The dawn of a new year sees many people setting new year’s resolutions such as losing some weight or giving up smoking. Similarly, the beginning of a new year is the ideal time for setting financial goals, and here are four practical ways you can kick your year off to a great start.

1. Decide what you want to achieve.

January is perfect for taking stock of where you’re at financially, particularly as those post-December bills start rolling in. So perhaps you’d like to start by paying off debt or commence a savings plan for a new car or family holiday. The main thing is to be decisive.

2. Set up a realistic budget

Setting a realistic household budget will provide understanding of your finances and identify areas of unnecessary spending. This will not only assist in balancing your income and expenses, but will help you clear debt and allocate money to other financial goals like setting up an emergency cash fund.

3. Tidy up your filing cabinet.

According to the Australian Taxation Office, you should keep financial records for five years. Shred financial paperwork older than five years and file everything else, including bills, invoices and bank statements. Remember that any filing system you implement should be quickly and easily maintained so you’re motivated to keep your records in order.

4. Review your paperwork

Start with insurances – life insurance, house, car etc. Are they current and are you adequately covered? Are your premiums appropriate for your level of cover?

Assess your superannuation and nomination of beneficiary. Is your will up to date or have your circumstances changed?

While we’re experiencing record-low interest rates, do a few sums and work out whether you’re getting the best deal on your mortgage. Perhaps it’s time to renegotiate with your lender!

While the idea of setting a new year’s resolution is common, sticking to resolutions and accomplishing them are less so.

The key to achieving any goal is to be SMART about it:

S –> be Specific. Clearly define your goal.

M –> ensure it’s Measurable so you know when you’ve achieved it.

A –> make it Achievable. Planning to complete a marathon in February may not be achievable if you’ve never run before.

R –> be Realistic; could you really lose 20 kilos in a month?

T –> set a time by which you want to achieve your goal.

If you’re not sure where to start, your financial planner can help you put processes in place to get your SMART goals underway.

With a little planning and organisation, being clear about what you want to achieve, and mapping out how and by when you expect to achieve it, you’ll be giving yourself the best possible start to a successful year.

Another year has swiftly vanished into history. How were the past 12 months for you? Did you make the changes you’d planned or did your resolve for something different this year fade out by February? Don’t worry, there’s another 12 months ready and waiting for you!

If you’re not happy with the way your life is playing out, here's a few steps to help you take a whole new direction.

Step 1

To make the change manageable, decide on the three most important things in your life. List them quickly without too much thought - often your first reaction will be what’s really important.

The list below provides some thought starters.

I want to make changes to my:

Health and fitnessMoney managementCommunity participationFamily timeCareerSelf-improvementBuilding stronger friendshipsTravel.........

Start by picking 3 and you can always add your own to the list!

Step 2

Decide what you will do in the coming months to make changes in these areas by writing down a series of actions that will make a difference. Put a timeframe on these actions.

For example, if you chose ‘Career enhancement’ a first step might be deciding to read one book every month for six months to improve your knowledge on the area in which you want to work. It could be totally unrelated to what you are doing now. This extra knowledge might then be the catalyst for embarking on formal studies to launch you on the career of your dreams.

Small actions like this can make big changes to how you feel and what you can achieve.

Maybe you want to learn a foreign language? What about spending more time with your kids? You might want to get involved in a men's shed or volunteer organisation?

Step 3

Tell family, friends and colleagues what you plan to do. This helps to reinforce your commitment and enables you to manage the expectations of others.

Step 4

Check your progress. Every month, take time to look over your action list and note any changes that have occurred in your life—even what appear to be small ones.

What are you waiting for?

If procrastination is your enemy, make a decision to overcome it and do something different RIGHT NOW. One small step could mean huge progress towards improving the most important aspects of your life.

Reach out to us if you want some help designing plans for your future...it doesn't need to be money related.

And remember to enjoy the adventure...Get after it!

Many people use the Christmas/New Year period to reflect on the year that has just passed, often in a blur, and begin thinking about the future and how to achieve their hopes and dreams. Similarly, the new financial year is a good opportunity to reconsider financial strategies and goals.

If that sounds like a good idea, below is a simple guide to tidy up your finances for the year ahead.

1. Have your key financial goals changed?

Our lives are not static and our goals change slightly (or greatly) from year to year. Also, major life events such as serious illness, the birth of a child, an inheritance, marriage, or the death of a parent or spouse can all result in significant changes to our wealth management goals.

2. Prioritise your goals.

Not all goals are equal and to ensure you aren’t overwhelmed with the task it’s important to rank and prioritise goals then determine the timeframe in which you want to reach them. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

3. Short, medium or long term?

Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium-term goals typically require two to five years, and long-term goals usually take longer than five years.

For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term goal. Paying off your mortgage and providing for retirement are long-term goals.

4. Be investment savvy.

Make sure that your investments support your appetite for risk and your objectives. A tailored analysis will address your individual risk preferences. Regular portfolio reviews are essential to determine any sell-downs or top-ups that would benefit you. Your adviser should work closely with your accountant to ensure any changes are implemented in a tax-effective manner.

5. If your financial goals have changed, how will this affect your financial strategy?

Financial advisers have the tools and knowledge to create projections that take into account changes to your risk level, goals, and the timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

Reflecting on and thinking about your financial position, together with setting a clear path and plan, is critical to achieving your dreams. Talk to us about making sure you’re on the right track.

For the past few weeks our family has been enjoying the planning of our annual holiday (sort of). We work long hours and are busy with the kids but we always try to get away for at least two weeks to a place where there is no mobile phone or email access (these days it's usually self imposed). Those destinations are becoming scarcer but we don’t feel like it’s a holiday if we’re still contactable.

Another golden rule we always follow is we have to be able to pay for the entire holiday upfront. The only aspects that go on plastic are daily expenses while we’re away. But we’ve budgeted for these as well and put an appropriate amount onto our credit card or savings account before we leave. That way we know everything is paid for and we don’t return to a debt that will ruin all the happy memories of our time away.

Obviously not everyone is as disciplined, and a lot of people spend up big using their credit cards to pay for holidays. If that applies to you, here are some tips to help you save for your next big break without relying on debt.

Start with a plan

Create a simple budget. Automatically allocate some money from each pay to a separate account and don’t touch it. It will quietly build while you plan for your holiday.

Hide it before you spend it

If you already have credit card debt, schedule an automatic deduction from your cash account direct to your credit card from every pay. In both of these tips, if the money isn’t there, you can’t spend it.

Sell stuff

Do you have unused gym equipment, a bicycle you never ride, or even clothes you’ve hardly worn? Have a big clean out and stage a garage sale, or sell it online. Reduce your card balance or top up your holiday account with the proceeds.

Use windfalls

Are you due a bonus or tax refund? See yourself on the holiday of a lifetime. You know where it’s going!

Spend less

Careful spending doesn’t need to impact on your lifestyle. Try these ideas:

Entertain at home rather than at restaurants or cafes.Lay-by birthday and Christmas gifts during the store sales throughout the year...but stick to your predetermined budget!Check out upmarket clothes recycling stores; they often have quality clothes at bargain prices. No-one will ever know and it reduces clothing waste (double benefit).

Ask for help

Sometimes it’s difficult to get back on top of debt by yourself. We have plenty of other great suggestions that can help, or if you would like to share your experiences and ideas for our readers, we’d love to hear from you. Send us your suggestions and we can all help each other.

I can’t tell you how great it feels to be on holiday knowing that we won’t return to debt. The freedom this gives us makes the holiday even more enjoyable. Try it, then send us your holiday snaps!

Consumer credit insurance, also called loan or mortgage protection insurance, helps you meet repayments on a mortgage, personal loan, credit card or other loan contract if you lose your job, cannot work due to illness or injury, or die. It may also cover theft of your credit card or even replacement of faulty goods you have purchased with a credit card.

It’s often sold when the loan or credit card is set up but it’s your choice, as a borrower, to decide if you want or need this cover. Many people have it without knowing, so it’s worth checking your loan contracts to see if you are covered - and what you are paying for it.

Mortgage protection insurance should not be confused with lenders’ mortgage insurance (LMI). This insurance is compulsory if you are borrowing more than 80% of the value of a property. Its purpose is to protect the lender if you can’t repay your home loan and your home is subsequently repossessed.

Who does it protect?

Claims under consumer credit insurance are paid directly to your lender, not to you, so your financial institution could be viewed as the main beneficiary. However, by taking at least some of the burden of making payments off your shoulders, it does provide borrowers with some protection.

How much protection depends on the policy and the type of claim made. For example, a claim resulting from involuntary unemployment may only cover loan repayments for six to twelve months. After that, you’ll need to recommence making payments. Or policies may not cover the full amount of the outstanding debt, leaving you liable for the remainder.

Is it really necessary?

Consumer credit insurance has a reputation for being both expensive and limited in the cover it provides. You therefore need to weigh up the costs and benefits very carefully. It isn’t compulsory, remember, and putting the premiums towards other forms of insurance may be a better choice.

What are the alternatives?

Standard life, disability and income protection insurances may provide much cheaper protection than consumer credit insurance. And as benefit payments are made directly to you or your family they can be used for more than just debt repayment. Many people have a default level of life and income protection insurance through their superannuation funds, though often not enough to provide adequate cover, particularly when taking on significant debt. It’s therefore important to check that any insurance you have provides enough cover to meet your needs.

It’s also important to be aware that income protection insurance only pays out if illness or injury prevents you from working. In most cases it doesn’t cover unemployment, so this is one area where consumer credit insurance may be an appropriate option. Although even here there may be alternatives, such as using equity in your home to pay off credit card debt.

Coming up with the right mix of insurances to protect you and your family from a range of financial risks is a complex task. Your qualified financial adviser will be able to help you work out a plan that’s just right for you.

Sources:

ASIC’s MoneySmart website www.moneysmart.gov.au Consumer credit insurance

Another year is almost over - how was it for you? 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?

We’ve put together a short guide to get you started and plan for the year ahead, a quarter at a time.

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 – something you can own.

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 fall due at the same time putting pressure on your cash flow? Investigate monthly premium payments or spreading renewal dates across the year.

Use this first quarter to bed down the budgeting habit and track your actual spending against your plan.

At the end of March, do a quick review of your progress so far and make adjustments if necessary.

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 towards 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 strait and how are you tracking? Are you ‘on track’?

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.

Invaluable help

Your financial adviser is an expert in working out the financial details of how you can achieve your goals. Just as important is the regular encouragement he or she can provide along the way.

Ready to start planning? Give your adviser a call and make a date to nut out your plan for the coming year.

Sources:

Budget Planner: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner

Lottery prize pools now amass huge amounts, regularly turning everyday Aussies into instant multi-millionaires. But being ‘struck rich’ is not only based on luck. There is more than $2.8 trillion worth of assets invested in superannuation in Australia.

