Avoid passing bad money habits on to your children

Avoid passing bad money habits on to your children

Updated on Budgeting, Education

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

Is Worker’s Compensation Enough? 

Is Worker’s Compensation Enough? 

Insurance

No matter what kind of job you have, there is always a possibility of falling sick or getting injured, regardless of the type of work you do.  That’s why every Australian workplace has a health and safety obligation to provide a safe work premises, assess risk and have workers compensation insurance.   What is worker’s compensation?  Worker’s compensation is a form of insurance payment paid to employees if they are injured at work or become sick due to their employment. Payments may cover:   The injury or illness must be work-related to receive worker’s compensation benefits.   Protection at work   A report released by Safe Work Australia in 2023 showed:  Whilst worker’s compensation offers some level of protection, it still only protects you for injuries or illnesses that occur at work or as a direct result of work – and then any claim made must meet eligibility requirements. Entitlements and eligibility for payments vary from state to state in Australia.  If you suffer from an injury or illness that does not qualify for a workers’ compensation payment, there’s a real possibility that you could be left without income to support yourself and pay for the costs of the medical condition.   (An important side note – If you’re self-employed, a sole trader or an independent contractor, you may not be covered under any worker’s compensation scheme, in which case you will need to organise your own protection.)  The best way to cover the gap  While worker’s compensation is beneficial, it may not provide enough financial support for you and your family, even if you have a successful claim.  Considering that the vast majority of Australians suffer from injuries and illnesses not related to work, relying on worker’s compensation alone may leave you short on financial protection.   So, how can you ensure you have the best safety to protect yourself when you can’t work?   Income Protection  Income Protection goes to work when you can’t and can cover you for well beyond what worker’s compensation may provide.  Although worker’s compensation might provide some coverage for injuries and illnesses sustained at work, including Income Protection in your personal protection plan can give you peace of mind knowing that you’re covered in various situations, both at and outside of work. This way, your ability to earn an income will be secured.  If you want to explore your options for Income Protection, get in touch with your financial adviser today.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Charting a course to financial recovery 

Charting a course to financial recovery 

Budgeting, Education, Finance

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

Achieving financial freedom 

Achieving financial freedom 

Updated on Investing

What does financial freedom mean to you? The ability to travel the world and build a dream home? Or to be able to enjoy a simple but active retirement, and support some good causes?   We all have different desires and goals in life, but most of us share the dream that one day we would like to achieve our particular version of ‘financial freedom’. The challenge is that most of us don’t really know what it takes to turn our goals, be they vague wishes or burning desires, into reality.   However, with just a little bit of forethought, some expert advice, and by acting on that advice, we are much more likely to reach that goal of financial freedom.  Making the list  Your key ally in achieving financial freedom is your financial adviser, and amongst the most important things your adviser will need to know is what your goals are. So make a list and prioritise it. Which of your goals are essential, and which ones are you willing to compromise on?  Reality check   Just as we have different goals, so do we have different financial resources. One of the first things your adviser will do is run a reality check. Given your income and expenditure, job outlook, health and family situation, are your goals realistic and achievable?   Your adviser will also check if key goals are missing. For example, life insurance can be an essential tool for protecting your family’s future financial freedom, yet many people overlook it.  With the big picture now clear, your adviser can develop strategies that will bring that goal of financial freedom closer to fruition.   Perfect timing  When’s the perfect time to start your journey to financial freedom?  Today.   Because the sooner you get started, the sooner your goals will be achieved.   So think about your goals and desires. Importantly, write them down. Then make an appointment to sit down with your financial adviser, and take those critical first steps towards achieving your financial freedom.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Building financial resilience 

Building financial resilience 

Updated on Budgeting, Education, Finance, Investing

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

Active or Index Funds: What’s Your Best Bet? 

Active or Index Funds: What’s Your Best Bet? 

Updated on Investing

Ever glanced at a list of different managed funds and wondered why some have remarkably low fees compared to others? Chances are, the ones with lower fees are index funds, also known as passive funds.   Over the last couple of decades, index investing has become increasingly popular, with big players like Vanguard and Blackrock managing trillions of dollars in assets (as of 2022).  Before we dive into the reasons and consequences of this trend, let’s break down the two main investment styles:  Active Investing:  Index Investing:  So, why has index investing gained so much ground?  1. Lower Fees: 2. Performance Challenges:  For instance, at the end of 2022, 58% of Australian General Equity funds returned below the index. Over 5-, 10-, and 15-year horizons, the underperformance proportions were 81%, 78%, and 83%, respectively. Similar trends are observed in international equity markets.  While choosing index funds may seem logical, it’s essential to consider their underlying premise. Returns come from income (like dividends) and changes in capital value over time. However, for the latter to happen, there must be market activity—investors trading securities. If everyone exclusively invested in indexes, the market would cease to exist.  Index investing doesn’t screen shares, meaning investors get exposure to both ‘good’ and ‘bad’ companies. Also, there are no exclusions based on environmental, social, or governance (ESG) criteria, which some investors prioritise.  In the active versus index debate, there’s no clear right or wrong. Many investor portfolios combine both approaches. Index funds or ETFs are often used for broad exposure, while active investment may be reserved for specialised exposure, such as smaller companies, property, or infrastructure.  Regardless of your choice—active, index, or a mix—the fundamental principles of investing still apply: diversification and time in the market are key to building long-term wealth.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Nailing your job hunt: A guide for school leavers

