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Financial advice

6 misconceptions about life insurance

By | Financial advice, Wealth Protection | No Comments

The probability of you developing a serious illness or getting involved in an accident so severe you’re unable to work, may seem highly unlikely…..until something happens.

It’s often small events that remind us we’re not completely in control of these possibilities, which is exactly what life insurance is for.

Unfortunately, there are a lot of misconceptions about life insurance which can lead to missed opportunities to protect ourselves and our dependants.

In this article, we’ll set the record straight for six of them.

1 – You don’t need insurance if you don’t have dependants

If you don’t have anyone financially depending on you, you may be under the impression that you don’t need life insurance, but it’s not always the case.  There are other financial commitments which could make it worth considering.

For example, if you fall sick or become injured for an extended period of time and are unable to work, you’ll still need to meet day-to-day expenses.  Having Income Protection may therefore help you in covering a portion of your income.

2 – Life insurance is set-and-forget

Unfortunately, it’s not enough to stuff your life insurance policy in a drawer and forget about it.

Adjusting your policy is extremely important as your needs change.  If you decide to reduce your level of cover though, make sure you’re not leaving yourself exposed.  For instance, even if your children are no longer financially dependent on you, your spouse may still need financial support if you were to pass away.  Reducing the total amount your cover could also place you at risk if it’s not keeping up with inflation.

Speaking to a financial adviser can help you determine how much cover you actually need, if you are considering reviewing your life insurance.

3 – Naming your child as a beneficiary is a good option

If you name your child or grandchild as your primary life insurance beneficiary, complications can arise if you pass away before they turn 18.

In most circumstances, if your child is under the age of 18, the courts will appoint a guardian or custodian to look after how the money is managed.  Restrictions, legal fees and other costs may take a significant amount of your life insurance proceeds, at your child’s expense.

A solution you could consider is to set up a trust on behalf of your dependants, which you can name as the recipient of your life insurance proceeds.  This can provide financial security for those who can’t or don’t want to handle large sums of money or other assets.

4 – You don’t need insurance because you’ve paid off your debts

While your need for life insurance may reduce once your kids have grown up and you’ve paid off your debt, it’s still worth considering it to cover things like everyday living expenses, any outstanding debts, medical and funeral costs.

Rather than removing it completely, you may therefore need to simply reduce it, depending on your needs.

5 – You’ve got life insurance covered through super

Many super funds offer life insurance cover which is often cheaper than being insured outside of super.  Your premiums are also deducted directly from your super rather than a bank account and there are some tax benefits too.

But it is possible that the amount of life insurance cover you have available through super, may not be sufficient for your needs.

So if you’re unsure about it, consider finding out exactly what you could receive if you were to make a claim and compare this to what you actually need.  Revolution Financial Advisers can help you with this.

6 – You only need to insure yourself if you’re the breadwinner

If a dependant, such your spouse or child falls sick, you want to ensure that you’re able to care for them.

Child cover for example, can provide a lump sum if your child suffers a serious illness or injury (refer to the product PDS to see if this is an option and what it covers).  The money may also help you take time off work to focus on what matters most.

Of course, there is an added expense to insuring your family members under your policy, so consider whether it is worthwhile.

Source: BT,

Live for the moment vs save for the future

By | Financial advice | No Comments

Want to boost your financial wellbeing without giving up completely on being spontaneous?  Get on top of your finances and enjoy life more at the same time with our five step guide to living in the moment while saving for the future.

Don’t be a slave to your savings

Mastering money starts with a budget and there’s no doubt that feeling in control of your money is linked to your overall wellbeing.  But you might be reluctant to set a budget when it makes you feel like all your money is spoken for.  Life can seem very limited if you’ve already decided on the exact destination for each and every dollar.

So instead of becoming a slave to saving for the future, here’s a five-step approach that keeps your options open for doing some spontaneous spending once in a while, without losing out on your future financial stability as a result.

1 – Get cash flow savvy

Figuring out just where your money is going right now night seem like a hassle.  But it’s absolutely necessary if you’re going to achieve your goal of saving and also spending a little just for the sake of it.  Understanding your spending habits and patterns can shed some light on where you’re spending more than you need to, so you can start to make better choices with your dollars in step 2.

Doing this weekly makes it much easier to take control of cash flow.  A week of overspending can be balanced out quickly in the following week simply by making a few small sacrifices.

2 – Budget based on what matters

Now it’s crunch time for making good on those cash flow lessons you’ve been learning.  By looking at where your money has been going, you’ve got the knowledge you need to stop spending on things that are less important.  This frees up more dollars for your savings and what you really value.

Let’s take dining out for example.  If you have your heart set on an overseas holiday once a year, ask yourself if weekly restaurant meals are as important?  By cooking at home for three out of every four Saturdays and saving that money towards travel instead, you’re directing your budget towards what matters to you.

3 – Limit fixed commitments

Having more to spend in the present also depends on limiting how much of your income is already spoken for.  Mortgage and loan repayments, utility bills, insurance premiums, memberships and subscriptions are all regular payments that can add up to a big chunk of your outgoings.  While some of these are essential, avoiding buying things on credit or using a loan can reduce your ongoing costs and free up money to save towards your goals or spend spontaneously.

4 – Automate your savings

Whether it’s saving for a new car – so you won’t have that long-term commitment to paying off a loan plus interest – a holiday, or just a rainy day, setting up separate accounts for these goals helps you see that you’re making progress.  And making automatic deposits from your income into these accounts is the ideal way to ensure you’re making regular contributions towards your goals.

5 – Plan to spend spontaneously

As these savings balances start to grow, it can bring a sense of freedom in your current and future spending choices.  Knowing your goals are getting closer allows you to spend money freely and still be financially responsible for your future. And if you want to look forward to a guilt-free splurge, think about dedicating one of your savings accounts to spontaneity.  With a pot of cash on hand to spend at will, you can enjoy ‘live in the moment’ experiences now and again without your future goals or cash flow taking a hit.

Source: Money & Life

Steps to buying a new home

By | Financial advice | No Comments

Ready to take the plunge and buy a new home?  Make sure you know exactly what to expect from the home buying process with our simple step-by-step guide, covering everything from making an offer to moving in.

Making an offer – private treaty

In Australia, properties are offered for sale either through an auction or private treaty arrangement.  The process for buying your home will be different, depending on which sales method is being used.

When you make an offer on a property that’s for sale by private treaty, the owner – or the real estate agent acting on their behalf – will let you know if the offer has been accepted.  There are a couple of advantages with this type of sale.  You can make your offer conditional on the outcome of inspection reports or certain repairs being carried out to the property before settlement.  Plus, most private treaty contracts will include a cooling-off period, allowing you time to arrange inspections and ensure you’re 100% certain this is the property you want to buy.  The length of the standard cooling-off period varies between different states and territories.

Having an offer accepted on a private treaty sale doesn’t guarantee you’ve got the property.  Until you pay the deposit and exchange contracts, you run the risk of being ‘gazumped’.  This is when the vendor accepts a better offer from another buyer after they’ve said yes to your offer.  This is perfectly legal if no contracts have been signed and no money has exchanged hands.

Buying at auction

Going to an auction is quite a different experience to negotiating a private treaty sale.  You need to do all your homework and research in advance, as your decision to bid and buy the property is binding on the day of the auction.  There is no cooling-off period and you’ll be expected to sign contracts and pay the deposit immediately.

