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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.   

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Quarterly Economic Update: July-September 2022

Quarterly Economic Update: July-September 2022

Economy, Finance

As geo-political tensions tighten in Ukraine, economies around the world are reeling from mounting energy prices, soaring costs of living and in a desperate attempt to bring down inflation, higher interest rates.  The US economy appears certain to fall into recession. Markets have suddenly become volatile as shares are sold in preference to holding funds in defensive assets such as cash. This in turn is reaping havoc on world currency markets. Funds are flooding into US dollar denominated investments and in doing so, are sending the value of the greenback sky high against other currencies.  Speculation is mounting that the British pound may fall to historic lows in coming months and may even reach parity with the US dollar, driven by the newly elected Prime Minister Liz Truss, implementing a big borrowing, low taxing budget. This controversial attempt to boost the British economy comes at a time when central banks around the world, including the Bank of England, are lifting interest rates in order to reduce economic activity and so, dramatically slow the rate of inflation.  The Organisation of Economic Co-operation and Development is now forecasting economic growth will slow from 2.8 to 2.2 per cent during the next twelve months as the United States, China and Europe all cut back on economic activity.  While Australia is not spared from this global slowdown, with the OECD forecasting domestic growth will tumble from 2.5 to 2 per cent during the coming year, it should survive this turbulent period better than most. Much will depend on this month’s Federal Budget. The first by the newly elected Albanese Government, it will tread a line between its reform agenda including much talk about tax cuts and trying to slow the economy and so reduce inflation.  Although the employment rate across the nation remains high, spiralling prices for basic foodstuffs and other essentials is putting enormous pressure on the Government to provide relief to those struggling to get by. In the meantime, petrol prices are set to bounce higher as the Federal Government restores the fuel excise tax, adding 23 cents a litre to both petrol and diesel sold in Australia.  In addition, the Reserve Bank has made it clear it will continue to lift the domestic cash rate and with it most other local interest rates, until it has clawed back the rate of inflation from an expected high of 7 per cent, to less than 3 per cent.  Higher interest rates are already impacting homebuyers. Five rate rises since May, mean a couple earning $92,000 each, can now borrow $264,000 less than they could in April according to analysis by the research house, Canstar. So even with a 20 per cent deposit, a couple’s maximum budget has dropped from more than $1.63 million to $1.37 million and this in turn is being reflected by prices in the property market. As buyer’s budgets have fallen, so too have property prices. CoreLogic Home Value Index shows house prices in Sydney have dropped by 7.6 per cent this year while Melbourne prices have fallen by 4.6 per cent.  With the Reserve Bank determined to force even higher interest rates on the economy in order to defeat inflation, there is no end in sight to higher interest rates and further property price falls.   The information provided in this article is general in nature only and does not constitute personal financial advice. 

6 common financial mistakes people make in their 30s

6 common financial mistakes people make in their 30s

Updated on Finance

Climbing the career ladder, perhaps buying a home and starting a family – the 30s are an exciting stage of life. However, decisions made now can make a big difference to future financial wellbeing, and with so much going on it is understandable, even inevitable, that the best decisions won’t always be made. So what are the common financial mistakes that 30-somethings should be alert to? 1. Buying an expensive car New cars plummet in value when driven off the showroom floor, and the higher the price tag the greater the fall. Buy with borrowed money and you’re paying interest on an asset of diminishing value. Settling for what you need in a car, rather than what you want, can add hundreds of thousands of dollars to your future nest egg. 2. Living on plastic If you don’t pay off your credit card balance in full each month you’ll be paying a high rate of interest on the carryover balance. Over time, the growing interest bill makes it increasingly difficult to clear the debt. If not used carefully, buy-now-pay-later schemes can also become something of a debt trap. 3. Forgetting to save A rule of thumb is to save at least 10% of your income, but saving even a small amount is better than doing nothing. And in your 30s you have time on your side. For instance, when you turn 30 if you put away $200 per month at an interest rate of 5% per annum (after tax), by the time you’re in your 60’s the savings will grow to $166,452. If you wait until you’re 40 to start your savings plan you will accumulate just $82,207. 4. Getting caught up in investment fads Tulips, alpacas, ostriches, the tech boom, crypto-currencies. Investment fads have come and gone, making fortunes for a few, but big losses for many. It pays to heed tried and true rules such as only investing in things you really understand, and diversifying investments to reduce risk. 5. Not insuring your most important asset For most 30-somethings your biggest asset is the ability to earn an income. Most health-related absences from work are due to illness or non-work related injuries – things that are not covered by workers compensation. Income protection insurance can replace much of the income lost due to accident or illness. 6. Being too hard on yourself Let’s face it. We’re all human, and we all make mistakes. Unfortunately, if we beat ourselves up about a mistake we have made it may compound the problem. The sour taste of a bad investment, for example, might put us off making a good investment. That would be a pity because the 30s is a decade of huge potential. Good advice now can help you unlock that potential. To find out more, contact us today!   This is general information only  

What can you tell your employees about Super?

