Welcome to the end of another year. It’s been a momentous one with Brexit, increasing terrorism in Europe, and the election of Donald Trump making headlines. It’s also been a year when Australians have finally woken up to the dangers of too much debt. For years I have been one of the few voices warning of the dangerous road to debt but most so-called experts have dismissed what I’ve been saying on the grounds that “our debt doesn’t matter – it’s just a tiny percentage of our GDP.”
Well, it does matter. Our interest bill is now over $1 billion a month, approaching $13 billion a year and growing faster and faster. Put simply, that’s $13 billion the government does not have to spend on important projects such as infrastructure, health and education. To make matters worse the number of elder Australians is growing putting an ever increasing strain on welfare.
We have already experienced the cuts to the age pension which will take place in less than a fortnight, and the huge changes to superannuation which come into effect after June 30. The changes to super make it much harder for people to save for their retirement because the amounts that can be contributed have been slashed. Also hidden away in the legislation are huge restrictions on the amount that can be held by the survivor in superannuation when their partner dies.
Put all this together and it’s obvious that major goals for any family should be getting the best return on their portfolio possible. The most important factor in how much you need to contribute to build a sufficient portfolio of retirement is the rate of return you can achieve. Have a look for yourself – just go to my website and play with the compound interest calculator, and the retirement drawdown calculator.
It’s also important to involve your partner in major financial decisions so they will have some clue about what to do if the partner who currently makes most of the financial decisions suddenly dies.
I will be talking a lot about these issues during the coming year. Just remember, as we enter 2017 that the best map in the world is useless if you don’t know where you are. So make one of your first goals is the preparation of a net worth statement that lists your assets and your liabilities.