Budgeting Archives

4 fool-proof ways to keep on top of your credit cards

8 June, 20221 June, 2022 Updated on1 June, 2022 Budgeting, Education

Credit cards certainly make life easier – they are simple to use, accepted almost everywhere, and help you to buy what you want, when you want, particularly online. So much so that living close to the credit limit has become the norm for many people and spending can quickly get out of hand. To make sure your credit card works in your best interests, use these tips to stay on top of your debt. Routine is key We all know how easy it is to let things get away from us. Just like that power bill sitting at the bottom of the stack of mail on the bench or “accidentally” bingeing an entire Netflix season while the laundry piles up, we tend to postpone boring, albeit important, tasks. Create a routine, though, and you’ll complete these jobs simply out of habit. It can be as easy as setting a monthly reminder in your calendar to check that your credit card payments are up to date. Paying your credit card balance off in full each month, will help you avoid pesky interest fees. This handy tip will also help you avoid any late fees! Make use of technology If organisation skills are not your forte, why not take advantage of the many apps and services designed to help? ‘Mint’ is one of the many useful apps available that will organise your spending into categories, helping you ensure there is always cash to go towards your credit card repayments. Making use of automatic payments in your banking app can also be helpful. Payments will be made on time and best of all, once set up, you don’t have to lift a finger! Cash advances cost more When money is tight, people are forced to use their cards for cash advances (withdrawing cash) instead of just purchasing goods and services… and in doing so, are paying a high price for the privilege. Interest is charged immediately on a cash advance and at a higher rate than purchases. Even if you have an interest-free card, you will immediately start paying interest as soon as you withdraw cash using your card. If you must take cash off your card, repay it as quickly as possible. Emergency funds will save the day! You’ve probably heard about the importance of emergency funds, and with good reason! If we’ve learnt anything over the course of the COVID-19 pandemic it’s just how quickly things can change, particularly within our economy. So, whether it’s an increase in the cost of living or a rise in interest rates, it is vital to have a bit of spare cash handy. A good place to start is with an emergency fund calculator. It will consider your income, savings, and living expenses, and provide an estimate of how much spare cash you should be saving for a rainy day. Realistically, many of us couldn’t get by without our credit cards, but it is vital that we use them in a way that only provides a benefit to our lifestyle. The secret to credit card success — keep your spending responsible and pay the full balance off every month; otherwise, the only winners are the banks. The information provided in this article is general in nature only and does not constitute personal financial advice.

“Tap and go” and then what?

2 March, 202224 February, 2022 Updated on24 February, 2022 Budgeting

Talk about hammering the plastic. In November 2021, Australia’s 13.2 million credit card accounts were used to make over 292 million transactions with a total value of $31.9 billion. Card holders who don’t pay their balances in full every month are currently paying interest on more than $18 billion worth of credit card debt. Interest rates range from 10% to 22% per annum so that adds up to billions of interest owing – and growing! It’s not just the easy money that cards provide; it’s the easy form of delivery via “tap and go” that’s pushing our debt to extraordinary levels. The quicker the transaction, the less thought or planning required. Pay now and think about it (and deal with it) later. Don’t become a statistic – here are some things to look out for plus a few tips. Traps Over 40% of credit card spending goes on groceries and utilities. While this isn’t a problem if you pay off your card balance in full each month, if you’re paying interest just so you can buy the necessities of life, it’s a real danger sign that you may be living beyond your means. Most credit limits are well beyond cardholder needs. On average, Australians only use about a third of their available credit limits each month. However, by giving you a higher credit limit card issuers hope temptation will get the better of you. If that means you can’t pay off your entire balance each month you’ll end up paying them lots of interest. Tips Financial institutions can only offer to increase your credit limit if you specifically ‘opt in’. This can be done in writing or over the phone. However, it’s prudent to withhold this permission to keep your limit under control. You can always apply for a once-off increase if you really need to. Switch to a reloadable (prepaid) credit card. Like a debit card it means you are using your own money with the added advantages that you can pre-set a limit on your spending and reduce the risks associated with buying online. Prepaid cards are available from banks, other financial institutions, and Australia Post. Make sure you check any fees and charges before buying one. If you sign up for a new card for an interest-free purchase, pay it off during the interest-free period then cancel the card before the renewal fee is automatically charged. There is no point paying an annual fee if you’re not going to use the card. And a myth Many people think that it is only lower income earners who are susceptible to the siren call of easy credit. But like the Sirens of Greek folklore themselves, it’s a myth. In fact, higher income earners also rack up huge balances on gold, platinum and diamond cards, and can experience real difficulty in paying them off. If your credit cards are more an enemy than a friend, a financial adviser will be able to suggest a range of solutions to get you back on track. The information provided in this article is general in nature only and does not constitute personal financial advice.

