Stop resting on your (high income earner) laurels!

Stop resting on your (high income earner) laurels!

Updated on Education, Investing, Superannuation

Achieving a high income is a significant accomplishment. You’ve put in the hard yards, climbed the ladder, and now you’re pulling in the big bucks!  But don’t be mistaken; a high income does not automatically equate to financial security. Just because the money is rolling in today doesn’t mean you’re protected from tomorrow’s uncertainties. Resting on your high-income earner laurels, assuming that a large salary guarantees long-term security without considering long-term financial planning, can be downright risky. So, before you get too comfortable, it’s time for a reality check. When “More” Becomes the Norm Earning more often leads to spending more, a phenomenon known as lifestyle inflation. As your income grows, so does your desire for bigger and better things—a nicer house, a new car, dinners at fine restaurants. This lifestyle upgrade can feel deserved, but without careful planning, it can leave you no better off financially than when you earned less. For instance, imagine a couple earning a combined $350,000 a year. On paper, that sounds like a strong financial position. But between a large mortgage, car loans, private school fees, and regular international holidays, their expenses could easily absorb most of their income. If an unexpected event like a job loss or economic downturn were to happen, they’d find themselves in a precarious situation, with little financial buffer. This is the danger of lifestyle inflation: it’s subtle and easy to justify, but it can undermine your ability to build real wealth. High Income ≠ Financial Security A high income can create the illusion of financial security. It’s easy to assume that as long as the money is coming in, you’re set for life. But without the right safeguards in place, a high income can actually mask financial vulnerabilities. Take Liam, for example. Liam, a 34-year-old marketing executive in Sydney, was earning $250,000 a year and living a pretty comfortable lifestyle. He assumed his high income meant he was financially secure. But when the pandemic hit, his job was made redundant, and without an emergency fund or sufficient savings, Liam found himself in financial distress within months. Liam’s story illustrates a key point: a high income is not a substitute for financial planning. If your finances aren’t structured to handle changes, even a hefty salary won’t protect you from financial uncertainty. How to Future-Proof Your Finances So, how do you make sure you’re not resting on your laurels, assuming that your high income will take care of everything? Here are some strategies to ensure you’re future proofing your finances, no matter how much you earn. 1. Create a Budget and Stick to It A budget is just as important for high earners as it is for those with more modest incomes. Avoid the temptation to spend simply because you can. Instead, allocate funds towards savings, investments, and building an emergency fund. 2. Build an Emergency Fund Even high earners need a safety net. A good place to start is having 3-6 months of living expenses in an emergency fund. This ensures that if something unexpected happens you’ll have the financial resources to cover your expenses without going into debt. 3. Invest Wisely Don’t rely solely on your salary—make your money work for you by building a diversified investment portfolio. The earlier you start, the better, as even small investments can grow significantly over time thanks to compound growth. Don’t wait—time is your biggest asset when investing! 4. Plan for the Long Term Even if retirement seems far away, it’s never too early to start planning. Superannuation is a tax effective structure for building wealth and making contributions to super can be a tax effective strategy for high income earners! 5. Don’t Overlook Insurance Insurance might not be the most exciting part of financial planning, but it’s essential. Income protection, life insurance, and health insurance are vital tools to safeguard your financial future. Take Control Before Life Happens While earning a high salary certainly opens doors to a more comfortable lifestyle, it also comes with the risk of complacency. The belief that you’re financially set simply because you’re earning more is dangerous. Lifestyle inflation, lack of an emergency plan, and failure to invest wisely can all leave you vulnerable when life throws a curveball. It’s not about depriving yourself of the things you enjoy—it’s about ensuring that your financial future is secure, so you can continue enjoying them for years to come. So, don’t rest on your laurels. Take proactive steps now to secure your financial future. You’ve worked hard for that high income. Now its time for that income to work for you!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

6 steps to a Happy New Financial Year

6 steps to a Happy New Financial Year

Updated on Budgeting, Education

The new financial year provides an opportunity for a fresh start for your finances. Make this the financial year you get on top of yours… for good!  We’ve broken it down into six bite-sized, manageable steps for you to tackle over six months, because real change takes time! The below is a suggested path to a New Financial You, however, you can choose your preferred order and pace. July: Goal Setting What is it that you want? I mean REALLY want? As with any goal, your financial goals should be SMART – Specific, Measurable, Achievable, Relevant, Timely. Whether you’re wanting to build an emergency fund, get out of debt, or save for a specific goal, write down your goals in detail and then revisit these regularly to remind yourself of what you’re working towards. August: Set your Budget A budget helps you see what’s coming in, what’s going out and most importantly how much you have to allocate towards your goals. There are plenty of free templates online so find one that works for you and add in your personal income and expenses.  Tip – Go through your last three months’ bank statements to get details of your spending. September: Set up a Savings Plan You can do this by working out how much money you need for a particular savings goal and by when, then breaking it down into regular amounts to be set aside. Example – If you want to save $2,000 for Christmas by December 1st, you’ll need to set aside $154/week from September 1st. Tip – Automate savings by setting up a regular transfer. October: Super Check It’s time to health check your superannuation:  Make sure your contact details are up to date to ensure you’re not missing out on important correspondence. Do you have a current beneficiary nomination in place? A valid beneficiary nomination will direct your super fund on how you would like your super benefits to be paid, if you were to pass away. How much is your super costing future you? There are a whole range of fees that might be funded from your super, including administration, investment, and adviser service fees, all of which will have an impact on your retirement savings.  Do you know how you’re super is invested? Is it Conservative or Growth? How well has it performed over the long term? Some important things to consider when choosing an investment option include your life stage, investment horizon and comfort for risk. November: Insurance Review There are a range of insurances that offer financial security for you and your family, including:  This month, get to know your current insurances and consider whether the types and amounts are suitable for your needs. December: Estate Planning Estate Planning involves documenting what you want to happen in the event you pass away or become incapacitated. It might include Wills, Powers of Attorney, Health Directives and Guardianship nominations.  If you don’t have these in place already, it’s time to build out your Estate Plan.  If you do, it’s time to dig these out for a review. Congratulations, you made it!  If you’d like some extra support on your journey, reach out to your Financial Adviser today for help with achieving your financial goals!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Avoid passing bad money habits on to your children