A multi-million dollar inheritance can be a life-changer. Regardless of the source, most people who receive unexpected money are launched on an emotional roller coaster ride.

Let’s use a big lottery win as an example for this article:

The first emotion is usually sheer delight – Woohoo! Aren’t I lucky! (although if it’s a massive win, the first feeling might be utter shock!).Relief generally follows quickly – I don’t have to worry about money anymore.Then indecision – What should I do with it?

Regardless of how your windfall landed, here are some ideas to help you make the most of it.

1. Bank it

Put it in a bank account where it will earn a safe and reasonable return. Online savings accounts currently pay similar returns to term deposits and give you easy access to your cash once you’ve decided how to manage it. On a large sum of money, you could still earn considerable interest - but remember it will be taxed at your marginal tax rate.

2. Spend it

This is a popular action but it may later leave you with the regret of wasted opportunities. The media is full of stories about lottery winners who were broke a few years after they won millions. Sure, put some aside to have a good time, but don’t go silly.

3. Clear debt

This is generally the smartest option. Take a lump sum to pay off debts, particularly those that are non-deductible like mortgages, personal loans and credit cards. This strategy will reduce future living costs and increase the possibility of borrowing against the equity in your home to invest further if appropriate.

4. Save it

Putting money into superannuation can be a good strategy to reduce tax on your investment earnings, but it means the money is locked away. Of course, this might be a good thing because it can’t be accessed and spent. Remember though there are limits on contribution amounts and account balances and financial penalties apply if breached.

5. Invest it

Depending on your goals you could build a portfolio to invest in a range of assets and make it work hard for you over the coming years. Maybe you could live off your investment income without impacting on the capital.

6. Share it

You could share it with family, friends or help the needy. Donations to registered charities are tax-deductible. If it is a substantial amount you could set up a Private Ancillary Fund – ask us for details on these.

7. Do them all

Of course, you don’t have to pick only one of these strategies. Depending on the size of your windfall, you could do it all.

Whether your instant wealth was created through a happy or sad event, often the difficulty is making a choice and everyone around you will have an opinion. Always seek professional guidance. Contact a trusted adviser to help you evaluate the options available for your own circumstances so the money will help your life, not hurt it.'

Popular in the days before compulsory superannuation, investment bonds fell out of favour as super became the preferred tax-advantaged environment. With tighter restrictions on superannuation contribution limits, bonds might be worth a fresh look.

Investment bonds are a type of insurance policy primarily used as an investment vehicle. Available from a range of providers, investors can choose from a suite of underlying investments in much the same way as regular managed funds. Investment bonds shouldn’t be confused with interest-paying government or corporate bonds. They are a unique type of asset offering a range of advantages.

Tax advantages

The primary attraction of investment bonds is that earnings are taxed in the hands of the issuing company at a rate of 30%. Provided the bond is held for more than 10 years no further tax is payable when the bond is cashed in.

While 30% is more than the 15% tax rate that applies to superannuation, it is less than the marginal rates of 34.5% to 47%** that apply to people with an annual taxable income above $37,000. The higher your marginal tax rate the more attractive investment bonds become.

What’s more, investment bonds don’t lock up your money for the long term as super does. You can access your money whenever you like, though you do need to be aware of some rules.

If the bond is cashed out within eight years, all the growth in the value of the bond is included in your tax return. You will, however, receive a credit for the tax already paid by the issuing company. You won’t be double-taxed. Withdraw from a bond between eight and nine years and two-thirds of the gain is declarable; and between nine and ten years, one-third of the gain goes into your tax return.

Bonds can be purchased with a single lump sum or with regular additions. However, to keep the original start date, an annual contribution cannot exceed 125% of the previous year’s contribution. If it does, the clock starts again for the 10-year rule. Another option is to simply purchase a new bond.

Additional benefits

Insurance bonds can be useful estate planning tools. As a form of life insurance, if the owner dies the proceeds will be paid directly to nominated beneficiaries. The money doesn’t go through the estate and can be paid out quickly. In addition, the proceeds are not taxable in the hands of the beneficiaries, even if the bond is less than 10 years old.

Allowing for relevant tax rates, they may also be a good vehicle for saving for a child’s education or other long-term goal.

Timing

Due to their long-term nature, it isn’t just your current marginal tax rate that is important; it’s what your rate will be in the future. As many retirees pay little or no tax, particular consideration needs to be given to purchasing a bond that will be held until after retirement.

Suitability

Investment bonds aren’t for everyone, but they may suit investors who:

have reached their concessional cap for super contributions;do not wish to lock away their money in super;are saving for a long-term goal and have a marginal tax rate above 30%;have specific estate planning needs.

There is much more about investment bonds than we can cover here. As with any type of investing, there are risks involved with bonds and these must be taken into account. Contact us if you would like to learn more.

** Including Medicare levy

Interest rates have never been lower, and it’s possible they might fall even further. This creates opportunities for householders and businesses, so how can you best take advantage of low interest rates?

1. Pay off your debt quicker

By maintaining constant repayments as interest rates fall, you’ll reduce the time it takes to pay off your loan. That’s because interest will make up less of each repayment, with more going to reduce the outstanding capital. And the great thing is that to take advantage of this strategy you don’t need to do anything. Lenders usually maintain repayments after each drop in interest rates unless you instruct them otherwise.

At Intuitive, we're always saying to our clients 'first goal - get out of debt asap'. Of course, not all debt is bad, but as a general rule, having little to no debt is one of the best positions to be in. Prioritise this!

2. Refinance your home loan

Lenders vary in the extent to which they pass on cuts in official interest rates. So if you want to reduce your loan repayments it might be worth shopping around to see if you can find a better deal from other lenders. Just make sure that, if switching lenders, you take all fees into account to be certain you really are saving money.

If you are restructuring your borrowing another thing to consider is fixing the interest rate on all or part of your loan. This can provide protection from the impact of rising interest rates in the future, though it may mean you benefit less from any further cuts in rates. However, with interest rates already very low, there simply isn’t the room for rates to fall much further.

3. Buy a first home – or upgrade

Low interest rates create opportunities for first homebuyers to get a toehold in the property market, and for existing homeowners to upgrade to a bigger home or better location. While lower interest rates can be a bit of a two-edged sword, as they tend to drive up property prices, most people are happier borrowing in a low rate environment rather than when rates are high.

With one main caveat - be very careful not to over extend yourself. It's tempting when rates are low (& subsequently the required repayments are low too) to borrow to the limit of what you can afford. If interest rates go up in the future though, your repayments go up and this can seriously derail your financial future.

4. Borrow to invest

While Australians love to invest in property, borrowing to invest in shares is also a viable wealth creation strategy. Often referred to as gearing, the key to successfully investing borrowed funds is that the total returns must exceed the total costs. As the most significant cost is usually the interest on the loan, low rates make this strategy more attractive.

Take care, however. Gearing can magnify investment returns, but it can also increase your losses. It’s therefore important that you fully understand investment risk and how to minimise it.

5. Expand your business

The whole point of a reduction in interest rates is to stimulate the economy, and that includes encouraging business owners to invest in their enterprises. Low interest rates make it cheaper to borrow to buy equipment to increase productivity, to take on more staff, or buy out a competitor and generally expand the business.

Take advice

Some of these strategies are simple ‘no-brainers’. Others involve significant levels of risk. To take a closer look at how you can make the most of low interest rates, get in touch with us or reach out to your personal financial adviser.

Payday lenders are flourishing and while their advertising makes it all sound so simple, there’s always a price. Here is a better solution.

Tara decided to replace her clapped-out car with a shiny new one. The repayments were affordable: $350 per fortnight over three years – easy!

All was going well until a month arrived that had five weeks instead of four. Tara’s fortnightly repayment cycle fell on the fifth week meaning that her monthly salary had to stretch to three loan payments instead of two.

She considered discussing the situation with her bank but was worried about admitting her difficulty.

After seeing an advertisement for payday loans, Tara phoned the credit provider and the consultant explained the following:

Applicants provide income and expense evidence for past 90 days.Loans are up to $2,000 payable between 16 days and one year.Repayments are automatically deducted from the borrower’s salary or bank account.Upfront costs are 20 percent.Monthly fees are 4 percent.

Tara saw no other option and borrowed $350 for her car payment. The credit provider sent a summary statement:

The $434.00 was deducted from Tara’s bank account next pay. For the following month, she tightened her belt and scraped through – just.

Later that year Tara broke a front tooth playing netball. The repair costs were way beyond her means but it had to be done.

Though she wasn’t keen on another payday loan, Tara’s history with the provider meant the application process was quicker and easier.

Repairing Tara’s tooth cost $1,700. This time her loan statement looked pretty scary.

Tara’s first payday loan had worked out, but now she struggled to make these monthly payments on top of her existing commitments. She feared she would have to sell her car.

A better solution…

Her boyfriend, Lachlan, introduced her to his financial adviser who helped Tara establish a workable budget. It meant forgoing her weekly dinner with friends and shopping trips most Saturdays, but she could structure her accounts to gain greater financial control – eventually saving a small amount for emergencies.

As Tara learned from her adviser, there are alternatives for bridging the pay-to-pay gap.

For example:

Many service providers – including dentists – offer interest-free payment schemes.Utility companies provide payment plans for gas, electricity, etc.Banks are more understanding than you think – really!The No Interest Loans Scheme (NILS) offers safe, no interest loans assisting low-income earners to purchase essential goods or services. See www.nils.com.au for information.

It can be easy to fall into a cycle of spiralling debt. There are always alternatives so before taking what appears to be an easy option, seek professional advice focused on your individual circumstances.

Sources:

No Interest Loans Scheme (NILS) website www.nils.com.au

Running your own business can be extremely rewarding but there will always be times when it will be quite the opposite. Depending on the business, many factors will determine the success or failure of a small enterprise however the most common is cash flow. Outlined below are three very simple solutions to cash flow problems to help make your business ownership more rewarding.

Without the regular inward flow of cold, hard cash any business will die a natural death. Many small business owners know too well that operating in an uncertain economic environment means customers take more time to pay. When most small businesses set their terms at seven or fourteen days payment, if these terms are consistently ignored by customers - who may also be struggling to get their own customers to pay - it is not only dangerous to the health of the business, but the associated stress is a danger to the health of the owner.

If you’re finding it hard to get your customers to pay you on time, there are some simple solutions:

On the flipside, if your customers are dragging the chain, you could be having difficulty paying your bills. Knowing what it feels like, take the upper hand and explain the position to your creditors. Most will be happy to work out a payment schedule so everyone wins.

Being proactive and understanding what's happening in your business means your much better equipped to make the necessary changes.

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 $25 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. Every dollar wasted on fees, is money you can't direct towards living your rich life.

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. If you can't pay for things with your own money (cash), then you need to rethink the purchase.

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.

I hear you asking what we reckon about BNPL...great question!