Nailing your job hunt: A guide for school leavers

Updated on Education

Every January, countless school leavers across Australia embark on their job-hunting journey. A NSW Government survey conducted in 2021 found that of 42,388 secondary school leavers, approximately 50% continued to higher education, while the remaining 50% chose to seek employment (14% apprenticeship; 13% part-time work; 8% full-time work; 7% looking for work; 5% traineeship; 3% other). That’s roughly 21,000 job-seekers – in NSW alone – hitting the employment market all at once! Extrapolate that across all of Australia, and you see where this is going. Given that a single job advertisement might attract scores of applicants, how can you stand out from the crowd? Drawing attention to your resume is easily achieved with little effort. Consider these points: Soft skills Don’t think you have experience? Think again! Perhaps you’ve done volunteer work, played a team sport, performed in a school play or fed the neighbour’s cat while they travelled. A positive attitude, ability to articulate an idea, reliability, problem solve or work in a team are considered soft skills – and they’re highly prized. Your activities and hobbies tell employers a lot about you. Showcase them on your resume and talk about them during interviews. Resilience and EI Employers value candidates demonstrating emotional intelligence (EI) and resilience. EI behaviours include: taking constructive criticism, displaying empathy and patience with others, resolving conflicts, awareness of cultural sensitivities, etc. Characteristics of resilience include: bouncing-back from setbacks, willingness to change, etc. When you provide examples of these attributes, potential employers gain an insight into how you communicate, develop relationships, support others and motivate yourself and those around you. Digital literacy Get familiar with the corporate software and tools specific to your chosen industry. Study advertised position descriptions to understand what companies are using and their expectations of candidates. Resources like LinkedInLearning have literally thousands of online courses. There may be a subscription fee but – huge tip – many local libraries include free LinkedInLearning access as part of your library membership. Prospective employers will be impressed with your effort to upskill yourself and your commitment to ongoing learning. Your brand Conduct a self-audit of your digital presence. Employers often check social media profiles so it’s important your online views and attitudes align with your professional image. Get active on business platforms like LinkedIn, and share and comment on industry content. Build a network by connecting with professionals in your chosen field and attending business events or workshops. Don’t be afraid to reach out for guidance – most people will be pleased to help. Write a schmick resume Check out the government’s Job Jumpstart website (www.jobjumpstart.gov.au) for hints and a whole lot more on writing effective resumes and cover letters. And here’s another big tip: never underestimate the value of correct spelling and punctuation. If you don’t know the difference between their, there and they’re, or your, you’re and yore, polish your grammar skills and don’t rely on spell-check. And finally… Get interview ready. Anticipate questions and practice responding. Remember that there are very few opportunities in life where you’ll be encouraged to talk about yourself and your achievements. So, without being arrogant or braggy, relax and enjoy the moment. If you’re not successful in securing the job, handle it with professionalism and think about where you might improve. Consider it a learning experience rather than failure! Entering the workforce, applying and interviewing for jobs, can be daunting. But when you do land that gig, there’s no buzz to compare with earning your own money. You’ve made it and you’re announcing to the world: I’m on my way, just try and stop me! The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Oct – Dec 2023

