Before we get into today's episode, I want you to pause for a bit and think about your current list of New Year's resolutions. Now, I want you to ask yourself, how many of these things were on your list 12 months ago? If the answer is none, then all power to you. But if you like most people, you probably have the same kind of resolutions rising to the surface each and every year.
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This episode is a recording of a money clip from our smart money accelerator where we cover the key takeaways from our sort out your superannuation series. We cover how to choose a good super fun, but more importantly, how to choose good investments that get your super money actually growing and working for you, not just your super company and how
to think about changing super funds and choosing the best one for you. This episode is perfect for anyone that wants to cut through all the noise around Super and make the most of one of their biggest investments. Welcome to Mo Money, where we bring you practical tips, hacks, strategies and the knowledge to level up your money game and replace your salary by investing.
So, super. Massive time horizon for a lot of people. But the reality is that if you get 1% less out of your super at age 20 and left until 65, that's a difference of a million dollars. But if you get 1% more,
Well, I mean, what are we talking there? It's also the difference of a million dollars, is it not? That's right. Yeah. And it's big numbers with super. And look, it's funny the way that we all think about super. I think that if you had the amount of money that you have in your super fund sitting in a bank account or an investment account in your personal name, you would view it completely differently to the way that you view your super.
And that's probably because you can't touch it until you're old. It seems like this bit of a confusing black box for a lot of people. But your super doesn't need a lot of your attention. It doesn't need a lot of focus, but a little bit goes a really long way.
Yeah, we looked through the content as well around like really short stint of focus, just focusing right now on ensuring that it's set up, right? Ensuring that it's set up, bulletproof, you've got some real high quality investments that you're making conscious decisions about and you've also looked at the fees. Now in doing that, we saw that making a 0.3% shift in fees, just 0.3%, you end up saving over $40,000 over an extended period of time.
To make that 0.3% shift, it can take about one hour. So that's a cost of one hour for $40,000 upside. I don't know about you, but that's pretty good return on investment. Yeah, 100%. And the reality is that once you do that, you super probably doesn't need a lot of attention for a little while. It's definitely worth staying on top of it, and that's why we talk about
you know, doing a review around at least once a year. But realistically, if you've got it set up in a rock solid way into fun that's quite cheap today, in a year's time, you're probably not going to have to change a lot if anything at all. And look, we know from the stats in Australia that more than half of Aussies allow their super fun to be chosen by their employer. They just go with that default super fun, whatever the employer offers. And look,
your employer sets up these funds trying to do the right thing. It's not like they're trying to get your super not working for you. But reality is that it's very difficult to get a one size fits all super fun that's going to be right for everyone. And so you and I through working with our clients at Pivot that we've helped
a lot of people set up super funds or look at their super, and probably more than 95% of them end up making a choice to make some sort of change to their super fund. And I feel that change often stems from them starting to think of it more as an investment, like a real tangible thing that they make a change now, rather than this weirdo wizardry thing that they don't have to worry about for 20, 30, 40 years. Do you feel that that's more aligned? Exactly, yeah. People think that super is an investment. Super is
not an investment. Super is only a tax structure. It's a tax structure. It's a special investment account where you can access pretty much any sort of investment that you can access outside of Super. It's got special tax rules, special tax concessions effectively that apply.
on the condition that you leave the money there invested until you're old. The government provide those tax concessions because they want you to have more money in the future because you'll pay more tax in the future, you'll rely less on welfare. It's not because they're great people, not to say that they're not. I'll let you make the choice on that. But it is because they know that when people are wealthier when they're retired,
but they're going to be more of a positive contributor to the government's bottom line and less of an expense line item, so it's smart planning on their part. But once you understand that Super is just an investment account, then you can focus on what you should be from the start, which is choosing good investments.
A lot of people do it the other way around that they start by going, what is the right super fun? What is the best super fun? But super is just a tax wrapper. So instead, you should be saying, what are the best investments for my super money? And then saying which super funds, which super accounts offer these investments that I've determined or established are the best ones for me.
And if someone was going to go ahead and make that decision and do some research on that, I would 100% say, go and look at the replace your salary by investing series. Like, you unpack that with me around what these investments are, where to look, what's inside them, the fees and pieces like that. Once someone's done that, so once they've gone, all right, I'm going for index-style investing, I can see that my super has that. What do they have to do?
Well, then it's just a matter of actually either going to your online portal or calling them up on the phone to make those changes. I think, though, that once you've established the investments that you want, it is worth having a quick check of the other funds that offer the very similar things to ensure that you're not paying overs on fees. As you said, even 0.3% difference. We're talking about tens of thousands of dollars over time.
So value is what's important here. It's not about the cheapest is necessarily the best, but you don't at the same time want to be paying a lot more for something that's almost identical. So quick comparison. So long as you're super fun is around the money, there's a lot of benefit in not having to change, not having to do all the paperwork, not having to re-update it all with your employer and everything else. But you can most funds now will allow you to switch your investments quite easily online.
And then once it's done, it's largely done. Yeah, it's awesome. And a massive part of this is controlling the controllables. Now, whilst fees aren't the most enjoyable topic to talk about, they're the cost of doing business, like we're talking small percentages to unlock the ability to multiply your money tenfold over time. So with covered fees, you can control that by making conscious decisions.
