Category

General advice

Don't-let-overspending-be-your-undoing

Don’t let overspending be your undoing

By | General advice | No Comments

Do you struggle to control your spending around your friends and family? If the urge to ‘keep up’ with a certain lifestyle is stretching your finances, it could be time to take action.

From splitting the bill at an expensive restaurant, to having the ‘right’ house, car and clothes, many of us fall victim to overspending. But if you regularly suffer from buyer’s remorse, or spend over and above your means, it’s time for a serious reality check.

Overspending can quickly spiral into long-term debt, especially if you use credit cards to try and bridge the gap.

Young Australians are particularly at risk, taking on debt at a far earlier age and carrying it longer than ever before. Research by RateCity shows that 42 per cent of those aged under 24 have between $10,000 and $30,000 in personal debt, not including a mortgage.

Even if you’re not living paycheque to paycheque, overspending will prevent you from reaching your longer term financial goals, like financial security and financial freedom.

Fortunately spending habits are just that – habits – and they can be changed. Here’s how to avoid the debt spiral and get your finances on track.

1 – Identify your risky behaviours

Do a financial health check and work out where the majority of your overspending happens.

Is it a penchant for designer clothes? An addiction to expensive electronics? Or a love of fine dining? We all have vices that threaten to throw us off track, so look at the numbers and be honest with yourself about which behaviours are forcing your finances off course.

If those behaviours are closely associated with certain friends, family or work colleagues, it could be time to re-evaluate your unhealthy relationships.

2 – Associate with people who share your values

Once you know what’s driving your poor spending habits, use it to take action. Distance yourself from any negative influences and find others who better fit in with your long term plans. Being surrounded by likeminded people will help restore your bank balance in no time.

3 – Find alternatives

If your social life is at the centre of your overspending it could be time to make some healthy swaps. Try suggesting low-cost alternatives such as bush walking, art classes or the beach. You might even meet new people who share your values.

Lead by example and encourage good financial practices among your friends and family. Be upfront about your goals and values, without being pushy. True friends will be supportive and want to spend time with you anyway.

4 – Make a financial plan

Taking control of your spending starts with evaluating your priorities and setting long-term goals. By making a financial plan, you’ll identify what is really important to you – and the steps you need to take to get there.

You can do much of the groundwork on your own, although consulting a financial planning professional can help you to nail the details and act on your plans. You could be experiencing financial freedom sooner than you realise.

5 – Stick to a budget

It’s much easier to maintain your new spending habits and make a real change if you have a budget in place. Make sure to allocate funds for clothing, entertainment and ‘fun’, so that you still get to indulge in some of your favourite interests.

6 – Create a ‘want to buy’ list

Every time something comes up that you want to buy, add it to your list then wait at least seven days before purchasing the item. In the meantime, find at least three prices for the same item. This reduces the risk of splurging on things you don’t really need and makes it more likely that you’ll get a good deal.

7 – Focus on the bigger picture

It’s easy to get carried away trying to keep up with a certain lifestyle and you may not even realise it’s happening until you’re already in debt. Good financial planning and a focus on the bigger picture will help keep your overspending in check.

Source: Money & Life

Deferred-loan-repayments-due-to-COVID-19

What you need to know if you deferred your loan repayments due to COVID-19

By | General advice | No Comments

With the initial six-month deferral period coming to an end, lenders have started contacting customers who deferred their home and business loans due to COVID-19.

Over the next month, Aussie lenders will contact more than 450,000 borrowers to assess whether they can start repaying their loans.

This includes at least 260,000 mortgage deferrals and 105,000 business loan deferrals. More than 900,000 loans have been deferred in total since the beginning of the pandemic.

So, what are your options if you deferred your loan and you’re yet to resume paying it?

If you can afford to resume loan repayments

Borrowers who are in a position to resume their repayments will be asked to do so. This means if you’re employed, or your business is in a better position than when you deferred, you’ll need to start making repayments. But don’t worry, that’s actually a good thing.

This is because lenders can capitalise unpaid interest from your deferred payments into the balance of your loan. So, the longer you defer your payments, the more unpaid interest will accrue. You could end up with a higher loan balance – and higher repayments – than when you started the deferral.

If you can’t afford your full loan repayments

The Australian Banking Association says banks are keen to work with borrowers to find a way for them to resume making repayments. That might mean restructuring the loan, converting to interest-only payments for a period of time, or extending the loan term.