This is why you’ll need to arrange inspections and carefully review the reports before going to auction.  You should also have your conveyancer look at the contract and inspection reports and request any changes to the contract prior to auction.  If you’d like a longer settlement period, for example, you need to arrange this before the auction.

Finances

Whether you’re buying at an auction or through private treaty, you’ll need to have funds available to pay the deposit on signature of the contract.  You should also make sure you have pre-approval for a mortgage up to the amount needed to pay the final sale price, plus all other costs associated with the transaction.

Deposits and contracts

10% of the sale price is the usual amount you’ll be paying as a deposit when you exchange contracts and commit to buying your first home.  So when you attend an auction or meet with a real estate agent after making a successful offer, bring your cheque book and make sure you have the funds in your account to pay this amount.

Having a conveyancer check the contract before you sign is very important, particularly if you’re buying at auction and won’t benefit from a cooling-off period.  Your conveyancer should be familiar with all the terms of the contract before you sign, so they can alert you to anything that might be a deal-breaker.

Inspection reports

Having your prospective home inspected for any sign or risk of pest damage or for building defects isn’t a mandatory part of the buying process.  But becoming a home owner is probably the biggest financial commitment you’ll ever make, so it makes sense to be as certain as you can be that you’re not about to buy a property that will need expensive repairs in future.

If inspections do reveal some type of problem, you may choose to use this information to negotiate a lower price with the vendor or decide on a lower bidding limit when you go to auction.  Your conveyancer can help you look for any issues in the report that may be significant and give you grounds for a reduction in price.

Valuation

Your mortgage provider will arrange a valuation of your property as they process your home loan application.  This is to ensure the lender isn’t loaning you more for the property than it’s actually worth.

Settlement

The settlement period is the time between contract exchange and transferring ownership of an existing property.  There are recommended settlement periods for different states, but generally speaking, vendors and buyers can negotiate a settlement to suit their circumstances.  For example, a longer settlement period may be requested by a vendor who hasn’t yet found their next home to buy.

During this time, your mortgage provider and conveyancer will work with you to prepare all the paperwork and the balance of the purchase price to complete the sale.  On the day of settlement there isn’t actually much you’ll need to do as your conveyancer and mortgage provider will finalise the legal and financial details of the transaction.

At settlement you’ll become the legal owner of the property.  Even if you’re not planning to move in straight away, it’s worth arranging a visit to ensure that everything is as it should be with the condition of property and any fixtures and fittings included in the contract.  And you should also arrange building insurance to cover your property starting from the settlement date.

Source: Money & Life

Four ways to declutter your finances

By | Financial advice | No Comments

Ready to discover the life changing magic of simplifying your money management?  Taking the lead from minimalism guru Marie Kondo, we bring you a step-by-step guide to applying decluttering principles to your finances.

Less really is more

Of course, we’re not talking about giving all your money away to make life simpler.  But simplifying your finances will almost certainly make it easier to stay on top of money matters.  When you’re dealing with too many bank accounts, bill payments, super balances and debts, you’re far more likely to lose track of what’s going on with your money.  And that means things can fall through the cracks, which leads to missed opportunities as well as long-term problems.

1 – Budgeting based on your values

Just as Marie Kondo lays down the challenge to only keep things that bring you joy, it’s just as important to prioritise things we value when spending money in the first place.  Understanding what you value most, and then taking a good look at where your money is actually going can be a powerful way to shift your spending habits.

2 – How many bank accounts?

Although it can help to have different bank accounts for savings goals, and another to make sure all your regular expenses are covered, keep multiple accounts to a minimum to save time and effort. Monitoring balances, interest and outgoings for so many accounts just makes things complicated.

Having four separate accounts should be enough for you to manage income and expenses with ease and keep everything simple and smooth with your cash flow and savings.  The majority of your money will go into the household account for everyday expenses, with two savings accounts, one for short term goals, like saving for a holiday, and another for your financial future.  Funds from this third account might go towards a rainy day fund, your super or some other type of investment.  And having a fourth account where you can channel about 10% of your monthly income to spend on yourself, guilt-free will allow you to save for the future without missing out on enjoying yourself, here and now.

3 – Simplify your super

Over a lifetime your super balance has the potential to become one of your biggest financial assets.  So making sure you’re receiving all the super contributions you’re entitled to and knowing where they are is an important part of financial housekeeping.  It’s not unusual to lose track of super if you’ve changed jobs or moved house a few times.  The MyGov portal (www.my.gov.au) and ATO offer a free service to help you find lost super.

The fund you’re with now can also help you track down super balances held in your name and consolidate them into a single fund.  Not only will consolidating super give you fewer funds and statements to keep track of, it can also save you a fair amount in fees.  Before you decide to close any of your existing accounts, it’s important to check whether you’ll still have the right level of insurance cover as you’ll often have personal insurance policies – such as life or income protection insurance – arranged and paid for through each super fund.

4 – Do away with debt

Clearing multiple personal debts once and for all can seem like an impossible task. As you struggle to get back to zero, temptation can creep in to just borrow more and become resigned to debt as a permanent part of your financial situation.  One option is to consolidate your personal borrowing into a single repayment to make it easier to chip away at the outstanding balance.  Your mortgage provider may be able to refinance your home loan so you can bundle debt repayments with your mortgage and benefit from a lower rate of interest as a result.

Source: Money & Life

9 retirement thought starters for people in or nearing their 40s

By | Financial advice, Retirement | No Comments

It’s never too early to begin to think about your retirement.  Here are 9 thoughts to get you started.

1 – Do I have to retire by a certain age?

You can retire whenever you want to in Australia, but your financial situation, employment opportunities, health and wanting to coordinate with your other half could play a big part.

2 – How much money will I need and where will I get it?

Industry figures show individuals and couples around age 65, looking to retire today, would need an annual budget of $42,953 and $60,604 respectively to fund a comfortable lifestyle, or $27,425 and $39,442 respectively to live a modest lifestyle (which is considered better than living on the Age Pension).  Note, these figures also assume people own their home outright and are relatively healthy.

3 – Have I considered what it’ll cost to do the things I enjoy?

Life expectancy in Australia is increasing, so spare a thought for things outside of just your living costs and utility bills.  What kind of money might you need to do the things you enjoy, such as sport, keeping up with any hobbies you might have, any travel you’d like to do and how often you see yourself eating out?

4 – How and when can I access my super savings?

Generally, you can start to access your super when you reach your preservation age, which will be between ages 55 and 60, depending on when you were born.  As for what you do with your super (which from age 60 you can access tax free) you’ll have a few options.

You may access a portion of your super via a transition to retirement pension (TTR), which you can do while continuing to work full-time, part-time or casually if you want greater financial flexibility.  Alternatively, if you stop work altogether, you may choose to take your super as a lump sum of money, or move it into an account-based pension or annuity, if you want to receive a regular income.

There will be different tax implications for different people and remember your super doesn’t guarantee an income for life, as it will come down to how much super you’ve saved over the years.

5 – Will I be eligible for government assistance?

Along with your savings, government benefits, such as the Age Pension, could be an important part of your income in retirement, if you’re eligible, which not everyone will be.  For instance, the value of various assets you have and any income you receive (in addition to other requirements) will determine whether you’re eligible for the Age Pension and what amount of money you’ll receive in Age Pension payments.