Quarterly Economic Update: Oct – Dec 2023

Economy, Finance, Investing

Global growth is forecast to slow and remain below its historical average in 2024, reflective of tighter monetary policy in advanced economies, as well as a soft outlook for China. Australians can expect higher prices, higher interest rates and higher population growth, with economic growth and unemployment decreasing. Inflation continues to bite With a new Governor at the helm of the RBA, and inflation tracking down since its peak in the December quarter 2022, public sentiment hoped that rate rises would be paused. However, the RBA delivered another rate hike at the November 2023 meeting, bringing the official interest rate to 4.35% – the highest level since 2011. It is likely that an increase in the monthly CPI indicator was a key trigger for the RBA to raise rates, as the monthly indicator rose to 5.2 per cent in August, and then rose again to 5.6 per cent in the September data. However, the next monthly data point, for October (which came out after the November rate rise) had inflation decreasing to 4.9 per cent. Services inflation remains high and was the primary driver of stronger-than-expected underlying inflation in the September quarter. Interest rates – will they or won’t they? The RBA continues to be cautious about the inflation outlook for Australia for several reasons: high and sticky inflation in the services market, house prices recovering sooner than anticipated, a tight labour market and increasing population growth due to migration. A survey of 40 economists by the Australian Financial Review shows that the median forecast is that the RBA will start cutting rates in September 2024, whilst the bond market is projecting an easing of rates by mid-2024. The RBA will meet only eight times in 2024, reduced from 11, beginning in February – following an independent review ordered by the Treasury. Coupled with the RBA governor’s commitment to return inflation to the target range of 2-3%, more rate hikes may be on the cards. Holiday spending to remain flat A survey by Roy Morgan forecast shoppers to spend $66.8 billion during the pre-Christmas sales period, only up 0.1% from the same period in 2022, likely as a result of cost of living impacts. Sales spending for the Boxing Day period to December 31 was expected to be about $9 billion, including $3 billion on Boxing Day itself, as retailers prepared larger discounts than usual after a slow year. Hot Property House and unit prices grew steadily in 2023, with a national annual growth rate of 5.42% (6.54% in capital cities). The main drivers include the highest net overseas migration levels ever recorded, few vacant properties and stronger demand for established homes due to the construction industry facing capacity and cost issues. This growth forecast is expected to continue as most experts believe demand for housing will continue to outstrip supply. However, Australia’s cost of living increases and interest rate uncertainty will keep biting—leading to weaker price growth than previous years. The rental market remains in a critical shortage of available dwellings according to SQM Research. Due to the ongoing supply and demand imbalance, the market is expecting capital city rental increases of 7-10% for 2024, on top of an average 10% market increase in 2023. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Post Christmas Sales – A Survival Guide 

Post Christmas Sales – A Survival Guide 

Updated on Budgeting, Education, Finance

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

A Self-Employed Superannuation Guide

A Self-Employed Superannuation Guide

Superannuation, Tax

When you’re at the helm of your own business, it’s easy to get caught up in the whirlwind of the present – chasing sales, generating leads, and growing your business. Often, self-employed people prefer reinvesting back into their businesses, hesitant to stash money away in superannuation. Yet, there’s a compelling case for setting aside a slice of your earnings. The facts don’t lie At present, self-employed Australians are not required to contribute to superannuation. According to the Australian Tax Office’s (ATO) data, while self-employed people make up about 10% of the workforce, their super contributions account for just 5% of the retirement pie in 2014-15. Dive deeper into the numbers, and fewer than 1 in 10 self-employed Australians opted to make tax-deductible super contributions that same year. What is ‘self-employed’? The ATO has clear guidelines on what a self-employed person is: For more information see the ATO website. Why contribute to superannuation? While it’s tempting to pour every hard-earned dollar back into your business, the reality is that not all businesses come with a pot of gold at the end. Some self-employed people and businesses rely solely on their own labour, with no substantial business assets to lean on. That’s where superannuation can come in, providing a great way to plan for your retirement. A nest egg for retirement By contributing to super, you are building a nest egg that will provide you with financial security and income in retirement. Putting a small amount of money into superannuation regularly can provide financial stability over time, allowing you to focus on growing your business knowing that you have another income stream building in the background. Tax benefits Here’s a big one: self-employed people may be entitled to a full tax deduction for contributions made to super. If you’re self-employed, you can make personal contributions up to the annual cap, which is $27,500 per year for the 2023-24 financial year. These contributions are taxed concessionally at 15 per cent, rather than marginal tax rates. So not only are the contributions taxed at a lower rate, self-employed people can also claim a tax deduction on those contributions. To claim a deduction for personal contributions it’s important to note that: Compounding Superannuation remains one of the most tax-effective ways to grow wealth. Over time, your contributions can benefit from compounding growth, as your investments earn returns on both your initial contributions and any earnings generated. Starting early and contributing consistently, even with small amounts, can significantly boost your retirement savings. Diversification Many self-employed people see their business as their retirement strategy. But by putting money away into the tax-effective superannuation environment, with investment strategies that can be tweaked over time, you can diversify your investment, reduce risk, AND plan for retirement. How do I contribute to super if I’m self-employed? Just because you’re self-employed doesn’t mean super has to be complicated! With various tax benefits, flexibility of contribution size and frequency, and having another source of income for your retirement, if you’re self-employed why wouldn’t you be contributing to super?! If you’d like to get started, talk to your adviser today. The information provided in this article is general in nature only and does not constitute personal financial advice.  

