February 28th, 2022 by

A lesson on What’s App to my 25 year old about to start full time work

Daughter;’ Does this seem right? Lots of tax.’

Me; ‘Perfect must include HECS’ would be $474 without HECS debt.

Daughter; ‘That’s so depressing for us.’ Takes $70k down to $49k after tax and super deductions .

Me; ‘ Welcome to the ATO’

Daughter; ‘Good luck to us’

Me; Effective tax rate is 22% ( $546 tax /$ 2430 gross salary)

Why not at least salary sacrifice $20 per week in super? It is good to start now.

You are only losing $15.60 in the hand but $17 goes to your super fund, if you get me.

Super is taxed at 15% and your tax rate is 22%, so if you put it into your superannuation fund you are already ahead, as if you made 7% on your money. Add to this your average return on Australian shares over 10 Years around 9.5%. This brings your real return to 16.5% on the money you salary sacrificed. Can’t get a return like that in many places.

I will send you the impact of this tiny amount, if you do it for 30 years.

Daughter; It’s okay I’m already not following


Me; Look carefully. $20 per week ( less 15% tax) for 30 years = contributions of $26,520

(after tax) in total. Look at what happens between 20 and 30 years. At the 20 year mark, it gets interesting and builds to $500,000 over the next 10 years.

Daughter; So in simple terms, we ask our employers to put an extra $20 into super a week?

Me; Yes ‘Hi payroll department, can I please salary sacrifice $20 per week to super beginning ASAP’.

; Okay

Me; Wealth creation has less to do with the investing choices you make, ( within reason) and everything to do with your commitment and endurance . So if you guys start early enough you can retire at 50. Most people cannot last on something (investing wise) for 30 years. That is why many people are not wealthy.

Daughter; Roger that. You make it sound easy.

Me; And that is the magic of Compounding Interest . You don’t have to be smart. Just stay in the game.

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