Living pay cheque to pay cheque might be a reality for a large majority of Australians and no more than in the current health and economic crisis that we are experiencing.
Whatever your financial situation may be, insuring you are on the right on path to retirement can provide an immense benefit to you and your family.
Retiring with Debt
Common to disbelief, retiring with debt is very common, in fact 46% of workers over the age of 50 expect to retire with some form of debt according to a REST Super study. These debts aren’t just mortgages, in fact credit card debt makes up the largest percentage of common debt to retirees (25%).
Credit card and mortgage debts may not seem like a problem while you are working as your cashflow is able to maintain a healthy equilibrium, but this abruptly stops once you retire. Instead of the debts being paid by a salary, they are now paid by your hard-earned savings which isn’t designed for that type of outflow.
Consequently, these repayments will increase your day-to-day budget but also leave you with less money down the track. The reality is once these debts start to chip into your savings you could find yourself living solely on the Age Pension which might not be enough to cover your lifestyle.
How does retirement impact your spending
The money you spend to maintain a comfortable lifestyle when transitioning into retirement will depend on what you define as comfortable and as such will vary between individuals. Obviously, there will be certain expenses, primarily related to work that will diminish once you enter retirement such as transport, work outings and clothing however many living expenses such a groceries and households bill are likely to continue in the same vein.
The Association of Superannuation Funds of Australia (ASFA) estimates that a couple living a comfortable lifestyle is expected to spend approximately $1500 per year on overseas travel and dining out is expected to cost around $4,300 per year. Depending on your financial situation and lifestyle, these figures might be above or below your expectations therefore it is important to start assessing what lifestyle you plan on living once you retire and is it affordable.
How to get back on track
If your superannuation savings are not where you want it to be don’t stress. It is important however to start taking accountability of your finances in order to make the best of your situation for the future. List out your inflows and outflows and draw up a budget to help put some money aside for savings. Once you have a good understanding where your money is going, then you can start to look at reducing unnecessary expenditures and where savings can be made.
Use our online Wealth Portal cash management to get started – its free and you can create an immediate budget without flicking through bank statements and receipts to develop your financial plan and objectives.