The challenges of being a Carer

The challenges of being a Carer

Updated on Aged Care, Budgeting, Centrelink

Caring for a loved one can be deeply fulfilling but brings its fair share of challenges too – as Laura discovered.   When her mother Shelly had a stroke, she didn’t require a nursing facility, but could no longer live alone.   Laura was working part-time while studying a Bachelor of Dental Surgery and dreaming of one day opening her own boutique dental practice. She assumed that moving home to care for Shelly wouldn’t greatly affect her career plans, and, in fact, giving up her rental accommodation would save money.  Unfortunately however, Shelly had had to quit work so the pair only had Laura’s wages to live on. Yet the bills kept coming in, and on top of everyday living costs, expenses such as medicines, transportation and modifications to the home soon added up.  Additionally, helping Shelly attend medical appointments and assisting with errands put Laura behind in her studies. Since Shelly’s condition was not going to improve, Laura deferred her course; telling friends she’d return later.  A great emotional weight settled on Laura’s shoulders as she automatically prioritised her mother’s day-to-day needs above her own.  As expected, Shelly’s condition worsened. Medical sessions often clashed with Laura’s work commitments leaving her no option but to give up her job as well.  While expecting to support her mum physically and emotionally, Laura wasn’t prepared for the financial hit.  Fortunately, the Australian government offers a range of financial assistance packages, such as:  Applicants must meet prescribed criteria and the amount of payment varies depending on the situation.  The Government website www.servicesaustralia.gov.au contains a wealth of information for carers, including eligibility criteria, entitlement estimation calculators and information on how to claim.  Shelly’s doctor provided program leaflets and additional details, and helped Laura gather the medical paperwork and other relevant documents.  For Laura, giving up her job impacted more than just her finances. Having already lost friends after too many declined invitations, she now lost her last source of social interaction.   Resigning herself to a life of care, Laura abandoned all thought of returning to university, along with her dreams for the future.  It was around this time that Laura discovered Carer Gateway www.carergateway.gov.au and Carers Australia www.carersaustralia.com.au.   These websites provided valuable carer resources, information and assistance services. While recognising that financial relief was crucial, their emphasis was on the relevance of self-care, urging carers not to underestimate the importance of their own well-being, particularly their physical and mental health.  Laura found a community of people who understood her situation, and a network of support groups, counselling services and respite programs encouraging carers to balance their care-giving responsibilities with their own needs.   One of Laura’s new friends suggested she seek legal advice around Powers of Attorney, and a financial adviser specialising in estate planning for both her own and Shelly’s peace of mind.  These days Laura says she feels the world opening up as the silence around caregiving is broken. With her mother’s illness, her life took an unexpected turn, yet it has expanded in other ways. Laura’s future is looking brighter; she has even enrolled in an online dental assistant course.  Not exactly what she’d originally planned, it’s nevertheless a pathway to her own future, and more than that, she’s daring to dream again.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Your recession survival guide

Your recession survival guide

Updated on Economy, Education, Finance

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

Roadmap to retiring young

Roadmap to retiring young

Updated on Budgeting, Retirement

The dream of retiring young is one that captivates many peoples’ imaginations. The freedom to live life on your own terms, doing what you want, when you want is undeniably appealing, but is it attainable? We say yes! It doesn’t just happen, though. As with any goal, it takes planning and dedication along with a clear understanding of when and how you expect to achieve that goal. Early retirement, as a concept, means different things to different people. Therefore, the first step on the road to your early retirement is to be clear about what it will look like, starting with: With an understanding of what retirement means to you, you can begin the process of charting a course to achieving it. Develop a roadmap to early retirement by considering: Attaining any financial goal requires discipline. Coach yourself to say ‘no’ to indulgences in the present, remembering that with the right roadmap and financial know-how, you really can make your dream of early retirement come true. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Jul – Sep 2023 