All of these options are designed to reduce the size of your repayments in the short term, which might be just what you need to get through the pandemic.

However, be aware that there may be longer term implications. Always do your due diligence and ask your lender what you’ll end up paying over the life of the loan. And if you’re in any doubt, seek professional financial advice before making a decision.

If you can’t afford to start repaying your loan yet

Some mortgage holders who are still struggling financially due to the impact of COVID-19 may be eligible for a further four-month extension to repay their home loans.

The extension won’t be granted automatically, but it will be determined by lenders on a case-by-case basis. If you think you’ll be in a better position to start repaying your home or business loan in a few months’ time, speak to your lender about it.

But once again, don’t forget to find out how much more you’ll pay over the life of the loan, and what your repayments will be.

If you’re in severe financial difficulty

If you don’t think you’ll be able to start repaying your home loan in future, and you’d like to understand your options, speak to a financial counsellor as soon as possible.

A financial counsellor can work with you to understand your true financial position and, if possible, put a budget in place to meet your mortgage repayments. They can also help consolidate and restructure other debts, and negotiate the best possible terms with creditors.

If you are thinking about selling your home, speak to your bank and find out whether any fees apply for exiting your mortgage early. Whatever you do, don’t make any major decisions without speaking to a financial counsellor or your financial adviser first.

Get your financial foundations right

Whatever your current circumstances, there’s never been a more important time to get your finances on track. That means sticking to a budget, reining in your cash flow and seeking professional financial advice.

While many people think financial advice is only for the wealthy, in reality you can benefit significantly at any age or stage of life. In such an uncertain environment, getting professional financial advice can give you peace of mind and put you on track to emerge financially stronger than ever.

Source: FPA Money & Life

Saving

Aussie’s saving for a rainy day instead of a holiday

By | General advice | No Comments

Not many people can say they’ve been unaffected by COVID-19. Whether you’ve lost work, had hours reduced or been fortunate to maintain employment, COVID has been a wake-up call for how we manage our money and set financial goals.

How are we managing?

Many of us are doing smart things such as:

  • 29% are cancelling non-essential services
  • 25% are reducing spending/expenses
  • 42% are putting money aside for unforeseen events

But worryingly there’s been an increase in people relying on credit cards to pay for everyday expenses and taking out personal loans. And 23% of 18-35yr olds surveyed had also accessed some of their superannuation early.

How has it changed our goals?

For starters, more of us are actually setting goals than before COVID. It’s made us more determined to gain control of our money and be better prepared for whatever life throws our way. And the goals we’re aiming for now are all about paying down debt and saving.

Goals we’re mostly on track for:

  • 73% have reduced spending/expenses
  • 65% have paid off the mortgage
  • 61% have paid off personal loan/credit card
  • 60% have put extra money aside for retirement

However, the COVID curveball has meant we’ve had to do a bit of fine-tuning. We’re extending the timeframe it’ll take for us to reach our goal, or we’re abandoning it altogether if it no longer suits our situation.

  • 43% have stopped saving for an investment property
  • 40% are no longer saving for a big-ticket item like a holiday
  • 35% postponed investing in the stock market
  • 31% decided to put on hold saving for a house deposit

Goodbye holiday, hello rainy day

Pre-COVID, saving for a holiday was a priority goal for almost half of us. Whether it was an annual trip overseas or regular cheeky getaways, Aussies were big travellers. But with the world shut down and travel greatly restricted, we’re realigning that goal to something that makes us feel more secure – saving for a rainy day.

Because we’re more focused on saving, we’re watching our spending more closely too. Things we used to think we needed have been recategorised as nice-to-haves. And it’s not just the overhanging threat of job losses that have made us feel this way. Stay at home orders and have allowed us space to take stock and start appreciating the simple things in life once again. We’re valuing time with our family, a slower pace, and being debt free over buying things for the sake of it, or that we might not be able to afford.

Whatever your situation, now could be an ideal time to revisit your financial goals and decide if they’re still right for you.

Source: AMP

A-new-way-of-working

The future of work – a new way of working

By | General advice | No Comments

2020 will be the year that changed the way many people work. COVID-19 introduced both societal and organisational shifts, with businesses and their employees forced to adapt quickly to new ways of working that included work being carried out remotely and with increased flexibility.

