Hi Nicole,
I am an hourly wage-earning, low-income, stereotypically under and precariously employed Gen Y. I do have a five-year career plan towards more secure, better-paid employment within a field aligned to my skills, interests and values. I am fortunate enough to live in my parents' investment property at their cost-price instead of market value in lieu of future inheritance. Since I'm not on salary and can't salary sacrifice, is it still beneficial to make after-tax contributions to my super fund? Last year I started a modest portfolio of shares. Soon I'll have a term deposit of about $5500 released, which has been my "holy sh*t" fund. All things being equal, I'll reach my $3000 save-to-invest goal in 10 weeks. I'm going to be a "rate tart" and sit the combined amount somewhere for bonus interest while I consider my investment options. What are they?
Rebecca, Melbourne
Well done you, Rebecca, for being so conscientious about building financial security, difficult though it might be for you.
I'll deal with your last issue first: investment options. You've told me your portfolio so far consists of mostly of Bendigo Bank/Bank of Adelaide shares and some overseas government bond exchange traded funds (ETFs), so my first tip is diversify: for safety, spread your money wider.
That used to be difficult without a large-ish amount but further, broader-based ETFs will now sort that out nicely. For example, you can buy ETFs over the ASX200 index of our leading shares, the US S&P 500, Global Healthcare companies or even the NASDAQ Cybersecurity Index. A quick Google will reveal a wealth of possibilities.
Investing with peer-to-peer (P2P) financiers is also worthy of the consideration I know you're giving it. These sites match investors with borrowers, to whom they can offer cheaper personal loans than banks (incidentally, risk-based pricing, United States-style, is up and running here - the better a borrower's credit score, the lower their interest rate).
To people with savings to invest, higher returns are available than the paltry ones from a bank. However, realise there are no guarantees you will even get your money back and P2P lenders do not qualify for the deposit guarantee.
Overall, these outside-super investments are sensible given your youth but it's smart to get the super giveaways too ??? principally the co-contribution, payable to some extent on salaries up to $51,813. You get the full $500 for an after-tax contribution of $1000, if you earn below $36,813.
And happy days: since July 1, you've been able to DIY salary sacrifice, which saves tax - you just choose to claim a tax deduction.
In all this, just be sure to keep three months' salary earning and accessible as an ongoing Holy Sh*t fund, in the no-risk bank.
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.