Quarterly Economic Update: Jul – Sep 2023 

Updated on Economy, Finance, Investing

Australia’s annual inflation rate has taken an unexpected step up, increasing pressure on the Reserve Bank to push interest rates higher and once again raising the prospect that Australia will fall into recession sometime over the next few months.  The annual inflation rate for the year to August reached 5.2 per cent, up from 4.9 per cent recorded for the year to July, spurred by higher prices for petrol, financial services, and labour costs, following the 5.75 per cent wage rise for 2.4 million Australian workers in July.  Some analysts believe recent wage increases and the Federal Government’s drive to reduce unemployment levels below their current historic low levels and provide more union friendly workplace regulations, will combine to push wages even higher.  The prospect of further wage hikes, low productive improvements combined with continued high levels of inflation, threatens to return the Australian economy to the dismal economic days of the seventies and with it, stagflation.  Of all the domestic price hikes though, higher petrol prices are seen as the most troubling as they have such significant flow through effects, making everything in the country more expensive to produce and so lifting the cost of living for all Australians.  The prospect of higher oil prices internationally, following a decision by Russia and Saudi Arabia to restrict production to boost prices, has cast gloom across the global economy, putting economies everywhere under pressure of higher energy costs.   Globally, US Treasury 10-year bond yields rose to above 4.5 per cent during the past month, taking them to their highest level since the global crisis started in 2007, as fears mount that climbing inflation will persist for years to come.   This, and the generally accept downturn in growth in the massive Chinese economy, is prompting fears overseas that the US economy will certainly fall into recession next year, with developed countries around the world certain to follow.  While there was hope the Reserve Bank was succeeding in driving down inflation, this latest uptick in prices and overseas interest rates, will put the Reserve Bank under renewed pressure to lift domestic rates yet again.  Although the much talked about fixed-rate mortgage cliff seems to have been averted, where homeowners have faced the end of super low fixed rate loans and been forced to move to higher variable rate loans, pressure is emerging in the housing market.  According to figures from the research house, Core Logic, the number of homes that have been sold at a nominal loss, and which have only been owned for two years or less, has increased from just 2.7% to 9.7% during the June quarter.   Pressure is building most clearly in the sale of home units with 14.4 per cent of all unit sales across Australia selling at a loss during the June quarter, compared to just 3.8 per cent of all homes sold during the same time.  There also seems to be a trend where people who moved to the regions during the pandemic are starting to sell up and drift back to the cities.  Resales within two years of purchase, made up 11.1% of all regional resales, compared to a decade average of 7.2% per year.  A rare bright spot for investors remains the hefty returns to shareholders with Australia’s largest listed companies paying out some $21.7 billion during the last week in September, by way of improved dividend payments.   BHP paid out $6.34 billion to their shareholders via a $1.25 per share dividend, Fortesque Metal paid out $3 billion via a $1 a share dividend and after posting a record-breaking profit, the Commonwealth Bank of Australia paid out $4 billion by way of a $2.40 a share dividend.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Harvesting Financial Success

Harvesting Financial Success

Updated on Budgeting, Education, Finance

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

Are we jeopardising the bank of Mum & Dad?

Are we jeopardising the bank of Mum & Dad?

Updated on Education, Finance

The temptation is obvious. Soaring house prices have made buying a home tough for most home buyers and prompted many parents to think they should step in and make a financial contribution.  The typical argument is that Mum and Dad don’t really need the money and that their children will inherit it one day anyway so it might as well be now when it can do some real good.  As a result of this thinking, the Bank of Mum and Dad is now estimated to be one of the top 10 mortgage lenders in the country, as more and more people turn to their parents for financial help when buying a home.  According to Digital Finance Analytics, parents are now contributing $90,000 on average towards the first home deposit of each of their adult children, up 20 per cent in the past twelve months.  With the median house price in Australia’s combined capital cities now $896,000, parents contribute just over 10 per cent as a deposit, or if two sets of parents are involved, 20 per cent as a deposit.  For most parents, this is a large amount of money, which can be given to their children either as a straight-out gift or as a formal loan or so-called ‘soft’ loan.  Typically, this is done by drawing down against the value of their home as security and gifting the funds or providing a guarantee for their child to buy a home using their home as collateral.  The financial comparison site, Finder, estimates that 60 per cent of all first-home buyers access funds from their parents to buy their first home.  More, it found that 50 per cent of these children were facing some level of financial stress before deciding to buy a property with the help of their parents.  While gaining financial support from Mum and Dad might be essential for many Australians to take that first step onto the home ownership ladder, is it a good decision for Mum and Dad?  While some parents can afford this financial handout, it is only the case for some. Figures from the Association of Superannuation Funds of Australia show 1.68 million, or more than half of all Australians over 70, have no super.  Of those older Australians who do have super, the median value is between $100,000 and $149,000, suggesting few in this age bracket have funds they can afford to give away.  ASFA estimates only 185,000 Australians have $500,000 or more in super, and about 27,325 individuals have more than $2 million in super – a figure where giving funds to children might be affordable.  These figures change considerably for Australians in the 50–70 age bracket as these younger Australians have had access to super for longer.   However, it’s clear that the Bank of Mum and Dad is not as flush with funds as suspected, and many are sowing the seeds of their own financial destruction.  While it is simple in the first flush of retirement to think there is more than enough to support Mum and Dad for as long as they live, life events might undermine this.  No one knows how long they will live or what medical issues they may face through retirement, which could mean they themselves need every cent they have.  Throw in the prospect of one or both parents needing to move into a nursing home at some stage, which can be a significant cost of around $500,000 per parent; then their finances start looking very shaky.  The real fear is that in trying to help their children buy a home, all the Bank of Mum and Dad is really doing is pushing up house prices and sowing the seeds of their own financial problems.  The information provided in this article is general in nature only and does not constitute personal financial advice. 