For most people it's just not necessary. Don't fall into the trap of derailing your financial future in order to give extravagant gifts, that usually end up in the bin in no time. If you don't have the money to buy things outright, you really shouldn't be buying them on credit. Set a budget and stay disciplined.

We are always hearing about how important it is to insure our own lives and income, but what about insuring our children’s?

How would your adult child and their family survive financially in the unfortunate event of an accident or an illness that prevented them earning an income for an extended period of time?

Income protection, TPD and trauma insurance are often not a consideration to a young family in today’s financial climate with many struggling with mortgage repayments, education spending and increased living costs.

But what would be your role if your child and their family were suddenly without an income? Without adequate insurance how would they cope?

What if you had helped your child to buy his or her first home and that child suffered a long term-illness or disability?

How would that affect you if they couldn’t make the repayments?

Here’s a scenario...

Alan and Joanne’s married son Craig was involved in an accident, sustaining a back injury that ultimately prevented him from working for about two years. Unfortunately, Craig didn't have income protection or temporary salary continuance insurance.

After using all his sick leave and holiday pay, he had to sell his house or the bank was going to foreclosed on his mortgage. The house was sold, mortgage repaid but Craig and his young family were forced to move in with Alan and Joanne.

Eventually, Craig recovered and was able to return to work.

Aside from the emotional impact on Craig and his family, Alan and Joanne’s retirement plans were seriously compromised. Joanne’s health deteriorated due to the extra stress of the situation and she was suffered from some mental health issues as a result.

What could Alan and Joanne have done differently?

They could have asked Craig if his income was protected in the case of an unforeseen illness or injury, Learning that the young couple was allocating all spare cash to the mortgage, the parents might have offered to help pay for adequate insurance cover.

Even if you are not in a position to contribute to the cost of their insurance, raising the issue with your adult children and encouraging them to talk to a financial professional could be some of the best guidance you could ever give them. It also helps protect your hard earned wealth should something unplanned like this occur to one of your kids.

You’re probably already pretty impressed by what your smart phone can do, but have you thought of it as a wealth builder?

It’s all down to the apps you can install, and there’s an increasing range to help you manage your spending, supercharge savings, complete your tax returns and manage your investments – all at the tip of your fingers.

Track your spending

Most people approach the ‘b’ word – budgeting – with dread, but getting your spending under control is fundamental to any wealth creation plan. For starters, you’ll want to know where the money is going. Several apps take much of the drudgery out of tracking each dollar you spend while also helping you to take control of your money. This includes separating your ‘wants’ from your ‘needs’, further categorising expenses and setting spending limits for each category.

ASIC’s TrackMySPEND covers the basics. Another popular app is Pocketbook, which syncs with many Australian bank accounts and largely automates the task of categorising each transaction. It also tells you exactly what your bank balance is and how much you can safely spend to stay within your budget for each category.

Boosting savings

Remember piggybanks and the pleasure of slipping the day’s loose change into the slot? With electronic transactions now dominating our spending, loose change is a disappearing commodity.

The Raiz app provides a digital solution. It automatically rounds up each purchase you make on a linked debit card to the next dollar and invests this ‘loose change’ into one of six diversified investment portfolios. You can also set up regular contributions or make one-off additions to your portfolio.

Carrott also takes a rounding up approach, with the additional amount going to paying off your mortgage.

Manage your investments

From simple watch lists for shares to mobile apps that give you full access to a stockbroker’s trading platform, a vast range of apps is available to the connected investor. Check out what’s available from your super fund, investment managers and share broker. In many cases you’ll find apps that can do everything that you would normally use your desktop computer for, and often with more convenience. Enjoy lunch in the park while you check up on your super or snap up a few shares.

File your tax return

We know that apps are mainstream when the tax office gets in on the act. The ‘ATO app’ includes the myDeductions tool to help you track expenses. Sole traders can also record income as well as deductions. Come tax time the data can be emailed to a tax agent or you can use your app to prefill your tax return before lodging it yourself.

Pocketbook also has a dedicated tax return app, though a fee applies to lodge the return with the ATO.

Be appy

This is just a brief sampling of the many mobile financial apps that are available. Many are free, but be aware of ‘in-app purchases’. In some cases, functionality may be limited unless you upgrade to a ‘premium’, paid option. Also remember that you may be sharing your financial information with a third party. Make sure you’re happy with the app provider’s privacy policy and security.

Then, when you’ve found the ideal electronic helpers for your financial needs, ‘app up’ and get your mobile phone building your wealth.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry delivered its final report in February 2019, capping off a process that revealed the unethical and, in some cases, illegal practices of some of Australia’s largest banks, insurance and other financial services companies.

Many of the Royal Commission’s recommendations are aimed squarely at financial services companies, and they should lead to changes in corporate attitudes and practices that will deliver indirect, and hopefully positive changes to many consumers. The Royal Commission also made a number of recommendations that will have a more direct impact on investors. Unfortunately, these may not always be for the better.

Even though the Royal Commission unearthed a wide range of bad behaviours, it’s important to acknowledge the large number of financial advisers who have always adhered to high ethical standards while delivering great outcomes to their clients. Clients of these advisers may see little change in the relationship with their adviser and how their money is managed. So what changes are likely to affect consumers?

A ban on conflicted remuneration

Conflicted remuneration arises when an adviser has an incentive, such as a sales bonus, to recommend an investment product.

Conflicted remuneration was banned some time ago, but existing arrangements were ‘grandfathered’. These grandfathered arrangements will now cease.

An end to trailing commissions

Investment and superannuation products may pay the recommending adviser an ongoing annual or ‘trailing’ commission. The expectation is that the adviser will continue to provide ongoing review of the suitability of the product, and recommend changes when warranted.

Unfortunately, the Royal Commission revealed numerous cases where fees were charged and no advice given. This extended to fees being charged to dead peoples’ accounts. All investment and superannuation trailing commissions will cease from 2021. While this should lead to higher investment returns, many consumers will miss out on proactive follow up from advisers unless they ‘opt-in’ and agree to pay for advice. As the cost of such advice may be uneconomic for investors with smaller portfolios, the end of trailing commissions may deliver mixed outcomes. One prediction is that it may spark an increase in so called ‘robo advice’, where automated systems deliver lower cost, albeit more generic advice.

Increased educational requirements for advisers

New advisers must now hold a relevant, degree level qualification. Existing advisers without such qualifications will need to undertake further study.

While qualifications are important, they overlook the value of the real-world knowledge of experienced advisers. Many older advisers may retire rather than undertake additional study, which may lead to a shortage of advisers.

Incidental outcomes

Another indirect outcome of the Royal Commission is that many of the larger banks and insurance companies have decided to sell off their financial advice businesses. This also has the potential to reduce the number of active advisers, but may see a rise in the number of smaller, independent advisory firms.

The Royal Commission has delivered a major and necessary shake-up of the financial services industry. To find out what the direct, personal impacts may be for you, make sure you talk to us further.

Just over four years ago Sarah bought an investment property. To help pay for it she took out a $400,000, 25-year mortgage that offered interest-only (IO) repayments for the first five years. At an interest rate of 4% per annum those initial repayments amounted to $1,333 per month.[1]

The benefit of IO was that it offered lower monthly loan repayments for five years, putting less strain on Sarah’s budget. However, with the IO period set to expire and the loan about to convert to principal and interest (P&I), Sarah now faces a significant jump in her monthly repayments. With 20 years remaining on the loan and at a steady 4% interest she now needs to repay $2,424 per month, an increase of $1,091.

Sarah was well aware that this increase was coming, of course, and the higher payments were factored into her budget. Using an IO loan to kick off this investment worked out very well for Sarah.

Unfortunately, the same can’t be said for property investors who used the lower initial repayments on IO loans to borrow more money to buy more property, often at high loan-to-valuation ratios (LVR). After all, property was booming. What could possibly go wrong?

Not so rosy

Well, as it has turned out, quite a bit. Action by the regulators APRA and ASIC to curtail ‘risky’ lending saw a significant drop in the availability of IO loans. This in turn has been a major contributor to the weakening of major property markets, most notably in Sydney and Melbourne. Also having an impact was the increase in interest rates charged by lenders, independently of changes in official rates.

Options

So what might be the options for borrowers who may face difficulties in meeting their increased loan repayments?

Dip into savings – if there are any. That’s unlikely to be the case with investors who used lower IO repayments to maximise borrowing rather than banking those savings for later.Sell properties. Some property markets have retained their values, and properties bought before the markets peaked may be worth more now. Realising some equity by selling one or more properties may be a way of reducing financial stress.Extend the length of the mortgage. This may help to reduce P&I repayments, but lenders may be less willing than previously to offer this option.Review loan(s) with a lender or mortgage broker. Better deals may be available, though it’s important to remember to take any switching costs into account.

Another thing to check: if the value of the property has fallen, is the loan now more than 80% of the market value? If so, mortgage insurance may now be payable.

Avoiding the pitfalls

Interest-only loans are still available and any market undergoing a “correction” will generate opportunities as well as challenges. Property investors needn’t flee the market, but do need to plan early and understand the potential risks, including those associated with IO loans, as well as the possible returns.

If you are interested in property investment, or need help in managing your existing loan/s, your licensed financial adviser is there to help.

Sources:

Interest-only mortgage calculator: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/interest-only-mortgage-calculator

[1] Figures from MoneySmart interest-only mortgage calculator www.moneysmart.gov.au

Australian retirees are facing a ‘double whammy’ when it comes to funding their retirement. On the one hand we, as a nation, are enjoying longer and healthier lives. On the other hand, record low interest rates have slashed the returns on the traditional bedrocks of post-retirement investment portfolios such as term deposits, cash management accounts and annuities.

A dilemma

This is the dilemma facing Dave and Linda. On the point of retirement these fit and active 65 year olds are looking forward to regular overseas travel while maintaining their comfortable lifestyle. They estimate this will cost them $80,000 per year, to be funded from their combined retirement savings of $1 million. Both are in good health, and realise there’s a high likelihood that one or both of them could live well into their 90s.

Naturally, Dave and Linda’s first thought is about security and capital preservation. This leads them to look at investing their funds in a portfolio mainly comprising income-producing investments that will spare them from the volatility of share and property markets. However they quickly discover that, with interest rates so low, it will be difficult to achieve a return of just 3% per annum. A simple financial calculation shows that if they draw $80,000 each year from a portfolio with this low rate of return, the money will run out in just under 16 years. This strategy will see them barely make it into their 80s.

Time for a rethink

This highlights to Dave and Linda that longevity risk is as much of a threat as investment risk. To address the risk of outliving their money, Dave and Linda consider a portfolio that, while retaining some conservative investments, apportions most of their funds to a well-diversified range of growth assets including property, Australian and international shares, and some higher-yielding income funds. With an estimated return of 7% p.a., Dave and Linda’s money is calculated to last just over 30 years, seeing them well into their 90s.