Although it took us by surprise, it has perhaps brought forward many businesses’ plans to create workplaces of the future. It’s presented an opportunity to act now and redefine the future of work, building on what’s been learned throughout the pandemic.

For employees, removing a stressful commute and the need for smart business clothes and adding the ability to get the washing on while the kettle boils has proved a success.

In turn, businesses have experienced increases in productivity and now see further potential to reduce overheads. If working remotely becomes the new way of working, office spaces will be smaller, reducing the cost of rent, cleaning and heating/cooling, even if there is a need to invest in IT systems and cyber security.

So, what might our workplace of the future look like, and what might it mean for our environment, social skills and work productivity?

It all starts with strong leadership. Business leaders must map out a path for the return to work, whilst learning from the lessons of COVID-19 to create their workplaces of the future. It’s a significant opportunity to drive positive change – change that might otherwise have taken years to design and implement, jumping through corporate hoops.

As well as the physical environment, leaders need to recognise managing virtual teams is quite different from face-to-face. The norms that emerge during face-to-face contact take longer to establish via a screen and require far more nurturing and intuition. Employees need to understand what’s expected of them, how decisions are made, what are the appropriate communication channels and how their performance will be measured.

A happy medium

As we return to work, some workplaces will advance quickly, transforming themselves into workplaces of the future, where people and technology co-exist effortlessly. Others may take longer to establish new ways of working. But either way, the future of work is certain to be different from what we’ve known before.

All changes must be sustainable to enable a meaningful, long-term recovery. And while health and safety dominate initial return to work plans, productivity must also be a key consideration. We’ll likely transition to a world where employees will be able to choose how they manage their time between working within the office and remotely.

Source: BT

Redundancy

What to do next if you’re facing redundancy

By | General advice | No Comments

Uncertainty around COVID-19 might be increasing your stress levels about losing your job, but here are five ways to soften the financial blow.

In April, Australia hit its highest unemployment rate in five years, and with the Federal Treasurer expecting an unemployment rate of around 10% by the end of the year, many Aussies may be feeling a little uneasy about their future job prospects.

Which sectors have been hardest hit?

COVID-19 has affected all areas of the workforce, but analysis by AMP reveals recruitment, retail and hospitality make up almost half of all early super release withdrawals, suggesting people in these sectors may have been more greatly affected by job losses.

Uncertainty around the reopening of interstate and international borders makes any tourism rebound also hard to predict.

How to get on the front foot with your situation?

It’s important to know that a genuine redundancy payment is made when you’ve been retrenched because there’s no longer a need for the job that you’re doing.

Here are some ways to help make sure you get what’s yours if you’re faced with a redundancy so you can be well prepared for the future.

1 – Know what you’re entitled to

What your employer is required to pay you will depend on your conditions of employment, so ask your boss or HR department (which might be easier if you’re still working), or be sure to check your redundancy payment summary carefully to ensure you get what it is you’re owed.

Fair Work’s redundancy calculator (www.calculate.fairwork.gov.au/endingemployment) can help you find what redundancy pay and entitlements to expect. It’s also a good place to find details of pay and conditions if you’re covered by a registered agreement.

Meanwhile, keep in mind that apart from your actual redundancy payment, you may be eligible for things like payout of accrued annual leave and long service leave.

When the redundancy happens, if you’re under your Centrelink Age Pension age (which will be between 65 and 67 depending on when you were born), special tax treatment is also given to genuine redundancy payouts, which means some payments you receive will be tax free up to a certain limit based on your years of service.

2 – Sort out your money situation, including benefits and super

The size of your payout may determine the time you can afford to be out of work, what you’ll be able to live on from week to week, along with how you’ll tackle financial responsibilities until you find another job. With that in mind you may want to:

Create a workable budget

You can do this by writing down your daily living expenses, and what you estimate any upcoming bills and loan repayments will total. This way you’ll be across all your outgoings, as well as where you may be able to make minimum repayments and cut back on other forms of spending.

Put your money somewhere useful

It might be tempting to go on a holiday, undertake renovations or pay off all existing debts with your redundancy packet, but if you don’t find work within a certain timeframe, you may leave yourself short.