What does it take to become a millionaire?

16 February, 20229 February, 2022 Updated on9 February, 2022 Budgeting, Investing

There are three key components to a successful savings strategy. The first is some surplus cash; an amount of money you can regularly set aside in your quest to become a millionaire. Second, an investment return. This can be in the form of share dividends, interest income, rent from properties or a mix. You won’t be withdrawing any of these returns from your investment portfolio; you’ll reinvest the income so that you earn interest on your interest on your interest. This so called compounding of investment returns, when combined with the next ingredient, is what will really drive your growing wealth. That final ingredient? Time. So what might your path to millionaire status look like? Let’s say you’re in your 20s and you’re prepared to wait 40 years to achieve your goal. Plug the relevant numbers into the savings goals calculator at moneysmart.gov.au and it will tell you that, at an interest rate of 10% pa and starting with a $0 balance, you’ll need to save just $157 per month to hit your target, or around a cup of barista-brewed coffee a day. Your total contribution will be $75,360. The other $924,640 is from your investment returns. No wonder that some people view compounding returns as a form of magic. The benefits of starting early can’t be stressed enough. If you only have 20 years to devote to your get-rich plan, you’ll need to save $1,306 per month. If you can afford that you’ll still be a millionaire, but $313,440 of the total will be your hard-earned money. A real return Of course, a million dollars in 40 years time won’t have the same buying power as a million bucks today. You’ll also likely pay tax on at least some of your investment income and incur some investment management fees. After accounting for inflation, tax and fees, let’s say your real rate of return is 6% pa. This lifts the price of a ticket to the real millionaires club to $500 per month over 40 years. Going for growth With your timeframe and contribution rate settled you’ll need to design an investment portfolio that is likely to deliver your required return without taking on undue risk. With a long investment horizon, and particularly in periods of low interest rates, it’s appropriate to look to growth assets such as shares and property to provide the foundation of your portfolio. And don’t be daunted every time investment markets take a bit of a tumble. Instead see them as opportunities to pick up some bargains. A helping hand To make sure you make the most of your savings, understand investment issues and utilise the best tax structure talk to your financial adviser. The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 30s: It’s important to squeeze it in!

2 February, 20223 February, 2022 Updated on3 February, 2022 Budgeting, Superannuation

If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Are you really expected to think about super at a time like this? Well, yes, there are a few things you need to pay attention to. Short-term plans As careers start to hit their strides, the thirties can be a time for earning a good income. If children are not yet in the picture, but are part of the future plan, then it’s an excellent idea to squirrel away and invest any spare cash to prepare for a drop in family income when Junior arrives. Just remember that any savings you want to access before retirement should not be invested in superannuation. Long-term comfort Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $164,287 per year to enjoy a ‘comfortable’ retirement. If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Growing the nest egg Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. Another option for lower income earners to explore is the co-contribution. If you are eligible, and if you can afford to contribute up to $1,000 to your super, you could receive up to $500 from the government. Let your super pay for insurance For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so talk to a licensed financial adviser about putting a plan into place. The information provided in this article is general in nature only and does not constitute personal financial advice.