Balancing the risks

Yes, a growth portfolio is, from an investment point of view, higher risk than a defensive or conservative portfolio. That is, it will be more volatile, rising and falling in value along with investment markets. Dave and Linda will need to accept this volatility if they want to meet their lifestyle goals. However, even 10 years is a long investment horizon, let alone 30, so with time on their side they should be able to ride out any market downturns.

And there’s another safety net. The above calculations ignore any age pension. As Dave and Linda draw down on their savings they will probably qualify for some age pension. Not only will this offset some of the investment risk, it will substantially extend the date when their savings will eventually be exhausted.

Helpful advice

Establishing a well diversified, considered portfolio is a little more complex than setting up a conservative portfolio. It will also require more active monitoring and regular review. On top of that individual circumstances can change quickly, particularly in older age.

For help with all aspects of retirement planning, including portfolio design, establishment of income streams and age pension strategy talk to your qualified financial adviser.

Whether it’s doing up the bathroom or kitchen, or adding an entire new wing to the house, some focussed planning will help your home renovation project run smoothly. Here are some tips to help you get the biggest ‘bang’ for your renovation buck.

1. Budgeting and saving.

Renovating is a major expense so unless you’ve already saved up the necessary funds you will either need to prepare for increased loan repayments or get cracking on a savings plan.

First up, prepare a couple of budgets - one for the renovations, and another for regular living costs. Then, with your current spending and future savings needs laid bare, it’s time to play the penny-pinching game. Can you take lunch from home rather than buying it every day? Does avoiding the toll road add that much time to your daily commute? Are you paying for bottled water? And can you still enjoy life with less eating out or ordering in?

2. Avoid hidden surprises

Make sure that the fabric of the existing house is sound. Depending on its age, have the house inspected for asbestos. Its removal can add time and many dollars to your renovation. Termites and rot are other unwelcome surprises.

3. Find the right contractors

Shop around, get multiple quotes and check references and reviews. Also ask to see contractors’ licenses. Don’t just go with the lowest quote; make sure you have confidence in the tradie’s ability to do the job.

4. Release your inner handyperson

How much can you save by doing some of the work yourself? Most people can do a great job painting a room. How about laying your own tiles? The Internet abounds with ‘How to’ videos for all sorts of renovation skills.

5. Call in a favour

How many chippies, sparkies and plumbers in your family or friendship group? Of course, you won’t want to stretch a friendship or impose on them, so maybe you can swap one of your skills for some of theirs.

6. Shop smart

Extend your budget by buying seconds or second hand. Check out Gumtree and eBay, or get to know your local auction rooms - bidding at auction can be both fun and rewarding. Can you deal directly with any suppliers, and who can offer you mate’s rates?

7. Select your materials with your budget in mind

Hand basins, shower screens, kitchen sinks, taps, flooring, light fittings, ovens… Everything comes in a wide range of styles and prices to suit every budget. However, appearances can be deceiving. A cheaper bench top or bath can provide all the visual appeal of more expensive alternatives. Still, sometimes you may have to compromise and opt for ‘good’ rather than ‘best’. And if you’re renovating with a future sale in mind, it’s also important that you don’t over-capitalise on your renovations.

Undertaking major renovations can be a daunting prospect, but some thought and planning can deliver not just a more valuable home, but also one that provides you with years of satisfaction.

Each new generation will treat money differently to the last, but children of the 21st Century certainly have many more uses for money than those of the last century. Not all that long ago a bike or a doll was a 5-year-old’s dream gift; now it’s an iPad!

Attitudes and activities are changing much earlier than in previous generations, so, for the sake of their future well-being, it’s important to introduce your children to the intricacies of money management from an early age.

Keep it simple - explain where your money comes from and how it is spent. Remember, children learn best from experience so they will probably follow your own example.

Some helpful hints include:

Starting out:

Set up a bank account in the child’s name and explain that if they want to buy something they must first have the money.Encourage them to do jobs to earn their pocket money. This also teaches them responsibility (which is handy when they start talking about their rights!).Help them understand that the money that comes “out of the wall” was first put in there through your work.Inspire your child to save a fixed amount, say 10%, from their pocket money for more expensive items (like their first iPad).

As they get a bit older:

Explain how unnecessary spending as a result of peer pressure will impact on their future.Explain how credit cards work and teach them what happens when the full balance isn’t paid off every month. This is a great lesson in how debt quickly gets out of control.When you buy their mobile phone let them pay for the plan or any excess calls over the monthly prepaid limit from their own money.Allow kids to make their own spending decisions so they learn from their mistakes.

Teaching the basic money facts to your children when they are young will go a long way to setting them on the right path to financial success in later life.

Increased housing costs and low wage growth are seeing more Australians carry higher levels of debt into retirement. Repaying this debt can place a major drag on retirement cash flows and hinder the achievement of retirement goals. These may include maintaining an adequate quality of life through retirement, and leaving a benefit to the next generation that is unencumbered by outstanding debt.

Fortunately, there are a number of ways by which retirement debt can be avoided or managed.

If you’re still working, increase your debt repayments. It may also be worth considering delaying retirement. However, bear in mind that with increasing age comes the increasing likelihood of being forced into retirement by ill health.Tackle high interest debt first. If you’re paying interest on credit card balances or personal loans and have the ability to redraw on a mortgage, pay off the higher interest debts from your mortgage account.Already retired? Look at using your superannuation to pay off outstanding debt.Down size your home. This may allow you to pay off debts and still have enough to purchase a smaller home. If this strategy frees up more money than you need to repay your debt, investigate the superannuation incentives available to ‘down-sizers’. Also be aware any surplus cash you pocket may reduce age pension payments.

As always, it’s important to take your personal situation into account. For example, if your mortgage interest rate is low, you have significant investments earning a good return, and you have a long life expectancy, carrying some debt into retirement may be worth considering.

For help in managing your debt in retirement talk to your financial adviser.

How many times have you downloaded a new app or connected to free Wi-Fi and agreed to the terms and conditions without giving them a second glance? In your rush to gain access to the must-have service you may end up agreeing to scrub public portaloos.

Of course, most companies who come up with absurd terms and conditions have no intention of enforcing them. Rather, the intent is to highlight the fact that most people don’t read the agreements they readily sign up to. In many cases that won’t have any significant consequences. Most businesses seek to be fair in their dealings with customers. However, in the case of legal and financial contracts, failure to read and understand the terms and conditions can prove costly.

What to look out for

When signing up for anything that will cost you money or expose you to other potential harm, it is important to read and understand everything you are agreeing to. Here are 10 key items to look out for:

Is the contract in plain English? It should be. Too much legal jargon may be a warning that the provider is trying to hide something.What are the costs involved and when and how are payments to be made?What other charges apply, for example, late fees? Are they fair and reasonable?What is the term of the contract? Is it ongoing or a fixed length? What happens at the end of the contract? Will there be ongoing costs?When and how can you terminate the contract? What will it cost?When and why can the provider terminate the contract?Are refunds available? For example, if you cancel an insurance policy will the unused premium be returned to you?What personal information do you need to provide? Is it reasonable? How is it safeguarded? Will it be shared or sold to a third party? Is sharing your personal information necessary for the provider to deliver their service?Are liability disclaimers reasonable?Can you complain? Who to?

What protections are there?

For a contract to be binding a number of rules apply.

For example, those entering into a contract must intend for it to be binding. That should probably allow you to leave the toilet brush and rubber gloves at home. Nor can a contract be enforced if it contains an agreement to do illegal things or breach other legal requirements.

In consumer contracts there are also protections against unfair contract terms that disadvantage a consumer. Further rules apply to credit contracts.

As for the liability waivers that are common when signing up for an adventure activity, if you are injured while undertaking the activity you may still be able to sue the operator. This is an area where expert legal advice is required.

Even in plain English, terms and conditions make for pretty dull reading and they may still be difficult to understand. If you are unclear about what you are signing up to, don’t sign. Seek clarification from the contract provider. And if significant sums of money are involved or if it’s a credit contract, obtain qualified advice.

If you’re wondering why we keep referring to portaloos, this was a clever experiment www.purple.ai/blogs/purple-community-service/. Have you ever read the terms before using free WiFi?

Sources:

22,000 people willingly agree to community service in return for free WiFi: https://purple.ai/blogs/purple-community-service/

“What was it like when you were growing up?” Remember when you asked an older relative that? Remember your enjoyment hearing the anecdotes; being amazed at learning something astounding about this person you thought you knew well?

We’re endlessly fascinated by the successes, failures and adventures of our forebears. Unfortunately, most of us only learn about them long after our loved ones have departed.

How much warmer would be the experience if you could read their life story while they were still alive?

Or what about you? Everyone has a story! Sadly, most of us don’t believe our stories are interesting. Perhaps we don’t know how to begin writing or what to do next.

The first step is to make the commitment. What comes next is:

Planning

Ask yourself:

What will I say and how will I say it? For example, will I start like David Copperfield in Dickens’s classic, “I am born …” and work from there? Or use an anecdotal style, i.e. each chapter being a short story in its own right?Will I date each chapter like a diary, or will it flow as a personal narrative?Who is my audience? Will my story be available for general consumption, copies in the local library, history societies, etc., or only family and friends?

Answering these questions will help you understand the ‘voice’ of your story and how to structure it.

Researching

Memories can fail, often recalling events differently from others, so gather your evidence.

Family photographs, letters, heirlooms and nostalgia are all important and don’t forget family genealogy charts!

Interview relatives and friends, and include sources and supplementary information to add context and bring the story alive.

All of these things can trigger memories and validate facts.

Writing

You don’t need fancy software – you won’t even need a computer if that’s not your thing. Just grab pen and paper and write!

Life stories traditionally use the third person, that is, “he went”, “she said”, etc. In general, only use “I” if you’re writing an autobiography.

A life story is a record of details – it’s quite different.

After completing the first draft, review it.

Then, review it again.

If you’re planning to share your story with the world, the next steps are:

Editing

Even literary geniuses make grammatical and spelling mistakes. It’s imperative to have your work professionally edited.

Good editors can be costly – often charging by number of words, although some will negotiate.

Search, ‘editors and proof-readers’ online for a reputable editor. Writing societies or the Australian Society of Authors can be helpful too.

Publishing

Small independent publishing companies that offer publishing packages can be the most efficient way to go. Prices depend on package inclusions and start from around $3,000.

Basic packages generally include:

cover design,back cover design,ISBNcopy layoutsocial media setupauthor support.

Printing

ePublishing is popular, but might be impractical for sharing with friends and family. Printing is pricey and usually not included in your publishing package. Shop around.

And finally, it’s ready to share

The hard work is done. The project owes you time and money that you’re unlikely to get back, but all is forgotten when your very own book is in your hands.

Hold a launch party! Invite family, friends and anyone remotely involved and enjoy your accomplishment. It’s something people often talk about, but very few achieve.

And in years to come, when memories are all that remain, many will thank you for sharing your story.