6 – Will I still be paying off my current debts?

If you’re going to be carrying debt into retirement, you may want to think about ways to reduce it sooner rather than later.  Some things you might do:

  1. Work out your debts and what they total;
  2. Look into whether you might benefit from rolling your debts into one;
  3. Look at whether you can afford to make extra repayments;
  4. Shop around for providers with lower interest rates and no annual fees.

7 – Are there other things I should think about?

  • Insurance – You might have insurance, but what you require in retirement could be quite different to when you’re working;
  • Investments – You might consider a more conservative approach to anything you’re invested in, as when you’re young you often have more time to ride out market highs and lows;
  • Estate planning – You may want to document how you want your assets to be distributed after your gone and how you want to be looked after if you can’t make decisions.

8 – Is it a possibility I might relocate or downsize?

Your living arrangements in retirement should be based on more than just your finances.  Your health, partner, family and what activities you’re interested in will all play a part.

If you are set on moving to release money from your property, planning ahead could help you feel more in control as you can assess any out-of-pocket costs in advance.

9 – Am I in a position to make additional contributions to my super?

The more you can put into super, the more money you could have when you retire.  And, if you put some of your before-tax income into super, these amounts will generally be taxed at 15%, which is lower than the tax most people pay on their employment income.

Source: AMP News and Insights

Financial focus – decade by decade

By | Financial advice, Holistic | No Comments

Everyone has a different life journey they’re on but getting on top of key financial goals as you follow your own path could see you enjoying a more comfortable lifestyle and being ready for the next chapter to begin.  Read our guide to getting all your money matters sorted out, one decade at a time.

In your 20s

Goodbye debt – the real danger in your 20s comes from building up debts that will need to be paid off before you can use your income for other financial goals.  Buying a home, investing or saving for retirement – all these things can end up on pause indefinitely while you get debts under control.

Hello investing – any investment is unlikely to earn more than you’d pay in interest on personal borrowing, so it’s important to pay debts down before getting started with investing.  However, investing while you’re young is important because the gains you can make through compounding returns really add up over time.  Keeping surplus money in cash or in a bank account could leave your savings losing value thanks to inflation.

Your super – super is likely to be one of your most tax-efficient ways to invest.  So give some thought to your super fund as one of several options to turn savings you have now into future income.

In your 30s

Personal insurance – your 30s are often a time when commitments and responsibilities start to ramp up.  Career, kids and a mortgage could all be coming into the picture.  If you haven’t arranged personal insurance until now, make sure it’s on your checklist.  You may have cover through your super fund, so remember to check your super statement and consider whether it’s enough cover to provide for your family.

Paying for education – if you have kids then private education fees may be on the cards in the years to come.  Making some timely investments that can earn enough to cover those costs will save your cash flow from being squeezed when you may have many other big bills to pay for including household expenses, your mortgage and more.

Your super – as your super balance starts to grow through superannuation guarantee contributions, keeping an eye on things like fees and investment options will ensure you’re on track for a comfortable retirement in a few decades’ time.

In your 40s

Manage spending – the great news is you’re probably hitting your straps in your career and earning more but living expenses can skyrocket at this time if you have a mortgage and kids are on the scene.  Now is the time to focus on what you value and budget accordingly.

Reduce money stress – if you’re struggling to manage cash flow, focus on your spending and lifestyle priorities and feel like your finances are out of control, a financial plan can help.

In your 50s

Get mortgage-free – if you still have a big home loan balance, now is the time to chip away with extra payments so you can get mortgage-free before retirement.  Not only will it save you on interest in the longer-term, it means more of your retirement income can go towards ticking things off the bucket list, rather than keeping a roof over your head.  

Invest wisely – once you’re in the clear with debt, consider putting any cash flow surplus into super.  As you get closer to retirement, it’s important to make sure your super is invested in a way that won’t put your savings and income at risk when you decide to retire.

In your 60s

Manage your savings and income – apart from your home if you own one, your super is likely to be your biggest asset at retirement.  So it makes sense to do some careful thinking and planning before making choices about how to maximise income from your retirement savings.

Get ready to hand over – being in the best of physical and financial health means you can look forward to a retirement with few restrictions.  While you’re feeling and living well, it’s a good idea to get your Power of Attorney and estate plan arrangements organised.  This will allow you to get the help you need if and when things change, and you’re less capable of taking care of your finances.

Source: Money and Life

4 tips for women to take control of their super

By | Financial advice, Superannuation, Wealth Creation and Accumulation | No Comments

Faced with average lower earnings, possible time out from the workforce to raise children, and longer life expectancy, it can be a struggle for women to save enough money in their super. According to the 2017 HILDA survey, Australian women are retiring with an average superannuation balance of $230,907 while men are retiring with about twice this amount.

But if you’re a woman earning an income, it’s never too late to play catch up.  Looking at your super and taking action now could make a difference over time to how much savings you have in super for retirement.

1 – Get to know your super better – it’s your money

Superannuation, or ‘super’, is money set aside while you are working so that when you stop working it will provide you with an income in retirement.  If you are an employee, your employer should be making super contributions to a superannuation fund on your behalf. These payments, known as super guarantee contributions or concessional (before-tax) contributions, will be equivalent to 9.5 per cent of your salary or wages.

If you are self-employed, you will need to pay yourself super to provide for your retirement.  You can make regular contributions or make lump sums less frequently, to suit your cash flow.  To get to know your super better, start by checking your balance regularly, along with the insurance and investment options you have to make sure they are the best fit for your circumstances.

The Australian Taxation Office (ATO) recommends that you check your employer is paying the correct amount of super on your behalf.  If you are unsure how much your employer should be paying you can use the ATO’s Estimate my super tool.  If your employer is not paying the correct amount you can report this to the ATO online.

Many super funds arrange life and disability cover for their members, for a fee.  Having insurance can provide a good sense of security for you and your family.  It’s important that you know what cover you have as you might have similar cover under another type of policy.  This might mean you are paying for the same cover twice, however you will not be able to claim twice.

2 – Consolidate your super and save on fees

It’s a good idea to make sure all your super is in the same place.  If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years.  This means you could have ‘lost super’ in accounts you’ve forgotten about.  If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.

3 – Contribute more and watch your super savings grow

Want to see your super grow faster?  You can make payments into your super fund account in addition to the Super Guarantee 9.5 per cent that your employer pays on your behalf.  This could really boost your super over time, and can help you make up for periods when you are not working.  Even small amounts could make a difference.

The different types of additional contributions that can be made to your super fund are:

  • Concessional (before-tax) super contributions – these are super contributions you make before you pay tax on them;
  • Non-concessional (after-tax) super contributions – these are super contributions you make from sources that have already been taxed.

Be aware that the Federal Government applies monetary caps to these contributions to limit the tax concessions associated with making super contributions.  Some types of contributions if made in excess of these caps are subject to tax rates of up to 49 per cent.

4 – Don’t forget your TFN, otherwise you may pay more tax

To confirm if your super fund has your tax file number (TFN), take a look at your super statement.  If your TFN is not listed, contact your fund and give it to them.

The benefits of providing your fund with your TFN are:

  • Your fund will pay less tax on employer contributions (and pass the savings on to you);
  • Concessional contributions are generally only taxed at 15 per cent, which means you could lower your taxable income;
  • You are less likely to lose track of a super account;
  • You will not miss out on government super payments – for example, the government co-contribution if applicable;
  • You will be able to make personal (after-tax) contributions to the fund.

