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Financial advice

Super withdrawal

Should I take my super as a lump sum or not?

By | Financial advice, Superannuation | No Comments

You’ve spent your working life accumulating super. So when the time comes, are you better off taking a lump sum, regular income or both? Let’s weigh up the alternatives so you can start to consider what may be best for you.

Taking a lump sum 

If your super has been managed on your behalf during your working years it can be tempting to take the lot when you can. But make sure you weigh up the upsides and downsides before deciding.

Think long term

A lump sum in your hands means you can spend it as you wish. For example, paying off the mortgage may be a good financial decision. But if it will mean you have no super left, what will you live on? It’s easy to spend a lump sum quickly so think ahead because in retirement a bad decision can be financially impossible to recover from. Work out how you can support yourself when you’re no longer working.

Will the tax office take a chunk?

When it comes to taking a lump sum, look into tax rules—if you’re under age 60 you may create a tax liability, which would eat into the money you’ll need for retirement.

Are you confident making your own investment decisions?

Sound investment plans may help you avoid relying on the government pension down the track. Evaluate your investment knowledge and the effort you’re prepared to put in―do you feel confident in your ability to invest your money to achieve the returns you need or will you need help?

Keeping your money in super

Sure, keeping your money in super can be one of the most tax-effective options. But there are other considerations as well, as you’ll see below.

Make the most of tax benefits

By starting a pension in superannuation your money is not exposed to the tax rules that apply to money held outside super:

  • No tax is applied to your investment earnings in your super pension;
  • No tax is applied to your income drawn from age 60;
  • Tax offsets of 15% are applied to the tax payable* on your pension you draw if you’re aged 55-59, which means in the lead-up to turning 60, 15% of your taxable income is effectively tax-free.

Investment control and earnings

You can generally choose from a range of pre-set investment options in super. But an investment manager makes the day-to-day investment decisions, so overall you have less control. Your balance will increase if earnings are added to your account. Although investment earnings and your balance can fluctuate depending on investment markets―there’s no guarantee your super will last as long as you do.

Access your money 

You can take a portion or your entire super balance as a lump sum, or draw out a regular income―it’s up to you. Each year you have to withdraw minimum amounts depending on your age―eg you’d need to take out at least 4% each year up to age 65 and then 5% until you turn 75. And just remember, if you choose to withdraw all your money out of your super account, you may not be able to put it back in, as there are rules and limits on how much you can put back in (particularly if you are over age 65).

Best of both worlds

There’s a lot to weigh up when deciding how you’ll use your super. On one hand a lump sum can give you flexibility and control. But so can drawing out an income. Deciding between the two can be challenging, but you don’t have to choose one over the other.

There is a lot to consider, so it’s probably a good idea to meet with your financial adviser to determine what’ll work best for you. Find out how changing your approach as you get older could help you benefit from tax rules.

*The taxable portion of your account-based pension will be taxed at your marginal tax rate.

Source: AMP

Are-you-eligible-for-school-subsidies

Are you eligible for school subsidies?

By | Financial advice | No Comments

With 2020 now well and truly in motion, many parents and carers are probably looking at how they’ll cover school fees for the year ahead, not to mention other costs, which might include things like uniforms, shoes, stationery, excursions and transport.

The good news is, you may be eligible for some financial assistance through subsidies in your state or territory, which may be means tested or require you to hold a concession card.

State and territory allowances

According to figures from Australian Scholarship Group (ASG), for a child born today, the total cost of schooling in a capital city (from ages 0 to 17) is estimated to be around:

$78,234 if they attend government schools

$148,019 if they attend systemic/catholic schools

$351,682 if they attend private schools.

With that in mind, it’s worth exploring some of the rebates and tax breaks you as a parent or guardian may be eligible for.

New South Wales

Children in Kindergarten through to Year 12, who are aged between four and a half and 18 (including those that are home-schooled), are eligible for an Active Kids Voucher, providing parents and guardians with $100 to put toward registration and participation costs for sport and fitness activities.

The Creative Kids program provides one $100 voucher each year to all school-aged children to help with the cost of creative classes and activities, such as music, dance and drama lessons, language classes, coding and design.

In addition, if you drive the kids to school because there’s no public transport where you live, you may be eligible for the School Drive Subsidy.

There are also two financial support programs for eligible families who have children boarding away from home to complete their secondary education.

Queensland

If you have secondary-school-age students who are attending state and approved non-state schools, you may be able to receive financial assistance to help with the cost of textbooks and other learning resources.

A Living Away from Home Allowance Scheme is also available, while talented students from regional and remote areas, who aren’t eligible, may apply for Queensland Academies Isolated Students Bursary.

On top of that, a voucher of up to $150 under the Fairplay voucher may also be available for children who can least afford or may otherwise benefit from joining a sport or recreation club, while there are additional funding sources that aim to support young athletes.

Victoria

Depending on your situation, your family may be eligible to receive free or discounted uniforms, shoes, textbooks, stationery and more through the State Schools’ Relief.

The Camps, Sports and Excursions Fund may also provide payments so eligible students can take part in school trips and various sporting activities.

South Australia

The School Card scheme assists with expenses, such as school fees, uniforms, camps and excursions. This is available for eligible students attending government schools.

The State Education Allowance is also available to geographically isolated parents with children at secondary level, who board away from home to attend school. The allowance assists with travel, boarding and other education-related expenses.

Western Australia

The Secondary Assistance Scheme is available to parents who hold eligible concession cards. It provides an education program allowance, which is paid to the school, and a clothing allowance that can be paid to the school or parent.

A Boarding Away from Home Allowance also assists geographically isolated families with boarding and education costs for primary and secondary-school-age children.

Tasmania

The Student Assistance Scheme assists with the cost of school levies. It provides support to low-income families to help with the cost of students in kindergarten through to year 12.

Northern Territory

The Back to School Payment Scheme provides financial assistance to parents and guardians of children enrolled in a Northern Territory school, or who are registered for home-schooling. The entitlement can be used towards things like uniforms, books and school camps.

There’s also a Sport Voucher Scheme that assists with sport, recreation and cultural-activity costs. And, you may be eligible for financial help if your child must live away from home or travel long distances to go to school.

Australian Capital Territory

The Secondary Bursary Scheme and Student Support Fund programs aid eligible low-income earners in the state with dependent full-time students in years seven to 10.

Commonwealth Government assistance

Commonwealth Government assistance may also be available for eligible young people through Youth Allowance and various Assistance for Isolated Children programs.

There’s also a Child Care Subsidy (which replaced the Child Care Benefit and Child Care Rebate in July 2018) which may help with the cost of childcare if you meet certain criteria.

Another initiative the Australian Department of Social Services is involved in is Saver Plus – a program that’s delivered in 60 communities across the country. It delivers up to $500 in matched savings for education costs and provides free financial education workshops and support.

Other considerations

The cost of kids doesn’t come cheap, so it’s worthwhile making the most of the subsidies available to you.

In the meantime, if you need further help, speak to your school about what financial support is available. It might also worth talking to other parents who have children at the same school or schools nearby.

Source: AMP

Investing-on-behalf-of-your-kids

Investing on behalf of your children

By | Financial advice, Investments | No Comments

Investing on behalf of your children can help give them a financial leg up and introduce them to good financial practice at an early age. Here are some considerations to help you find an appropriate kind of investment vehicle to set them on their way.

Whether it’s birthday cash from proud grandparents, a slice of an inheritance, or you just want to set them up with something in their own name, many parents want to invest on behalf of their children.

