Not all of us are investment gurus. Many have never bought an investment property or bought shares. If this is you and you still want to have a comfortable retirement consider these 7 ideas. They will assist you to tackle your savings and debt areas and help you become more money conscious. The result will be a slow and consistent improvement in your financial position.

Over time your financial awareness will grow. Who knows you may find yourself looking into property investment or directly owning shares. Cathy Freeman wasn't a 400 metre champion when she was born. She first had to walk then run then progress through various levels of athletic competitions before reaching the elite level.

1/. Make personal contributions to your superannuation (retirement plan)

We have seen employer contributions reach 9% for most employees in Australia. But is this enough? There is no correct answer as to how much is enough because everyone has different standards of living. There is one way to look at it. It is better to have more than you need when you retire than wish you had more! With this in mind a great way to improve your living standard for your retirement is to put extra money into superannuation yourself.

As previously noted in this site, I worked for a Bank for 22 years. It was compulsory when I started to make superannuation payments out of my pay, and this was supported by the Bank, who, if my memory is correct, put in $2 for every $1 that I put in. Back then, I didn't see the point; however the benefits over time have become apparent. It is also worth mentioning back in 1981 bank employees were one of the lowest paid employees going around. A friend who was working as a brickies labourer was earning twice as much! I was only earning $120 gross per week and with tax, superannuation and board there wasn't a lot left over. Nevertheless I managed to live within my means and those contributions over 22 years have helped give me a good start to having a comfortable retirement.

Experts in the industry often recommend that to really be self sufficient in retirement we need to put 15% into superannuation over our working lives. I can't see the burden on our employers being increased any further therefore it is up to us. The Australian Federal Government has helped by offering a bonus of up to $1500 if you put in $1000 yourself. Conditions do apply, even if you qualify for only $500 that $500 and your $1,000 in 10-20 years will grow, together with extra contributions from now on. By putting money in yourself you start to have more ownership of your superannuation. This might even encourage you to have a look at your superannuation annual statement when it arrives in the mail.

To really see the benefits of additional contributions work out how much extra you are able to put into super. Add this to what your employer is putting in. These two combined are the annual amount being paid into your superannuation. What amount of income would you need to earn if the only super payments were from your employer? Consider this and then work out your own estimate.

Say you earn $40,000 per annum gross and you want to pay an extra 6% ($2,400 p.a.) of your gross salary into super bringing total contributions to 15%. Total contributions would therefore be $6,000 ($3,600 & $2,400). Now with the help of a calculator ($6,000 / 9%) = $66,667

What this means is you would be contributing the same as someone earning $66,667 gross and relying solely on their employers contribution.

There is also salary sacrifice to consider. It is best to talk to an Accountant to ensure this works for you.

Go on, put more into superannuation now!

2/. Pay your home loan as if the interest rate was 1% higher.

We have had low interest rates now for many years and yet despite this great advantage, it is disappointing to see many people still having 25 years to go to pay off their home loans

Consider this, work out the repayments on your home loan, however increase the rate by 1% (use our calculator). To do this and to see the benefits go through this example:

1. $100,000       7.5 %              25 years         = $739 per month

Now change the interest rate to 8.5 %

1. $100,000       8.5 %              25 years         = $805 per month

Now change the interest rate back to 7.5% and reduce the loan term until the repayments equal $805 per month

1. $100,000       7.5%               20 years         = $805 per month

Wow !!!

5 year saving!

And how much interest is it saving you? You will notice at the bottom of the graph 'Total interest payable'. In this example the original interest cost is $121,697 while in the last example it is $93,342.

$121,697 - $93,342 = $28,355   !!!!

How much do you owe?

Try the same example but use your home loan balance.

What is your saving?

While you are at it don't forget to also increase your home loan repayments by your monthly fee as the fee is usually added to your loan balance and therefore costing you interest.

Don't forget to have a look at your home loan statement every time you receive it. Is it reducing as fast as you like?

Interest rate changes

If your interest rate goes up, to ensure the benefits are not eroded, you should increase the repayments on your loan.

If the interest rates go down, keep the repayments as they are!

The benefit here is the loan will be repaid even faster saving you more interest.

While you are at it, are you paying fortnightly?

Are you making lump sum repayments from tax return refunds, bonuses, irregular overtime and any other money received that is not normally received?

Take control of your home loan now!

3/. Don't debt

Even if you don't have much of a debt problem, you may find some value in going through our debt section 'Debt Program'. It could be you are not taking full advantage of what you are earning and therefore not improving your financial position as well as you could.

Don't debt may include paying for goods and services like these using your credit card or a personal loan. These should be paid for out of your savings.

• Food
• Restaurants / Take Away / Cafe's
• Motor Vehicles (up keep)
• Rent
• Utilities (Power, Water, Heating etc)
• Clothes
• Furniture

Borrowing money is more suitable when buying property for you to live in and for investment purposes like an investment property, shares & managed funds.

If you are considering borrowing for investment purposes it is essential you get professional advice from Accountants or Financial Advisors.

But remember the main point from the debt program? Just for today, one day, do not incur any new debt?.

After all what have you got to lose?