Avoid passing bad money habits on to your children

Updated on Budgeting, Education

Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. Unfortunately, that doesn’t mean we’re actually putting that know-how into practise and making astute financial decisions.   According to the Australian Bureau of Statistics (ABS), the average Australian household debt has risen by 7.3% (over $260,000) in the 2021-2022 financial year. As of July 2023, Australians were paying $18.4 billion – that’s billion with a B – in credit card interest every year.  As parents, we’re role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.  For us to replace bad money habits with good ones may be a big ask, particularly as they’ve evolved over the course of our lives. But the trouble is that kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.  Of course, we all want the best for our children. But in this busy world, we’re pulled in so many directions at once that sometimes it’s all we can do to juggle our daily work, family, school and social lives. Who has time to consider the inadvertent messages we could be giving out?   Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?   The table below shows a list of good and bad money habits that are commonly passed onto children.  Poor money habits  Good money habits Impulse buying We regularly make spur-of-the-moment purchases. Additionally, we tend to indulge our kids – we want them to be happy.  Impulsive or indulgent behaviour can inadvertently foster in children an attitude of instant gratification, normalising impulse buying.  Lead by example As a family, we discuss the difference between needs and wants. When we see something we want, we walk away and give ourselves a cooling off period to determine whether we genuinely need the item. We encourage our kids to wait for things they want, and suggest that delaying the purchase can lead to smarter choices and savings. When shopping we compare prices and identify items that offer better value.   Not budgeting  We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before pay day.   Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means.  Family budgeting  We involve our children in creating and monitoring our household budget. We discuss decisions around allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc.  Credit card misuse  We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out we make sure we pay off as much as we can every month. Some months, depending on expenses, we can’t manage the full balance. Cards, while useful, can cause children to perceive them as a source of unlimited money.  No free money  We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. We involve our kids in making card payments and explain the consequences of not paying the full balance each month.  Not saving  We’ve never set up a structured savings plan so have little-to-no savings. We’d like to take a holiday or have a nestegg for emergencies but there never seems to be any money left over at the end of the pay cycle. Children seeing parents struggling to save may not learn the value of saving or setting goals.  Set goals, save We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. We get them to set short-term goals like saving for a new toy or book, and long-term goals like an outing or a larger purchase, and then help them create a savings plan to achieve their goals. We make it fun by using a visual chart to track progress and when they reach their goal, we celebrate the achievement, making a special occasion out of buying the item or attending the event.  Failing to discuss  We never talk about money with our kids. They have a limited understanding of how money is earned and how we use it. Failing to discuss how money is earned can lead to children not grasping the concept of money as a finite resource, and appreciating its value. Widespread use of credit cards or taking cash from ATMs suggests that money is readily accessible.   Have the conversation  We have always been open with our kids about the household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out. We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores.  If we can make time to examine the way we view and use money, and replace poor habits with good ones, we can positively influence our kids by:  As parents we have a limited opportunity to equip our children with tools like, knowledge, confidence and forward planning skills – before they decide they know more than us!   So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.   I don’t know about you, but if I can achieve that, I’ll know that I’ve done what I can to enable the next generation to succeed and thrive.   What a legacy!  The information provided in this article is general in nature only…