We've covered the investments as well, which you can pick the investments that align with how much risk you're going to take, your timeframes and pieces like that. One thing that comes up so often is, well, do I need to look at the performance of these funds to determine whether or not to pick them? I just wanted to take a quick break to call out what I'm seeing in the world at the moment. We've got cost of living increases, pressure.
Fastest interest rate tightening cycle in a generation pressure. Less savings and more debt are for a bit too much Christmas cheer, extra pressure. So if you like most people, you're probably feeling the pinch with money at the end of last year and decided to get through Christmas and basically sort it all out later.
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Well, I think that it depends on what your investment strategy is. And so with the example that you gave there about using an index fund, so long as it's an index fund, then the performance of your super investments should be the same as the performance of the index that you're following. So if you're in an Australian share market index,
then your super should be doing the same thing that the Australian share market is doing. For most people, they be in a more diversified index where you've got some international shares or maybe some US shares and some Australian shares. And again, so long as the index is tracking the index that you want, you don't have to worry too much about the performance. Now, I do think it's worth checking in, but
the performance is largely consistent. Where I see a lot of people get confused and sometimes it even pushes them to make bad decisions around this super is that they think that when the share market is not doing well, it means that their super is no longer good.
that it's just because the market, like we've seen over the last few years, that there's been a number of periods in time where the share market wasn't performing particularly strongly. There's been a couple of big periods where it's been going down, obviously with COVID, it was a severe one, but there's been a number of drops of, say, 10%, and people will look at their balance and go, oh, my super is doing something wrong if my balance has gone down.
but it doesn't mean that at all. Particularly if you're in an index fund and that's why I'm a big advocate for index funds like a way I use them myself, why I'm a big advocate for them for my clients. Because you should be able to then sleep like a baby knowing that your investments are doing what the market is doing. And we know that the market is going to go up, it's going to go down and over the long term, it's going to go up more than it goes down. And so you shouldn't worry too much about short-term performance.
Awesome, mate. So we're talking about, firstly, checking in on our investment strategy, checking in on the fees. The third level is we are considering the performance, but it's not the be all and then all. Exactly. And the only other thing is to just start the habit around making some contributions to your super. This is something that you definitely get into more in the more advanced stages when you've got a few of your other personal investing property strategy and those sorts of things sorted.
But you'd be blown away by how much of a difference it makes that even putting an extra 10 bucks a month into your super fun, it's funny that something just shifts in your brain and then all of a sudden you're paying more attention than you would if it's just your employer's money going in there.
Even though that is your money, you're still paying that 10 bucks if you're getting 10 grand a year from your employer, you start putting in 10 bucks a month at your own, you're going to open the statements, you're going to click into the portal, and that is never going to hurt. So long as you're understanding and taking it back to
the understanding of investments as we've spoken about through the Replacer salary series. It's not about making changes, but just knowing what's going on with your super, how it's tracking, that all ties into your planning. It also gives you a nice win to celebrate when you're doing your money check-ins over time and that habit building as well. Instead of it just continuing to be this black box that you never really look at that much. But that way you've covered all the bases. You don't need to do a lot at the start.
Super will come more into focus at those later stages, but in the early stages, you want to probably be more focused on the other tactics that you're using to build your wealth and setting yourself up for the future success. So it will come back, but it doesn't need to right now. As I said at the start, a little bit of attention really goes a long way.
and closes off on one thing. So we've obviously got people in all different age brackets. They're going to be saying, OK, how do I work with Superm? Make sure that it's going to be working for me as best as it can. Is there ever a point that it's too early? And is there ever a point we start to change what you do?
Well, I don't think too early is a thing. I think as soon as you get a super fund, is the right time to start paying a bit of attention to it. I know I didn't too much when I first started working, but if I'm scared to actually calculate what that lack of attention would have cost me over time, because I now understand the benefit of compound interest.
So I don't think there's a two early. I think though that as you get older and as you get towards retirement, particularly as you get within 10 years of the timeframe that you want to be retiring, I do think that it's quite important to go and seek out some specialized advice because you only really get one crack at it. You can't unwind that. And while we know that, talking about the principles that we cover through the superannuation series that
You can follow and set up the foundations pretty well when you've got a long time to ride out in markets. When it starts getting down to crunch time, you want to make sure that you're doing everything that you possibly can. And so I know that the principles are going to be completely consistent with what we're talking about. But given the importance is really amped up at that point, it's worth getting some tailored personalised advice to make sure that you're doing everything that you should be.
If you're already doing everything you should be, having someone say, look, I've checked out everything. Here's all the things that we consider. You're doing all of those things. You can just sleep better at night and ultimately that's going to be time and focus and probably money well spent. But the principles will ultimately be the same. Beautiful.
So we're talking about one millimeter shifts right now, 10, 20, 30 years payoff is there. That's right. And just keep paying attention. It is your money at the end of the day. So you should be treating it like that. When you do, you'd be set to get more money out of your super and get what is growing to be one of your biggest assets, working hard for you, not just your super company.
Thanks for listening to Mo Money, and we hope you picked up some knowledge to help make your money easier. This podcast was recorded on the land of the Gadigal people of the Eora Nation, and we celebrate and pay our respects to Elders past, present and future. Now don't forget to subscribe to the podcast to get future episodes delivered to you directly, and if you're ready to save more, you'd best smart and maximize your money, head over to www.pivotwealth.com.au where you can level up your money knowledge and get clear on your next steps.
Helping people with this sort of stuff is our jam, so if you get stuck, we'll need a hand to move forward, you know where we live. And we'll be back here with another episode really soon.