amount and then you
buy the property.
Speaker 1 (19:28):
God, that's so good.
Speaker 2 (19:29):
And you can like talk to your bank about where
your like home deposit is sitting, Like you can come
and talk to a broker and be like, yeah, I'm
using the first Home super Savior scheme, and we can
see that in the same way that we can see
your savings. It doesn't change anything. That's so so good,
isn't it sexy? Yeah, that's really helpful. It actually blows
my mind when I get first home buyers, you meet
(19:51):
the criteria who are like, no, I can't be bothered.
I'm like, babes, free money, free money, that's so good,
makes so no sense, Like are we not meant to
be using everything to our own advantage?
Speaker 1 (20:03):
Absolutely?
Speaker 2 (20:04):
At least what's there for? Well, that's what I thought.
Speaker 1 (20:07):
Well, I mean like technically it's going toward your future,
and arguably having shelter might help you continue to earn
money until retirement exactly.
Speaker 2 (20:16):
And there are some other circumstances where you might need
access to your super early beck so like knock on
wood that this never happens to you or anybody in
our community, but you might need to access your supernuation
on what they call compassionate grounds to pay for medical
treatment for you or a dependent, or if a dependent
(20:37):
passes away, super can be accessed to pay for like
funeral costs, or to prevent the forced foreclosure of a
sale of a home. That sort of thing. So those
things suck, But like, how good that we can lean
on that cash if we really need to, for sure,
and it can also be accessed during times of extreme
financial hardship. But there are a whole bunch of things
(21:00):
that need to happen before you're legally allowed to access
this money before retirement. And just because I said, oh,
like financial hardship, like you could access your super and
you might like have some bells dinging, like oh I
could access that, no worries, Like if you can not
do that, it's way better, Like I would be trying
to avoid it at all costs. Yeah, but at the
(21:21):
end of the day, like if it is extreme financial hardship,
I'm very glad that you have access to that.
Speaker 1 (21:26):
Absolutely, And from memory, you have to be on sendling
for like six months beforehand, you have to be in debt.
Speaker 2 (21:31):
I know.
Speaker 1 (21:31):
It's a whole thing.
Speaker 2 (21:32):
Yeah, there's a whole, very thing.
Speaker 1 (21:34):
Yeah, long list of things you got to tick off.
Speaker 2 (21:35):
So yeah, and like I think some people look at
it and go, oh my god, like I would love
to do that, and it's I don't know, it's like
your financial future. And don't get me wrong, in the
short term, it feels like it's like a band aid
and you just rip it off and you take it
and it like it just is what it is. But
there are so many people who during COVID took money
out of their superannuation because they made it much easier
(21:56):
to do so. And don't get me wrong, lots of
people ben fitted from it in the way that that
scheme was intended to be benefited from. Yeah, but a
lot of people were like, Oh, I can get cash
out of my super. I'm just going to do that
and now deeply regret it.
Speaker 1 (22:13):
One of those people, that's for sure, but.
Speaker 2 (22:15):
Like it wasn't And that's just like a whole side conversation.
I feel like they're marketing around that. The conversations around that,
they weren't like, hey, Beck, are you aware that like
this is a really like negative thing to potentially do,
like you basically saw it, and they were like, did
you want Like the way that it felt from my
perspective was, hey, Beck, do you want ten grand out
(22:35):
of your super? And you were like sure, and they
were like great, no worries, all you have to do
is feel out this form and you were like, oh easy, thanks.
Speaker 1 (22:42):
Yeah, it's so true, Like that's what it felt like, yes, exactly,
and you're like, what the hell?
Speaker 2 (22:48):
And now lots of people are like Victoria had I know,
and I wish I hadn't done that, but like, don't
crucify yourself. That's not the end of the world.
Speaker 1 (22:54):
That's very sweet, thank you. So okay, well, you know
that was not good. It was not good. But hopefully
we won't need to access like that earlier than retirement
in the future. Hopefully no more pandemics where they're giving
it away will and nearly exact fingers crossed. No one
needs that that early access exactly.