1. Reduce your debt

This is definitely the priority if we had to pick one. Every dollar you don't have to pay back in saved interest is pure gold for your wealth creation.

2. Special savings

Put it towards that special goal or experience you've got. Extra contributions towards your goals, means you can achieve them faster or even have a bit extra to spend when you get there.

3. Invest it

As we always say to our clients "It's not about timing the market, but it's about time IN the market". The longer your money is invested, the better the magic of compounding works.

4. Share it around

Doing good with our money is important. It helps us to play our small part in bringing the world we want, into reality.

What are you going to do with your extra cash?

Don’t have a Will? You’re in good company. Less than half of Australian adults do. Even then, many Wills are out of date or invalid. The upshot is that hard earned wealth may be fought over by family or distributed by government formula, and not end up with the preferred beneficiaries.

It’s also important to remember that Wills are just one component of estate planning, so here’s a quick checklist to help you get your estate planning on the right track.

If you don’t have a Will, make one. Consult a specialist estate planning lawyer.If you do have a Will, ensure it is up to date and reflects your current wishes. Is your executor willing to take on the role and likely to outlive you?Have enduring and medical powers of attorney drawn up so someone you trust can act on your behalf and make decisions if you are no longer able to do so.Review your superannuation death benefit nomination. Super death benefits can be directed to your estate and distributed under your Will, or they can be paid directly to nominated beneficiaries.Look into pre-paid funerals or funeral bonds. Aside from relieving your family of one burden at a time of great stress, you may see an increase in your age pension payments.

Depending on business and financial structures, family dynamics, pension rules and legal requirements, estate planning can be complex. Your financial adviser can help you identify the estate planning issues you need to address, and the professionals you may need to consult, to ensure your assets are distributed according to your wishes and to provide the best outcome for your beneficiaries.

The equity you have in your home is simply the difference between the current market value of your home and the amount you still owe on your home loan. For example, if your home is worth $800,000 and your outstanding loan balance is $200,000, your equity is $600,000.

Your equity increases as home loan repayments reduce your loan balance or whenever your property increases in value. While you can’t control the property market, the more that you can pay off your home loan the quicker you build equity.

Many people are content to sit on this growing equity. However, it’s possible to utilise even modest amounts of equity to boost the rate at which you can build additional wealth. And you don’t need to pay off your entire mortgage to do so.

Putting equity to work

Putting your equity to work involves borrowing against your increased share of the value of your home and investing the proceeds. This could be by:

Buying an investment property.Investing in shares or other growth assets.Renovating your home, provided the increase in home value exceeds the cost of renovations.

The key requirement for boosting wealth by using equity is that the long-term returns from your selected investments (capital growth, rent, dividends or distributions) need to exceed the long-term costs (interest payments, insurance, repairs and maintenance, taxes and management costs).

The emphasis here is on ‘long-term’. In the short term property and share prices can fluctuate. If your investments fall in value, so does your equity. Taking on too much debt, even to fund productive assets, can lead to real financial stress. Interest rate rises may increase your loan servicing costs. It’s therefore important to introduce buffers such as not borrowing too much and factoring in possible interest rate rises to ensure that your strategy can survive the ups and downs of the various markets.

Also bear in mind that the out of pocket costs of funding an investment may be higher in the early years. Over time, however, increasing rent or dividend income help to cover costs.

It may be tempting to use some of your equity in your home to fund lifestyle, such as a holiday or new car. And if it adds to your enjoyment of life, why not? Just be aware that funding living expenses with debt tends to erode wealth rather than build it.

Be informed

Using the equity in your home to help you build your wealth is just one form of borrowing to invest. Done well it can provide a real boost to wealth. However, as this is quite a technical area of financial planning it’s important to understand how building wealth with debt works and to appreciate the risks involved.

Your financial planner will be able to look at your specific situation and help you design a strategy that will allow you to take advantage of your equity.

And when it comes to putting that strategy into practice, a mortgage broker can help you find the loan that’s right for you. We can help you find the right people to get things sorted.

Making ends meet can be difficult enough for two-parent families, but for single-parent families it can be even harder. With a few small steps you can be on the path to financial security.

For many single-parent families, the struggle-cycle is a constant reality. Often they face unique hurdles that most people are totally unaware of; usually the biggest one is trying to make ends meet.

If you are a single parent and not sure where to start, here are a few steps to help get things under control:

Talk to Centrelink. It’s important that you investigate your eligibility for parenting payments, tax benefits, the child care subsidy, etc. Benefits are regularly altered so make sure you are prepared for any planned changes ahead of time.

Protect your family. Look at insurance options for protecting you and your income. As the only source of income, how would your family survive if you couldn’t provide for them? Life insurance, disability or trauma insurance all offer peace of mind. While you’re at it, think about reviewing your estate plan – is your Will current?

Identify needs from wants. Needs are essentials: housing, food, health, etc; while wants are non-essentials like entertainment, eating out, etc. When tempted with a want, ask yourself, “do I really need this?” Identifying a genuine need from a desire for something can be the difference between staying on budget or not.

Stay healthy. Eating well is possible on a tight budget. Fresh fruit and vegetables are GST-free and cheap compared with takeaway meals. Slow-cookers turn affordable cuts of meat into healthy, hearty meals. Have fun researching websites offering recipes and clever ideas for using leftovers.

Get advice. Many people mistakenly believe that financial advice is only for the wealthy. A financial adviser can help get you on track by:

planning a budget,consolidating debts,setting up a savings plan (even small amounts add up!),identifying your insurance needs,planning your estate.

A shoe-string budget doesn’t mean sacrificing your family’s fun, health or security, neither does it mean you have to do without. Small changes can make a big difference.

If you are a single parent, ask us for some guidance. You don’t have to do everything by yourself.

Most social security payments in Australia, including the age pension, are subject to both an assets test and an income test. The more assets and income a pensioner has, the lower their pension, eventually reducing to zero. A pensioner’s situation is assessed under both tests and whichever test results in the lowest payment applies.

Deemed income

When it comes to investment income, the income test can be a bit confusing. That’s because it doesn’t use the actual income generated by investments. Rather, the government “deems” that financial assets earn a particular rate of return. This makes life easier for pensioners as they don’t have to track interest payments, dividends or distributions from each of their investments.

How much those investments are deemed to earn differs for couples and individuals.

For a single pensioner, the first $51,800 of financial assets are deemed to earn 1% p.a. Anything over $51,800 is deemed to earn 3% p.a.

For a couple where one or both receives a pension, the 1% deeming rate applies to the first $86,200 of financial assets, with the 3% rate applying to anything above this amount.

These deeming rates apply from 1 July 2019 and are 0.75% lower than the old rates. They reflect the decrease in official interest rates since the last change in March 2015, which in turn have resulted in a reduction in most term deposit and bank account interest rates.

The reason for the two different deeming rates is that it is assumed that pensioners with higher levels of financial assets are likely to invest more of their savings in higher earning investments such as shares and property.

What’s the impact?

For a single pensioner with $250,000 in financial assets their deemed income drops from $8,339 p.a. to $6,464 p.a., a reduction of $72.12 per fortnight. This should result in a pension increase of $36.06 per fortnight.

For a couple with financial assets totalling $400,000, their deemed income drops from $13,276 p.a. to $10,276 p.a., or a reduction of $115.38 per fortnight. This will increase their pension by $57.69 per fortnight.

It’s important that pensioners understand that the reduction in deeming rates does not affect the actual income produced by their investments. In fact, actual earnings in excess of deemed income put a little bit of icing on the pension cake.

Who is affected by this change?

A reduction in deeming rates affects part-pensioners provided it is the income test that determines their benefit. They will see an increase in their fortnightly pension.

It’s also a good thing for people who, under the previous deeming rates, just missed out on a part pension as a result of the income test. They may now qualify for a part pension.

If deeming rates increase, the opposite applies. Part pensions will be reduced, and some pensioners may lose their pension entirely.

Time for a review?

Anytime there’s a change in deeming rates is a good time to review your age pension. Your financial adviser will be able to look at your situation and help you make the most of your pension.

You might think that only importers and exporters pay attention to the value of the Aussie dollar, but movements in the exchange rate affect us all.

After peaking at US$0.81 in January 2018, the Australian dollar fell as low as US$0.68 in January 2019, recovering a day later to around US$0.70. Our dollar has also fallen against a number of other major currencies.

A falling Aussie dollar makes it more costly to travel overseas and increases the local cost of imported goods. On the upside, it makes many of our exports less expensive for foreign buyers, giving a boost to our farmers and other exporters.

The reverse applies in the case of a rising dollar, but movements in exchange rates don’t just influence our living costs. Most people with superannuation will have a portion invested in overseas assets, and changes in currency values can also influence the performance of retirement savings – a lower dollar boosts the local value of our overseas investments while a higher dollar has the reverse effect.

So what are the main influences on exchange rates? Ultimately it comes down to supply and demand, and that can be determined by a number of things:

Interest rates. Imagine an Australian investor earning 1% interest on her money. She looks across the Pacific and sees that she can earn 2% in the USA. Here’s an opportunity to double her income! To do so she needs to buy US dollars, increasing demand for the greenback and thus increasing its value against the Australian dollar. Exchange rates respond very quickly to both actual changes in official interest rates, and to expectations of where interest rates in different countries are heading.Commodity prices. From wheat and wool, to iron ore and natural gas, Australia produces a wealth of commodities. When demand for materials falls less money flows into Australia, and with decreased demand our dollar falls in value.The economy. If the economy is doing it tough the Reserve Bank of Australia may drop interest rates to encourage borrowing and stimulate investment (as we’ve witnessed over the last decade). This takes us back to item 1. A weak economy relative to other countries attracts less overseas investment, causing the local currency to fall.Politics. Elections and referenda can create a climate of economic uncertainty that investors, on the whole, don’t like. However, if the market thinks that a more business-friendly government is likely to be elected, this could boost the value of our dollar.Fear. In times of market volatility and global political upheaval, investors flock to the US dollar as a ‘safe haven’ currency. Most other currencies, including ours, usually fall relative to the US currency.

But it’s not that simple

Other things can influence currency values, such as speculation or central bank intervention. There’s also a lot of interaction between the influences outlined above. For example, strong commodity prices may give a boost to the economy, which leads to higher interest rates. Throw in some political uncertainty add a touch of speculation and things quickly become very complicated.

Armies of analysts are employed to sift through massive amounts of data in their attempts to figure out where different currencies are headed. However, given all the complexities it is perhaps no surprise that they often arrive at very different conclusions.

So will the Aussie dollar rise or continue to fall? History suggests flipping a coin may provide as useful an answer as following the opinions of ‘experts’.

Australians are a nation of animal lovers. According to the Australian Companion Animal Council, we have one of the highest incidences of pet-ownership in the world!