Financial Education for a Successful Future 

Financial Education for a Successful Future 

Updated on Education, Finance

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

Estate Planning is not just for retirement 

Estate Planning is not just for retirement 

Updated on Finance

Many people think that Estate Planning is only for people who are close to retirement, especially if we fall into the trap of thinking that Estate Planning is just about getting a will. But did you know that Estate Planning addresses key protection strategies whilst you’re still alive? It doesn’t matter who you are, Estate Planning is for everyone.   What are the key pillars of Estate Planning?  Estate Planning is all about making sure that you get the choice as to what happens to you and your assets – whether that’s if you need someone to make decisions on your behalf, or you pass away and your estate needs to be divided up.   1. Advance Care Directive  Should something happen to you, and you are unable to communicate decisions about your medical care and treatment, an advance care directive allows you to:  As long as the directive is valid, it must be followed and cannot be overridden by medical professionals or family members.   2. Power of Attorney  A Power of Attorney allows a person who you nominate to make financial and legal decisions on your behalf if you lose capacity as a result of illness, injury or disability.   They can help ensure important financial and legal matters are handled without delay if you can’t manage them yourself – for example, paying your bills, managing your bank accounts, managing your investments and buying and selling property.  3. A Valid Will  Whereas the first two pillars ensure that important matters are handled in accordance with your wishes if you’re incapacitated, a will ensures that those same matters are handled in accordance with your wishes after your death. A will gives you the best chance of ensuring that your assets go where you want them to.   If you die without a valid will:  4. Superannuation   When you pass away, your superannuation is distributed to the person(s) you have nominated in the fund’s death benefit nomination. However, this may not be binding on the super fund, and if you haven’t nominated a beneficiary this could result in a lengthy process as the super fund trustee needs to decide who gets the money.   Superannuation is also not automatically included as part of your estate. The best way to ensure your super is distributed in accordance with your wishes is to nominate your legal personal representative. Your Executor will then be required to distribute your super according to your Will.   An estate plan gives you choice and control  Whilst growing your wealth is one part of a great financial plan, protecting your wealth in the event of your incapacity or death is just as important. Ensuring that your estate plan is in order gives you choice and control in how your affairs and assets will be handled, which in turn benefits both you and your loved ones. If you would like to explore your estate planning options, contact us to get started.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Discovering Your Financial Mindset

Discovering Your Financial Mindset

Education, Finance, Investing

In the quest for financial stability and success, we often focus on tangible elements like earning more money, saving diligently, or investing wisely. But have you ever stopped to consider the role your financial mindset plays in achieving your financial goals. Understanding financial mindset Your financial mindset is a set of beliefs and attitudes you hold about money — how you earn it, save it, spend it, and invest it. This mindset largely influences your financial behaviours, decisions and ultimately your financial success.   Each mindset carries a unique perspective about money, influencing your financial decision-making process.   There are four common financial mindsets: 1. The Spender enjoys the thrill of the present, often overlooking long-term financial security for immediate gratification. If you frequently find yourself making impulsive purchases, or your credit card balance perpetually outweighs your savings, you may identify with this mindset. 2. The Saver is characterised by frugality and a steady focus on long-term financial security. If you diligently maintain a budget or feel a sense of accomplishment when growing your savings, the Saver mindset most likely resonates with you. 3. The Avoider, often plagued by financial anxiety, tends to shy away from money matters. If you find bills and bank statements overwhelming, or frequently procrastinate financial planning, you likely have an Avoider mindset. 4. The Investor sees money as a tool for wealth creation. If you appreciate the potential of assets and are willing to take calculated risks for future returns, you are most likely aligned with the Investor mindset. Identifying Your Current Financial Mindset  So how do you uncover your financial mindset? It begins with self-reflection –    Do you often worry about money, or do you feel confident about your financial situation?   Are you comfortable taking calculated financial risks, or does the thought of investing scare you?   Do you view money as a tool for achieving your dreams, or a necessary evil to be managed?  Examining your feelings and behaviours around money can provide valuable insights into your current financial mindset. This process is beneficial because it sets the stage for potential shifts in perspective that can improve your financial life.    Once identified, you can analyse your money behaviours, uncover potential blind spots, and take action to optimise your financial decision-making. For instance –   If you identify as a Spender, incorporating a budget and automating savings can provide some balance to your financial outlook.   Savers could benefit by introducing an element of investment to their financial strategy, allowing their savings to work harder for them.   Avoiders must confront their fears and actively engage with their finances, perhaps by seeking professional guidance.   While Investors generally have a positive approach, ensuring a balanced portfolio to mitigate risks is essential.  Transforming your financial mindset requires commitment, patience, and time. Take it slow and make gradual changes as you grow more comfortable with your changing perspective on money.  It’s not just about money; it’s about your attitude towards it. Adjusting your financial mindset means transforming both how you see money and how you engage with it, paving the path to financial success.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Building a Strong Foundation: Avoiding Mortgage Default