Charting a course to financial recovery 

Charting a course to financial recovery 

Budgeting, Education, Finance

Australian Bureau of Statistics, (ABS) figures indicate that between 2017-2018 and 2019-2020 total average household debt rose from $190,000 to $204,000.  That’s an increase of over 7% in two years!  The reasons why would make for an interesting study, however a more pressing question might be what can we do about it?   Combine high levels of debt with rising interest rates and a cost-of-living crisis, and it’s no surprise that Australian households are reaching out to Debt Management (DM) companies to help regain control of their finances.  DM companies are private organisations that can assist by:  Sometimes, DM companies repay your debts – to a specified limit – and you repay them under a single loan arrangement. Terms and payment amounts can be negotiated, offering a beacon of hope and a sense that you’re taking back control.  If this sounds like the perfect solution, remember that for every pro, there’s usually a con. For example:  While weighing the pros and cons of a DM service, here are a few do-it-yourself strategies for consideration.  Budgeting  Creating a budget is a 3-step process.  The government’s Moneysmart website lists easy ways of cutting back everyday spending.  Negotiating  Rather than customers defaulting, most banks and utilities companies prefer to negotiate repayment terms, sometimes even offering assistance programs.    The key is to reach out before it’s too late. Be upfront about your situation and willing to arrive at a mutually beneficial arrangement.   Remember, nobody wins when debts are not paid.  Government assistance  The Australian government provides a range of financial assistance packages and interest-free loans depending on circumstances. These include crisis payments for unexpected situations, and income support payments for cost of living expenses.  Of course there are conditions, but further information, including application criteria, is available from the MyGov website.   Financial counselling   Financial counsellors help you understand your financial position and assist you to navigate your way out of difficulty.  Some local communities offer free, or low-cost, financial literacy programs, aimed at providing education about money and debt reduction.  Everyone’s financial position is unique. There’s no one-size-fits-all, so it’s important that your action plan is specific to your needs and that you’re 100% comfortable with any decisions you make.  If you’re uncertain, seek the assistance of a qualified financial planner.   What’s crucial is that you do something; being proactive is empowering and sets you on the path to financial recovery.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Building financial resilience 

Building financial resilience 

Updated on Budgeting, Education, Finance, Investing

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.  

Post Christmas Sales – A Survival Guide 

Post Christmas Sales – A Survival Guide 

Updated on Budgeting, Education, Finance

We’ve all experienced it… the undeniable allure of post-Christmas sales.   No sooner has Christmas wrapped up for the year than the frenzy of Boxing Day Sales descends upon us.  Every store window beckons, and our inboxes overflow with promises of unbeatable discounts.  But before you indulge in some festive leftovers and make a beeline for the air-conditioned wonderland of sales, let’s take a moment to pause and ponder…   Is that shiny, discounted gadget truly a necessity?   Do those new outfits genuinely add value to your wardrobe?   Or might there be a wiser way to allocate your hard-earned money?  The Allure and Reality of Post-Christmas Sales  The holiday season often leaves our wallets feeling lighter than usual.   Australia’s festive spending reached an eye-watering $74.5 billion in 2022, marking an 8.6% increase from the previous year, according to the Australian Retailers Association.   And Boxing Day? A whopping $1.23 billion was spent in just 24 hours!   These figures aren’t just numbers; they paint a picture of our collective weakness for a good holiday sale.  But here’s the other side of the coin: while sales can offer genuine bargains, they also come with pitfalls. The risk of accumulating more debt is a very real reality for many shoppers, especially with credit cards already stretched thin from holiday shopping.   And let’s face it, impulse purchases can often lead to buyer’s remorse and an overstuffed home.  The Merits of Post-Christmas Sales  While the post-Christmas sales period often comes with warnings of overspending, it’s not all doom and gloom.  When approached with a well-thought-out strategy, these sales can be a great opportunity to secure essential items—be it electronics, clothing, or household goods—at a fraction of their original prices.   But how can one truly benefit without falling into the common traps? The key lies in being discerning.   With a bit of planning and restraint, the post-Christmas sales can be both enjoyable and economically rewarding.  Smart Money Moves Beyond Sales  It’s easy to forget about your bigger picture goals when there are neon signs screaming discounts of 50% OFF or more!  But remember, every dollar spent is a dollar less saved… or put towards those bigger picture goals.    Before you fall prey to the post-Christmas sales, consider these alternatives:  Save for a Rainy Day: Life is unpredictable. Having a safety net can make all the difference.  Debt Reduction: Free yourself from the burden of debt, by paying down your credit cards and/or any loans you have.   Invest: Think stocks, bonds, or other avenues to grow your wealth. (Hello Financial Freedom!)  Financial Goals: Would you rather a new outfit?  Or to be one step closer to that dream holiday, new car, or first home?    Post-Christmas sales can be both a treasure trove and a minefield. The choice is yours.   This festive season don’t succumb blindly to the allure of holiday sale discounts. Instead, either purchase your “need to have” items (remember, be discerning here!), or skip the sales completely and opt to put the money towards your financial goals!   Here’s to spending wisely, and a financially savvy new year!  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Your recession survival guide