Speaker 2 (23:17):
But let's also reframe that situation by asking the question,
all right, Beck, how much money do you want to
retire with?
Speaker 1 (23:24):
Yeah, it's a great one, Like I well, I always
think a million, because you have said a million, and
so I'm like, you.
Speaker 2 (23:32):
Don't need a million's that's a very large number that
to be quite honest, most people in Australia do not
retire this Like, that's not normal, Beck.
Speaker 1 (23:41):
Five hundred thousand, Like that's a good goal.
Speaker 2 (23:44):
I mean, you're young and hot and hopefully getting rich.
But thank you, I feel like having a goal of
a million dollars at your age is actually quite reasonable
and puts you in a really good financial position. But
I also am acute aware that a lot of people
will be like, Victoria, that's unrealistic, And I'm like, well,
I is it really unrealistic if people have done it before?
(24:06):
Beck right, right, right, Like if other people can do it,
we can do it. Yeah, Like how are good to
be boys do it?
Speaker 1 (24:12):
Yeah?
Speaker 2 (24:12):
Like that's not that deep. No, But I think the
conversation needs to change around retirement because if we look
at like and we'll get into it, but like, if
we look at what works out to be reasonable, it's
a lot different to what I talk about on the
podcast because like, as we know, the government believes that
(24:33):
the Centerlink income is enough to live a good life.
Would you say that it is? I would say definitely,
not exactly. So, like the numbers that the government recommends
are going to be the bare minimum, if that makes sense.
They're going to be like, Okay, cool, you're not living
in an area that you really want to live in.
(24:53):
You're not putting the food on the table that you
would really want to put on the table, Like, you're
not having a life experience. Is that I believe you
deserve and like that might be the life you want
to lead, and like, pop off, queen, I'm here to
give you options though and kind of help you see
that maybe that might not be enough. But it also
depends really heavily on the type of lifestyle you want
(25:14):
in retirement. And when I was a financial advisor, I
used to sit down with clients and be like, well,
what does that look like? Like, Beck, are you going
to buy a caravan and then you know, drive around
Australia for your retirement and just stay at free camping
locations and you know, put a few snags on the barbie?
Or are we going to Europe every Christmas hour we
(25:38):
you know, skiing in the Swiss Alps? Like what does
that lifestyle look like? Because that's going to determine what
you need. And obviously, if you're just gonna live, love,
laugh around Australia, the income required for that is very
different to someone who wants an international holiday of luxury
every year. So let's get into some research. To the
(26:00):
Association of Superannuation Funds of Australia, for a comfortable retirement,
singles will need to have fifty five thousand, nine hundred
and twenty three dollars a year during retirement. Well, couples
apparently will need seventy eight thousand, five hundred and sixty
six dollars to live a comfortable life. But this, again
(26:24):
I think is outdated because this number presumes that you
own the roof over your head and you aren't making
mortgage or rent repayments.
Speaker 1 (26:32):
True, yes, yes, so like.
Speaker 2 (26:34):
That doesn't make sense in an economy where most millennials
are now struggling to buy property. Most you know, gen
zs are you know, maybe considering not even having that,
so you might need more than that. So if you're renting,
this figure is going to climb by about forty percent
for you to have what they call a modest lifestyle.
So that's not like a life of luxury. That's just
(26:55):
like they're basics, everything's going well and caveat. I really
just don't want this episode to be scary for people,
because you do have so much time to fix things
and so much time to put yourself in the best
possible position. But these numbers are big and you can
instantly be like, but Victoria, I only have thirty two
thousand dollars in super What am I going to do? Girl?