Dogs and cats are our favourites; around 36% of Australian households own a dog, and 23% own a cat. We’re familiar with the companionship pets bring, and the social interaction they foster, but there are other benefits too, such as:

Lowered blood pressure and cholesterolIncreased physical activityStrengthened immune system and reduced incidence of allergiesChildren learn responsibility, empathy and respect.

When considering a pet, you expect costs like, food, bedding and the annual vet visit, but there are other costs you may not have thought about.

Let’s start at the beginning. Those purchasing a pet from breeders, could pay anywhere from $100s to $1,000s. Additionally, there are de-sexing, vaccination, and microchipping costs.

Conversely, there are fewer surprises from rescued cats and dogs. Shelters are overflowing with abandoned pets seeking a second chance and adoptions cost around $200 (puppies/kittens) or anything from $150 (adult dogs/cats). De-sexing, vaccinations and microchipping are included in the adoption fee.

But that’s not the end of it. How much, for example, will your pet grow and can your weekly grocery budget expand to feed another hungry family member? Standard dog food can be around $2 per 700g tin. A large dog may require more than one tin a day in addition to dry food and treats.

In most municipalities, pets must be registered – at a cost, of course. Then you need to think about fencing. Pets must be restricted to your property meaning ensuring your boundaries are securely fenced; cat-owners may need to invest in a cat-safe enclosure.

Regularly exercising your pet and providing toys to keep them mentally stimulated will assist in preventing costly property damage through boredom or escape attempts.

Ongoing health care can be pricey too. According to moneysmart.gov.au, health care estimates start around $3,000, excluding unexpected problems.

Pet insurance policies are widely available and offer cover from $50 per month. As with any insurance, choose wisely. Carefully read the policy document checking for:

Benefits and limitsEligibility/age limitsPre-existing conditionsExcess optionsWaiting periods/discounts

Depending on your pet’s circumstances, you might opt to regularly contribute to a dedicated account instead, ensuring there’s money available when needed.

Reduce costs by keeping your pet healthy and happy through diet, exercise, training and play.

Pet-care while you’re on holiday is an additional cost. Dog boarding kennels charge from about $40 per day (cats about $20). Alternatively a pet-sitter staying in your home could charge anything from $30 per night.

In recent times household expenses have been attracting more scrutiny than ever from financial institutions. Lenders are increasingly antsy about approving loan applications without seeing a full household budget.

When looking to borrow or renegotiate an existing loan, you must know your position. Your financial adviser will help you work through your income and expenses to determine whether a new family member will fit into your budget.

Pet ownership is a long-term financial obligation, but there’s no denying its rewards. With a pet-ownership of 62%, the majority of Australian households would agree.

Do you have a twelve-a-day habit? We’re talking seated hours, not cigarettes, although recent studies indicate that sitting too much and moving too little can be just as bad for your health.

The Victorian Government’s Better Health website suggests that sitting is the new smoking, and plenty of studies are backing up the claim. According to government stats, more than 60% of us do less than the recommended 30 minutes of daily exercise.

But it’s not just structured exercise we’re lacking.

Not so long ago, office workers communicated by walking to colleagues’ desks. Information was shared by hand-delivered memos (remember those?) and we physically attended meetings.

We went outside to buy lunch and – horrors – may have even eaten it outside!

Today’s world is one of remote connectivity. We email or instant message colleagues and attend meetings via video conferencing.

A new crop of office catering companies accept lunch orders via website or app and deliver it by courier directly to our desks – we don’t even have to get off our chairs for food!

As a population, we are moving less. We’re buying online where we used to visit shopping centres. We, who once walked or cycled to school, now drive our kids; and they spend hours chatting with friends online instead of physically meeting up with them.

Technology has aided and abetted us in becoming more sedentary than ever before – to the detriment of our health and well-being.

According to the United Kingdom’s National Health Service (NHS), excessive sitting is putting us at risk of all manner of diseases, the most common being obesity and Diabetes Type 2.

The NHS quotes sources from Melbourne’s Baker IDI Heart and Diabetes Institute claiming that too much sitting is thought to slow the metabolism. This in turn affects the body’s ability to regulate blood sugar, blood pressure and metabolise fat.

Other consequences may include conditions like varicose veins, sciatica, deep vein thrombosis (DVT) or more sinister ailments like heart disease and cancer.

So, if too much sitting is the problem, is standing the solution?

Well, yes and no.

Adjustable workstations enabling office workers to stand at their desks are a step in the right direction, but standing alone is not a panacea. Standing for hours can affect posture, and lead to neck, back and hip problems.

Movement is the key. Too busy to exercise, you cry? Fitting more movement into daily life isn’t as difficult as you might think.

Consider:

Taking the stairs instead of the lift.Visiting colleagues’ desks.Pacing while on the phone.Setting an hourly timer reminding you to get up and walk.Walking with the kids to school.Organising walking meetings at work – it’s a thing, Google it!

Our bodies are designed for movement. Lack of movement causes muscles and bones to weaken and ultimately our health and mental well-being can suffer.

It’s like leaving a car idle in a garage for months. You can replace a car, but you can’t replace your body – technology hasn’t gone that far yet – so get up and move it!

Sources:

www.betterhealth.vic.gov.au - The dangers of sitting: why sitting is the new smoking (last updated August 2016)

www.nhs.uk - Why we should sit less (last updated October 2016)

Most of us had retirement dreams, and couldn’t wait to finish work. So once retired, why haven’t we started ticking items off the bucket list? There’s no time like now for living your dreams.

When Tony and Chris retired they had grand plans involving a campervan, Kakadu and a rescue-dog. Their great Australian road-trip was happening the very next year, after they, “just got few things out of the way”.

Things like their daughter’s November wedding, then the kitchen reno in January. Kakadu wasn’t going anywhere; it would wait until July – after Chris’s knee reconstruction.

Eventually, they stopped putting a date on their road-trip. They were going to Kakadu – Someday.

But in this fast-paced world, someday can be elusive.

Nine years later Tony and Chris finally resumed preparations – they even visited a Campervan Show. But then Tony fell and needed hip surgery and reality hit hard: the road-trip was impossible.

Why do we so often put our dreams on hold?

While it’s unwise to spend retirement savings too quickly, delaying our goals may mean never achieving them – after all none of us is getting any younger. It’s important to enjoy life while still fit and healthy enough. If you’re not sure of your finances, speak to your adviser or tax accountant.

The key is to make firm decisions, budget carefully, and stick to your plans.

It's one of the real risks with retirement planning we see all to often - clients delaying their dreams for a later time and end up missing out on fulfilling them. Regret can sadly sometimes be the consequence.

A wise man once said, “Don’t save a good wine for a special occasion. Open it now and make today the special occasion.”

In other words, live the best life you can – now.

Sound advice.

#bestlife

Often when we're discussing financial arrangements, this can uncover areas where people are struggling. Too often we all overlook the deeper questions about "how are you really going?". Fixing a financial issue may help but is usually not all that is needed in situations like this.

Money plays a huge part in peoples lives and we all agree it's a very important area to get under control. But what happens when someones financial life starts affecting their emotional and mental health in a negative way. Maybe they are worried about the future, lack certainty about their employment, have mounting debts or maybe life just hasn't panned out the way they planned.

Every area of life affects other areas - money is no different. And this shouldn't be confused with the idea that more money will lead to more happiness. There's countless examples of very successful people who struggle in this area.

When financial struggles begin affecting someone's mental health, it's important to ask the questions. There's no easy answers but we'll never know if we don't ask.

Ask your family, your spouse, your friends (yes even those who seem to have loads of money) how they are going really. Be open to listening to their answers and not immediately trying to solve their problems. It's a real challenge for us as financial advisers...to ask and then listen without jumping straight into problem solving mode. Sometimes a listening ear is worth infinitely more than the best solutions.

Please ask the question and maybe we can help reduce the damage. Whenever you notice a change, no matter how small, we want you to trust your gut and start an R U OK? conversation.

If you're not ok...please don't be silent - reach out - https://www.ruok.org.au/findhelp

If you’ve ever laid awake at night thinking about your finances you’ll know: financial stress can be debilitating. What you may not be aware of is the strong link between financial stress and mental health.

According to the Australian Institute of Health and Welfare, 4.2 million Australians received mental health related prescriptions from their doctors over the 2017-2018 period.

Though governments annually spend over $9 billion on mental health, there’s a continuous need for more resources, funding, and understanding around mental health issues.

What is mental health?

The term, mental health, refers to a wide range of health and behavioural issues that vary in severity and duration. Among the most common mental health issues in Australia are depression and anxiety.

While the causes of depression and anxiety are varied, financial stress is a common theme.

What is financial stress?

Financial stress is the all-consuming worry about money. Mortgage stress, in particular, is defined as needing to use more than 30% of the household income to cover mortgage payments.

A report by ratings agency Moody’s, stated that the number of Australian mortgages more than 30 days overdue was at its highest level for five years, (1.58%).

According to Relationships Australia, financial pressures are the number one contributor to relationship breakdown.

Signs of financial stress

Recognising financial stress before it gets out of hand is a step towards taking back control of your life. Some signs are:

arguing with loved ones about money,difficulty sleeping,feelings of anger, withdrawal or fear,mood swings,loss of /increased appetite,increased use of alcohol or other substances,thoughts of self-harm.

Reducing financial stress

Financial problems can happen to anyone. A sudden illness, retrenchment, or an unexpected expense may throw your budget out of kilter. However, there are steps you can take to get your finances back under control.

Speak to your lender about restructuring your mortgage or consolidating credit cards, etc.Speak to your creditors about setting up a payment plan.Work with your financial adviser to develop a realistic budget.Contact the National Debt Helpline on 1800 007 007.

How can you manage stress?

Emotional stress can find you obsessing over ways to solve problems, ultimately affecting your behaviour and interaction with others.

Take care of your health by:

talking with a trusted friend or professional counsellor.keeping a journal.distracting yourself by going for a walk, seeing a movie or playing sport.practicing meditation to take your mind to a ‘quiet place’.taking back control, as discussed above.

Where to find help for mental health issues

If mental health issues affect you, or someone you know, consider:

speaking to your doctor,calling Beyond Blue on 1300 224 636 or chat online,calling Lifeline on 13 11 14 or chat online,

Thursday October 10 is World Mental Health Day, which aims to remove the stigma attached to mental health through awareness and information.

By removing some of the misconceptions around mental illness, we build a caring community in which those that are affected are more likely to seek the help they need.

Like the idea of owning your own small part of some of the world’s largest and fastest growing companies? Maybe you want to tap into the growth potential of emerging economies, or get in early on the next big thing in technology. To achieve these investment goals you’ll need to look beyond Australia’s shores to access a wide range of investment opportunities that are simply not available on the local market.

Why invest in overseas shares?

