More and more often in the news today we read about the epidemic that is financial illiteracy running rampant amongst the younger generation. We lament the lack of financial education they’ve grown up with and wonder how they will ever survive in this world of fragile economies, overpriced real estate and cheap debt. It’s not an unjust concern. In broad strokes, the landscape of the itinerary in both primary and secondary schools has not changed dramatically over time. Teaching techniques and the tools used have certainly evolved, but they taught math, language arts and science 20 years ago and they teach them still today. Advocates for financial literacy have argued the lack of responsibility when it comes to money with today’s youth cannot be ignored any longer.
The fact of the matter is financial literacy is certainly lacking in today’s society, but to point the finger at individuals born after 1980 is a little bit like the pot calling the kettle black. There is plenty of irresponsibility to go around. In the past years Australian household debt hit record highs, with the average Australian household debt at four times what it was in 1988, rising from $60,000 to $245,000 after inflation, according to the latest AMP.NATSEM Income and Wealth report Generation Y may be an increasingly large contributor to these statistics, but it would be naïve to think the more mature component of the pie chart is much better off. Every category has its balance of those who pull the numbers up and those who drag them down. What should be concerning for those in the former situation is this, you have less time to right the ship then someone with 25 more years than you have in the workforce ahead of them.
We live in times of unprecedented low interest rates and high real estate prices. This has been a recipe for investment and a dream for sellers. It’s nothing profound to say this won’t last forever, we’ve already begun to see cooling in the housing market, and the regulators of mortgages have tightened their lending practices.
The message here is the generation of workers who are closing in on exiting the workforce and see the bulk of their retirement nest egg in the walls around them and the roof over their head might want to think twice about just what their future looks like. There is a massive shift in the demographics of the workforce already taking place, baby-boomers are on the horizon of retirement and unfortunately for too many the timing simply won’t be when they originally planned. Your house isn’t worth what you think it is, particularly when you consider half of your neighbours will be trying to downsize at the same time as you.
While real estate represents a significant part of our household wealth, it can’t be the sole source of your retirement strategy. Government pensions don’t add a great deal to the mix.
What this means for John and Jane Taxpayer is if you want to enjoy your retirement, you better be sure you’re the one in the driver’s seat. Take charge of your retirement planning now. It can be a daunting task, which in itself is likely why so many people ignore the issue, but rest assured by doing so the problem doesn’t go away. If anything, it gets exponentially worse the longer you push it back. The truth is we could all stand to brush up on our financial literacy. There are a number of online tools to assist with calculating your retirement income. Beyond that, you should seek out help. There are resources available and financial professionals whose advice could be the difference between relaxing on a beach in your golden years and working for “just a few more years…”
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As COVID-19 struck, Australian businesses had to rapidly evolve and implement new ways of working with very little warning or preparation. Whilst many companies have successfully adjusted to their 'new normal', it's also time to consider what the future holds for employers.
If you perform some of your work from your home office, you may be able to claim a deduction for the costs you incur in running your home office, even if the room is not set aside solely for work-related purposes.