Right choice for family’s future

Sarah is driving herself crazy trying to make the ...

QI am a single mother, 41, with two children, aged 5 and 7. I earn about $71,000 a year after tax. My living expenses are about $45,000 a year, including the kids’ costs, of which I pay half. I save $350 each fortnight, and $100 a fortnight for each child.

I have $200,000 to invest and about $75,000 in an emergency fund. I have about $130,000 in super.

I’m capable of managing my budget but I’d love some advice on investing, superannuation and insurance.

The problem is that after the recent banking royal commission hearings I’m terrified to commit. I have so far talked to five advisers and paid $1650 for a statement of advice that I’m unhappy with.

It has made me aware, though, that I could be in a lower-cost superannuation fund, with better income protection, life and TPD insurance. (I’m currently with my employer’s Mercer fund.)

I’m willing to pay some fees but don’t want commissions to influence any advice. Should I spend less time looking for an adviser and more time sorting it out myself? I’m driving myself crazy wondering what is the right choice for my family’s future. Is it worth paying some fees to have someone monitoring my money?

Interesting question, Sarah. The royal commission has rattled most of us, so let’s see what you can do yourself.

First, I agree that a low-cost super fund is really important. The big funds such as AustralianSuper and Hostplus, for example, have really low fees – for some options they are under 0.1% Do ask your current fund about what it has available. I think you need to be in a balanced or growth fund, and your fund may have a lower-cost option.

Then, in your shoes I would be salary sacrificing up to the maximum $25,000 a year. That means you would pay only 15% tax on this money, which is much better than the rate you pay on it as personal income. Whichever fund you choose, you can also sort out your insurance. You need enough to cover you for illness or injury and, of course, death.

I am assuming you own a home debt free. With the $200,000 I think you would either buy an investment property or a low-fee managed share fund. Index funds run by managers such as Vanguard are really low cost.

A property is a different kettle of fish – it’s more labour intensive – but this really is a choice only you can make. I am not sure an adviser would help you here.

Both are perfectly sensible ideas, so do what works for you.