While we have our local success stories, we don’t really have the equivalent of the FAANGs (Facebook, Apple, Amazon, Netflix and Google) that have generated much of the growth in the US markets. Nor do we have a local Toyota or Tesla, Nike or Boeing. Tapping into the growth potential of these companies requires investment in overseas shares. The New York Stock Exchange alone is around 20 times bigger than the Australian Stock Exchange. That means more companies engaged in a wider range of businesses offering a bigger universe of opportunities.

Then there are emerging markets. China and India are two large economies that have grown rapidly for a number of years, and buying the right shares in these markets allows investors to access this growth.

Because different economies, sectors, technologies and geographies perform differently at different times, investing in a range of international shares provides a diversification benefit that, over the medium to long term, helps to reduce investment risk while maintaining returns.

How to invest in overseas shares

There are two main ways to invest in overseas shares:

Direct share purchase. Most stockbrokers offer clients the opportunity to buy international shares, though they may only provide access to a limited number of markets. Also, an international custodian may legally hold the shares, although you’ll have the right of beneficial ownership.

Managed funds. Investors can choose from a wide range of funds that provide exposure to many different markets (regional or country-specific), technologies (biotech, lithium, cleantech, resources), or management styles (high dividend funds versus growth funds). At the fund level, a professional manager makes investment decisions, relieving investors of this crucial task.

Managed funds may be unlisted, in which case units are bought from and redeemed with the manager. There are also exchange-traded funds (ETFs), where units are bought and sold on the Australian share market in much the same way as direct shares. ETFs usually track a specific index, and this ‘passive’ approach means they often charge lower fees than actively managed unlisted funds. As ETFs can be bought and sold whenever the market is trading, they provide quicker entry and exit from your investment than is the case with unlisted funds.

Currency concerns

When you invest in international shares you are effectively investing in two asset classes – the shares themselves and the currency of your overseas investment. In fact there may be periods when currency movements have a greater impact on your investment performance than any changes in the underlying share price.

Given a steady share price, if the Australian dollar falls in value against the currency your investment is held in, then the value of your investment in Australian dollars will increase. However, if the investment’s currency falls against the Australian dollar, than the value of your holding in Australian dollars will also fall.

Some managed funds use hedging to provide protection against changes in exchange rates. This means the value of your holding in Australian dollars should primarily be determined by investment performance, not currency movements. However, hedging comes at a cost, so while it may decrease risk, the extra cost may also decrease net returns.

Create a plan

Whether you opt for managed funds, direct investment or a bit of both, it’s important to understand exactly what you are investing in. When buying shares directly, specific company research may be harder to come by, particularly for smaller companies and emerging markets. This leads to higher risk. With managed funds you need to understand the manager’s style, focus (large companies, small companies, specific technologies or other themes), and whether currency exposure is hedged.

You also need to understand how dividends and capital gains are taxed. This varies from country to country, and you may need to complete some paperwork to reap the benefits of Australia’s tax treaties with other countries, and not pay any more tax than you need to.

Remember that international shares should only form part of a well-diversified portfolio. And as one of the more volatile (i.e. higher risk) assets, expect values to fall occasionally as well as rise. Put together an investment plan detailing what you want to invest in, how, and how much. By all means undertake your own research, but talk with your stockbroker or financial planner, too.

Embrace the opportunity

Whether it’s through direct shares or managed funds there’s a place for international shares in most portfolios, and it’s never been easier to grab yourself a piece of iconic brands such as Apple and Facebook. If you want to own a piece of the big end of town, dabble in niche markets or buy into tomorrow’s world-changing technologies, opportunity awaits. If you take advice and follow the rules of sensible investing, it could be a very lucrative move indeed.

None of us likes to consider our own mortality. For our older loved ones, it’s an even more confronting topic and difficult to discuss

When Lindsay became ill, his family’s priority was to support him through his treatment, and keep him positive and as comfortable as possible.

Typical of his generation, Lindsay had always been very private, never sharing personal information – not even with his nearest and dearest. After he passed away, it dawned on the family that nobody knew whether Lindsay would have preferred cremation or burial. At such an emotionally charged time, the question caused quite a dispute.

As parents, we aim to have open dialogue with our children over issues like drugs, sex, etc. But as our parents age, difficult discussions around medical arrangements, Wills, money, etc, are usually put off until something occurs to trigger the talk. Often, by then it’s too late, which is why it’s so important to communicate while you still can.

Once Lindsay’s funeral was over, the family faced more complex questions: did Lindsay have a Will? Was there any insurance? What investments and assets did he have? Trying to locate Lindsay’s paperwork and make sense of his finances became a nightmare.

If only someone had asked him.

What should you talk to your parents about?

If you think about all those things you’d rather not discuss you’re off to a good start.

Before the conversation, consider:

Finances, assets, investments, accounts, insurance policies, etcFuneral preferencesAged care arrangements, family home, care facilitiesLocation of important documentsUsernames and passwords for online accountsContact details for doctor, financial adviser, trustees, power of attorney, solicitor, executor, etc.

Carefully consider your approach. These are sensitive topics; introduce them gently and tactfully. It may be helpful to involve their executor, financial adviser or accountant.

During the conversation:

Present an example

Use examples of challenges faced by others, explaining that you hope to avoid the same situation. Tell them you’d like to help them organise their paperwork to provide peace of mind and a plan for their future.

Support independence

Point out that you’re not reducing their independence but ensuring they maintain their independence as long as possible.

Don’t judge

As your loved one opens up, listen respectfully and without judgement. Encourage discussion around their choices so you can understand and help implement them.

Afterwards, follow up and fulfil any promises you made.

Finally, just when you think your job is done, have the same discussion with your children, only in reverse. Be clear about what you want and why you’re talking to them.

Children don’t want to think about your mortality any more than you do. They’ll think you’re overreacting and probably won’t thank you for the information – not right now anyway. But that’s the nature of kids.

The main thing is that when your time comes, they’ll realise you’ve saved them a lot of heartache.

Australia is a generous nation that finds joy in giving gifts. New research* from the Financial Planning Association of Australia (FPA) shows we give almost $20 billion per year in gifts to loved ones, and most people (81%) say it feels like the right amount to spend.

Experts in psychology agree the act of giving sparks the parts of our brains linked with pleasure, social connection, and trust, and can contribute to lowering blood pressure and stress.

So it’s no wonder most of us (85%) say we get more joy giving gifts to others than receiving gifts ourselves. There’s an innate goodness in giving.

Get inspired with the FPA’s Goodness of Giving eBook, which contains fun and useful tips on gift giving for significant occasions such as weddings, kids’ birthdays and Christmas.

This eBook also explores how you can become a more socially conscious gift-giver and how to set a gift budget.

If you want to read the full conducted by the FPA, just .

*

#giftsthatgive

#FPWeek2019

There’s a common view that as you approach retirement you should tilt your investment portfolio towards more conservative investments. This means favouring things like term deposits, annuities and cash management trusts while reducing exposure to more volatile assets such as shares and property. The thinking is that preservation of capital is key, as without an earned income it is hard to recover from any downturns in the share or property markets.

In the days of high interest rates this might have been a good strategy, but when interest rates are low and life expectancies long, being too conservative with investment can see the money running out way too soon.

Peter plans to retire on his upcoming 63rd birthday. He has $600,000 in super and wants this to provide him with an income of $50,000 per year. If his net return is 3% pa, Peter’s nest egg will last for just over 15 years[1]. The problem is there’s a good chance Peter will live into his late 80s or even 90s. To give his savings a chance of lasting until he is 90 (27 years), Peter will need to target a net return of 7% pa.

Chasing higher returns does involve taking on greater risk. However, for a well-designed portfolio the great moderator of investment risk is time. Even over just a 10-year period it’s much more likely that a ‘growth’ portfolio will meet Peter’s needs rather than a more conservative one.

Just because you stop working doesn’t mean your money should too. To ensure your nest egg keeps working hard through your retirement talk to your financial adviser.

[1] Does not take account of any age pension entitlement

Even for seasoned travellers there’s a little bit of magic involved in hopping on a plane in Australia today and disembarking in a far-off destination like Istanbul or London tomorrow. For most people their travels will be a safe and wonderful experience, but things can go wrong. While you can’t control everything, a little bit of preparation can help to create cheerful memories.

Let’s start with something most people don’t associate with an overseas holiday - make sure your Will and powers of attorney are up to date and your executor and/or attorney know where to find important information. If there isn’t anyone that holds your power of attorney, consider appointing one before you leave. This can either be an enduring or a limited power of attorney.

Prepare a list of your accommodation details including addresses, phone numbers and dates. Place a hard copy in each of your bags and give copies to your travelling partners, including any accompanying children. It may help to reunite you with lost bags or lost companions, but is perhaps most useful when giving directions to taxi drivers. Showing them the written address avoids the inconvenience and expense that occurs when mispronunciation or a misunderstood accent delivers you to the wrong hotel.

Most of us rely on our phones to look after our contacts, so who could you get hold of if you lost your phone? Take hard copies of your key contacts list, including family members, travel insurer, credit card and travel card providers, banks, airline, and travel agent. Give a copy to your attorney or executor. It’s also a good idea to back up your phone to your home computer before you leave. If you do lose your phone you can upload everything back onto a new one upon your return.

Split cash, credit cards and travel money cards with your travelling companions. If travelling alone, consider taking two wallets (in separate bags or keep one in the hotel safe), so you have backup cash and cards if a wallet is lost or stolen.

Security screening, which now can include full body screening, can be intimidating and seem intrusive, but it’s there to make our travels safer. Follow your airline’s instructions on what can be taken in hand luggage otherwise certain items will be confiscated. Remove even the smallest items from your pockets, and if you want to keep your water bottle, you may have to empty it before screening. Be prepared to put your phone, wallet, watch, small change, belt and, in some cases, your shoes into the tray for x-ray scanning. You also have to remove your camera, laptop or tablet from hand luggage before it is scanned. This all takes time so allow for it before boarding.

Attracted by the beauty of Venice or Dubrovnik? So are several million other people. Crowds provide an ideal operating environment for pickpockets. So does public transport. In such situations stay alert to what’s going on around you. If you’re carrying a backpack, maybe wear it on your front. You don’t need to lock all the zips, perhaps tie them together with twist ties to slow down entry. This also can deter the unscrupulous from adding stuff without your knowledge. Wear shoulder bags diagonally across the body so they can’t simply be slipped off your shoulder. And choose bags with slash-resistant straps.

While credit cards are widely accepted, smaller restaurants may only take cash. If you’re relying on plastic to pay for a meal, check that cards are accepted before you sit down.

Do not use internet cafes or public Wifi to access your bank accounts. If you use these services to access social media, don’t save your login or password or any other personal information on the computer. These connections are never 100% secure.

Of course the aim is to travel with confidence and wonder, not fear. The purpose of these tips is to help build that confidence because when you’re fully prepared it’s easier to sit back, let your adventure unfold, and allow yourself to be touched by the magic of exotic destinations.