Picking an appropriate investment for your child

Just as you wouldn’t set off across the Nullarbor on a hovercraft, it’s important to pick an appropriate vehicle. Tax, social security and the appropriate structure will all affect your decision.

The first thing to consider is why you want to invest. There’s a plethora of products you could select, so think about which goals you’re aiming to achieve. Setting something up to fund year-on year educational expenses might be quite different from a fund to establish a deposit on a first home, where the aim is a lump sum.

Alternatively, you may simply to want to open a bank account to give them the feeling of ownership, the equivalent of the old over-the-counter passbook. This might be a first step towards financial literacy in adulthood.

Once you’re clear about your aims, it pays to bear in mind the effects of taxation.

Minors and tax

In Australia, children under 18 on the last day of the financial year (30 June) are considered minors as far as tax is concerned. Minors are generally taxed at penalty rates on unearned income such as interest, rent and dividends.

There are exceptions for certain children working full-time, with disabilities or who are entitled to a double orphan pension.

Further, the above minor penalty tax rates don’t apply to amounts of excepted income received by children – these amounts will be taxed at adult rates. Excepted income includes income from employment, their own business, or from a deceased person’s estate.

Mario is 15 years old and is not an excepted person. His income consists of a $500 family trust distribution and $8,000 wages from casual work. Mario also has $180 in deductions relating to earning his wages.

In whose name?

The most common approaches are to hold the investment in the child’s name, or in the parent or grandparent’s name, with them as a trustee. Whichever you choose, it helps to think upfront who will be liable for any tax and what the social security impacts might be.

For tax purposes, the ATO determines who has control of the assets, and therefore who pays tax on the income earned.

If the money to set up the investment is given without any conditions, such as pocket money, or earned and used by the child and no-one else, then income, and any capital gain or loss, is assessable to the child. It’s the same if the investment is held under an informal trust agreement and the ATO is satisfied that the money belongs to the child. This applies in most cases where the money is a genuine gift.

However, if the money for the investment is provided by the parent and the parent uses the money as if it were their own, then they should declare the income on their return.

Note that children are not exempt from quoting a tax file number (TFN) and can apply for one at any age. Whichever investment vehicle you choose, make sure you supply the right TFN, if one is required.

Investment vehicles

These are some of the popular options parents turn to:

Bank accounts

Opening a bank account is usually the most straightforward. This doesn’t require the child to sign a legal document and so can be registered with your child’s name. However, if they are under 16, the bank will often require parental permission.

Managed funds

Managed funds and share investments generally require legal capacity, which doesn’t apply to under-18s. Therefore, these are usually registered in an adult’s name. The fund manager or share registry may allow for a name that reflects the intention, ie John Smith in trust for the late Jane Smith.

Insurance bonds

An insurance bond is a type of life insurance policy, with a range of investment options. It may be withdrawn in part or full at any time, although there may be tax implications. It can be established in the child’s name for those aged 10 to 16 with parental consent. Anyone over 16 can invest without consent.

For children under 16, insurance bonds generally also offer a ‘child advancement option’, where a parent or grandparent invests on behalf of the child, with ownership passing at a nominated ‘vesting’ age. This might tie in with making funds available for education, home deposit or travel and so on.

Superannuation

Although it may seem odd for an under-18 more into skateboards, it’s never too early to think about super.

Children can become members of a super fund, if the rules of the fund allow this. Generally, a parent or guardian needs to sign the application form and there are additional considerations if the child will be a member of a self-managed super fund (SMSF).

Because of its concessional tax treatment, super is a popular savings vehicle. However, depending on your purpose for setting up the investment, it may not be right for your child as they may not be able to access their funds until their own grandchildren have skateboards.

Social security

Where a parent or other adult holds investments on behalf of a child, Centrelink typically treats these as protective trusts. As a result, assets will most likely be attributed to the adults, up until they transfer to the child.

It’s important to evaluate the pros and cons to get a suitable approach for your family. These can be complex, so you may wish to speak to your adviser.

Source: AMP

 

Is-one-million-dollars-enough-to-retire-on-1

Is $1 million enough to retire on?

By | Financial advice, Preparing For Retirement, Retirement | No Comments

Everyone who’s approaching retirement wants to know how much money they need to save – how much is enough to leave work confidently and then live comfortably? Lately, we’ve been seeing $1 million dollars bandied around as the magic number but is $1 million enough?

Well, it depends. If you’re a high-income earner and want to maintain a similar lifestyle when you retire, then $1 million might not stretch as far as you think. If you’re happy to spend less, then it may be enough.

The Association of Super Funds of Australia (ASFA) calls this the difference between a ‘modest’ and a ‘comfortable’ retirement. It estimates that a couple needs an annual income of around $40,000 for a ‘modest’ life and $60,000 for a ‘comfortable’ life.

Gold Coast or Amalfi Coast?

While ASFA recommends $60,000 for a ‘comfortable’ life, if you’re used to a much higher income, then this probably won’t keep you as comfortable as you’d like. The amount of money you’ll need will vary a lot depending on your personal situation. Here are some of the most common variables:

Your home

If you own your home, you’ll need less income. Retirees who own their homes outright spend on average 5% of their income on housing, compared to 30% for retirees who rent.

Your health.

You are likely to spend more on healthcare as you age. While Medicare should cover much of the increase, private healthcare costs are rising much faster than inflation, going up 66% since 2009.

Dependents

If you’re supporting children, or parents – or both, you’ll need to think about how their financial needs will affect your financial needs over the years.

Less over time

Most people spend less as they age (spending falls by 15% on average between the ages of 70-90). This is because as they get older many people have bought most things they really want (and can afford) and have less desire to be so busy.

Longevity

People are living longer and longer, which is fantastic, but it does make it harder to work out exactly how much money you’ll need. Do you need to fund a retirement that lasts till you’re 88 or 108?

Keeping the money flowing

When you’ve worked out roughly how much income you’ll need, the next step is to work out how to get it. Here are some of the main ways:

Account-based pensions

You generate regular income payments by transferring some, or all, of your super to an account-based pension account. It’s generally tax free (as it stays within super), but your income will fluctuate depending on how your investments perform.

Annuities

An annuity gives you a set income for a defined period, or for the rest of your life. It’s great for reliability (you’ll always receive the same income), but not so great if you need extra cash for an emergency or a one-off purchase. You may also get locked into whatever rate is available when you buy it – which may not be great when interest rates are at all-time lows.

Dividend investing

Share dividends can be a great (and growing) source of income. While shares have potential for excellent returns, they also come with greater risk.

Government assistance

Even if you’re reasonably well off, you may still be eligible for a part pension – 2/3 of retirees are – and then there’s the seniors healthcare cards, travel discounts and other concessions.

Term deposits

You receive a set rate of interest for the term of your investment. Great for security and guaranteed income, but often a lower rate of return than other investments.

Rental property

Renting out an investment property is a common way to diversify your investments and gain a consistent income. Difficulties can occur if you have problems with tenants, you need to make expensive repairs, or rents or the value of your property falls.

Work

Many people choose not to stop working entirely. They enjoy their work and it keeps them mentally active while giving them purpose, a sense of identity and time with friends.

It’s never too late to get advice – or too early

As you can see, working out exactly how much money you’ll need to retire is complex. A financial adviser can unravel the complexity for you and get you closer to your ideal retirement life.

Source: Perpetual

Will-I-pay-Capital-Gains-Tax-on-my-inheritance

Will I pay Capital gains Tax on my Inheritance?

