Starting a new job or career path comes with so many opportunities such as gaining new skills and confidence, exploring your passions, and developing yourself financially as you grow within your profession. Whether you have a few decades under your belt or you're just starting out, there are three important factors to consider when changing jobs that can really help to set yourself up in the long run.
1. Consolidate your super
When you start a job, you will generally be asked as if you would like your employer to make payments into your existing super fund, or if you would like to use their nominated default fund. Superannuation and retirement are probably the last thing on your mind, but keeping on top of your super now will make a world of difference when you are looking to retire.
Choosing to go with your employers default fund could end up costing you more money in the long run if you already have a super fund from a previous employer.
Take the opportunity of starting a new job to do some life admin and ensure all your super is consolidated in the one account. Having just the one super account will save you money by only paying one set of fees and allow you to keep track of your balance more easily.
You can consolidate your super easily through the ATO by visiting my.gov.au. And if you're not sure which of your funds to stay with, check out moneysmart.gov.au which provides tips on what to look for when choosing a super fund.
2. Contribute to your retirement
Speaking of super, if you're now in a position where you've received a pay increase, you may want to consider making additional contributions into your superannuation, also known as salary sacrifice.
If you're not too sure what it means, salary sacrifice is arranging for your employer to pay part of your salary into your superannuation instead of paying it to you in your take-home pay and is on top of the mandatory 10.5% paid by your employer
- when an employee is over 18 years, or
- under 18 years and works over 30 hours a week.
Contributing to your superannuation cannot only help grow your retirement savings, but it's also tax effective. Most of the personal income tax rates are higher than the 15% superannuation tax rate which means you would be paying less tax on the money you are putting towards to your super fund (your retirement) where it will then grow even more with compound interest.
Tip – Compound interest is calculated based on your entire account balance. Any money earned through interest grows your balance and continues to be invested by your fund which in turn continues to grow your balance and be reinvested, therefore accumulating (compounding) over the lifetime of the account.
3. Pay yourself
If you've received a pay increase as part of your new job, don't forget to pay yourself! This means increasing the amount you are paying into your savings account. If you're not big on starting a budget spreadsheet, try the 50-30-20 rule which involves splitting your salary into three basic categories: 50% of your salary to be used for needs (such as groceries, rent or mortgage repayments), 30% for wants (such as eating out, going out, or buying something new that you don't really need) and 20% for your savings, investments, or debt. It's a simple way to budget and means you can easily work out how much you should be putting away based on your incoming pay.
This information provides general advice only. We do not provide advice based on any consideration of your personal objectives, needs or circumstances. If you require personal financial advice about your situation, we can refer you to Alliance Wealth Pty Ltd AFSL 449221 ABN 93 161 647 007 ('Alliance Wealth') for financial advice. For full details of our relationship with Alliance Wealth and its Corporate Authorised Representative, Financial Advice Matters Group Pty Ltd, please visit www.auswidebank.com.au/financialadvice