Your recession survival guide

Updated on Economy, Education, Finance

In the ever-fluctuating world of economics, recessions are an inevitable part of the financial cycle.   While they can be daunting, understanding their nature and preparing for their impact can make a significant difference in weathering the storm.   Understanding Recessions  At its core, a recession represents a period where economic activity contracts, often reflected in consecutive quarters of negative GDP (Gross Domestic Product) growth. This contraction is not just a statistic on a chart; it resonates through various facets of the economy.   Employment opportunities might become scarcer, leading to job losses or reduced working hours. Households might witness a dip in their income levels, which in turn affects their purchasing power. Consequently, consumer spending, a significant driver of the economy, takes a hit.  The onset of a recession can occur for various reasons, and often it’s a combination of several factors, rather than just one event.   High inflation rates, for instance, can reduce the value of money, prompting consumers to cut back on spending.    Additionally, rising consumer debt can be problematic. While borrowing can boost economic growth in the short term, too much debt can lead to payment defaults, affecting both households and the banks they borrowed from.   Moreover, unexpected events, such as a global health crisis, can interrupt business operations and reduce consumer demand, leading to economic downturns.   It’s the mix of these local and global factors that highlights the intricate nature of recessions and the importance of understanding them.  Preparing Everyday Expenses for a Recession  1. Budgeting: The cornerstone of financial resilience is a well-planned budget. Track your monthly income and expenses, prioritise necessities, and cut back on luxuries. This will not only help you save but also give you a clear picture of where your money goes.  2. Debt Reduction: High-interest debts can cripple your finances. Focus on paying off high-interest debts first, like credit card balances. Consider consolidating your debts or negotiating with lenders for better terms.  3. Emergency Fund: An emergency fund acts as a financial cushion. Aim to save at least three to six months’ worth of living expenses. This fund can be a lifesaver if you face job loss or unexpected expenses during a recession.  Fortifying Your Savings for a Recession  1. Automatic Savings: Set up an automatic transfer to your savings account each month. This ensures you’re consistently saving, making it less tempting to spend that money elsewhere.  2. Diversify Your Savings: Don’t put all your eggs in one basket. Consider diversifying your savings across different accounts or financial institutions. This can protect your money from bank failures or other unforeseen events.  3. Liquidity is Key: In uncertain times, having access to your savings can be crucial. While long-term deposits or high-yield accounts might offer better interest rates, ensure a portion of your savings is in easily accessible accounts, like a regular savings account or a money market account. This ensures you can quickly access funds without penalties or waiting periods should the need arise.  Navigating Investments During a Recession  1. Review Your Strategy: Recessions are not the time for hasty decisions. Re-evaluate your investment strategy in light of the current economic climate. Ensure your portfolio aligns with your long-term financial goals.  2. Seek Professional Advice: If you’re unsure about your investments, consult a financial adviser. They can provide insights tailored to your situation and help you make informed decisions.  3. Avoid Impulsive Moves: It’s natural to feel anxious during economic downturns. However, making impulsive investment decisions based on fear can lead to significant losses. Stay informed, be patient, and remember that recessions are temporary.  Recessions, while challenging, are a natural part of the economic cycle. By understanding their nature and preparing in advance, you can not only survive, but thrive, during these times.   Remember, the key is to be proactive, stay informed, and make well-considered financial decisions. With the right strategies in place, you can navigate any economic storm with confidence!  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Harvesting Financial Success

Harvesting Financial Success

Updated on Budgeting, Education, Finance

Spring is the perfect time to rejuvenate your financial habits as well as your garden!  Here are 5 ways to set you, and your garden, up for success:  1. Plan your garden: Start with deciding what type of garden you want. In other words, get clear about what goals you want to achieve and by when. Once you have your list of goals prioritise them, so you know where to focus your efforts.  Tip: If a goal is large and will take some time to achieve, set yourself some smaller goals with shorter timeframes along the way.   2. Pull out the weeds: You don’t see garden designers on TV rushing in to plant a new garden without getting rid of the weeds first. In financial terms this is the same as eliminating bad debt. Bad debt is debt used to purchase things that don’t go up in value, like cars and household goods. Financing purchases with credit card debt (where the entire balance isn’t paid off each month), personal loans and perhaps ‘buy now, pay later’ facilities mean paying very high interest rates or late fees. Your total cost ends up much more than the original purchase price. These are your weeds – pull them out and don’t let them take hold again!  3. Prepare the soil: A key element to a flourishing garden is good soil. For us this is managing our cashflow. For many people our income is fairly consistent, so the focus is on managing outflows. Think of this as a spending plan not a budget. The ‘B’ word has a strong association with denial and, much like a diet, too much restriction can be counter-productive. Be honest when completing it as you need to know exactly where your cash is going. Your adviser can be a huge help with this. It’s an opportunity to look at your spending and think again about your goals. Is the enjoyment you get from three streaming services more than what you’ll get from achieving your goal? What do you want more?  Tip: Ways to reduce spending often require some planning. Taking lunch to work can save a heap of money. Too rushed to do it in the morning? Make something the night before – and remember to take it with you the next day!  4. Plant your garden: This is where things start to take shape! Gardens often start small so think of this as your initial investment which over time becomes larger and larger. In your financial life this is the power of compounding. To help those initial plants fill out your garden quicker you can add other small plants over time. This is known as dollar cost averaging or adding regularly to your initial investment to boost the effect of compounding.   5. Protect from pests: Your garden will appreciate some help to guard against pests and disease. In the same way it’s a good idea for you to protect your biggest asset – your ability to earn income. Income protection and other types of life insurance can protect you against unexpected events and prevent all the hard work you’ve put into your financial garden from unravelling.  Success requires commitment because, just like droughts which affect your garden, there will be times when reaching your goal seems hard going. Don’t abandon your dreams! With clear goals, elimination of bad debt, a realistic cashflow plan, disciplined regular saving and protection of your biggest asset, you’ll be harvesting rewards season after season!  The information provided in this article is general in nature only and does not constitute personal financial advice.    