That's why we're besties. I got you. Yeah, Like it's okay,
(27:18):
it's okay, it's okay. That's why you're here, right, because
you want better for yourself and we're like building towards
a more secure financial future. But if you wanted to
look at this total super balance at retirement and you
don't have a house, this works out to be roughly
six hundred and thirty thousand dollars in superannuation for singles
and seven hundred and thirty thousand dollars for couples. Now,
(27:41):
when I say a comfortable retirement, I mean that you
have enough money in order to have some occasional takeaway meals,
maybe to go to the movies, to go to dance
classes if you really want to, because like you know
what happens when people retire, they're like do stuff they've
never done before. Yeah, yeah, I love it. But also
(28:03):
we need to pay for those experiences. It's true, comfortable
means having enough coin to get, you know, a nice
hack up pretty regularly, having a good level of private
health insurance, and having enough money maybe for an overseas
trip now and then. It's definitely not like if I
look at the budgets. It's definitely not every year, but
like you're not not going to have them. So that's
(28:25):
where comfortable is looking. So now I kind of get
why people are always aiming to retire on a million dollars. Yes,
because that figure feels relatively safe and kind of with
a buffer. Yes, seek, And that's why I often pick
that million dollar figure, because I go, I know it's
seven figures. I know it's really scary, but if you
can work towards that, you're going to be quite comfortable.
(28:47):
And if you are retiring with a partner, Beck, two
million dollars do goldwen? Yeah? Okay, So I'm going to
get a little bit further into that and what we
might salary sacrifice to reach that goal at retirement right
after this break, So guys don't go anywhere, all right,
(29:08):
Miss Beck say, ed, have you digested all of the
information that I have thrown at you so far?
Speaker 1 (29:13):
Yes? Yes, I have.
Speaker 2 (29:14):
We have covered the benefits, we've covered the definitions, we've
covered you know why we might be looking at doing
the maths on a million as opposed to five hundred thousand?
Speaker 3 (29:24):
Do you like?
Speaker 2 (29:25):
Okay? I now think that maybe a million is what
I would like to aim for I'm going to aim.
Speaker 1 (29:30):
For it, but I like, hey, shoot for the stars.
Shoot the stars, and maybe you will land on a
moon or something they say.
Speaker 2 (29:38):
I think they say, shoot for the moon and you'll
land among the stars. Oh, which makes a lot more sense.
Speaker 1 (29:43):
Yeah, I guess it does.
Speaker 2 (29:45):
We don't need to make sense, We need to make
money exactly right, all right, back, So let's do a
little example. Let's say that you are twenty four years
old and you might have what seven grand in super
sure you and let's say sixty four thousand dollars per
year before tax, right, good example, your employer makes the
(30:06):
compulsory twelve percent subrenuation contribution. That means that every year,
seven six hundred and eighty dollars is going into your
super Your salary sacrifice that you've chosen might be five
percent of your gross and your income. Do you remember
the difference between gross and net.
Speaker 1 (30:23):
Gross is in total? Yes, why, it's a gross amount
of money.
Speaker 3 (30:29):
Yeah.
Speaker 2 (30:29):
To look at and what you're missing out on and
what you're missing out exactly. Yeah. So like for those
of you who maybe missed that on a previous podcast episode,
I said that the way I see gross and net
when we talk about it is gross amount of money
is really disgusting and gross because that's how much money
we're not going to end up within our bank account,
and the net is like kind of what we scooped
(30:51):
and got to keep in our bank account.
Speaker 1 (30:52):
Great call, great call.
Speaker 2 (30:54):
Right, So your salary sacrifice is five percent of your
gross income. Okay, makes sense. So that's three thousand, two
hundred dollars a year into your superannuation. All up on
an annual basis, you're contributing ten thousand, eight hundred and
eighty dollars. We then apply our fifteen percent tax on
concessional contributions. That's one thousand, six hundred and thirty two dollars.
(31:18):
Your net contributions for the year then become nine thousand,
two hundred and forty eight dollars.
Speaker 1 (31:25):
Yeah, got you and all.
Speaker 2 (31:26):
So we're doing the maths. Yeah, just a really.
Speaker 1 (31:28):
Quickly recap Concessional means not compulsory, like you don't.