Make this year a financially healthy one

5 January, 20223 February, 2022 Updated on3 February, 2022 Budgeting

Another year is over. Did you achieve everything you’d hoped? Are you better or worse off financially than you were this time last year? With a new year in front of you, what can you do to make the most of every moment? January to March Make a start by turning wishes into goals. Some might be long-term like becoming debt-free, saving a home deposit, or retiring in a few years’ time. What can you do this year to support those goals? Write it all down and give it a name. At the same time, don’t forget living for now. Prepare a month-by-month budget that makes room for the fun times – holidays and celebrations – as well as covering the necessities. Anticipate spikes in your spending. Do your car, home and life insurance premiums all seem to be due at the same time putting pressure on your cash flow? Investigate monthly premium payments or spreading renewal dates across the year. April to June It’s time to prepare for the end of financial year (EOFY). By June 30 you will want to have made any intended additional superannuation contributions (make sure you stay within relevant limits) and finalised donations to your favourite charities. Is there any other tax-deductible expenditure you can bring forward? June is also the month for EOFY sales – an opportunity to grab some bargains on early Christmas shopping and birthday gift purchases. Don’t forget to include these in your budget. July to September If you’re expecting a tax refund for the financial year just finished, lodge your tax return early. What are you going to do with the windfall? Whether you put it toward one of your goals or blow it on a big night out is up to you. Just make sure it’s part of the plan. With your tax return out of the way, the third quarter is a good time to start a bit of financial spring-cleaning. Review your super and savings, insurance and Will, loans and credit cards, Power of Attorney, and overall financial strategy. Is everything up to date? How’s your super doing? Would salary-sacrificing help? Can you consolidate debt or refinance at a lower rate? October to December Into the final quarter and how are you tracking? Are you ‘on plan’? Maybe the plan you came up with back in January wasn’t realistic. It’s not too late to adjust both your strategy and your expectations. If things are looking good, it’s important to stay focused. Christmas is looming with its temptations to over-spend. Once the turkey and plum pudding have settled, it’s time to review the year just gone and to give yourself a pat on the back for what you’ve achieved. Then take a deep breath, check your goals, and update the plan for the coming year. The information provided in this article is general in nature only and does not constitute personal financial advice.

Building financial resilience

24 November, 202118 November, 2021 Updated on18 November, 2021 Budgeting

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience? Expect the unexpected Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver. With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan. Create buffers You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments. Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover. Cut costs The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances. Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun. Invest in quality There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers. This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again. The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility. With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal capital gain triggers a capital gains tax event and consequent reduction in portfolio value. Take advice Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience. The information provided in this article is general in nature only and does not constitute personal financial advice.

When was the last time you paid cash?

7 July, 202130 June, 2021 Updated on30 June, 2021 Budgeting, Education

Prior to COVID, we were steadily moving towards a cashless world. Post 2020, even the most resilient of us has made the leap to tap-and-go payments sooner than we expected. From the morning coffee to filling up the petrol tank, we wave that plastic with little thought to the impact on our account balances. In fairness to us, many retailers are now adopting the ‘no-cash please’ trading regime, but we Australians have a reputation for embracing technology and touchless shopping is no exception. According to the Organisation for Economic Co-operation and Development (OECD), Australian household debt is currently sitting at around 210% of net disposable income. That places us fifth in the world, behind Denmark (257%), Norway (240%), Netherlands (236%) and Switzerland (223%). Compared with countries with spending habits similar to our own – the USA with (105%) and the UK (142%) – we’re quite high. If your debt level is pushing northwards of your preferred limit, here are a few ideas for getting, and staying, on track: – Pay your full card balance off every monthSure, it’s an oldie but a goodie. You know what you need to do; if your current balance is too high, pay more than the minimum amount. The first step in breaking the credit cycle is to get off it, which leads into our next point: – Create a realistic budgetThis will identify where your money is going and how much extra you can pay off your credit cards. The government’s Moneysmart website has a free budget planner to help you. Alternatively, chat with your financial planner and work with them to develop a payment strategy to get your debts under control, and stay that way. – Keep your tap-and-go receipts and reconcile them against your account each weekThis is one of the best ways to see exactly how much you’re shelling out, and on what. You’ll identify areas of unnecessary spending, and you’ll spot any errors or dodgy transactions. – Instead of a credit card for your touchless transactions, consider using a pre-paid cardAvailable from banks and other financial institutions – even Australia Post offers one – you load it with your own money and use it for in-person or online shopping. It’s just like a credit card but without the risk of getting into debt. – Consider your subscriptionsYou know, streaming services, magazines and memberships, etc. Many renew automatically and the first you’ll know about it is an unexpected – often expensive – transaction on your card. Do a stocktake to see what subscriptions you have and decide if you really need them. For those you no longer need, change your subscription settings so they don’t automatically renew. Don’t worry, they’ll alert you when the renewal is due in case you change your mind! We’re definitely living in an interesting time. Our lives have altered in ways we’d never have imagined and we Australians, in our typical way, are adapting to these ‘new-norms’. This is a good thing, just as long as we stay in control! The information provided in this article is general in nature only and does not constitute personal financial advice.