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In Australia, special capital gains tax rules apply when dealing with assets of a deceased estate.

The most common types of assets inherited by a beneficiary that could be subject to a capital gain are property, shares and managed funds.

You may have just received (or are about to receive) an inheritance. While this article isn’t a substitute for specialist tax advice it considers some of the capital gains tax implications should you ultimately choose to sell an inherited asset of this nature.

Implications for Australian tax residents

Where you’re an Australian resident for tax purposes and you inherit assets from the deceased estate of an individual who was also an Australian tax resident, the transfer of these assets from the deceased estate is not a capital gains tax (CGT) event, in and of itself. This means that only if you decide to sell the asset at a later point in time, then the normal CGT rules apply.

In this scenario, CGT outcomes are an important aspect to consider when selling inherited investments like shares, managed funds and investment properties.

The sale of the family home may receive the ‘main residence exemption’ which means that CGT will not apply. However, this an area where advice is best sought.

Note: where a family home was used for investment (income producing) purposes at some stage, only a partial main residence exemption will occur. We discuss this in a little more detail below.

Implications for non-Australian tax residents

Where the deceased individual was an Australian resident for tax purposes, if you’re a non-Australian tax resident CGT may be applicable.

Depending on the type of asset inherited and the circumstances involved, this can be an especially complex area, so specialist advice is key.

Other Capital Gains Tax considerations

Generally speaking, if the asset is:

  • a collectable asset, such as rare stamps, then CGT may apply depending on a host of circumstances
  • a personal-use asset such as jewellery, a car or boat CGT will typically not apply.

Capital gain (or losses) on an inherited asset

There are several considerations involved in calculating a capital gain or loss. Some of these can include:

  • the type of asset, and how it was used prior to the deceased’s passing;
  • the deceased’s date of death;
  • the date the asset was inherited;
  • your ownership period, prior to selling the asset;
  • whether you are selling the asset as an individual Australian tax resident, or not.

Did you know:

Inheriting a family home may involve CGT when it is sold. This depends on a few factors, such as when it was bought, when it was sold and if it was used for investment purposes at any time during the ownership period.

You should keep detailed financial records related to an inherited asset. This information is needed to determine if there’s any CGT payable later when the asset is sold.

Your financial adviser will be able to assist you in understanding any tax implications of inheriting an asset, based on your personal circumstances, objectives and goals.

Source: Perpetual

Withdrawing-Super-what-to-consider

Withdrawing Super – what to consider

By | Financial advice, Superannuation | No Comments

The federal government has been releasing details of financial support available to Australians who have lost income due the economic impact of the COVID-19 pandemic.

A huge number of us have been affected in some way and many have been left feeling stressed and confused about what to do to keep afloat.

Although concern about money isn’t the only problem we’re grappling with, financial stress is likely to be on the rise, even among those of us who are generally pretty good at staying on top of our finances.

A sudden and unexpected loss of income can send anyone into a panic and many will be looking for ways to replace that income to stop them from racking up debts or running out of savings in a matter of weeks.

Who can withdraw super and how much can I get?

One option Australians in need may be looking at is applying for early access to their super savings.

Here’s a quick summary of some of the more important details of this temporary measure to ease financial hardship:

  • Eligible Australians will be able to access up to $20,000 from their super fund or funds.
  • If you meet the financial hardship criteria, you can apply for $10,000 before 30 June 2020 and a further $10,000 after 1 July 2020.
  • Early withdrawal is available to people who are unemployed, have had their working hours/business income reduced by 20% since 1 January 2020, or are receiving Centrelink payments.

Playing catch-up

A payment of $10,000 or even $20,000 is a very welcome injection of cash at a time when you may be struggling to cover basic costs like your rent, groceries and utility bills. However, it’s really important to remember that these super savings have the potential to make a significant difference to your level of income in retirement.

If you dip into your super now, you could find yourself lagging behind in having the savings you need to live comfortably when you’ve stopped work for good.

“The ramifications of accessing super early could be really significant,” says Ben Marshan, Head of Policy and Standards at the Financial Planning Association of Australia (FPA).

“Conservatively, every $1000 that you have in super at age 30 will be worth about $4500 at age 60. If you take $1000 out now, you have to put in $4500 over the next 30 years to get back to the same position. Financially, for a lot of people that can be a massive struggle and they’ll never actually catch up.”

Multiply that $1,000 by 10 or 20 and you can start to see what you could be sacrificing from your retirement nest egg by making a substantial withdrawal now. And this is why it’s so important to get expert advice before making a decision, as well as exploring other options.

“Consider getting professional financial help to understand the implications for yourself, Marshan advises. “Accessing your super early should only ever be a last resort.”

What are my other options?

If you already have a financial planner, it’s definitely worth reaching out to them at this time to talk about whether you should be using your super as a temporary income boost.

Seeking advice is particularly important if you are told by any service provider that you have no other option but to access your super.

The financial services regulator ASIC has recently taken steps to caution landlords and property agents against suggesting that tenants should be accessing super to keep paying their rent.

Making such a suggestion could be seen as giving financial advice, and real estate agents are neither qualified or licensed to provide such advice.

Source: Money & Life

Sound financial advice

The value of sound financial advice in these challenging times

By | Financial advice | No Comments

In addition to the terrible health consequences, the coronavirus is having a massive impact on global economies and the way we live, work, and interact with each other.

Loss of income and uncertainty about the future can place a great strain on households, relationships and finances. For those affected, it can be overwhelming.

For those approaching or already in retirement, sharp falls in share markets can lead to sleepless nights about their retirement plans and whether they will have enough income to live comfortably.

In times like these, seeking professional financial advice is essential. We can help you to:

  • Assess your current financial situation, review your income and expenses, and develop strategies to manage your cash flow more effectively.
  • Make the most of any severance pay or redundancy payment.
  • Identify any government support payments you may be entitled to receive and assist you with the application process.
  • Assist you with practical strategies to consolidate and eliminate debt.
  • Review your circumstances and assess whether early access to your superannuation savings or early retirement may be a suitable option for you.
  • Review your retirement strategy to determine whether it continues to meet your near and longer term needs and objectives.
  • Develop and implement a detailed financial strategy for your future personal and financial wellbeing.

Avoid making emotional or impulse decisions

It’s natural to feel anxious in turbulent times, however it’s important to make carefully considered decisions when it comes to your finances and investments. An emotional or impulse decision in the short term will rarely benefit your financial wellbeing over the longer term.

Sound financial advice can be life changing

Sound financial advice really can make all the difference. As qualified professionals, we understand the complexities of financial planning, the world of investments and the various support packages available from the government.

We are available to help you, or someone you care for to make the most of a difficult situation and to navigate a path forward.

Now isn’t the time to go it alone.

Making-sense-of-medicare-and-your-taxation-obligations

Making sense of Medicare and your tax obligations

By | Financial advice | No Comments

To help pay for the public health system which we call Medicare, you’re required to pay a 2 percent Medicare levy as part of your income tax. While the low-income tax offset can reduce your individual tax liability, sadly it does not reduce the Medicare levy per se, which can make it that little bit harder to get ahead with your savings.

However, if you’re on a taxable income of over $90,000 as a single or $180,000 for families, and don’t have private health insurance, you may also be subject to a surcharge of up to an extra 1.5 percent of your income, on top of the basic Medicare levy.