Speaker 2 (31:32):
Like you don't have to, yeah, which is why it's
only like sixteen hundred and thirty two dollars because it's
on the amount that you didn't have to contribute, but
you've chosen to gorgeous, gorge gorgeous, gorgeous. So now we're
at the net contributions because we've taken out our tax.
So you're adding nine thousand, two hundred and forty eight
dollars into your super every year instead of the initial
(31:53):
amount that I quoted, which was seven thousand, six hundred
and eighty dollars. Got you, okay, thishavior is going to
grow your contributions from ninety two thousand, four hundred and
eighty dollars in ten years to three hundred and sixty nine,
nine hundred and twenty dollars over forty years. Oh my goodness.
Speaker 1 (32:15):
That's that.
Speaker 2 (32:16):
Because the average long term growth rate for standard super
funds is typically between seven and nine percent every single year,
this figure not only grows by let's say seven percent yearly,
that growth is compounded. So the money that your money
made then makes money, and that's what compounding is. So
every dollar that you earn then earns you more money.
(32:39):
So remember you had seven grand in your super before
doing any salary sacrificing. So your new total, including your
contributions is sixteen thousand, two hundred and forty eight dollars. Yes, okay,
So that's that initial seven grand that you had plus
the nine thousand, two hundred and forty eight dollars that
you've added in this financial year. Apply that by the
(33:00):
seven percent annual growth, and we always go with like
the lower number. I want to say this is for
illustrative purposes only, just as an example. I'm just doing
some maths. This is not a specific super fund. This
is not a recommendation. This is just me doing some maths.
Multiplied by that seven percent annual growth, that's one thousand,
(33:22):
one hundred and thirty seven dollars. First year, you're going
to have seventeen thousand, three hundred and eighty five dollars,
Year two twenty eight thousand, four hundred and ninety seven dollars,
and year three forty thousand, three hundred and eighty six dollars. WHOA,
So you go, oh, forty grand after three years. I've
(33:42):
been contributing so much. That's so disappointing. It's not like
forty thousand dollars is a lot of money. But over
the long term, this adds up, beck Like, and when
I say this adds up, I mean doing the maths.
On the day you retire at sixty five, which is
the common retirement age. It's also the age that you
can access stuff. You're on track to having one point
(34:04):
two million dollars in your super.
Speaker 1 (34:06):
That's crazy. That's crazy.
Speaker 2 (34:08):
Just by adding five percent, that's so wild, okay, right,
And as I said before, for some people, adding five
percent is not going to change their lifestyle at all.
We're just going to pretend we never had that cash.
Speaker 1 (34:20):
Oh my god, that's a wild okay. So I guess
like in the grand scheme of things, you're only sacrificing
around three thousand a year before tax.
Speaker 2 (34:28):
Before tax, and you get a little tax deduction at
tax time, and so if I say, oh, Beck, do this,
you're probably not going to notice it. And then at
tax time you get some casholder in your account. Deal.
Speaker 1 (34:40):
It seems like maybe you wouldn't be that much worse
off with your take home earnings, but it seems to
all add up in your super. And yes, it doesn't
take things like pay rises into consideration. Exactly, you stayed
on this forever.
Speaker 2 (34:54):
Yeah, exactly. I'm just assuming that you never change your income,
which is what I would want to do because in
my ex financial advice life, I would always want to
underpromise over deliver, Like I'd always want to make sure
that I was kind of like promising you the bare minimum,
and then if you exceeded it, I'd be like, I
(35:15):
knew it, but I also just didn't want to bank
on it, because like, we never bank on stuff like
that because I can't promise it for sure, right, Like
I don't know if your job is going to go,
oh no, no pay rises this year, And what if
I was banking on your finances changing next year to
put you in a better situation. It's terrible. Like that
puts you in such a significantly better financial position, and
(35:37):
I just I'm so excited about it. Yeah, do you
want another example? Sure, Like, do some more maths? Sure,
because not everyone in our community is twenty four pack,
that's true, and they will all be like, but I
didn't start then, and that is cool. So let's say
you're my age, we're aging millennials, we are thirty five
years old, and let's say you have a suberannuation balance
(35:58):
of thirty three thousand dollars. Yes, and then you've got
an income of eighty five grand year, which seems to
be pretty standard for people who are in that thirty
five year age bracket. Right, and this is where we're
doing the maths. Your employer is going to make the
compulsory contributions of twelve percent to your super, so every
year they are contributing ten thousand, two hundred dollars on
(36:19):
your behalf gorgeous minimum. Then let's say you change your
budget and you've told your employer, I really want to
contribute five percent of my gross annual income, so my
total annual income, So that's four thousand, two hundred and
fifty bucks a year that you're going to contribute into
your super. All up, that is fourteen thousand, four hundred
(36:40):
and fifty dollars.
