Life Stages > Getting goals together

Getting goals together

Since finishing his degree, James has worked for a bank. His fortnightly student loan repayments have been $180. He only has 3 repayments to go, then he’ll be free of it. Cause for celebration!

James is 28 and his wife Anita is 29. Lately they've been talking about what to do when the extra cash comes free. So far the most talked about options have been new clothes, going out more often, repayments on a flasher car, and saving for an overseas holiday.

But in the end, they can’t bring themselves to do any of that. Instead, they set some financial goals. They decide that increasing their net worth is really important for them. So they decide they’ll use the extra money to build their wealth.

Once the student loan is gone, James and Anita decide to put the same amount of money James had been paying on the loan into a retirement savings scheme.

They have an idea of how much money they want when they retire, and they use the Sorted quick retirement calculator to work out how much they’ll need to save to reach their goal.

To their surprise, they discover that - thanks to the beauty of compound interest - they don’t need to save all of the $180 James has been paying on his student loan.

They decide to put $140 a fortnight into the retirement savings scheme and the other $40 into the savings account they’ve already been using to save for a house. James wants to use the extra savings as a deposit on a bigger mortgage for a bigger house. But Anita convinces him that it’s smarter to use the extra savings as a bigger deposit which can reduce the size of the mortgage they'll need to take out.

Glossary: net worth
Your overall financial position - the value of your assets minus your debts. Or the difference between what you own and what you owe.
Glossary: compound interest
Interest paid on interest. You earn compound interest if you have savings and don't spend the money you earn from interest. For example, if you save $100 at 3%, you'll earn $3 in the first year. You now have $103. In the next year, you earn 3% interest on your $103. The 3% you earn on the $3 you earned as interest last year is compound interest. Over the long term, compound interest makes your money grow much faster than the straight interest rate.