The surcharge was designed to encourage those who can afford it to take out private health cover and use the private hospital system, hence reducing demand on the public Medicare system. But you are exempt from paying the Medicare Levy Surcharge by having private health insurance with a sufficient level of hospital cover.

While taking out private health insurance can be cheaper than the additional surcharge, you need to do your homework beforehand.  Private health cover has come under a lot of criticism for not offering value for money due to a myriad of shortcomings, none the least being exclusions and major out-of-pocket costs.

Rebates for private health insurance

However, if you do decide to take out private health insurance, you may also be eligible for a rebate depending on your income level.

While the private health insurance rebate is income tested, singles and families earning under $90,000 and $180,000 respectively, can expect the highest (base tier) rebate of 25.059 percent (under age 65).

Most people with private health insurance can claim the rebate as an upfront reduction on their private health insurance premium. However, if you don’t claim the rebate as a reduction to your premium, you can still claim it as a tax offset in your annual income tax return.

What exactly is the lifetime health initiative?

If you’re under age 31 and still in two minds whether to take out private health cover or not, the Federal Government has provided an incentive to help you decide. Should you wish to buy health insurance after 1 July following your 31st birthday, you’ll be required to pay an extra 2 percent for each subsequent year of cover due what’s called a lifetime health cover loading (LHC).

For example, if you join at age 35, you’ll pay 10 percent more for your hospital cover than if you’d joined five years earlier. Given that the cost of top hospital cover averages around $4,500 for families and $1,250 for singles, a 20 per cent loading means you’d be paying an additional $900 and $250, respectively.

If you take out private patient hospital cover when you are 40 years old, you could pay an extra 20 percent on the cost of this cover annually for 10 years. If you wait until you are 50 years old, you could pay 40 percent more annually.

However, it’s important to note:

  1. The maximum LHC loading that can be applied is 70 percent
  2. The LHC loading applies to the cost of hospital cover only, not extras cover, and you will cease paying this loading after 10 years of continuous hospital cover.

For more information, please contact us.

Source: FPA Money and Life

How-to-recover-from-a-financial-setback-1

How to overcome a financial setback

By | Financial advice, Retirement | No Comments

When considering the financial position they’ve achieved in retirement, many Australian retirees share the same opinion: “I wish I’d saved more.”

For some people, keeping up with day-to-day living expenses and staying on top of debts is challenging enough, and investing for the future can seem out of reach. Meanwhile, others are better at sticking to a budget and putting aside money on a regular basis so they can build wealth over time.

But even with a retirement plan in place, what happens when someone’s life takes an unexpected turn that changes their financial position? For instance, if they or their partner became seriously ill or injured. While some people would still be able to keep up with their living expenses while investing for the future at the same time, others would struggle to make ends meet – putting them on the back foot financially for years to come.

Life is nothing if not unpredictable, so the best thing to do is put measures in place that will minimise the impact of unexpected financial shocks before they happen.

How can you improve your financial wellbeing?

Review your Insurance

Consider taking out personal insurance such as life, disability, trauma and/or income protection cover, in addition to private health insurance. With personal insurance, you can receive either a lump sum or regular payments to cover your living and medical expenses if you have to stop working due to illness or injury. We can help you choose the right level of insurance for your needs and advise whether to take out your cover through your super fund.

Understand your entitlements

If you or your partner has to stop working due to illness or injury, you may be eligible for government assistance in the form of a sickness allowance or carer payment. We can help ensure you receive all the financial support you’re entitled to.

Put some money aside

If you’re suddenly faced with a financial setback, it helps to have a safety net. If you’re not already saving regularly, review your household budget to see if you can afford to put some money from each paycheque into a separate savings account. Then, if you get seriously ill or injured, this money can help tide you over while you’re making an insurance claim.

Create an estate plan

A strong estate plan is the best way to protect your family’s finances if the worst happens to you. It’s important to get legal advice when building your estate plan and to update your will whenever your personal or financial circumstances change. Your financial adviser can also help you create a binding death nomination with your super fund so your super balance and insurance benefits are distributed according to your wishes when you pass away.

Maximise your super

While you’re healthy and working, it might be worth putting extra money into your super. That way, your retirement savings don’t suffer if you’re off work for an extended period or you need to retire sooner than planned. Salary sacrificing is a tax-effective way to boost your super, allowing your nest egg to grow faster.

Source: Colonial First State

Federal stimulus

Federal Government stimulus package

By | Financial advice | No Comments

The Federal Government stimulus package – What does it mean for individuals, retirees and the Australian economy?

Here we explain some of the benefits you may be eligible for.

With the COVID-19 coronavirus crippling the Australian economy and affecting livelihoods, the Australian Federal Government has announced a range of measures to support both businesses and individuals.

The total stimulus announced to date is worth $189 billion, or 10% of the size of the Australian economy, and the government has said more financial support will be announced over the coming months.

Coronavirus supplement

For the next six months, the government will establish a new coronavirus supplement worth $550 per fortnight. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit, doubling the payment for those currently on these benefits to $1,100 per fortnight. Students receiving Youth Allowance, Austudy and Abstudy will also be eligible.

Asset tests and waiting periods that typically apply to these types of payments will be waived, and eligibility will be extended to permanent employees who are temporarily stood down.

Sole traders, the self-employed, casual workers and contract workers whose volume of work has been affected may also be eligible, provided they’re earning less than $1,075 a fortnight. These payments will begin from 27 April 2020.

Household stimulus payments

The government is providing two separate, tax-free $750 payments to social security, veteran and other income-support recipients, including those on the Age Pension, and eligible concession card holders.

The first payment will be made from 31 March 2020 and the second payment from 13 July 2020. However, people eligible for the coronavirus supplement (detailed above) won’t be entitled to the second payment.

It’s expected that up to 6.6 million people will be eligible for the first payment and around five million for the second payment, with around half of these pensioners.

Temporary access to super

The government will allow some people affected by the coronavirus to access up to $10,000 of their super between now and 1 July 2020, and a further $10,000 in the first three months of the 2020-21 financial year, tax free.

Those who are eligible include the unemployed, people receiving JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. And also people who’ve been made redundant, had their work hours reduced by 20% or more or sole traders whose turnover has reduced by 20% or more since 1 January this year.

Applications can be made online from mid-April by using myGov. Members will self-certify that they satisfy the eligibility criteria.

Support for retirees

To assist those in retirement the government is temporarily reducing minimum super drawdown requirements for account based or allocated pensions, annuities and similar products by 50% for the current financial year and the 2020-21 financial year. This should reduce the need for retirees to sell investment assets in the current soft sharemarket conditions to fund their minimum drawdown requirements.

In addition, the upper and lower social security deeming rates will also be reduced by 0.25% from 1 May in recognition of the impact of persistent low interest rates on retirees’ savings. This comes on top of a 0.5% reduction announced earlier in March.

The government says the change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.

 

State and territory stimulus

The state and territory governments have also announced economic stimulus packages. The majority of these have so far focused on businesses, however there have been a few measures for individuals, including:

– Western Australia: The WA Government has frozen scheduled increases for household fees and charges, including electricity, water, motor vehicle charges, the emergency services levy and public transport fares, which were previously due to increase by $127 from 1 July. And the Energy Assistance Package, which is available to eligible concession card holders, will be doubled from $300 to $600 from 1 July.

– Tasmania: The Tasmanian Government has announced one-off payments of $250 for individuals (or up to $1,000 for families) who are required to self-isolate. Recipients must hold a Health Care Card, Pensioners Concession Card or be low income earners who can demonstrate a need for financial support, including casual workers.