Think about where you could put your money, still have access to it and potentially reap added benefits. Options may include high-interest savings accounts or a mortgage offset account that allows you to redraw funds while reducing what you pay in interest on your home loan.

Apply for financial hardship with your lenders

If your redundancy payout starts to run out and you’re struggling to make repayments, you may be able to seek assistance from your lenders by claiming financial hardship.

All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.

Find out if you’re eligible for government assistance

There’s a range of Federal and State government assistance available related to COVID-19. Make sure you’re across these and don’t miss out on support you might be able to access straight away.

These may change as the economy emerges from hibernation, so bookmark the pages relevant to you, in case you’re out of work for longer than you anticipate.

Depending on your age, different benefits may be appropriate at different ages – for instance most workers may look to JobSeeker payments where they’re out of work, while the Age Pension may be more appropriate for older Aussies.

Waiting periods may apply to some benefits, so keep that in mind when it comes to any payout you receive, as you may need it to cover your living expenses for a while.

Loss of a job and income in the family could also mean that you may qualify for Family Tax Benefits, or for a higher rate of payment.

Look into your super situation

See how much money you have in super and think about the effect a break from work may have on your balance.

If you have insurance inside super and are paying premiums with your super money, consider how this may affect your retirement savings if the premiums aren’t being offset by contributions.

You might also be considering early access to super during COVID-19, where the Federal Government is allowing eligible people affected by the outbreak to access up to $10,000 of their super as a tax-free payout between 1 July and 31 December 2020.

There may be short-term advantages to this, but there may also be some disadvantages that you’ll want to make sure you’re across.

3 – Create a plan for your return to work

You might have a bit of leeway to take some time off, but when you do look to join the workforce again, a good place to start will be your resume. Make sure your previous roles and responsibilities are up to date and that you’ve listed all your skills and achievements.

In the meantime, set up relevant online job searches, tidy up your LinkedIn profile, touch base with recruiters in your field and don’t be afraid to target companies directly.

4 – Contemplate the benefits of training

Depending on whether you want to remain in your industry or make a career change, further training could help you gain new qualifications, keeping in mind this can still cost time and money.

A new education assistance package has recently been made available to help displaced workers upskill and retrain during COVID-19. A number of free online courses are also available from TAFE, while Open University offers a range of short and longer education courses for all levels.

5 – Seek further support

There’s a range of support and resources available.

Talk to your financial adviser as they may pick up on things that could otherwise be missed

Check out AMP’s free webinar – Managing through a redundancy

Find a range of articles on AMP’s COVID-19 support hub

Seek free financial counselling from the National Debt Helpline on 1800 007 007

Take a look at the government’s Moneysmart website for further financial education.

If you’re finding it difficult to cope and need to speak to someone, there’s a range of mental health and family support services available through:

Beyond Blue – 1300 22 4636

1800 RESPECT – 1800 737 732

Lifeline – 13 11 14

 

Source: AMP Insights

Some-ways-to-use-your-tax-refund-for-a-stronger-financial-future

Some ways to use your tax refund for a stronger financial future

By | General advice | No Comments

Whether you breeze through tax time or dread the extra admin, receiving a tax refund makes the effort worthwhile.

For many of us, getting a financial boost will be even more welcome this year, and you might be looking around for the best ways to use it.

These simple actions can help you figure out how to make a plan for your tax return. And if you’re looking for inspiration for how to spend it, we suggest some ideas to consider, too.

Plan to succeed

Never underestimate the power of a well-crafted plan – it’s easy to watch funds dwindle when you haven’t given them a clear direction. Recent research has revealed that 81% of us admit to splurging an average of $1,430 annually as a result of comfort spending and that one in six Australians struggle with credit card debt.

Like any goal, your ambitions for this year’s tax return can be more easily realised if you have a concrete plan in place. In fact, studies have found that taking the time to write down your goals and plans can actually improve your chances of making them happen.

Once you’ve lodged your tax return, you should have a decent idea about the amount of your refund. Use the time before you receive the money to give yourself a financial check-up and decide exactly where you plan to put your tax refund to avoid excitement spending once it lands in your account. This includes any money you’re hoping to use for a holiday or other splurge – work it into your financial plan to avoid spending beyond your means.

Anticipate your upcoming living expenses

When making your plan, you might want to consider your upcoming living expenses, particularly any large, irregular bills such as car insurance and registration costs, utility bills and general home maintenance.