 Source: Colonial First State

6 things to avoid as a new investor

By | Financial advice, Wealth Creation and Accumulation | No Comments

Whatever your age, if you’re thinking of dabbling in investments like shares, managed funds or cryptocurrencies, here are a few things to steer clear of.

When looking to invest, it’s generally wise to think about:

  • Your current position and how much you can realistically afford to invest (consider what other financial priorities you have or existing debts you may be paying off?);
  • Your goals and when you want to achieve them;
  • Implications for the short/medium and long term;
  • Whether you understand what you’re actually investing in;
  • Whether you know how to track performance and make adjustments;
  • If you want to invest yourself, or with the help of a broker or adviser.

As a general rule, investments that carry more risk are better suited to long-term timeframes, as investment performance can change rapidly and unpredictably.  However, being too conservative with your investments may make it harder for you to reach your financial goals.

  • Low-risk (or conservative) investment options tend to have lower returns over the long term but can be less likely to lose you money if markets perform badly;
  • Medium-risk (or balanced) investment options tend to contain a mix of both low and high-risk assets.  These options could be suitable for someone who wants to see their investments grow over time but is still wary of risk;
  • High-growth (or aggressive) investment options tend to provide higher returns over the long term but can experience significant losses during market downturns.  These types of investments are generally better suited to investors with longer term horizons who can wait out volatile economic cycles.

There are risks attached to investing, which means while you could make money, you might break even, or even lose money should your investments decrease in value.

On top of that, liquidity, which refers to how quickly your assets can be converted into cash, may be an issue.  Depending on what type of investment you hold or what may happen in markets at any point in time, you mightn’t be able to cash in certain investments when you need to.

Investment diversification can be achieved by investing in a mix of:

  • Asset classes (cash, fixed interest, bonds, property and shares);
  • Industries (e.g. finance, mining, health care);
  • Markets (e.g. Australia, Asia and the United States).

The reason diversifying may be a good thing is it could help you to level out volatility and risk, as you may be less exposed to a single financial event.

Many investors get caught up in media hype and or fear and buy or sell investments at the top and bottom of the market.  Like with anything in life, it is easy to get stressed and concerned about the future and act impulsively but like with other things this may not be a smart thing to do.

While there may be times when active and emotional investing could be profitable, generally a solid strategy and staying on course through market peaks and troughs will result in more positive returns.

Source: AMP News and Insights

7 ways to reduce your credit card debt once and for all

By | Debt management, Financial advice | No Comments

If you’ve realised you might have a problem with your credit card debt, it’s time to take back control.

Sit down, take a deep breath and work out a step-by-step plan.

  1. Stop all but essential spending on your credit card.  Try and get by without your credit card and use cash wherever possible while you work on your plan.  You could even set yourself a challenge not to spend any money for a week!;
  2. It sounds basic, but start by listing how many cards you have and what you’re paying for them in interest;
  3. If you have more than one card, start chipping away at the low-hanging fruit.  Consider paying the card with the highest interest rate off first or if the rates are similar, work on clearing the smallest debt;
  4. If you can’t pay a card off in full, see if you can pay more than the minimum each month to reduce your balance more quickly and save on interest.  It could be worth setting up a direct debit on your payday to pay a fixed amount;
  5. Once you’ve paid off a card, close the account and work towards having a single card to help make your finances easier to manage;
  6. If you feel that your interest rate is too high, you could consider transferring any remaining balance to a card with a lower interest rate or rolling the debt into an existing personal loan or mortgage, these tend to have lower interest and fees.  Many providers offer great rates to consolidate, but make sure you pay the card off during any honeymoon period with the new provider so that you don’t start accruing interest.  Check the fine print—what interest rate will you pay after any promotional period ends?  You don’t want to just kick the can down the road;
  7. If all else fails, don’t be afraid to ask for help from your credit provider.  There may be a way you can work out a spending plan that takes into account your financial circumstances.

But how do you make sure you don’t fall into the same credit trap again?  It’s all about developing more healthy financial habits.

  • Reduce your credit card limit(s) to take temptation off the table;
  • Try not to use credit to pay for the basics like food, groceries and utility bills.  See if there are any ways you could adjust your household budget or make savings elsewhere so you’re only using credit as a last resort;
  • Avoid cash advances because they may attract higher interest rates;
  • Be wary of store cards and any fees you’ll pay – they are just another form of credit card;
  • Keep track of your spending.

Don’t forget to take advantage of credit card reforms

  • You can cancel your card or lower your limit online for all new accounts;
  • You won’t be charged any back-dated interest, and;
  • You’ll be assessed on your capacity to repay your debt when you ask for an increase.

Once the credit card’s sorted, it could be time to move on to any other debts you might have.

Source: AMP News and Insights, 18 December 2018

How close are we to a cashless society?

By | Financial advice | No Comments

With tap and go payments becoming ever more popular and the advent of instant transfers between domestic bank accounts, how much longer will we be using cash as a form of payment?

According to recent survey results produced by You Gov Galaxy and commissioned by payments provider Square, the average answer to the question of “How much cash do you carry?” is likely to be ‘about $38’ if you’re under the age of 40.  Baby boomers are much more likely to have a few more notes and coins on them, carrying $72 in cash on average.  Almost five million Aussies haven’t visited an ATM within the last 4 weeks or can’t even recall the last time they withdrew cash.

Put this together with the Reserve Bank of Australia’s report from 2016 that found only 37% of payments in Australia were being made in cash and you can see where we’re heading – a time when having cash just won’t be necessary or practical for the vast majority of the transactions we make.

Tap happy?

Unfortunately, the convenience of tap and go payments may end up having a negative impact on our ability to keep our spending within reasonable limits.  According to a study from the University of Sydney, people can be expected to spend up to 50% more by paying with any payment type other than cash.

“There’s good empirical evidence that people spend more money when they don’t actually have to use cash, and that goes across different alternative forms of payment,” says Donnel Briley, Professor of Marketing and Behavioural Psychology at the University of Sydney.

A survey of high school students back in 2017 demonstrated that many teens simply don’t understand key concepts around personal borrowing with credit cards.  This makes them particularly vulnerable to the perils of buying something without really thinking through how much it costs in real terms.  When there is interest to pay on their purchase, as well as the opportunity cost of having already spent the money, young people can be particularly vulnerable, to buyer regret as well as serious financial struggles when they’re saddled with repayments on long-term debts.

Good and bad for business

As well as presenting economic challenges for consumers, a cashless world also has pros and cons for businesses.  While some small and medium sized businesses might celebrate saying goodbye to hours spent counting notes and coins – 216 hours on average each year according to the You Gov Galaxy/Square survey – others could be losing out on revenue with less cash changing hands.

A 2017 survey by ME Bank reports a 51% fall in cash payments in the last five years for industry employees traditionally remunerated in cash, such as tradespeople and hospitality staff.  Tipping and on-the-spot charity donations are two of the biggest casualties of the disappearance of cash, with each recording falls of 45% and 44% respectively in the frequency of cash payments in the same period.

