As women move up the ranks of public service, they are increasingly taking a major, if not leading role as family breadwinners. This is leading to a re-orientation of how money is managed within the family.
Overseas research has shown women tend to approach their finances in a different way to men. Women are more inclined to focus on the family’s needs than their own. This often results in their financial goals being centred around things like sending the kids to good schools, universities, funding their first home and family holidays rather than traditional goals such as investing or saving for retirement.
Just as they will often go into bat for their team at work — arguing for better conditions or remuneration for them while overlooking the need to negotiate improvements for themselves — women can often put themselves at the bottom of the list financially. We think our own financial security can wait until other priorities have been dealt with.
There is nothing wrong with wanting the best for your family. Most of us do. But it is possible to look after your own financial security at the same time.
These days it is more difficult to get a major tax break or windfall investment gain without taking on a higher degree of risk. But over time, small amounts here and there can add up.
Talking to your bank about a discount package is an obvious place to start. Most lenders will offer a discount on the standard borrowing rate to professionals and executives if you ask or are prepared to take your loan elsewhere. This can be worth 0.5 to 0.75 percentage points off normal borrowing rates — or a couple of thousand dollars a year that can be directed to other financial goals.
If you have several debts, it is also important to ensure they’re structured so that you’re paying the higher interest/non-tax deductible debts off first rather than, for example, making extra repayments on your mortgage while you still have an expensive credit card or personal loan.
Similarly, it’s worth having a strategy in place for future pay rises, rather than just adding the extra money to your disposable income. If you make a conscious decision to direct part, or all, of every pay rise to a savings or investment program, or to reducing debt, chances are you won’t end up in a couple of years wondering where all that extra money has gone.
While most public sector employees are doing well in terms of super, it is also important to maximise your salary sacrifice contributions. The maximum limits for concessional super contributions have risen in recent years and are now $30,000 if you’re under 50, and $35,000 if you’re 50 or older. If you haven’t reviewed your salary sacrifice for some time, you may find you can save on tax, and put aside a bit extra for your future, by taking advantage of these limits.
This is especially important for women who plan to take a break from the workforce to look after children or elderly parents. Because there are limits on how much you and your employer can contribute, you can’t assume you can “catch up” on your retirement savings later in your career.
Getting the most from super is an incremental game where every dollar you can set aside now counts. If you are planning a break from the workforce, it’s also worth considering other ways in which you may be able to continue building your super during this time through strategies such as making after-tax contributions, getting your spouse to contribute on your behalf and claim a tax rebate, or using the super co-contribution (where the government adds up to $500 to your contribution) if you’re eligible.
If you are earning more than your partner, you may be paying unnecessary tax by holding savings accounts in your own name rather than theirs. Another alternative is to look at setting up an offset account with your home loan so that savings reduce your home loan interest rather than earning taxable interest.
While thinking about money may be low on your priority list, it’s worth putting time aside to get on top of your finances. It is the small things you can do now that can make a big difference later on — both for yourself and your family.