4/. Be money conscious

As outlined in our 'where are you now' and 'budgeting', sections many people's spending habits are unconscious. That is, when handing over the credit card, money from their wallet or making an ATM withdrawal they don't ask themselves questions like:

• Can I afford this?
• Do I really need this?
• If I buy this how will I be able to afford my electricity bill?

One way of making yourself more money aware is to look at the cost of that item and then compare it to how many hours it would take to earn that amount. Say you earn $20 per hour net and that dress or pair of shoes cost $180. You would ask yourself is this purchase really worth 9 hours of my labour. You could even take it to another level by deducting your fixed / necessary costs first. From your net weekly pay deduct an amount that covers rent, loans, food, petrol and other bills. How much is left?

From the above example you might work out that you have $100 per week surplus to be spent for your own pleasure (play money). Therefore you would ask yourself is this purchase worth me spending my play money now leaving me nothing left for almost 2 weeks? If you allowed yourself $50 per week it would take you almost 4 weeks of your labour.

That puts the purchase in another perspective doesn't it?

It is important to have your own money system. This is best achieved after you are money conscious. Have a read of our budgeting section in particular cash diary and latte factor subsections.

Always go through your Bank statements including transaction/saving, credit cards and loan repayments. Use this as another tool to review all spending and also checking for Bank errors (yes they do happen) as well as the level of Bank fees. Is there a way to reduce them?

If you don't try to improve this area, it is likely that your efforts in some of the other areas in this section will not work. You will reduce your home loan instalments or cancel the extra amount of your superannuation because of your credit card debt or bill that has arrived in the mail.

In other words your short term needs will override your long term goals!

5/. Start today

There are many people who have a wonderful lifestyle who are not making any effort to ensure they can at best have a comfortable retirement. The shock of having to live on a pension or part pension after having a very good income must be great.

How would you cope?

This is what is received on the aged pension in Australia.

Single                        $499.70 per fortnight

Couple           $417.20 (each) per fortnight

Can you live on $250 per week (single) or $417 per week (couple)?

To see what it is like, go through what it costs you to live on basics only.

I hope this is a spur to start you growing your wealth now.

I can recall a number of examples over the years where people saw the need to work on growing their wealth. Many had even started the process by looking at investment properties or finding out about superannuation. For what ever reason their wish to take it further never succeeded. Don't let this happen to you!

Remember it is a grim life on an aged pension and I can't see the standard of living for age pensioners improving. In fact I believe the opposite is true. With the rising level of life expectancy the Federal Government is going to have to support an ever increasing number of retired people. This is why they brought in compulsory employer superannuation contributions and increased the level to 9%. It is a commonly held view that the full benefits won't be seen until we see people retire who have had this support their whole working life. Until then the Federal Government has a problem, a big problem. They can only hand out what they receive and it won't be a surprise if the aged pension and other pensions and allowances don't increase at the same level as inflation.

Act now!

6/. Invest Automatically and Regularly

For many of us the main deterrent in becoming financially independent is not the prospect of rising interest rates or difficulty in picking the next boom suburb, it is us. Our habit of starting something, going gang busters for a while and then quitting all in the space of a few months is not uncommon. To increase the chance of success the change must become automatic where it can become part of your regular behaviour.

To improve your chance of becoming a successful investor set up an automatic system that ensures money is transferred on a regular basis. This takes you out of the picture and provides the benefits of paying yourself first.

The benefits of this system have been shown in both the automatic budget and automatic investment plan.

Have a read of both.

It is a simple solution that provides consistency.

It would be wonderful if we had a crystal ball and were to know when the share market had hit rock bottom and therefore a good time to buy and the same when shares had hit a peak and therefore a good time to sell.

Seeing we don't have one and the so called experts are not always reliable, it is therefore worth considering investing regularly and following a system known as 'dollar cost averaging'.

This system ensures you continue to buy when the market is down. In fact it enables you to buy more shares or units (managed funds) as they are cheaper. You are also buying when the market is doing well and the value of your investment is up. This system means you don't miss out on that period when values skyrocket.

Pick an amount and a time frame that suits and start investing now.

7/. Think like a Millionaire

When we think of the rich we often think of luxury cars, big houses and holidays at flash resorts. But how did they become wealthy. As we have previously mentioned in almost all cases they didn't inherit it. What did they do? Now some did it with a high paying job, others with a successful business but they all had the same attitude.

Their ability to have a long term perspective in regard to their financial affairs reaps benefits down the track. This behaviour ensures short term spending is carefully monitored. By long term we are talking about 15 years +.

To start this process you need to set some goals, these could be:

•       How much you want in your superannuation in 20 years
•       To buy an investment property in 5 years time
•       To pay off your home loan by the time you are 50
•       To retire at 60

Once you have some goals, what do you need to do today, tomorrow, next week, next month, next year to achieve them?

A key factor in your success may be to improve your financial education. Money100 is a great start but there is more you can do. Read the business/money section in your daily newspaper, financial magazines. There is lots of information out there you just need to be aware of it and grab it.

Start your journey to financial independence now!

Summary

The benefits of these steps are far greater if combined than if you concentrate on just one or two. At face value it all looks pretty simple and it is. It is supposed to be easy to understand, set up, continue with and see the benefits.