Speaker 1 (36:41):
OK.
Speaker 2 (36:41):
Right, then we do our tax, so that's fifteen percent
on your concessional contributions, which is approximately twenty one hundred
and sixty eight dollars. So then the net amount or
the total amount you end up contributing to your superannuation
that year would become twelve thousand, two hundred and eighty
three dollars. So that's what we're working with.
Speaker 1 (37:04):
Now.
Speaker 2 (37:05):
This behavior beck grows your balance from one hundred and
twenty two thousand, eight hundred and twenty five dollars in
ten years to three hundred and sixty eight, four hundred
and seventy five dollars in thirty years.
Speaker 1 (37:19):
Amazing.
Speaker 2 (37:20):
And that's not even taking into account any kind of
like performance of your superfund. Like that's again just the
bare minimum basics, like the bare minimum mats.
Speaker 1 (37:30):
Right, yes, okay, but we.
Speaker 2 (37:33):
Want to remember that you had thirty three thousand dollars
in your subranuation when you began, before you started salary sacrificing.
And I picked that amount because that is what a
lot of people are like V I only have you know,
thirty grand, or I only have forty grand in super
There are some people in our community who are running
rings around that, as they should, icons but imagine the
(37:55):
power if they added more to what they're already doing.
Speaker 1 (37:58):
For sure, Rich reach rich, Richard Rich.
Speaker 2 (38:01):
But your new total, because you had that thirty three
thousand dollars in your super fund to begin with, so
your new total, including your additional contributions that you're now making,
is forty five thousand, two hundred and eighty three dollars.
Speaker 1 (38:15):
Yes, okay.
Speaker 2 (38:16):
Then we look at that seven percent rate of return
that I really like working with. That's about three thousand,
one hundred and seventy dollars. First year, you will have
forty eight thousand, four hundred and fifty three dollars. Then
the year after that you'll have sixty four thousand, nine
hundred and eighty seven dollars. Then the year after that
you'll have eighty two thousand, six hundred and seventy nine
(38:39):
thousand dollars. And you're going, oh, v like, is that enough? Well, yes,
it is, my friend, because if your super fund performs
better than seven percent, you'll end up with more money
money win. But if it doesn't, that's okay, because you
are actually on track to hit a million dollars by
the time you reach the age of sixty seven.
Speaker 1 (38:58):
Wow, that's right.
Speaker 2 (39:00):
While so you'll still hit a million dollars, oh my god, like,
but it's just over the long term. We need to
commit to this. Yeah, And that doesn't take into consideration
any like pay rises, or like any additional contributions, like
if one year your super fund performs by eight percent
instead of seven yeah, or like my superfund which a
few years ago was doing last fourteen percent.
Speaker 1 (39:22):
Yeah, thank you.
Speaker 2 (39:23):
And I mean that doesn't take into consideration as well
the fact that some years your superfund is going to underperform. Sure,
but that's okay because over time it all balances out.
We're not worried about that, not worried about that. We're
not worried.
Speaker 1 (39:35):
Oh my god, that's incredible. It really snowballs.
Speaker 2 (39:37):
It does snowball like, it just picks up and picks
up and picks up, and then all of a sudden,
that's going really fast and crazy. What they say in
subernuation and this is called the rule of seventy two.