Easier than EFT

A significant game changer for Australia’s move towards being cash-free could well be the National Payments Platform (NPP).  Officially launched in February 2018, the NPP technology could end up replacing many EFT and cash transactions but hasn’t been offered broadly by financial services institutions yet.  Assuming that widespread adoption of the NPP, and its associated services like PayID and Osko, are just a matter of time, the move towards a cash-free economy could pick up speed in the months and years to come.

Source: FPA Money and Life

Gearing can be a great way to grow your wealth but it carries risks

By | Financial advice, Wealth Creation and Accumulation | No Comments

If you are you borrowing money to invest, or considering doing so, it’s important to ensure you aware of the risks involved.

Gearing, or borrowing money to invest, can be a great way to grow your wealth, but it isn’t for everyone.  The aim is to borrow money at a lower rate of interest than the return you will earn by investing that borrowed money – to make a profit.

We often hear about gearing when people talk about investing in property – that is, they’ve taken out a mortgage to help pay for the property or they hope to benefit by negatively gearing it for tax purposes.  However, many investors use gearing to fund other asset classes, such as direct shares and managed funds.

Gearing can magnify your gains, but it can also magnify your losses.  Here are some factors to consider:

Market conditions

Gearing pays off when asset prices are poised to rise or are rising, but what happens if they fall?  The dramatic plunge in share prices in the wake of the global financial crisis in 2007 and 2008 was a sharp reminder of the risks of gearing.

Thus, an important consideration is how you expect markets to perform.  If you follow the markets, you’d know that share markets have been on a 10 year bull run and that the property market, especially in Sydney and Melbourne, has been booming in recent years although it is beginning to slow down and values decrease through late 2018 and early 2019.

After such good runs, it’s no surprise that some experts believe both of these markets could be in for a correction in the near-term.  World markets are also fairly volatile, given talk about trade wars and problems with countries like Russia and North Korea.  Could there be some unpleasant surprises that affect investment markets?

Interest rates

Interest rates have been low for the past decade, but they are starting to rise in some parts of the world and at some point, the Reserve Bank will also lift them again in Australia.  In addition, it’s possible that your bank could lift the rates it charges you because it faces rising regulatory costs.  How will higher interest rates affect the returns on your investments?  Will you have the capacity to pay these higher rates?

Margin calls

If you have taken out a margin loan, there is the risk that if the assets you have used as security for this loan drop in value, your bank will ask you to provide additional security or pay down part of the loan.  If you don’t have the money available, you may even have to sell the asset at a loss to meet the bank’s demands.

There’s also the risk that your lender will adjust the loan to value ratio or LVR on your loan.  The LVR is the amount of your loan divided by the total value of your shares or property.  Most lenders require you to keep the LVR below a maximum of 70 per cent.

If the lender lowers the LVR, you will have to find the extra cash to pay the lender.  If you don’t have it, you may have to sell part of your investments to raise the cash or you may have to provide additional security for the loan.

Timing

Another risk is that your income may lag behind your interest payments.  On the investment side, the income you receive may be delayed because your property currently has no tenant in it or a company decides not to declare a dividend.  In addition, your income could also be affected if you lose your job or fall ill.

Reducing the risks

The following are some of the ways in which you could reduce the risks of gearing:

  • Have an emergency cash stash in an account that you can use to meet any margin calls.  You will have to respond quickly if your bank makes the call, perhaps within 24 hours or less;
  • Consider getting some income protection insurance in case you become sick or injured and unable to work;
  • Borrow less than the maximum amount the lender offers you.  This will reduce the chances of you experiencing a margin call;
  • Diversify your investments.  Spread your investments across different industries, regions and asset classes.  If one type of investment falls, another may rise, smoothing out the volatility in your portfolio and making a margin call less likely;
  • Make regular interest repayments on your loan to prevent your debt from growing;
  • Be vigilant.  Keep a regular eye on your investments, the market and your margin loan and be ready to adjust your strategy if circumstances change.

Source: Money & Life

What’s Your Investment Lifestage?

By | Financial advice, Wealth Creation and Accumulation | No Comments

Whether you’re a long term investor or just starting out, it can be easy to fall into a rut and leave your investments undiversified.  With all the things going on in our lives, keeping track of the market and researching investments can feel like one more project we just don’t have time for.

With this in mind, we’ve broken down each decade to help you understand some of the financial considerations.

Many people have just entered the workforce at this stage and most people will still be renting.  While some people in their twenties have formed long-term relationships, many have not yet had children.  For the majority, home ownership and families are still a thing of the future.

The major financial focus for this group is to eliminate debt that may have been accumulated while at university/college (HECS/HELP, credit card debt, student loans etc.), and to start saving for a deposit on a home.

Many people in their thirties are in long-term relationships and have children.  They have most likely bought their first home and some would be considering renovations.

The major financial focus during this stage is usually on reducing mortgages as much as possible.

People in this age bracket need to be careful not to over extend themselves financially, and aim to keep money available for emergencies that are more likely to occur than when they were renting and had no children.

Those without children or a mortgage, who are looking to get ahead at this stage, may consider investing in the share market.

It may sound obvious, but the financial position in this period will be largely determined by how much spending restraint has been shown during the previous decade.  For disciplined savers, there is a good chance of being able to upgrade to a bigger home at this stage of life.

In saying that, the forties can be difficult for couples who have children in their teens as they generally incur more costs at that age, especially if they attend private schools.  Careful budgeting is required for people in this position.

Those who don’t have children and have enough money for their day-to-day expenses may start thinking about diverting more of their money into superannuation.

By this stage many people will start experiencing more sustained wealth creation due to fewer family costs.  The reason for this is because most will have children at an age where they are becoming financially independent.

Generally salaries are also higher in this bracket.  Putting more savings in superannuation is very common when people are in their fifties given the current tax incentives that come with it.  This is also an opportunity for many to start their own individual business.

By this stage, many people will find themselves in a position with more time and money.  The kids have finally flown the nest, they may be working fewer hours and have more time to travel.  However, the financial focus is generally to invest savings to generate a retirement income and to maximise the Age Pension.  People in their mid-70s may also be looking at ways to fund retirement home living and estate planning.

In Summary

Regardless of which stage you are at, it’s important to make a financial decision based on the assessment of the risks and opportunities that exist in your life.  As you can see, these seem to change with each decade.

Revolution Financial Advisers can help you find the right investment opportunities for your individual situation and for each life stage.

Source: Colonial First State.

Would you like to retire by 40?

By | Financial advice | No Comments

Many younger Australians are joining the Financial Independence, Retire Early (FIRE) movement.  Is it right for you?

When you’re starting out in the workforce and building your career, retirement can seem like a long way away.  With the age at which you can access your super and age pension creeping up—not to mention the increasing cost of living—you might be steeling yourself for a longer working life.

The stats don’t lie—Australians are staying in the workforce for longer and any thoughts of retiring early are becoming a distant dream for many of us.

But there’s a growing movement of younger Australians who believe that by following the right set of rules, it’s possible to achieve early retirement.

Popularised by US-based blogger Peter Adeney, better known as Mr Money Mustache, the Financial Independence, Retire Early movement looks more closely at what makes us happy.

Changing your spending and saving habits

FIRE is all about following an extremely frugal lifestyle with the aim of retiring as early as your 40s…or even your 30s!

At the core of the FIRE philosophy is changing your attitude towards spending and saving.

But FIRE is more than just following a budget.  It’s a whole-of-life movement that inspires fervent belief in its followers.