– Australian Capital Territory: The ACT Government will give rebates of $150 on household rates, as well as freeze a number of fees and charges, including the fire and emergency services levy, public transport, vehicle registration and parking fees. Public housing tenants will receive $250 in rental support, as well as a one-off rebate for residential utility concession holders of $200 to help with power bills.

Due to the uncertainty around the country’s economic position, the Federal Government has also announced that it will postpone the next Federal Budget. The budget is usually handed down in May, but has been postponed until 6 October 2020

Source: AMP

Salary sacrifice to boost super

Super guarantee and salary sacrificing: The changes that may benefit you

By | Financial advice, Superannuation | No Comments

Salary sacrificing – making before-tax (concessional) contributions from your salary into your super – may be an effective way to help grow your super and set yourself up for a comfortable retirement.

For most people, their salary sacrifice arrangements are on top of the 9.5% pa super guarantee (SG) contributions that employers are legally obliged to make into their employees’ super funds.

Previously, while many employers paid the same SG contributions whether an employee was salary sacrificing to super, some employers reduced their SG contributions where an employee elected to salary sacrifice, because the SG rules allowed employers to base their 9.5% SG contributions on an employee’s ‘ordinary time earnings’ (which doesn’t include salary sacrifice contributions).

The previous rules also allowed salary sacrifice contributions to count towards meeting an employer’s 9.5% SG obligation.

From 1 January 2020, the law generally requires an employer to contribute 9.5% of an employee’s ordinary time earnings (OTE) base. Your OTE base is broadly your earnings during your ordinary hours of work, as well as salary sacrifice contributions made from those earnings.

Employers are also prevented from counting salary sacrifice contributions towards meeting their 9.5% SG obligations.

The difference one law could make

This new law ensures that everyone will get the amount of SG they’re entitled to – regardless of whether they’re adding more to their super through salary sacrifice. And for some people, this could make a big difference to their super balance.

Case study

Maria earns $60,000 a year as a teacher. Because she’s keen to build up her super so she can retire comfortably, every three months she salary sacrifices $1,000 into her super.

Before 1 January 2020, Maria’s employer was calculating her super guarantee contribution based on her annual income less her salary sacrificed amount of $4,000. This meant that her super guarantee contribution was based on her annual income of $56,000 instead of $60,000.

From 1 January 2020, Maria’s employer will contribute 9.5% ($1,425) each quarter, plus her salary sacrifice amount of $1,000. That means Maria will put away $2,425 (made up of salary sacrifice & super guarantee contributions) a quarter in super – a total of $9,700 a year, compared to $9,320 in previous years.

Under the new law, Maria will have an extra $380 contributed to her super.

  Before 1 January 2020 From 1 January 2020
Salary sacrifice $4,000 per year $4,000 per year
Employer super guarantee contribution $5,320 per year $5,700 per year
Total contributions $9,320 per year $9,700 per year

Why making extra super contributions makes sense

Salary sacrificing even small amounts to your super – as little as $10 or $20 a week – could make a real difference over time. That’s partly because any returns on your super will be compounded over the years, which may boost your super balance.

What’s more, when you salary sacrifice, you’re contributing money from your wage before you get taxed on it. Your contributions will generally be taxed at 15%, which may be less than your marginal rate of up to 47%.

Other ways to build your super

Not all employers offer salary sacrifice arrangements. And as a result of this new law, employers that were previously allowing their employees to salary sacrifice may decide to no longer offer this option.

But don’t worry, because if salary sacrificing isn’t an option for you there are still other ways you can boost your super savings.

For example, you can contribute some of your after-tax salary yourself into your super. As you’ve already paid tax on this money, you won’t be taxed on this contribution in your super fund.

You could also choose to make a personal tax-deductible contribution. The contribution will generally be taxed at 15% but you will receive a tax deduction at your marginal tax rate.

There are many conditions to claiming a personal contribution as a tax deduction – you must submit a valid notice to your super fund that you’re going to claim a tax deduction for your contribution (within required timeframes) and the fund must acknowledge your notice, prior to you claiming the tax deduction in your tax return.

There are other additional conditions – so seek advice if you are planning claim a tax deduction on your super contributions.

Remember, both before and after-tax super contributions are capped, so it’s important not to go over that limit or you could pay additional tax.

Before-tax (concessional) contributions, which include your SG, salary sacrifice and personal contributions that are eligible for a tax deduction, are capped at $25,000 while after-tax (non-concessional) contributions are capped at $100,000.

Source: Colonial First State

3-factors-affecting-retirement-income

3 factors affecting retirement income

By | Financial advice, Retirement | No Comments

In Australia, people are living longer and interest rates are lower than ever. While the first is good news, the second carries risks if you’re looking for an adequate income to see you through retirement.

Here we look at three elements that affect a post-work reasonable income – interest rates, inflation, and longevity.

  1. Interest rates – high valuations, low returns

Historically low interest rates have driven valuations of defensive assets such as cash and fixed interest to unprecedented highs. Generally, a defensive asset is seen as a lower-risk, lower reward investment.

High valuations mean low yields (or percentage income returns in the form of dividends and interest) for defensive assets.

Low interest rates affect variables such as inflation and investment returns, which in turn affect how we save for retirement.

In the high interest rate era of the late 1970s and 80s even relatively low-risk assets like term deposits and bonds offered double-digit returns. These days rates of return are all closer to one per cent.

Similarly, property yields in Australia are around two to four per cent depending on the type of property and geography. Better yields may be available via Australian equities, but many retirees are not in a position to take on a higher level of risk.

  1. The inflation perspective

Inflation has a big impact on retirees who are less able to earn and save more after their working lives have finished. Falling returns mean providing for retirement is challenging, but although returns are low now compared to in the past, the impact is eased when you take inflation into account.

Inflation was running at around 15 per cent in the late 70s and 80s, which ate up much of the bond and term deposit returns.

Nevertheless, the combination of low interest rates and low inflation make it hard for retirees to find returns.

There are risks too, should the current global inflation rate of about three per cent shift higher than the defensive asset classes. As these assets are priced for the very low inflation of today, they would face major negative revisions.

  1. The longevity conundrum

In Japan, adult diapers are forecast to outsell those for babies within a few years. Many developed countries are having to adapt to the demands of an ageing population.

Australians are also living longer, increasing the risk that a retiree will outlive their savings. Back in 1980, a man starting a pension at age 65 had a life expectancy of 78 – 13 more years. Now, a male starting a pension at 65 has a life expectancy of 86 – an additional 21 years. While this is great news in many ways, financially it means higher income needs and the need to grow the assets over time to make up for rising costs of living.

This is a concern in an environment which sees retirees drawing down on their pool of retirement assets because they can no longer generate sufficient income returns. This means retirement account balances are being depleted relatively quicker than in the past, especially if retirees lack exposure to growth assets to generate some capital growth over their longer lives.

Supporting an ageing population to achieve their retirement goals in a market of lower investment returns is a major challenge. A stable policy framework for superannuation and a long-term approach will be important in giving retirees the best chance of achieving a comfortable retirement.

Source: AMP

The-economy-learn-the-basics-in-5-minutes

The economy: learn the basics in 5 minutes

By | Financial advice | No Comments
  1. What is the ASX?

ASX stands for Australian Securities Exchange (not stock exchange like many people think).

How does it work?

The ASX provides a market for people to buy and sell shares in the companies listed on it. If the company does well, the investors (those who own shares) have a chance to make a profit. In return the companies raise money to run and expand their business by selling the shares.