Putting aside some of your tax return as a cushion for upcoming expenses or an emergency fund helps you avoid reaching for other financial support – such as personal loans and credit cards – when the bills start to build up.

Reduce outstanding debt

If you have some debt to pay down, you’re not alone: the average Australian household debt-to-income ratio is around 190%, meaning we owe almost twice as much as we earn each year. Putting your tax return towards any outstanding debts, including mortgage repayments, personal loans and any credit card debt may help reduce any interest charges.

Invest in growing your wealth

If you don’t need the money for immediate expenses, paying off debt (or the occasional luxury), you might be looking to make a long-term investment with the extra money. You might consider contributing some or all of your refund to boost your super, or add it to a term deposit or savings account.

Make tax-deductible purchases

If you’ve been holding off buying specific equipment for work, such as a new laptop or desk, now could be a good time to make the purchase. For purchases over $300, tax deductions are calculated on the depreciation of the ‘effective life’ of the item. If you purchase them at the beginning of a financial year, the item has almost a full year to depreciate before you do your next tax return.

Donate to a charity

Although this has been one of the most difficult years in living memory, Australians have shown extraordinary generosity by donating to bushfire appeals and other charities. If you plan to support a charity or not-for-profit organisation, don’t forget that any donations over $2 to eligible organisations in Australia are tax deductible. Just remember to keep a receipt for when you start preparing next year’s tax return.

Source: AMP Insights

HomeBuilder grant

Are you eligible for the HomeBuilder grant?

By | General advice | No Comments

Available for a limited time, the HomeBuilder grant offers eligible owner-occupiers, including first-home buyers, a potential tax-free $25,000 boost to help fund the cost of building a new home or substantially renovating an existing home.

Although not specifically targeted at first-home buyers, the Government expects the HomeBuilder grant will be popular with first-home buyers looking to buy a house and land package, as well as growing families upgrading to a bigger new home.

It could also spark interest for retirees who might see this as a trigger to downsize their home, using the grant to help purchase a new smaller apartment or unit, and potentially the money saved to invest into their retirement fund.

As with any Government grant program, there are rules around who is eligible and the type of renovations or properties you can use the money for.

Deciding if you’re eligible

The first and most simple criteria for the Homebuilder grant is that you must be an owner-occupier. If you tick that box, and you’re someone looking to build or renovate your home, you must also meet the following criteria.

  • Be an Australian citizen aged 18 or over.
  • Have an annual income less than $125,000 for individuals or less than $200,000 for couples (based on your 2018/19 (or later) tax return).
  • Planning an appropriate renovation or new build

The Government has defined strict price caps for renovations and new builds to ensure the HomeBuilder scheme sits in-line with other programs already operating in Australia.

  • Substantial renovations – the planned cost of a renovation must be between $150,000 and $750,000, and the value of the property being renovated should be less than $1.5 million when work begins.
  • New builds – the purchase value of new homes (house and land combined) must not exceed $750,000. This also applies to new homes bought off-the-plan.

In addition, all building contracts must be entered into at arm’s length. This means the builder you choose cannot be a relative for example, and you cannot be an owner-builder.

Types of property eligible for the HomeBuilder grant

Good news – this is the most flexible part of the HomeBuilder scheme. Whether you own a house or apartment, or you’re buying a new house and land package or a property off-the-plan, all are eligible types of dwelling.

However, you must live in (or plan to live in) the property, ie you’re an owner-occupier. The HomeBuilder grant is not available to investors looking to renovate or those wanting to build a new home to use as an investment property.

Defining ‘substantial renovations’

In simple terms, the renovations you undertake must improve the liveability, accessibility or safety of your home. And the changes or additions must be connected to the main property.
While there isn’t an exhaustive list of do’s and don’ts, here are a few things that aren’t considered improvements.

  • Tennis courts
  • Swimming pool
  • Spas and saunas
  • Sheds or garages not connected to the property

Given that the scale of required renovations far exceeds just painting walls and replacing carpets, the work must be carried out by a licensed or registered builder. Also, the terms of any contract should be commercially reasonable and the contract price should reflect fair market value and not be inflated to ensure it fits within the imposed price boundaries.

The HomeBuilder grant is only available for a limited time, so if you’re thinking of applying there’s no time to lose.

Source: BT