Financial Education for a Successful Future 

Financial Education for a Successful Future 

Updated on Education, Finance

Think back to when you got your first job and that sweet taste of financial independence. Regardless of what age you started working, it’s unlikely you knew how to manage that first paycheck.  Let’s face it; our world isn’t particularly adept at teaching financial literacy to the younger generation.   I don’t know about you, but when I was in school, we learned trigonometry (SOH-CAH-TOA is still permanently etched in my brain), which has been helpful for all the times I’ve needed to solve the missing sides and angles of a right triangle, but not so much for managing my financial affairs as an adult.    It’s time we change that narrative by sparking open, honest discussions about money and giving our young adults the financial tools they need to flourish.  The Need for Open Discussions About Finance  Money talk has often been cloaked in secrecy, even considered taboo in some households. This needs to change.   Parents can play an integral role in setting their children up for financial success by fostering an environment where money conversations flow freely. Open dialogue demystifies the world of finance and empowers young adults to make informed decisions.  Using Positive Language  As we foster an environment of open discussions around money, it’s important to remember that the language we use significantly impacts the subconscious beliefs and attitudes our children will develop.    Just as negativity can breed fear and anxiety, positive language can cultivate a healthy relationship with money.   Instead of saying, “We can’t afford this,” try saying, “Let’s work out how we can save for this.” This small shift in dialogue encourages a mindset of abundance and possibility rather than scarcity. It helps young adults view financial challenges as opportunities for growth, aiding them in building a positive and proactive belief system around money.  Financial Goal Setting  Goals give us direction and purpose.   Whether saving for a first car, paying off a student loan, or investing in their first property, encouraging young adults to set and work towards financial goals from an early age is a great way to help them build discipline and a future focussed mindset.  It’s equally important to celebrate milestones, no matter how small. This positive reinforcement nurtures a sense of achievement and motivation, propelling them further on their financial journey. The Essentials of Budgeting  Ever heard of the saying, “Failing to plan is planning to fail”?   That’s precisely why budgeting is so important. Budgeting is not about limiting yourself; it’s about making your money work for you.   The 50/30/20 rule, where 50% of your income goes towards needs, 30% towards wants, and 20% towards savings, is a great place to start for young adults because it’s simple and gets them in the habit of saving from an early age.    Understanding and Practicing Responsible Spending  Managing your money doesn’t mean you have to miss out on the things you enjoy. It’s all about responsible spending.   Need versus want is a timeless debate, but helping young adults to understand the difference is key.   Impulse spending is something that can often sabotage budgeting and saving efforts. A great tip for young adults to help them avoid impulse spending is to implement a 48-hour waiting period for non-essential spending. This allows time to consider whether the purchase is within their budget and aligned with their financial goals.    We’re not just equipping our young adults with financial knowledge but empowering them to build a successful financial future.   So, let’s keep the money conversations flowing and start helping our young adults build habits that will set them up for financial success. The narrative changes today!     The information provided in this article is general in nature only and does not constitute personal financial advice.   

Building a Strong Foundation: Avoiding Mortgage Default

Building a Strong Foundation: Avoiding Mortgage Default

Updated on Budgeting, Economy, Finance

When building a home, it’s often said that the foundations are the most important part. Their primary purpose is to hold your house up – supporting the structure and preventing it from being affected by uneven ground. Similarly, when purchasing a home and financing it with a mortgage, your financial foundation is just as crucial. A solid financial foundation can help you avoid mortgage stress, loan default, or even eviction. Unfortunately, economic factors such as higher living expenses, interest rate hikes, or job loss can jeopardise your financial foundation. What is mortgage stress? Mortgage stress occurs when homeowners face difficulty meeting their mortgage repayments and their living expenses. The Australian Bureau of Statistics has developed a “Mortgage Affordability Indicator”, which applies a 30% mortgage repayment threshold based on a household’s income. Mortgage stress can cause immense strain on individuals and families and increase the risk of mortgage default. Defaulting on a home loan happens when borrowers cannot make repayments as per the agreed terms and conditions of the loan agreement. This situation may result in serious consequences, including eviction and mortgagee possession of the property by the lender. How to avoid mortgage stress and loan default 1. Know Your Financial Situation One of the most crucial steps to avoid mortgage default is having a clear understanding of your financial situation. By evaluating your income, expenses, and overall financial position, you can identify potential risks and understand what options are available to you. Tracking your income and expenses will help you to analyse your spending habits and identify areas where you can cut back or make adjustments to free up cash flow. This is also a great time to review your expenses and renegotiate with service providers. Reviewing your financial position may help you identify available options to assist in financial hardship. 2. Seek Professional Guidance A mortgage broker can help you assess your current loan terms and explore options for refinancing or loan modifications that better align with your financial circumstances. They can provide valuable advice and assist in negotiating more favourable terms with your lender. 3. Communicate with Your Lender If you anticipate difficulties in making your mortgage repayments, it is best to communicate proactively with your lender in advance. Most lenders have teams dedicated to supporting customers experiencing financial hardship. They may be able to offer temporary payment arrangements or alternative solutions to help you through a difficult period. Case Study: Consider the case of John and Sarah, a couple facing the risk of defaulting on their mortgage due to a sudden but temporary loss of income. To avoid this outcome, they took several steps: Reviewed their financial situation – John and Sarah underwent a complete review of their financial situation. They reviewed their expenses, paused or cut back on discretionary spending, and renegotiated with all of their utility and service providers. This freed up cash flow to allocate towards their home loan. They also identified that they were slightly ahead with their home loan repayments. Communicated with their lender – John and Sarah reached out to their lender to explore their loan repayment choices. Since they had made some progress in their payments, they were eligible for a repayment holiday. This option would allow them to pay less towards their home loan for the next six months. They had examined their financial situation and were confident that they could manage these reduced repayments, and this would give them six months to replace the lost income and get back on their feet. To prevent mortgage stress and default, it’s important to actively manage your finances and have a clear understanding of your financial situation. Though it can be tough, taking early action and being transparent with your lender can help you work together to overcome financial challenges and ensure the safety of your home. If you are facing any difficulties in making your mortgage payments, you can find helpful resources on the MoneySmart website: https://moneysmart.gov.au/. The information provided in this article is general in nature only and does not constitute personal financial advice.