  1. What does ASX200 index do?

The ASX200 was created in 2000 (its full name is S&P/ASX200 but no-one ever says that over drinks). It’s a share market index that tracks the performance of the shares of the largest 200 of the listed companies in the ASX, so everyone can see who is doing well and who is not – a bit like a public report card.

The ASX200 index moves up or down each day as investors buy and sell shares in the companies it measures. These movements can be described in percentages or points. As you would expect the more points or percentages a company moves up or down on the index means very good, or very bad news for investors.

  1. What is the FTSE?

Sometimes called the FTSE 100 or ‘the Footsie’, it’s the share index of the top 100 companies listed on the London Stock Exchange.

  1. The DOW – please explain?

‘The DOW’, a little confusingly, is short for Dow Jones Industrial Average (DJIA). The DJIA is one of the most watched stock indexes in the world, and includes companies like General Electric, Microsoft, Coca-Cola and Exxon. When people are wondering how the US market did on a particular day, they will usually quote the DOW (even though it’s the DIJA – go figure).

  1. The inflation rate

Inflation is complicated, but a simple way to understand it is; as an increase in the price you pay for goods but it could also be seen as a decline in the purchasing power of your money. For example, as inflation rises, every dollar you own buys a smaller percentage of a good or service. High inflation is generally considered a bad thing for a nation’s economy and often equals high interest rates.

  1. Cash rate and interest rates

The official cash rate (OCR) is the term used for the bank rate – the rate of interest, which the central bank charges on overnight loans to commercial banks. What does that have to do with you and your mortgage repayments you ask? Well the cash rate indirectly influences interest rates and the RBA (Reserve Bank of Australia) adjusts both in line with the nation’s economic situation.

  1. Exchange rates

Normally, we are only interested in exchange rates when we are online shopping or are about to cash our savings into another currency to go on holiday. Basically, the exchange rate is the ever-changing value of one currency for the purpose of conversion to another. For example, how many US Dollars you can buy with $100 Australian Dollars. Apart from being crucial to how many beers you can buy at Oktoberfest it hugely impacts imports and export trade.

So now you know, prepare to impress!

Source: BT

5-minutes-for-5-days-get-your-finances-in-order

5 minutes for 5 days – get your finances in order

By | Financial advice | No Comments

New Year’s resolutions are such a drag, right? Whether it’s fitness, family or finances, the best laid plans rarely last beyond the first week of January. Life has a habit of getting in the way, especially these days with so many demands on your time.

Instead of making ambitious resolutions you don’t have the time or energy to keep, try our personal finance challenge.

Here are five things you can get done in around five minutes…start on Monday and by Friday you’ll have a better handle on your daily budgeting, banking and super savings.

And then you can start thinking about the rest of the year.

Monday | Sort out your super

Retirement might be a fair way off but there’s no excuse for ignoring your super. After all, it’s your money. And it’s not that hard—you don’t need to be an expert on investment markets to log into your super account online and get the basics sorted.

  • Check your employer is paying you the correct amount of super.
  • Check you’ve nominated a beneficiary so your super goes to the right people if something happens to you.
  • Check whether you have any lost super lying around from previous jobs.

Tuesday | Check your utility bills

Water. Gas. Electricity. Internet.

Yes, it’s the boring stuff. But that’s no excuse for letting your provider take you for granted. Get online and do a quick comparison to see what deals are out there. If you have time give your current provider a quick call to see if they can do a better deal…and be prepared to take your business elsewhere if they can’t.

Wednesday | Start an emergency fund

You know it’s important to put money aside for a rainy day. And you’re tired of worrying about the car breaking down or the water heater packing up.

If you’re among the one in five Australians who has less than $250 in their savings account, now’s the time to do something so you can meet an unexpected bill.

It could help to give yourself a target. If you’re aiming for $2,000 in an emergency fund and you can manage to put away $50 a week, you’ll reach your target in less than a year.

You could think about setting up an automatic payment every time you’re paid into a high interest account, so it’s working a bit harder. And then simply set and forget.

Thursday | Check what interest rate you’re getting

Yes, interest rates are at generational lows. But that doesn’t mean you can’t get a better rate on your savings account so your money works harder for you.

The first step is to ask yourself what rate you’re actually getting. If you’re not sure, then it’s time you found out. And once you’ve double checked, have a quick look around to see what else is out there.

These days you can set up a new savings account pretty quickly online. So there’s no reason to stick around if you’re not getting a good deal. But make sure you check out the Ts and Cs of any offer—a great special rate could revert to a very low rate after the honeymoon period.

And while you’re at it, why not check out the rate on your home loan if you have one? See if your lender can give you a better deal. Or you could shop around other providers. There could be a bit more paperwork with switching providers, but it’s still worth getting up to speed with what’s out there.

Friday | Build your 2020 goals timeline

Congratulations! You’ve made it to the final day of our ‘five minutes for five days’ challenge. You’ve started the ball rolling to sort out your super, banking and utilities. And you’re hopefully feeling a bit better about your personal finances.

So now it’s time to think about the bigger picture. Whatever you’re aiming for in 2020, spending time on setting your goals can reap rewards.

Source: AMP

Opening-up-about-money

Opening up about money

By | Financial advice | No Comments

Funny thing, money. On the one hand it can get us excited or give us a real sense of achievement (think reaching a savings goal). On the other hand, it’s something we tend to keep to ourselves. Whether our finances are in great shape or need a bit of TLC, talking about it openly with a partner or loved one could help you share your experiences and align your financial goals.

Why we don’t talk about money

There are all sorts of reasons we don’t discuss money, and the psychology behind it is different for each of us.

Some of us had it drummed into us at an early age. Remember gran telling you it was rude to talk about money? Well, her advice should have come with a few caveats.

Another reason is that, for many of us, our sense of self and success is wrapped up with how financially successful we are. So we play our cards very close to our chest. It’s also why we see people falling into the trap of using money they don’t have to project a false, more successful ‘version’ of themselves.

When we should be talking about money

Some things are best kept to yourself (like your PIN!), but there are circumstances where you could really benefit from an honest discussion about your finances. Here are a few examples:

  • In a relationship? Talking openly about your finances with your partner could help you align your goals and pool your knowledge.
  • Worried about your finances? Opening up to a close family member could help you regain psychological control of your situation.
  • Planning for the long term? Talking to a licensed financial advisor about what you want to achieve could help you set achievable goals for the future.

Getting the conversation going

Once you’ve decided to have the chat and chosen a trusted person to talk to, here are three steps that’ll help you make the most of your time:

  • Decide what you want from the conversation. Do you want advice, help or just someone to talk things through with?
  • Share your feelings. If you’re feeling overwhelmed or worried, say so.
  • Focus on outcomes. Try and walk away from the conversation with a positive change you can move forward with.

So there we are. Opening up about your finances could be a great help, but remember – your financial information is private, so treat it with care. You can still discuss goals, share hints and tips, and get advice without revealing sensitive information.

Source: ING

Ka-ching-talking-money-with-kids

Ka-Ching! Talking money with kids

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

Parents and guardians want to send children out into the world armed with the skills and knowledge they need to succeed but oddly, many of us never talk to them about money and how to manage it. Here are a few simple tips for passing on good money habits.

Earlier the better

If you’re wondering when to start a child’s financial education, here’s the answer: today. Every lesson in financial responsibility, no matter how small, can help shape a child’s view of money, its value and how it should be used. They’ll pick up on ideas like not spending more than you have by listening to you and watching how you act. Once those basics are in place, you can take them to the next level with practical applications – like earning money with chores and saving for something they want. Good habits picked up early in life will stay with them and help determine their future relationship with money.