What does a good financial adviser do?

9 June, 20212 June, 2021 Updated on2 June, 2021 Aged Care, Budgeting, Economy, Finance, Insurance, Investing, Retirement, Superannuation

Some people may think that a financial adviser’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly. This is not the reality, of course. Investments are only one small part of what your financial adviser can provide for you. Consider for a moment the number of websites, newsprint and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finance. Whether it’s the latest share market activity, economic news or the constantly changing tax and superannuation rules, a licenced financial adviser can help answer your burning questions and save you the hassle of finding it yourself. Usually, the benefit you receive from a financial adviser can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn’t know you could get. The finance section of your newspaper or online magazine probably includes a regular “advice” or “Q & A” column. By law, these columns must warn readers that the advice does not consider your personal situation or needs, and you should consider its appropriateness before acting. In setting your financial strategy, a good financial adviser will take the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk. As the years go by, your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, your adviser is there to help you make the most of the good times and the bad. And a regular financial review doesn’t always mean major changes, but at least you’ll know that you’re on the right track – and not having to do it alone. Quality, knowledgeable advice is critical, and wherever you are on your financial path, now is always the best time to talk to us. The information provided in this article is general in nature only and does not constitute personal financial advice.

It’s time to get focused on super in your 40s

3 March, 202112 March, 2021 Updated on12 March, 2021 Budgeting, Education, Finance, Investing, Retirement, Superannuation

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. A beneficial sacrificeAt this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit. Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at only 15%. If you earn between $90,001 and $180,000 per year that money would otherwise be taxed at 39%. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone. It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed $25,000 in a given year the amount above this limit will be added to your assessable income and taxed at your marginal tax rate. What about the mortgage?Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super produces the better outcome in most cases. One caveat – if you think you might need to access that money before retiring don’t put it into super. Pay down the mortgage and redraw should you need to. Let the government contributeLow-income earners can pick up an easy, government-sponsored, 50% return on their investment just by making an after-tax contribution to their super fund. If you can contribute $1,000 of your own money to super, you could receive up to $500 as a co-contribution. Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income. Your financial adviser will be able to help you decide if this strategy would benefit you. Protect what you can’t afford to loseWith debts and dependants, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required. Seek professional adviceThe forties is an important decade for wealth creation with many things to consider, so talk to us and we’ll help you make sure the next 20 years are the best for your super. This is general information only

Three steps to your children’s financial success

27 January, 202117 September, 2021 Updated on17 September, 2021 Budgeting, Education

For many of us, our first experience of banking and savings was the school Savings Account Program. But in 2019 the Australian Securities and Investments Commission (ASIC) raised concerns that these accounts had little lasting impact on children’s savings behaviour. All parents want their children to be better-off than they were – more secure and financially independent, but the big question remains: where do you start? Ushering your children toward financial security can be a simple three-step process. Step 1: Create good habits Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save. Help them by: Providing a piggy bank for very young children, or a glass jar through which they can see their savings mounting up. Teaching the difference between needs and wants. Lead by example with your own savings habits. Involving them in the household budget; compare prices at the supermarket and demonstrate bill-paying. Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to: spending on anything they want. donating to charity to instil a sense of community and empathy, saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys. Step 2: Inform Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores. People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals and better interest rates. Helping kids understand the concept of a credit score can be a little daunting, so try these tips: Brush up on your knowledge first. Try our eLearning section for some great general information. Don’t focus on numbers, explain that it’s about financial behaviour over time. Avoid complexity and keep the information age-relevant. Use examples. Discuss mistakes you’ve made in the past, explain how you rectified them. Step 3: Consider where you’re saving Record-low interest rates have taken the fun out of savings, but don’t let that stop your kids from calculating how much they can earn from the right type of account. The Moneysmart website has savings calculators that kids can play with and learn from. The banking and finance industry offers a plethora of accounts specifically designed to encourage kids to save. Help them research the account that will suit them; consider fees and interest. Additionally, searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and savings. Introduce your kids to good habits while they’re young, and you’ll be setting them up for success. Finding the most child-appropriate plans and accounts that specifically suit your child’s needs can be a minefield. Our financial advisers will work with you to assist you to guide your children into a financially secure future. The information provided in this article is general in nature only and does not constitute personal financial advice.

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