How to create a Debt Repayment Plan

How to create a Debt Repayment Plan

Budgeting, Finance, Superannuation

Debt can be overwhelming and stressful, but creating a plan to pay it off can help ease that burden. In Australia, household debt is on the rise, with the average household owing over $260,000 in 2021, according to the Australian Bureau of Statistics. If you’re struggling with debt, here are some tips and strategies for creating a debt repayment plan. Create a Budget The first step in creating a debt repayment plan is to create a budget. This will help you understand where your money is going and where you can cut back on expenses. List all of your income and expenses, including bills, rent or mortgage payments, groceries, and any other expenses. Once you have a clear picture of your finances, you can start to identify areas where you can save money. Prioritise High-Interest Debt If you have multiple debts, it’s important to prioritise the ones with the highest interest rates. These debts are costing you the most money in interest charges, so paying them off first will save you money in the long run. Make minimum payments on all of your debts, and put any extra money towards the one with the highest interest rate. Automate Payments Automating your debt payments can help ensure that you don’t miss any payments and incur late fees. Set up automatic payments for the minimum payments on all of your debts, and then add extra payments as you can afford them. This will also help you stay on track with your debt repayment plan. Choose a Repayment Strategy There are different methods of debt repayment, such as the snowball and avalanche methods. The snowball method involves paying off the smallest debt first, while the avalanche method involves paying off the debt with the highest interest rate first. Choose the method that works best for your situation, and stick to it. Case Study Let’s compare two scenarios to see how creating a debt repayment plan can make a difference. Scenario 1: Sarah has $10,000 in credit card debt, with an interest rate of 20%. She is making minimum payments of $200 per month, but is struggling to make progress on paying off the debt. Scenario 2: John has the same amount of credit card debt, but has created a debt repayment plan. He is making minimum payments of $200 per month, but has also cut back on expenses and is putting an extra $200 per month towards the debt. He is using the avalanche method, and has prioritised the credit card with the highest interest rate of 25%. After one year, Sarah will still have $8,360 in credit card debt, and will have paid $1,440 in interest charges. In contrast, John will have paid off $4,800 of his debt, and will have saved $1,200 in interest charges. Creating a debt repayment plan can make a big difference in your financial situation. By creating a budget, prioritising high-interest debt, automating payments, and choosing a repayment strategy, you can take control of your debt and work towards becoming debt-free. If you need help creating a debt repayment plan, speak with our advisers who can provide guidance and support.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Thriving in the ‘Gig Economy’

Thriving in the ‘Gig Economy’

Updated on Budgeting, Education, Tax

If you’re a freelancer or contractor or maybe even a consultant then you’re part of the “gig economy”. Gone is the job for life, or even a job in the normal, employed meaning of the word. For you, work consists of short-term contracts or a series of one-off jobs. “Gigs” as the band down at the pub might put it. For some, gig work is a liberating choice that allows them to work their own hours, holiday when they like and work wherever they wish. For others it’s a necessity in a weak job market where under-employment and age discrimination is rife, and more companies choose to outsource specific tasks. Key to the gig economy is technology, be it an Uber app, Skype, crowdsourcing sites or just email and the Web. A study found that 4.1 million Australians had freelanced in 2014/15, and it’s a trend more likely to grow than diminish. So if you’re a “gig worker” what can you do to make the most of your situation? It’s business If you’re happy picking up the odd jobs that fall into your lap for a little extra money, that’s fine. But if you are looking to earn a full-time income then you’re in business and need to operate accordingly. To begin with, you need to know: Who your potential clients are; How to reach out to them; How to gain referrals; The processes you have to put into place to track your work, issue invoices, and make sure you get paid on time; How to meet your tax obligations. Protect yourself Depending on the work you do and the requirements of your clients you may need a range of insurances: Professional indemnity insurance – if there’s any chance a client could sue you in relation to the work you are engaged to complete. Public liability insurance – in case your work activities cause injury to a member of the public. Income protection insurance – you may be eligible for workers’ compensation insurance, but the rules vary from state to state, depend on your business structure, and only cover work-related injuries. Income protection insurance will also cover you against illness and non-work-related injuries. Life insurance – if you have dependents but little in the way of net assets. Think long term Can you build your business into something you can sell? If not, how will you fund your retirement? As a gig worker you’re unlikely to receive compulsory superannuation contributions, but you can (and should) make your own contributions. Personal contributions are tax deductible up to the annual concessional cap of $27,500. Get advice All state and territory governments have departments of business that offer a wealth of information and support for small businesses. Check out the help available in your state. And talk to your financial adviser. Aside from being able to look at your insurance, savings and super needs, your adviser may be an experienced small business operator, a potential mentor, and a valuable member of your network. Contact us today!   The information provided in this article is general in nature only and does not constitute personal financial advice.