Start them off at home

There are a number of ways you can help kids get used to handling money and budgets. And it’s important to remember that any practice is good practice. Lunch money might be a good place to start. If you usually give them a daily allowance, try changing to weekly or monthly. Then keep checking in to see how they’re doing and if they’re managing to stay on track. If they’re a bit older, you could set them up with a transaction account. It’s a good way to get them thinking about budgets, outgoings and living within their means.

Let them see you doing it

Setting a good example is a sure-fire way to pass on good financial behaviour. So while you’ve got the kids at the shops, show them what you’re doing and why. Explain why you’re buying extra units of a sale item to save in the long run. Or how coupons can help bring prices down. Once you explain your behaviour and they understand it, it’ll be reinforced every time they see you do it.

Let them learn by doing

One of the best ways to teach kids is to set practical financial tasks for them to complete. For example, you could put them in charge of the family’s meals for the week and give them a budget to shop with. Show them how they can save on some items (by buying own-brand or sale items) so they can spend more on others. They’ll get it wrong at least once, but that’s ok! It’s as much of a learning experience as getting it right. Just show them where they went wrong and let them try again.

Source: ING

Stay-one-step-ahead-of-online-scams

Stay one step ahead of online scams

By | Financial advice | No Comments

Just as the internet continues to surprise us every day, so do online scams and fraudsters. It’s good to stay in the know with the cyber dark arts so you can quickly spot them.

Keeping your computer secure

The first place to start is right under your nose. Spyware and Malware can snoop on your internet activities on your phone and computer. Here’s what you can do to protect your computer:

  • Install a reliable internet security program
  • Cover the camera on your laptop or computer (as certain Spyware allows the scammer to watch you and learn your everyday movements)
  • Regularly update your browser and operating system
  • Scan your USB sticks (and other removable media devices) before you use them
  • Disable autorun programs on your computer
  • Don’t open emails from unknown sources.

Phishing

Phishing is where criminals attempt to get your personal details, like bank account numbers, credit card numbers and most importantly your passwords, normally through the scammer portraying themselves as a trustworthy and genuine source through an email or text.

Phishing messages are designed to look genuine and will copy the format used by the organisation that the scammer is pretending to be.

Do not click on any phishing communication, or any attachments or links contained within that communication.

Skimming

This is a scam where your charge card numbers are stolen, often through card processing gadgets. For example, a device might be placed over the top of the card reader at an ATM to try and record your account numbers.

How to avoid skimming scams

Naturally, you should immediately contact your bank if you suspect there is something unusual going on, but it’s better to avoid the problem by making it harder for criminals to steal your information.

  • Choose an ATM that looks like it’s in a secure location (ie the location has visible security cameras), like a bank
  • Give the card reader a little jiggle before you use it. If it’s loose, there’s a good chance that it’s dodgy.

If you think that you’ve been skimmed, call the ATM’s bank and your bank straight away.

Porting

“Porting” happens when someone steals your personal information to transfer your mobile phone number to them without your knowledge or consent.

This can happen by the scammer:

  • setting up a new account with different phone company (by pretending to be you) and then porting your number; or
  • contacting your existing phone company pretending to be you and requesting a new SIM card which contains your number, for use on their mobile.

Once transferred, your stolen mobile phone number can be used to receive SMS verification codes and allowing that person to access your personal services, such as your bank, email and social media accounts.

You’ll know your phone number has been ported if you unexpectedly lose phone reception or coverage (you’re unable to make or receive calls or messages) and your phone goes to ‘SOS only’ when everyone else has reception bars.

How to protect your phone from being ported

Noting that scammers still need your personal information to port your phone (including your full name, mobile phone number, date of birth and answers to security questions), you should be extra careful with your personal information online.  Some handy tips to prevent porting are below:

  • Hide your mobile phone number from public viewing in your social media profiles. You can Google your mobile phone number to see where it shows up and have it taken down.
  • Remove your birth date from public view (similar to your mobile phone number) – keep in mind that a scammer can work out your birth date from photos or posts on social media.
  • Scammers can gain your personal information from your personal mail, so make sure you have a lock on your letterbox or consider using a PO Box.
  • Keep the PIN numbers and passwords you use for telephone companies and banks secret.

Unsolicited phone calls

Sometimes a scam will start with a phone call you didn’t ask for from a person or company you don’t know.

Some examples of unsolicited phone scams are:

  • The scammer mentions that you need to make a payment or confirm your bank details.
  • The scammer mentions a service you didn’t sign up for and needs your details to process it
  • You receive an automated voice call asking for sensitive information
  • If in doubt, call the company’s general line phone number advertised on their official website to confirm they called you. However, be wary that if you’ve never heard of the company before, the website may be set up to make the scam more credible.

Source: ING

Three-reasons-why-fun-should-be-in-your-budget

Three reasons why fun should be in your budget

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

It’s fair to say that most of us aren’t crazy about budgeting. Even with the latest budgeting apps that aim to make this common sense habit into something easy and fun, the thought of keeping tabs on what we’re spending from month-to-month fills many people with boredom or anxiety.

In their Know your Numbers survey results from February 2018, UBank revealed that 86% of Australians don’t know their monthly expenses and only 28% actively use financial management/budgeting tools. The survey also found that being in the dark about your spending can be a big source of stress, with 59% of Australians saying their current financial situation causes them stress or loss of sleep.

Taking it back to basics

When finances are this much of a worry, what does it take to face up to things and take control? One way is to put the fun back into budgeting by taking a step back in time.

Remember when you were young and had pocket money? Maybe you spent the lot every week on lollies or saved it up for a favourite toy. With Mum and Dad picking up the bill for clothes, food and other essentials, pocket money was there to spend on whatever you wanted, guilt-free

It feels great to know you can treat yourself to something without any concern about the impact on your finances. Thanks to credit cards and Buy Now Pay Later, it’s still easy to buy something just because you feel like it. But when you’re borrowing to buy, it’s not such a carefree experience. In fact, it’s a purchase you might regret if the cost of servicing debts makes it harder to just keep up with essential expenses.

Why fun should be in your budget

So instead of spending in an ad hoc way when the urge to splurge strikes, it’s well worth trying. By making fun money an essential ingredient in your budget and cash flow formula, you’ll be giving yourself a much more positive reason to keep an eye on money going in and coming out. And this is important for three key reasons:

1 – It makes your budget real and achievable

The problem with most budgets is that they start with what you need to pay for.  Rent, electricity, travel passes are all important for day-to-day living, but generally aren’t things to get excited about. So instead of basing your budget on needs, make a list of your wants and what they cost first. If the holiday of a lifetime is at the centre of your budget, doesn’t that give you a much greater incentive to be in control of your money?

With money in your budget dedicated to these future plans, you’ll have a good reason to bring more discipline to daily spending. But we’re only human, and it can be hard to wait for weeks on end to reap the rewards of self-control. By including a provision in your budget for some ‘pocket-money’ you can use to spoil yourself every month or so, you won’t have to feel like fun is always just out of reach. This kind of fun money in your budget is like the icing on the cake. It gives you that sweetener to keep you on track with your whole budgeting effort.