Building a Strong Foundation: Avoiding Mortgage Default

Updated on Budgeting, Economy, Finance

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

The impact of natural disaster on property values and insurance

The impact of natural disaster on property values and insurance

Updated on Finance

Australia’s vast expanses and varied climates make us prone to natural disasters. In recent years alone, we’ve experienced the devastating impacts of bushfires in the southern parts of the country, flooding along the Eastern Coast, as well as significant storm events and cyclones. As you can imagine, the aftermath of a natural disaster typically involves a lot of clean-up and rebuilding for those affected. However, there are also a number of flow-on effects from these events for those not directly affected that are of particular importance to homeowners and first home buyers. Impact on Home Values A natural disaster can drastically reduce the market value of affected properties, as property buyers become deterred by the high risk factor associated with the property or area. This can also make it difficult for owners to sell their homes or vacant land, as the buyer pool willing to take on that risk reduces. In some cases, properties in high-risk areas may become uninsurable, which can further impact value, sometimes causing these properties to become unsellable as purchasers are deterred by the inability to insure the property. Impact on Insurance Following a natural disaster, insurance companies are inundated with claims for damages, which can take months, or even years, to process. Property owners in affected areas may face increased premiums, regardless of whether or not the event directly impacted them, due to insurance companies requiring their underwriters to assess potential future risks to ensure a balanced risk portfolio across their entire insurance pool. For example, in its ‘Report on Home and Contents Insurance Prices in North Queensland’, the AGA reported that North Queensland’s home and contents insurance premium rates had increased by around 80 per cent over the period of its investigation. Throughout that time, North Queensland experienced Cyclone Larry, Cyclone Yasi, and the Mackay Storms. By comparison, premium rates across Australia increased by around 25 per cent for the same period. Underinsurance or uninsurance is often the outcome, with homeowners either unable to afford the cover or justify the cost, presenting a substantial financial risk to homeowners if a natural disaster occurs. Tips for Property Buyers It is crucial to conduct thorough research, especially when considering buying a property in an area prone to disasters. Know the Property History Research the history of the property, including the surrounding area, to understand the risk for natural disasters: Research historical records of property damage in the area. Check with the local council for any risks in the area and any tools they might offer. Be familiar with the environmental factors that create risk for the area. Read the Fine Print Not all insurance policies are created equal, so it’s essential to understand the terms and policy definitions of any insurance contracts, particularly for disaster prone areas: Discuss the appropriate levels of insurance coverage with an insurance agent, Research insurance providers and consider their options. Also, by researching insurance coverage and obtaining quotes during your property due diligence, you can factor the actual cost into your budget to ensure you can afford cover and not be forced into uninsurance or underinsurance. Risk Mitigation & Disaster Management If you’re looking to purchase a property in a high risk area, be aware of risk mitigation strategies to assist with reducing risk. Understanding your property’s building materials and construction methods may help to protect your property. Understanding risk mitigation activities you could take to reduce your exposure. For example, in bushfire prone areas, being aware of hazard reduction activities such as fuel-reduction burning, removal of vegetation and maintaining fire lines. Without appropriate insurance cover or a streamlined disaster management plan, the financial implications of natural disasters can have dire consequences. If you’d like further advice in relation to ensuring you are adequately protected, or if you require assistance with purchasing a home, please reach out to discuss how we might be able to assist. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 Time-Tested Investment Strategies for Young Investors