The FIRE movement encourages its followers to build up seven levels of financial safety by:

  • investing in property;
  • investing in dividend-yielding assets;
  • building tax-effective super;
  • working part-time;
  • taking full advantage of social security;
  • looking for entrepreneurial work opportunities;
  • adjusting their lifestyle to live a simpler life.

When it comes to saving, every little bit counts

Like any movement, FIRE inspires some committed followers and some of the lifestyle advice can seem a little extreme—churning credit cards to access freebies, living in a truck to avoid rent and even sifting through bins outside restaurants for free food.

Now, if the thought of going without your daily latte…not to mention movie outings, fine dining and regular holidays…sounds like a living nightmare, then perhaps FIRE isn’t for you.

But if this sounds too much like hard work, don’t worry.  You don’t have to be quite so committed.

You could consider making some simple changes to your daily habits to reduce your spending and boost your savings.  Make a list of where you could cut back to reduce your waste.  Cycle all or part of the way to work and save on transport costs.  Shop around for the best deal on utilities like gas, electricity and water.  Entertain at home—a monthly Netflix subscription costs less than a single movie ticket.

How to light your FIRE and retire on your terms

Once you’ve ramped up your savings, you could think about being a little more savvy with your money.

Bring your super together into one account to avoid paying more than one set of fees.  Look at ways to save and invest your money to increase your potential returns.  Consider investing in property…but watch out for aggressive gearing, especially if interest rates change.

You may not retire quite as early as the more committed FIRE followers, but you may just put yourself in the box seat to retire on your own terms.  Along the way, you might find yourself reappraising your attitude towards money and happiness.

Source: AMP News & Insights

Is it better to buy an investment property or home first?

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There’s a lot to consider when buying an investment property or home, especially for the first time.

Have you been saving for a long time and feel ready to get into the property market?  Maybe you’re considering buying a home to live in or investing in a property you can rent out to somebody else.

Either way, it’s worth knowing some more about both options to ensure you’re making a well-informed decision, noting that regardless of what you choose to do, property prices can go through major swings that can occur with little warning.

Buying your first property to live in

  • First home owner grants. Depending on which state or territory you live in, a first home owners grant could help you to finance your first home purchase.  This doesn’t apply to investment properties, and in some states you’ll lose your right to this grant if you buy an investment property first;
  • Security and stability. You can stay in your home as long as you like, as long as you’re making your home loan repayments;
  • Exempt from capital gains tax (CGT). Any home that is classified as your main residence, whether it’s your first place or not, is free from CGT when you go to sell it;
  • Expenses stack up and aren’t tax deductible. There will be initial costs, such as stamp duty and legal fees, as well as ongoing costs, such as water rates, building insurance and repairs.  When buying an investment property, you’ll also be hit with these costs, but depending on your situation some of the costs attached to your investment property may be tax deductible;
  • You may have to make some sacrifices. Where you really want to live may not be where you can actually afford to buy.  So, whether it means choosing a place that’s smaller, further out from the city, or looking for a job closer to your new home, you may have to make some trade-offs.

Buying your first property as an investment

  • You may get a cheaper place. An investment property doesn’t need to tick all the boxes of your ‘dream home’, which means you could potentially buy something at a cheaper price;
  • It’s not an emotional decision. Your purchase should be based on investment potential, including forecast rental return and capital growth.  So, instead of walking into a place and having to love the look of it, you can walk in with your investor’s hat on;
  • Earn rental income. If you’re renting out your investment property, you’ll be getting money from someone else to contribute to your mortgage, which means you could pay off your loan sooner.  Bear in mind however that the rent you receive may not completely cover your home loan repayments and additional costs;
  • Tax advantages and disadvantages. Many of the costs associated with an investment property are often tax deductible.  For instance, the interest and fees you pay on your loan, advertising for tenants, as well as cleaning, gardening, maintenance and pest control.  Also, if your property is negatively geared—which simply means the interest, and other costs you incur are more than the income your investment property produces—the loss can reduce the amount of tax you pay on your earnings at tax time.  On the flip side, if you sell your investment property down the track and make a profit, capital gains tax may be payable;
  • Management and obligations. If you’re time poor or located a long distance from your investment property, another thing you’ll need to think about is appointing a property manager to take care of certain duties.  On top of that, there are various responsibilities that apply to landlords before, during and when ending a tenancy and these can differ depending on which state in Australia the investment property is located.

Source: AMP News & Insights

5 risks of going guarantor on your child’s home loan

By | Financial advice | No Comments

If you’re going to balance the future of your own home or property on your child’s reliability to pay their mortgage, make sure you’re across the risks.

The majority of Aussies take about 3.7 years to save for a deposit on a first home, with a third of the nation taking just over five years.

If you’ve got a child who wants to get into the market sooner rather than later, you may have discussed whether you’d be willing to up their ability to borrow (if you’re in a position to) by going guarantor.

This is where you use the equity in your own property as security for the loan being taken out by your child.  Meaning, you promise the lender your child will make the necessary repayments and if they don’t, or are unable to, that you’ll repay the loan for them.

While there may be benefits for your child, things can still go wrong, so here is a list of things to avoid.

1 – You don’t really know what you’re signing up for

Depending on the lender, you can use your property as security on your child’s entire home loan, the entire loan amount plus additional costs, or limit the guarantee to a portion of the loan.

How long you act as guarantor will depend, but once your child’s loan has reduced beyond a certain level, you can ask to be removed as guarantor, but this will have to be approved and fees may apply.

You also may be required to get legal advice before a lender will accept the arrangement.

2 – You haven’t considered what’d happen if your child was without an income

You always want to hope for the best, but in reality, over the term of your child’s loan, there could be a point where they lose their job or become injured or ill and be unable to make repayments for a while.

For this reason, you may want to find out if they have a back-up plan, any emergency cash stashed away or personal insurance (what type and how much).

If things don’t go as expected, the loan does become your responsibility, so unless you have additional capital, worse-case scenario, you may have to sell your home to clear your child’s debt.

3 – You haven’t really thought how this could affect what’s on your bucket list

Going guarantor reduces your ability to borrow funds, so it’s important to think about whether you have other plans that could be affected – holidays or other big purchases.

You may also want to give some thought to your retirement.  June 2018 figures show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $42,953 and $60,604 respectively to fund a comfortable lifestyle.  This assumes you own your home outright and are in relatively good health.

4 – You haven’t chatted with your child about any expectations you have

Having an agreement in place could go a long way to ensuring everyone is on the same page.  You may even consider writing down what you’ve agreed to so there are ground rules in place.

It’s also worth discussing how long you intend to act as guarantor and what your exit strategy is, as you may only be required to do it for the first few years as they pay down their loan.

5 – You haven’t explored other financial avenues that may work better for you

Could you gift a deposit?

If you can afford it, gifting a deposit might be something you’d prefer to do.  A good deposit will reduce the amount your child needs to borrow, and the interest paid over the life of their loan.

Bear in mind, if you happen to receive Centrelink payments, you’ll need to consider that a gift of this nature could impact your benefits so do your research.

Could you go in as a co-owner?

When you buy a home with your child you share responsibility for the costs involved while receiving the benefits of investing in property.

It’s important to understand that as a co-owner you are included on the loan and you’d technically own only half of the property.

If you sign as a joint borrower, you’re equally responsible for the home loan and must repay the entire debt with the principal borrower—your child—whether they default or not.