Three-Minute Financial Check-up

Three-Minute Financial Check-up

Updated on Budgeting

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress. A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress. It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors. There is nothing worse than that niggling feeling that you’re not in control of your financial situation or worse, the dread that you may not be able to meet your next home loan repayments or that you’ve maxed out your credit cards. For many people, it is simply that their lives are so busy they never have the time to focus on their financial position and so the constant pressure of earning money and paying bills can easily spin out of control. Just as all financial situations can be improved, so all financial problems can be resolved and the earlier you act, the better. Just the simple step of reaching out for help will make you feel better about your financial situation. So, it may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you have created a debt mountain that you feel helpless to reduce. If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help. A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you should make time to discuss your financial situation with a qualified financial adviser. They will be able to tell you just how serious your situation is and more, how you can take steps immediately to improve your financial position and help you get you back on track, so you do feel in control. Your Three Minute Financial Check-Up Action YES NO Do you pay all your credit cards off in full by their due date?     Do you sleep easy knowing all your bills will be paid when they fall due?     Do you have a budget, and do you stick to it?     Are you making all your loan repayments on time?     Do you know exactly how much your home loan is today?     Do you know what you would do if you lost your job tomorrow?     Are you confident about your children’s financial future?     Do you have life and total and permanent disability insurance in place?     Do you have income protection in place?     Do you know how much you have in super?     Are you and your partner in agreement about your finances?     Do you feel confident about your overall financial position?     The information provided in this article is general in nature only and does not constitute personal financial advice.

6 steps to a sustainable Christmas

6 steps to a sustainable Christmas

Budgeting

Just as the Grinch stole Christmas, excess spending can rob us all of yuletide happiness. Seasonal credit card splurges can create ballooning long term debt, while unnecessary consumption inevitably leads to a blow-out in rubbish bin waste. The Commonwealth Bank of Australia estimates $11 billion is spent on presents each year, including some 20 million unwanted gifts. At the same time, seasonal celebrations boost landfill rubbish by a massive 30 per cent. So, if you want to max out the ho, ho, ho in Christmas this year, think of applying more whoa, whoa, whoa to your spending and consumption ideas. Here are six simple tips Ebenezer Scrooge would be proud of: Ninety per cent of Australians claim to recycle something, sometimes. What better way to do this than to shop for presents in one of Australia’s 2,500 opportunity shops? Forget the old days of chipped crockery and stained used clothing. Op shops are full of trendy, mint condition items and are the perfect place to find something slightly offbeat or unusual for your loved one. Save on postage and reduce needless paper usage by sending clever and original e-Christmas cards. Head online to create your seasonal messages to email to friends and family. Many websites provide free cards, while others offer designer animated versions. Instead of giving a physical gift, give an experience such as tickets to a concert or a voucher to use at a favourite restaurant. Better still, why not gift something special of yourself by offering to cook a meal or provide free babysitting for a family member. Giving an experience rather than a physical gift also means you don’t need to waste precious paper by wrapping the present or spend money on postage getting it to that special someone. If you do give a physical present, think of some clever ways to wrap it, so you’re not adding to the 150,000 km of wrapping paper Australians needlessly use each year – that’s enough paper to circle the equator 4 times. Wrap your gift in a re-usable patterned tea towel or scarf, or better still, invest in some brightly patterned boxes to hold your present that can be recycled from one Christmas to the next. Stop for a moment and look around your home to see what you can re-use and turn into a gift. A great place to start is the garden. Many plants can be easily divided and, in doing so, will create new plants you can pot up in a re-usable pot to give away. Take time to plan your meals this season and, wherever possible, cut down on buying heavily packaged or processed foods. Instead, buy fresh foods that can be eaten without much cooking, re-used as leftovers, or frozen for later consumption. It’s estimated that ninety per cent of Australians discard some 25 per cent of all the food they buy during December – that’s food that has been needlessly produced only to end up in Australia’s landfills. What really matters is remembering how blessed we are to be enjoying the festive season in whatever way we can and being with the people we care about most.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Being sensible with Buy Now Pay Later this silly season