4 Time-Tested Investment Strategies for Young Investors

Updated on Education, Finance, Investing

The newest generation of young investors were raised during the Age of Information. Growing up alongside the internet, this generation has been exposed to more information and technological advancement than any generation before them. Young investors have greater access to education around investing, more diverse opportunities for investing, as well as a rise in social media content creators creating communities around building wealth – making this topic much more popular among younger generations. However, the world of investing can still seem intimidating, especially for young adults who are just starting out. While investing does involve risk, there are some time-tested investing strategies that all young investors should adopt to set themselves up for success: 1. Know your financial goals Before investing, it’s essential to know what you’re working towards. Are you saving for a house deposit? Or are you building wealth so that you can retire early? You may want to launch a business. Or start a family? Knowing your financial goals can help determine the best investment strategy for you. Once you have set your goals, you can develop a financial plan for achieving these through investing. 2. Start small and grow your portfolio over time When starting, you might think you don’t have “enough” to begin investing. Starting small and gradually increasing your portfolio over time is a great way to begin. It allows you to “learn the ropes” and build your knowledge and confidence over time, without feeling like you have too much at stake. Getting started sooner rather than later also means you’re taking advantage of the power of compounding returns. Compounding returns happen when you reinvest your investment earnings, allowing your investments to grow over time. The earlier you start investing, the more time your investments have to compound, leading to significant long-term growth. 3. Diversify your investments You might have heard the term ‘Don’t put all your eggs in one basket’, which, in the world of investing, translates to ‘Don’t put all your money in one investment’. Diversifying your investments across different asset types is a key strategy that can be used to lower portfolio risk and provide more stable investment returns. 4. Keep calm… and remember your investment plan Investing should generally be viewed as a long-term strategy, as markets are cyclical and typically go through periods of growth, decline and stagnancy. This means that you will likely experience a market crash at some point in your investing journey, which can be a scary time for investors. It’s important to stay calm and avoid making impulsive investment decisions. In many cases, the best strategy during a market crash is to stay the course and stick to your investment plan. Further, market corrections can often present a great opportunity to invest as markets sell off and asset prices reduce. As Warren Buffet said: “Be fearful when others are greedy and greedy when others are fearful”. While investing may seem daunting at first, incorporating these fundamental strategies will pave the way for success. And a final tip… Seek expert guidance! A financial adviser can help you set achievable financial goals, plan ahead, and making informed investment decisions that will keep you on track towards building lasting wealth. Don’t navigate the financial world alone – let us be your partner in success! The information provided in this article is general in nature only and does not constitute personal financial advice.

Financial Success: More Than Just Money

Financial Success: More Than Just Money

Updated on Finance

When discussing financial success, many people tend to use the terms “rich” and “wealthy” interchangeably. While being rich is often associated with having a lot of money or material possessions, being wealthy is about having financial abundance that is sustainable over the long term. Being Rich Being rich is often associated with having a high net worth, a large income, or significant assets. It’s a term used to describe people who have accumulated substantial money or wealth. However, being rich does not necessarily guarantee financial success. Someone who is rich may have a lot of money, but they may not have the financial stability or security that comes with being wealthy. Being Wealthy On the other hand, being wealthy is a more sustainable form of financial success. Wealth is often created through long-term investments, passive income streams, and wise financial planning. A wealthy person has accumulated enough assets and income-generating investments to provide a steady income stream, allowing them to live comfortably without relying on external factors. Financial success requires more than just having a lot of money… it is about having financial security AND freedom: Financial security means having enough money to cover your basic needs and some comforts. Financial freedom is the ability to make choices based on what you truly want rather than being constrained by financial limitations. The path to financial success requires a good understanding of financial literacy, clearly defined personal values, a long-term perspective, and the ability to establish, and stick to, a strategic plan. Financial Literacy Understanding how money works, including managing, investing, and saving it, is critical to achieving financial success. This knowledge will help you make informed decisions about your finances and enable you to take control of your financial future. Personal Values Successful people achieving financial freedom often clearly understand what is most important to them. They know their values and use them as a guide when making financial decisions. This approach helps them focus on their priorities and avoid impulsive purchases that jeopardise their long-term financial security. Long Term Perspective True financial success and wealth isn’t built on the back of “get rich quick” philosophies. There is no “magic pill” for financial success; it’s a lifestyle, not an overnight fix. Building wealth takes time. It requires focus, discipline, patience, and long-term commitment. Strategic Planning Achieving financial success requires strategies such as creating a budget, investing wisely, and building passive income streams. Again, these are all strategies that require patience and commitment. It is essential to stay focused on your goals and take the necessary steps to achieve them. While the above factors each play a critical role in your journey to financial success, the secret ingredient lies in defining what financial success and wealth mean to you personally, as someone else’s definition of financial success may look very different to yours. Some ways to achieve this are to: Assess your lifestyle – Consider what your ideal lifestyle looks like; where are you, who are you with, what are you doing? Define your values – Figure out what is important to you and define your values based on this. Your values can then provide a framework to make decisions based on what is important. Set Financial Goals – Be clear on what you want to achieve in life. You can then define your vision further by setting specific financial goals. If you are ready to start your journey towards achieving financial success, a financial adviser can help. They will assess your financial situation, identify your goals, and create a long-term financial plan tailored to your individual needs. With their guidance and support, you can take control of your financial future and achieve the financial security AND freedom you deserve. The information provided in this article is general in nature only and does not constitute personal financial advice.    

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