This is also a big commitment and you’ll need to understand the risks and get the right advice.

Could you let them save money by staying at home for longer?

Nearly one in three adults aged 19 to 34 still live with their parents, with financial reasons dominating why people said they stayed at home.

With that in mind, you may prefer offering your child their old room for a while for low or no rent to help them get some more savings behind them.

Source: AMP News & Insights

What are the 3 biggest living expenses for households?

By | Cash Flow and Budgeting Strategies, Financial advice | No Comments

We check out the three largest contributors to household spending in Australia and where people would source additional cash if living expenses rose.

If you worked a full-time job in Australia in 1975, the average amount you would’ve earned a year was about $7,600, whereas today, that figure would be closer to $72,000, according to research by McCrindle.

That’s welcome news, but while we’re earning more than what we did in 1975, things are also costing us more.  A loaf of bread is 10 times the price, a litre of milk is three times the price, a newspaper is 20 times the price, not to mention petrol has doubled, with house prices in some capital cities up thirtyfold.

Housing, food and transport

The three largest contributors to household spending in Australia have been the same for many years, according to the Australian Bureau of Statistics (ABS).

ABS figures reveal three-and-a-half decades ago the largest contributors to household spending were food (20%), transport (16%) and housing (13%), with housing now at the top of that list (20%), followed by food (17%) and transport (15%) respectively.

A separate report by Deloitte highlighted that around 37% of Aussies were concerned about their ability to cover expenses, with more than 50% indicating that they expected to pay even more on housing and energy costs going forward.

What people would do if costs rose further

When asked, if your day-to-day living expenses increased, where do you think you’d source additional money from, here was the top eight responses in a survey of Australians:

Reduce luxury spending – 20%

Buy fewer groceries – 12%

Spend less on transport – 12%

Borrow money via a loan or credit card – 10%

Draw on savings – 5%

Spend less on food delivery and eating out – 5%

Cancel subscription services – 4%

Cancel streaming services – 3%.

Source: AMP News & Insights October 2018

Superannuation – know your rights

By | Financial advice, Superannuation | No Comments

There’s a staggering amount of superannuation that may never find its way to the people who should be spending it in their retirement years.  According to ATO figures, there’s approximately $12 billion in unclaimed super in their coffers.  That’s a lot of money just waiting to be transferred to Aussies who have lost track of account balances after changing their job, name or address.  Getting this super back is pretty straightforward and either the ATO, your myGov account, or your current super fund(s) can help you bring all your super together.

Sadly, the amount of super that never gets paid at all is even more alarming.  Back in 2016, Industry Super published a report claiming that around 2.4 million employees are being short-changed in mandatory super payments to the tune of $3.6 billion per year.  At the time, the report estimated the total figure for unpaid super could reach $66 billion by 2024.  That’s a huge potential problem with what’s known as super non-compliance – employers deliberately failing to pay money their workers are legally entitled to under the super guarantee (SG).

Who should receive super from their employer?

Most employees, whether full or part-time, salaried or casual, must be paid super contributions by their employer under the SG.  When you receive more than $450 per month in wages or salary, then you’re entitled to the SG.  If you’re under 18 or working as a private/domestic employee – such as a nanny – you’ll need to be working for more than 30 hours per week to qualify.

How much super should you be getting and when?

Under current legislation, SG payments should be made at the rate of 9.5% of your salary, or ordinary time earnings (OTE) if you’re a casual worker.  Your employer is required to make these payments to your nominated super fund(s) every three months at least.  When an employer pays your super later than they should, there are still consequences for your retirement savings.  The bigger your super balance the more money you can earn from investing it.  So for each and every day that a dollar is in your super account, it can be helping you grow your retirement nest egg.

Missing out on these payments is going to have an even greater impact on your super balance in the next few years.  Legislation has been passed to increase the SG rate from 1 July 2021 and the rate will increase by 0.5% each year from this date, reaching 12% by 1 July 2025.

Are you missing out?

According to the Industry Super report, it’s small and medium sized businesses that are most likely to come up short with SG payments.  An ABC news story from May 2018 highlights how much of a problem unpaid super can be in the hospitality industry.  Workers report having seen super payments on their pay advice, not realising the money wasn’t being paid to their super provider.

Take some time to check your latest super statement to see when SG payments have been made and how much is being paid.  Many funds will also offer you a login so you can check in now, and in the future, to make sure contributions from your employer are up to date.

Super shortfall – what you can do

If you find your super balance isn’t all it should be due to super non-compliance, the ATO and Fair Work Ombudsman should be your first port of call for more information, or to report the problem.  With the ATO having announced a 12-month amnesty for unpaid super starting from 24 May 2018, employers could be expected to be more co-operative in settling an unpaid super claim without the usual stiff penalties that would usually apply.

The amnesty is part of a raft of proposed legislative changes designed to crack-down on super non-compliance.  It includes harsher penalties for directors of businesses who fail to pay super and requirements for immediate reporting of employer SG contributions to the ATO by super funds.  This will act as an ‘early warning’ system for non-payment of super and take the onus off individuals to alert the ATO when there’s a problem.  However, at the time of writing, this legislation has not been passed.  So for the time being, it’s very important to take an interest in your super and act if you discover that you aren’t receiving your full SG contributions.

Source: Money & Life. 

What to look for on your super statement

By | Financial advice, Superannuation | No Comments

When your super statement arrives it’s important to take a proper look because it could become one of the biggest assets you’ll ever have.

Here’s our quick guide to what you should watch out for and why.

1 – Personal details

Check your name and address are present and correct.  Not having the right details could lead to you having unclaimed super if you change jobs or move house.  You can update these details with most funds by setting up a member login.

2 – Tax file number (TFN)

Having the right tax file number means your super fund will be paying the right rate of tax on your super contributions and investment earnings.  If your TFN is missing or incorrect, the fund may be deducting tax at a higher rate.

3 – Personal contributions

Check for any personal contributions to this super fund for the period the statement covers.  If you haven’t provided your TFN, your fund won’t be able to receive these payments.

4 – Employer contributions

Check that any employer contributions you’re entitled to under the super guarantee (SG) are being paid in full at least once a quarter.

5 – Your balance

Providing either you or your employer (or both) have been making contributions your balance is going to be higher than it was at the beginning of the statement period.  Depending on your investment options, your current balance will include investment earnings too.  And there will be deductions shown for tax, fees and insurance premiums.

6 – Investment options

Most super funds offer a range of investment options.  Your balance is likely to be invested in a default option if you haven’t made an active choice.  Different investment choices carry different levels of risk, expected return and fees.

7 – Fees

All super funds will charge a fee for administering your account.  There will also be fees associated with your investment option/s or brokerage fees for direct investment in shares.  Paying too much in fees can quickly erode your super balance so it’s important to make sure you’re getting enough investment earnings to justify any fees you’re paying.

8 – Insurance premiums

Super funds are required to provide certain types of personal insurance to their members by default and take premiums from your super balance to pay for the cover.  However, legislation proposed in the 2018 Federal Budget will give account holders with lower balances the choice to opt in or out for paying for insurance through their super.

Paying for personal insurance through super can be a way to make your policy more affordable but there are lots of things to weigh up when it comes to getting personal insurance right.