2 – It makes the fun money count

This monthly splurge budget doesn’t have to be much. $100 may be all you to need to spoil yourself a little and perhaps that’s all you can afford right now with your other day-to-day commitments and bigger fun goals to save for. But it’s an amount you should stick to. If you don’t put it towards something worth enjoying, you can be sure it will get spent anyway. And this can teach you an important lesson about why a budget works wonders for lifestyle goals, large and small. If you don’t take control of where your money goes, you’re very likely to spend it anyway and have little to show for it

3 – It gives you permission to spend – but not too much

Knowing that your fun money is finite can help you think more carefully about each spending choice. Keeping your monthly limit in mind when shopping or out with friends can remind you to put the brakes on spending when you’re at risk of getting carried away. Giving yourself permission for a couple of small splurges or one bigger one can feel more like a real treat when you know it’s money you can genuinely afford.

Source: FPA Money and Life

It’s the getaway you take when a getaway’s out of the question – the staycation.

Staycation: should you stay or should you go now?

By | Financial advice | No Comments

It’s the getaway you take when a getaway’s out of the question – the staycation. Whether it’s venturing out locally and returning each evening, or taking a few nights to explore places within driving distance of home, the staycation is becoming increasingly popular.

It might come down to time, or money, or just that you simply can’t be bothered with all the rigmarole of going overseas or interstate. Whatever the reason, it looks like the staycation is here to, well, stay.

Why are more people choosing to stay put?

Faced with the multi-headed hydra of stagnant wage growth, the rising price of many of life’s necessities, the lower value of the Australian dollar and an economy growing at its slowest rate since the global financial crisis, consumer confidence is low.

With the family budget top of mind, 62% of Australians plan to keep their annual trip to under $5,000 – which means splashing out on an overseas holiday is shoved on the back burner.

NSW Tourism Minister Stuart Ayres also believes staycations are an attractive proposition, “because of the convenience and comfort in vacationing so close to home. The ease of travel, coupled with exploring the hidden treasures of your own state, makes for a winning combination.”

He adds: “It’s an easy way for people to escape the day-to-day grind, but still have some flexibility within their itinerary. For example, friends or family may choose to join, it’s easy to add on a day or two, and the journey to your destination is often the best part.”

Other benefits, he says, include affordability and convenience: “Holidaying locally is an affordable option for people to get away without having to budget for expenses such as overseas flights, transfers and visas. The convenience of travelling somewhere familiar can also be appealing as the planning time required is far less.”

The pros and cons of a staycation

Pros

  • No queuing. An overseas trip involves queuing to check in, queuing at security, queuing at passport control, queuing to get on the plane. And then doing it all again at the other end to come home.
  • No need of passports or expensive, bothersome visas. And no chance of locking the passport in the hotel safe and only remembering it when you hit the airport.
  • Smaller, lighter bags are less hassle and you don’t have to check them in. They’re not needed at all if you’re a day tripper. There are no luggage size restrictions either, so if you’re taking a quick local trip with the kids, you can pack whatever you want.
  • There aren’t any so there are no delays and no cancellations.
  • You don’t need to take out extra, expensive policies.
  • Luggage again. Unless you’re a real klutz there’s no chance of losing your own bags.
  • Proximity to home. If there’s an emergency, you’re close enough to deal with it.
  • Getting to know your own area. Staycations are great ways to appreciate where you live.
  • No air miles and no flights mean it’s better for the planet.
  • Location, location, location. Spending money locally means you’re supporting local businesses.
  • It’s cheaper.
  • Pet-friendly. It’s not hard to find a local destination where your four-legged friends are welcome. No need for pet-sitters!

Cons

  • Being closer to home means being closer to work and the temptation to take that call or answer just that one email.
  • You can’t see the Eiffel Tower from your bedroom.

Source: Colonial First State

My-partner-doesnt-have-super-should-I-be-worried

My partner doesn’t have super, should I be worried?

By | Financial advice, Superannuation | No Comments

Picture the scene. You’ve moved past the honeymoon period of a new relationship and you think this could finally be the one.

You’re starting to think about the medium-term future and setting up your lives together.

So you’re at your favourite restaurant discussing joint finances when your partner drops a bombshell by revealing they hardly have any superannuation saved up.

Time to smash up the breadsticks, pour your glass of wine over them and storm out never to return?

Probably not. Ditching the love of your life for a lack of super could be a slight over-reaction. After all, there could be a number of entirely legitimate reasons their super is a bit low.

  • They could have been out of the paid workforce studying or volunteering for an extended period.
  • They could have been self-employed for a while and not got around to topping up their super.
  • They could have missed payments from a previous employer through no fault of their own.

But while a lack of super is probably not a very good reason to break up, it could give an indication of your partner’s overall attitude towards money.

The last thing you want is for any super secrets to fester. So even if one or both of you haven’t given super much thought up until now, if you’re getting serious it should be an important part of your discussion on joint finances.

7 questions to ask your partner about superannuation

Here are some of the super-related questions you might want to ask yourselves as part of your conversation on joint finances.

  1. Should you think about putting money into super to save for your first home together?

If you’re looking at setting up home together and you haven’t bought a property before, you could be eligible for the First Home Super Saver Scheme. You can contribute up to $30,000 each ($15,000 in any one financial year) into your tax-friendly super account and then withdraw it, along with a set earning amount, at a later date to pay for a deposit.

  1. Should you think about contribution splitting with your partner?

If you’re looking at boosting super for a spouse with a low super balance, a pretty easy way to get started is contribution splitting. If you’re living together in a de facto or married relationship, this strategy enables the spouse with a higher super balance to effectively transfer amounts of concessional contributions (including super guarantee payments) that they have received into the account of the spouse with a low super balance on an annual basis. And better still it won’t impact either partner’s cash flow.

  1. Should you think about making contributions to your partner’s super and claiming a tax offset?

If you’re living together—whether married or de facto—you can potentially benefit from the spouse contributions tax offset. This is where the higher-earning partner contributes towards the lower-earning partner’s super using after-tax dollars and claim a tax offset of up to $540.

  1. Should you think about taking advantage of government co-contributions?

If one of you is a low-to-middle income earner and they make an after-tax contribution to their super fund, they might be eligible for a government co-contribution of up to $500.

  1. Should you think about contributing more into your super?

If you’re thinking long term, super can be an effective tax-friendly vehicle to save for retirement. The current limit on concessional contributions is $25,000 a year (including super guarantee payments from your employer) so unless you’re a very high earner there could be more leeway to top up your super and save on tax each year.

And there’s also now an opportunity to claim a tax deduction for personal contributions made to super (regardless of whether you’re employed or self-employed). These contributions would be concessional contributions, taxed at 15% on entry, and would enable the person contributing to claim a tax deduction up to the balance of their remaining $25,000 concessional contribution cap.

Plus you can also put up to $100,000 a year (or $300,000 over a three-year period under bring-forward rules) in non-concessional contributions.

  1. Should you think about changing your investment options within super?

Your super savings are likely to become your biggest pot of money outside the family home. So it’s important to get up to speed with how your money is being invested. Depending on your super fund, you can usually choose between a basic set of options ranging from conservative (less risky assets like cash and bonds that have less potential for growth) all the way through to high growth (more risky assets like shares and property that have more potential for growth).

Your appetite for risk can change as you get older and your life changes so it’s important to revisit your options regularly to make sure they still match your circumstances.

  1. Should you think about making sure your partner receives your super benefits?

It’s important to make sure the right people receive your super if you die. So if you want to include your partner you’ll need to make the necessary arrangements with your super fund, nominate your beneficiaries and ensure your will is up to date.

Source: AMP