Being sensible with Buy Now Pay Later this silly season

Updated on Budgeting

Move over debit and credit cards; consumers are flocking to Buy Now Pay Later (BNPL) services. Afterpay, Zip Pay and several similar payment solutions allow shoppers to take home their goodies now while paying them off via a few weekly, fortnightly or monthly payments. There’s no interest payable as such, although fees are charged for late payments. A survey by Mozo reveals that 30% of Australian adults have one or more BNPL accounts and we’re not afraid to use them. Afterpay, our most popular BNPL service, achieved sales of $4.3 billion across Australia and New Zealand in the 2019 financial year, nearly double its sales of the previous year. With the nation set to splurge around $27 billion on Christmas, it’s a safe bet that plenty of that spend will be by BNPL. But with 60% of those surveyed by Mozo admitting that BNPL lead them to buy things that they wouldn’t have otherwise, it begs the question: how to use this payment option sensibly during the silly season? 1. Set your limits Make sure you have a budget for your Christmas spend, and use it to help resist the temptation of impulse purchases. 2. Track your spending Don’t just track your BNPL spending. Make sure you review credit and debit card purchases, too. Are you staying within budget across all your spending methods? 3. Avoid fees Around one third of BNPL users have missed at least one payment. While late fees may seem modest, they can add up. 4. Don’t repay BNPL loans with a credit card If you don’t pay off your entire credit card bill within the interest-free period, adding your BNPL repayments to the card may see you paying a high rate of interest on your purchases. Better to use a debit card or direct debit from your bank account, and making sure there’s enough money in the account to meet payments. 5. Avoid BNPL if you’re saving for a home loan Lenders may look at your use of BNPL as a sign that you don’t have significant savings and are living from payday to payday. The lower your debt, of all types, the easier it will be to get a mortgage. 6. Have a happy festive season Used wisely, BNPL can help you jingle your bells and put the merry in your Christmas. Just make sure you know what you’re signing up for and that you can meet all of the regular payments. Take care, and you’ll be able to enjoy the start of the New Year without a financial hangover. For further budgeting tips and financial advice, talk to us. We’re here to help.    The information provided in this article is general in nature only and does not constitute personal financial advice. 

Retirement wrongs that could send you broke!

Retirement wrongs that could send you broke!

Updated on Finance

While retirement should be the best years of your life, many Australians make simple, avoidable mistakes with their finances that can leave them without the funds to really enjoy life. However, with some simple good advice at the start of retirement, these mistakes can usually be avoided, leaving retirees to focus on what is really important and that is, simply enjoying life. Making emotional investment decisions Many people reach retirement age and panic that they don’t have enough money. This then prompts them to make high risk investments in the vague hope of catching up on lost time. Too often their dreams of big profits blind them to risks and many end up losing a chunk, if not all, of their money. All retirement savings are irreplaceable and should be invested with this in mind. Ignoring your portfolio At the other end of the spectrum are retirees who think they have so little saved for retirement that it doesn’t matter what they do with it, in terms of their investments, it won’t make any difference to their lives. This is almost as big a mistake as taking excessive risks. No matter how much money you have saved for retirement, you should be pro-active in making sure these funds are safely invested and providing for you. Miscalculating your retirement funds Many misjudge either the total amount they have to retire on, and/or, the level of income it will generate. This is particularly the case when the decision is made to keep an investment property in retirement. The high value can often give a false sense of financial security, while the actual income generated after all the costs are deducted, can be extremely low. Determine just how much money you have saved for retirement, conservatively judge how much income will be generated from those savings and ensure you don’t spend more than your investments generate. Changing asset allocations to conservative assets, such as cash For many, retirement is the first time they have had to manage or decide how to invest a large amount of money. This can be unnerving at the best of times. Throw in a small market downturn and it is not unusual for people to panic and sell perfectly good investments. This is, of course, the worst option. By panicking and selling investments when the market has taken a step down, losses are locked in and any chance of recovering those funds as the market improves, is lost. Keeping up with the “Joneses” Too often, we’re swept along by what others do. Focus on how you want to live. Think about what will make you happy in retirement and then invest your savings safely so you can focus on enjoying life. For most, the things that make them happiest are free. Time spent with grandchildren, walking barefoot on a beach, or spending time in the garden, all cost very little money and are a fabulous boost to the body, health and mind. If you have any doubts at all about how you should structure your finances, make the decision to get quality advice before you make any of these mistakes. It will be the best investment you make in retirement. The information provided in this article is general in nature only and does not constitute personal financial advice.

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

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

Updated on 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?

“Tap and go” and then what?

Updated on 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?

What does it take to become a millionaire?

Updated on 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.

Make this year a financially healthy one

Make this year a financially healthy one

Updated on 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

Building financial resilience

Updated on 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?

When was the last time you paid cash?

Updated on 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.

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

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

Updated on 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

Super in your 20s: Boring? Doesn’t have to be!

Super in your 20s: Boring? Doesn’t have to be!

Updated on Education, Superannuation

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life. Are you getting any? Earn more than $450 in any given month? Then every three months your employer should be paying 9.5% of that into your super fund. Usually you can choose your fund; if you don’t, it gets paid into a super fund of your employer’s choice. If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website (ato.gov.au) to see what you can do. This is your money. Where have you got it? Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and insurance premiums. Simple fix – combine your super into one account. Is it working for YOU? Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others. What do you want? Buying a new car. Travelling, Having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours but think about this: If Mum and Dad retired this year, they would need a minimum of around $61,909 per year to enjoy themselves. If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $214,248. That means you will need to have at least $3.71 million in savings! Sure you’ve got 40-plus years but that’s still a lot of money to save up! It can be done if you start early enough – and you don’t need to miss out on enjoying life now. Starting early and adding a bit extra when you can makes a big difference. Let’s work on another 40 years before you can retire. If you start now by making an extra post-tax contribution of just 1% of your annual income to super, ($350 from a $35,000 salary – and the government could add to that with a co-contribution) at an 8% investment return could add an extra $149,000 to your retirement fund. If you wait 20 years before starting to make that extra contribution, you’ll only get a boost of $49,000. $100,000 less! Continuing this small extra contribution as your salary increases will turbo boost your super fund balance. Imagine your retirement party?! So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us today and we will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life!   The information provided in this article is general in nature only and does not constitute personal financial advice.

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