9 – Beneficiaries

If you’ve nominated a beneficiary or beneficiaries for your super – perhaps your spouse, partner or children – then this will be included on your super statement too.

What now?

Taking an interest in your super is important – regardless of your age.  If you’re looking at multiple super statements from different accounts, then it may be worth consolidating your super into a single fund to save on fees.  Before choosing one fund over another, it’s worth checking to make sure you’re continuing to get the right insurance cover and investment options with your preferred super fund and for a competitive fee.

Source: Money & Life October 2018

8 money tips for when your child lands their first full-time job

By | Financial advice | No Comments

Your child may not have listened to anything you’ve said over the past umpteen years, however, now they’ve landed their first full-time job, there’s a possibility that could change.

Here are some things you may want to cover off with them:

1 – Your bank account details and tax file number

Your child will need to give their bank account details to their employer if they want to get paid, so this will no doubt be high on their list of things to do.

On top of that, they’ll need to provide their tax file number as well, because if they don’t, they may end up paying a lot more tax on the income they earn.

If your child needs a tax file number, they can contact the Australian Taxation Office (ATO) about applying for one.

2 – Whether you can choose your super fund

Super is money set aside during your child’s working life to support them in retirement. It’s deposited into a fund, where it’s invested to potentially earn interest and grow over time.

Most employees can choose their own super fund but your child will need to check with their employer or the ATO.  If they can choose their fund, they’ll typically have a choice between their employer’s fund or a fund they select themselves.

There are things they’ll need to consider though, such as any fees they might pay, how the fund performs and their super investment preferences.

In addition, super funds generally offer a few types of insurance cover as well, which your child can pay for using their super money, so it’s worth them looking into whether it’s something they want.

3 – What tax you’re going to pay on the income you earn

Your child may not be pleased, but they’ll have to pay income tax on every dollar over $18,200 that they earn.  And, on top of that, many taxpayers are also charged a Medicare levy of 2%.

The amount of tax they pay will depend on how much they earn.  You might also want to point out that if they’re lucky enough to receive an annual bonus, they’ll also pay tax on this (yes, we know, life isn’t fair).

4 – What tax you can claim back when tax time rolls around

If your child spends some of their own money on work-related expenses (work uniforms, safety equipment, or travel costs to attend training for instance), there is some good news.  At the end of the financial year, they may be able to claim some of this money back when they do their tax return.

Remind them that they’ll need to have a record of these expenses, such as receipts, but in some instances if the total amount they’re claiming is $300 or less, they may not need receipts.

Meanwhile, if their expenses are for both work and personal use, they’ll only be able to claim a deduction for the work-related portion.  Perhaps point your child to the myDeductions tool in the ATO app to save records throughout the year, so they don’t have a bag full of receipts to go through.

Meanwhile, tell them if they’re lodging their own tax return, that they have until 31 October to lodge it each year, or maybe longer if they would prefer to use a tax agent.

5 – What’s in your contract and what you’re entitled to

An employment contract (which can be in writing or verbal) is an agreement between your child and their employer which sets out the terms and conditions of their employment.  It’s a good idea to know what’s in their contract should questions ever arise around what they’re actually entitled to.

Regardless of whether your child signs something or not, their contract cannot provide for less than the legal minimum, set out in Australia’s National Employment Standards, which covers things such as

  • Maximum weekly hours of work
  • Requests for flexible working arrangements
  • Parental leave and related entitlements
  • Annual leave
  • Personal/carer’s leave and compassionate leave
  • Community service leave
  • Long service leave
  • Public holidays
  • Notice of termination and redundancy pay.

While National Employment Standards apply to all employees covered by the national workplace relations system, only certain entitlements will apply to casual employees.  For more information, check out the Australian Government Fair Work Ombudsman website.

6 – How to read your payslip so you’re across potential errors

Pay slips have to cover details of an employee’s pay for each pay period.  Below is a list of what a pay slip typically includes:

  • Your child’s before-tax pay (also known as gross pay)
  • Your child’s after-tax or take-home pay (also known as net pay)
  • What amount of money your child has paid in tax
  • The amount of super their employer has taken out of their pay and put into their super fund
  • HELP/HECS debt repayments (if they have an education loan).

Meanwhile, mistakes can happen, so if anything doesn’t look right, tell them to chat to their employer and if your child has raised an issue they’re not satisfied with, they can also contact the Fair Work Ombudsman.

7 – How much super is coming out of your pay and if it’s correct

If your child is earning over $450 (before tax) a month, no less than 9.5% of their before-tax salary should generally be going into their super under the Superannuation Guarantee scheme.

If they’re under 18 and work a minimum of 30 hours per week, they may still be owed super.  For this reason, it’s important that they check their payslip and if something doesn’t look right, that they speak to their boss or contact the ATO.

8 – How to budget and save so you can get what you want in life

Budgeting may be another point that makes your child’s eyes glaze over but jotting down into three categories – what money is coming in, what cash is required for the mandatory stuff and what dough might be left over for their social life (or saving for their future), could really go a long way.

If they’re paying off debts, or on a more exciting note, want to buy a car or go on a holiday, getting a grip on their money habits early on could see them get a lot more out of life.

Source: AMP News & Insights October 2018

Don’t just invest for your children, invest with them

By | Financial advice | No Comments

Investing with your child can help them build a nest egg and improve their financial literacy.

Gifting your child with a nest egg of investments is a wonderful idea, and will no doubt give them a kick-start into adulthood.

But some experts say we may be approaching this incorrectly; we could be investing with our children, rather than for them, to give them not just money but knowledge.

Orsolya Bartalis, 39, from Perth does just this with her oldest child, Jordan.  “I take 35 per cent of my 15-year-old’s wage [from his part-time job], and we sit down and look at possible investments together,” she says.

“We look at what we’re getting, how secure it is, what the returns are and how long we have to invest the money for.  He can then ask questions and we decide whether we invest or not; it’s often property investments.”

Investing in property is something that Cherie Barber, founder of Renovating For Profit is passionate about teaching young people.  In her Young Renovators Scholarship Program, she teaches kids aged 12 to 18 about investing in and renovating homes.

“We’re seeing an increasing number of young people getting interested in property,” she says.

“Children are watching renovating shows on TV, like The Living Room and The Block, and all these young people are getting inspired by and curious about property.”

Barber says her views on involving kids in the world of property can be controversial.

“There are plenty of people saying that kids shouldn’t be into property; they should be out kicking a football or playing their Xbox, but I don’t think that’s necessarily true.  That’s up to each individual child.”

“Kids are thinking about the future, and the sooner that parents can start educating their children about what to buy, where to buy and how to identify really good capital growth suburbs, the better.”

Investing together: a parent’s responsibility

Make no mistake: financial literacy, from budgeting to investing, is the responsibility of parents.

Orsolya Bartalis says she aims to teach financial literacy to her kids.

“Kids receive [almost] no financial literacy in the education system, so that responsibility falls back on parents and the individual child to learn it of their own accord,” Barber says.

With a future filled with housing affordability problems and self-funded retirement, there’s nothing more certain than the fact that the next generation need to learn how to be very smart with their money.

And, while it feels like a big step for our generation of parents, many of whom experienced money as a taboo topic, it’s worth forging the way for our children.  Bartalis says, “The main message I am working on instilling in my kids is to learn to be financially literate, so they can have a choice as to what they want to do in life.”

Source: AMP News & Insights