Anyone applying for a home loan these days will find that there are more hurdles to jump than has recently been the case. So why is it harder to get a home loan? And what can you do to improve your chances of getting a loan?

The Royal Commission

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that concluded in early 2019 discovered a number of lax lending practices by some of Australia’s biggest lenders. Of particular concern was that some banks failed to verify the living expenses of home loan applicants. In many cases this lead to people receiving loans that they were unable to repay. The Royal Commission also revealed that one of the bank regulators, ASIC, did little to punish misconduct, so there was little incentive for banks to comply with their legal obligations.

In response to the Royal Commission ASIC promised greater scrutiny of lending practices and lenders began to ask for a lot more information when assessing home loan applications. They now require detailed proof of both income and expenditure at a level that many people may find intrusive.

Bigger deposits

The decline in home prices in Australia’s major cities mean that buyers don’t need to borrow as much for a given property, which should make it easier to get a loan. However, falling prices create a greater risk for the banks, and one way to reduce this risk is to require a higher deposit, extending the time it takes to save that deposit.

Stringent stress testing

Even before the Royal Commission the prudential bank regulator, APRA, introduced a requirement that banks check on their borrowers’ ability to service their loans if there is a significant increase in interest rates. While it might be possible to borrow at an interest rate of less than 4% per annum (pa), the banks need to check that the loan is still affordable at an interest rate of more than 7% pa, thus reducing the amount that can be borrowed.

Being prepared

The main response to this more difficult lending environment is simple, but that doesn’t make it pleasant. Unless you are able to increase your income, you’ll need to save more. Inevitably, that means spending less:

Apps such as TrackMySPEND from MoneySmart can help you track your spending and make it easier to work to a budget.Keep detailed records of saving and spending. You will be asked for them come loan application time.Start early. You are more likely to be successful in your home loan quest if you can show a consistent history of saving and responsible spending spanning years rather than months.Shop around. By all means start with your regular bank, but also check out what the non-bank lenders and mortgage brokers can offer.

Make sure you drop us a line hello@intuitivefs.com.au if you have any queries or want to discuss further.

How often do you give your business finances a tidy-up? As another end-of-financial-year rolls by, now is as good a time as any to undertake a bit of housekeeping.

The stresses of running a small business often see us rushing, unprepared, towards June 30th. It’s that time when we draw a line under our business finances for one year, take a deep breath, and plunge into the next.

This year, before holding your nose and leaping into July, why not take a moment to dust off your finances and begin the year with a fresh outlook?

Here are five ideas to get you started.

Insurance

The Australian government’s business website, www.business.gov.au can help you understand your compulsory insurance requirements, along with other cover you should consider, like personal insurances to protect yourself, your income and your family in the event you’re injured or become too ill to work.

Additionally, there are policies to protect your premises, your stock and machinery.

If you’ve had insurance for a while, perhaps shop around and see if there are better deals to be had.

Tax planning

The start of a new financial year is perfect for developing a forward strategy. To get organised, and stay organised, throughout the coming year start by understanding your industry’s regulatory obligations and entitlements. Look at government concessions, asset write-offs and deductions.

Stay up-to-date with compliance responsibilities like, Single Touch Payroll, effective from 1 July 2019.

You should:

analyse your profit and loss: monthly, quarterly, annually.track revenue to ensure billing and collecting provides adequate cash flow.calculate the cost of doing business; devote more time to activities that are the most profitable and help grow your business.

Your tax accountant can help you put a system in place that will keep your tax records organised and up-to-date throughout the year. Why not call them to arrange a time to talk it through?

Systems

If you’re doing things a certain way because that’s how they’ve always been done, it may be time to cast a critical eye over your business procedures.

Are there:

better/faster/more efficient ways of doing things?technologies to simplify processes, e.g.: point-of-sale (POS) systems?process bottle-necks or duplicated steps that can be safely bypassed?ways to automate manual processes like running reports or paying regular accounts?

Business tracking

Staying on top of business performance, trends and cash flow can eliminate surprises by spotting potential problems and identifying supply and demand patterns.

Start by:

analysing data from previous years or seasons.looking for peaks and troughs in sales/turnover/productivity.identifying what worked and what didn’t work.

Plan to grow

Once you know where you are, you can look for ways to move forward.

Whatever your business’s growth strategy, be sure you have the resources to support it. Consider whether you’ll need to invest in machinery, supplies or specialist staff?

Now, update your business plan and review it regularly to stay focused on where you’re heading.

Running your own business is hard work, but it’s also one of the most satisfying things you can do.

Richard Branson once said, “A business is simply an idea to make other people’s lives better.” So, this new financial year, start refreshed and set yourself up to make your life, your family’s life and your customers’ lives better.

Retirement: you’ve made it! And one of the rewards for all your hard work is that you can now access your superannuation. Suddenly a world of opportunities opens up – a Caribbean cruise, major home renovations or maybe helping your kids reduce some of their debt.

Of course you deserve to celebrate your retirement, but bear in mind that your super might need to support you for the next 30 years or more. Eat too far into your nest egg in the early days and you significantly reduce the time that your super will last. This is particularly the case in a low interest rate environment.

Take Ron and Val. They retire with a combined super balance of $800,000. At an interest rate of 4% pa this nest egg will fund annual living expenses of $60,000 for 19.4 years[1]. If they spend $100,000 on travel and home renovations and give a further $100,000 to their children, the reduced nest egg will now only last 13 years.

Planning for big expenses in retirement is just as important as it is pre-retirement. The longer that an expense can be deferred, the longer the money will last, and the greater the total income received.

In Ron and Val’s case, this might mean scaling back the travel plans a bit, putting off the renovations for a couple of years, and helping their kids by making regular, small gifts rather than a large lump sum.

Your super is there to help you enjoy life in retirement, but it’s a balancing act. A little restraint now may allow for more fun later, so talk to your financial adviser about how you can make the most of your super in retirement. Being able to confidently spend in retirement, knowing your planned expenditure has been considered, is such an important but often overlooked aspect.

[1] Does not take account of any age pension entitlement

By the end of 2018 Australia had, relative to the size of its overall economy, one of the highest levels of household debt in the world. At 127% of gross domestic product (GDP), our household debt, as a percentage of GDP, had nearly doubled over the last 20 years.

So are Australian households groaning under the weight of oppressive levels of debt? For the most part the answer is no. A major reason for the increase in household debt is that interest rates are much lower than they were 20 years ago, so it’s easier to service larger loans. And over 90% of our household debt is owner-occupied home loans and investment loans.

Good debt, bad debt

Home loans and investment property loans are often referred to as ‘good’ debt because, when used responsibly, they (usually) improve well being and build wealth over the long term. That said, poor choices or unfortunate changes in circumstances – borrowing too much, loss of a job or an increase in interest rates for example – can see ‘good’ housing debt turn ‘bad’.

Another type of bad debt is lifestyle debt. This has a negative impact on wealth because the debt is being used to buy things such as cars and clothes, holidays and groceries – that lose value rather than gaining it. In today’s world it’s easy to accumulate bad debt.

Temptation galore

Credit cards, digital wallets on our phones, payday loans and buy-now-pay-later options all make it easier to spend money, even if it’s money we don’t have. Relentless, targeted advertising, the fear of missing out, the increasing level of peer pressure enabled by social media or just paying for daily essentials are all capable of leading us into spiralling debt.

Is debt consuming you?

Some warning signs that you have a debt problem include:

Not paying off your credit card in full each month. This means you will be paying a high rate of interest on the carryover balance.Your total debt is increasing, along with your interest payments.You’re experiencing housing stress. This means rent or mortgage repayments consume more than 30% of your pre-tax household income.You’re using debt to fund basic living costs.

Taking control

How do deal with your particular debt problem depends very much on personal circumstances.

Track your spending. Australians buy huge amounts of clothes they don’t wear, food they don’t eat and gadgets they don’t use. For every purchase ask yourself, “do I really need this?” Take out a lower interest rate personal loan to pay off high interest debts such as credit cards. Repay the loan as quickly as possible.If you have a home loan, make sure it has a linked offset account that you use for everyday banking. You only pay interest on the difference between your loan balance and offset account balance so all of your money is working to pay down your loan.Review your home loan regularly. You may be able to refinance at a lower interest rate. Check for all the fees involved.Talk to your financial adviser. They can look at your specific situation and recommend strategies that will put you in control of your debt rather than having debt consume you.

A growing number of Australians are choosing to return to study as mature-age students. Perhaps caught in the hamster-wheel of mortgage and family, furthering their education wasn’t an option when they were younger.

But that was then.

Harriet had long fancied setting up a home-based book-keeping business. But being a single mum, raising her two daughters and working part-time in a clothing store, kept her too busy for anything else.

After her girls left home to begin their own lives, Harriet enrolled in a book-keeping course at her local TAFE. She’d put her own goals on hold for almost twenty years and now she was finally able to achieve them.

Older people return to study as mature-aged students for a number of reasons. Perhaps, like Harriet, they’re fulfilling a dream, that due to various lifestyle or family commitments, they’ve had on the back-burner for a while.

Some wish to update their skills and gain confidence at work, qualify for a job promotion or pay increase. Many seek a complete career change or something to keep them busy in retirement.

Take Ed, for example. After a thirty-year banking career, Ed was approaching retirement. Though he looked forward to finishing full-time work, he couldn’t see himself doing nothing at all.

After chatting with some local real estate offices, he discovered their regular need for a handyman to perform odd-jobs on properties they manage.

Happily for Ed, on 28 November 2018, the federal government announced an expansion of its Adult Australian Apprentices Incentive – a program supporting employers who engage a mature age (over age 25) apprentice.

Ed had always loved working with his hands, so he quit his job at the bank and began life as a mature-age apprentice. By retirement, he planned to achieve a trade qualification and enough work experience to set up a part-time handyman business.

Harriet and Ed are not alone. In fact, so many mature-age Australians are furthering their education that the federal government is a major sponsor of the National Skills Week.

This is a national event held in August each year, for the promotion of activities that align with adult learning, along with a support program for those preparing to return to education.

The federal government also provides financial support for mature-age Australians seeking to further their education along certain study paths. The list of eligible courses covered is extensive. Additionally, government study loans are available through the Higher Education Loan Program (HELP) which has a range of loan schemes to help with various study costs.

On 1 July 2019, the Government’s Protecting Your Super package introduces new laws designed to protect members from paying unnecessary fees and insurance premiums.

You might hold insurance through your super fund and if you do, it might be cancelled if you or your employer haven’t made a contribution for the last 16 months. So it’s worth checking whether you’re affected.

The easiest way to know if you’re affected is to open and read any letters, emails or SMS messages you receive from your super fund.

If you haven’t received any communication, but think you should have, reach out to your fund – they may have been trying to contact you at an old address.

You might not have to do anything, but it’s a good idea to check – your future self will thank you!

To help break down what’s happening and what it could mean for you, check out this simple animation to take you through the changes and how to check if you’re affected.