And maybe I'll do a whole podcast episode on this
because there's like a really cool, like mathematical concept. I
just said that aloud, and I was like, no one's
going to care Victoria anyway. Essentially, because of the rule
(39:58):
of seventy two, your money will double every ten years. Yes,
so like if you can get to a million dollars
by the time or a million dollars in your investments
by the time you're sixty, and you're like, well, v
I'm sixty, and like seventy is the new sixty, and
like eighty is the new seventy. Yeah, I actually want
to work until I'm seventy. Well, by the time you
(40:19):
hit seventy, you have two million dollars that's insane.
Speaker 1 (40:22):
I can't even just feeling magical, like doesn't feel real, okay, but.
Speaker 2 (40:25):
Like that's why. But that's why compound interest is so
hard for humans to wrap their heads around because it
just genuinely feels fake. So you go compound interest. And also,
if you put your money in today, you're not going
to see the returns tomorrow, Like it'll just be like
sense and you'll be like, what's the point. But you've
got to trust the process. Process, Trust the process, Trust me,
(40:48):
I promise.
Speaker 1 (40:49):
Does every employer do salary sacrificing or is it like
something you just request? It's just something you can request, Okay, amazing,
you can just do it.
Speaker 2 (40:56):
And also if you're like V, I don't know if
in my budget I can afford to do this like
salary sacrificing through my employer, because like you know, they'll
take it out of my pay and like some months
I need it, you can always just literally be pay
money to your super on a monthly basis true, and
then at tax time claim it back. Hell yeah, So,
like it can be really easy. And I think a
(41:16):
lot of people think the second it becomes super it
becomes really complex. But it's not, I promise. So, like,
the longer you do it, the more time it has
to grow back.
Speaker 1 (41:24):
That's so cool.
Speaker 2 (41:26):
So beck, summary, what have we collectively learnt today?
Speaker 1 (41:30):
Okay, so that contributions before tax can not only lower
your tax income, but they can create compounding wealth in
your super.
Speaker 2 (41:39):
So we're going to get rich.
Speaker 1 (41:41):
We're going to get rich, and they're retiring with a
comfortable amount in your super as a personal thing. And
it depends on what you want your retirement to look
like exactly.
Speaker 2 (41:49):
I don't know about you. What does my retirement look like?
It's looking bright, hot, smart, rich? Yeah, girl, exactly. And
maybe your super is actually the key to unlocking that
like really intimidating million dollar figure that we are not,
you know, really feeling comfortable with still, but like salary
(42:09):
sacrificing could help you get there. All right, I feel
like I've used terms like through renuation and earlier mathematical
concept and called it really cool. So I'm calling it time.
I think that that is all we have time for
today in time out. Yeah yeah, yeah, I'm putting myself
in time out. I also really want to do some
maths on the rule of seventy two because I'm wondering
(42:30):
if that could actually be a whole podcast episode, because
through my head it's still cool.
Speaker 1 (42:34):
A couple of your cylinder maths after this.
Speaker 2 (42:36):
I yeah, I'm the daughter of an accountant. Guys, if
you found this episode really helpful or maybe you learnt
something new, please let us know by leaving us a
cute little review. Maybe tell us what you're like in
the Spotify comments, what your five percent contribution could look like.
I would love to see it, and thanks as always
(42:56):
for being part of our gorgeous community. Guys, make sure
that subscribed so that you never miss a deep dive episode.
We will catch you on Friday for another edition of
Friday Drinks. Till then, take care of yourselves and of
each other.
Speaker 1 (43:08):
Bye, guys.
Speaker 4 (43:13):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial.
Speaker 2 (43:32):
Advice tailored towards your needs.
Speaker 4 (43:34):
Victoria Divine and She's on the money are authorized representatives
of money. Sheper pty Ltd ABN three two.
Speaker 2 (43:42):
One six four nine two seven seven zero
Speaker 4 (43:44):
Eight AFSL four five one two eight nine
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