What can you tell your employees about Super?

Updated on Finance

It’s a common question asked by employees: “what should I do about my super?” If you are an employer or manager and feel confident of your knowledge of superannuation and investment, it can be tempting to give an answer. However, just about anything helpful you have to say will likely fall within the definition of giving financial product advice, and that could land you in very hot water. The boundaries Financial product advice is a recommendation or statement of opinion that: is intended to influence a person or persons in making a decision in relation to a financial product or class of products; or could reasonably be regarded as being intended to have such an influence. The Corporations Act casts a wide net. Financial product advice can include anything you say about: joining, or making contributions to, a superannuation fund; making additional contributions to a super fund, including by salary sacrifice; rolling accumulated superannuation into or out of a fund; and selecting particular investment or insurance options within a superannuation fund. The ability to provide advice is generally restricted to holders of an Australian Financial Services Licence or their representatives. Very few employers, or their staff, fall into this category, and giving financial product advice, even inadvertently, could lead to prosecution. What can you talk about? You can provide factual information that does not include a recommendation, an opinion, or an intention to influence a person’s decision regarding their super. This allows you to provide information about: employees’ rights and employer obligations; how your employees can tell you what superannuation fund or retirement savings account (RSA) they want their superannuation guarantee contributions paid into; or the employer fund into which you will pay superannuation guarantee contributions if the employee doesn’t nominate a superannuation fund or RSA. You can also give your employees the Product Disclosure Statement (PDS) of your default superannuation fund. Just don’t provide any explanation of the material it contains or attempt to recommend the default fund. How can you help? None of this precludes you from helping your employees. You just need to go about it the right way. For example, you can refer employees to a licensed or authorised adviser. Just be sure to disclose any benefit you may gain from making such a referral. Or you can ask a superannuation fund provider to make a presentation to your employees. Take care, though, that you don’t give the impression of either endorsing or disapproving of the fund in question. Being asked for advice is recognition that your employees respect your views and knowledge. It can be flattering and you may well know a great deal about superannuation and investment. However, without the necessary authorisation, you need to steer well clear of financial product advice. And it’s not just you who needs to be aware of these restrictions. You need to ensure that your HR staff and line managers are also aware.   What can you tell your employees about Super 14/11/2018 This is general information only

Five reasons to refinance your home loan

Five reasons to refinance your home loan

Updated on Finance

Many people treat their home loan as a set-and-forget, riding out whatever the original loan terms and prevailing interest rates dish up. They may be doing themselves a disservice, as there are several ways in which borrowers can benefit from refinancing their mortgage. 1. Find a lower interest rate.Whether interest rates are rising or falling, in a competitive mortgage market you may be able to refinance your mortgage at a lower interest rate. The benefits are that you can then… 2. Reduce your home loan repayments. For a given loan term the lower the interest rate the lower your repayments. This then frees up some of your income for other purpose. Or you can… 3. Shorten the term of your loan.If you maintain your current repayments with a lower interest rate loan, you’ll pay it off sooner and save heaps on interest. 4. Switch from a fixed to a variable rate mortgage (or vice versa).A fixed rate home loan can help you lock in an interest rate for several years into the future. This can provide some protection against rising interest rates. Conversely, when interest rates are falling, a variable rate loan is the better way to go. Be aware, however, that even the experts often get it wrong when it comes to predicting the direction of future interest rates. 5. Consolidate debt or access equity.If your home has increased in value then refinancing may allow you to access some of the greater equity you have in your home. This may allow you to pay off higher interest debt, such as credit cards, take a holiday, or pay for renovations. Take careWhile refinancing a home loan can be a winning strategy that’s not automatically the case. There will likely be costs involved in both paying off the existing loan and in establishing the new loan. If the difference in interest rates between the old and new loans is small, it may be hard to gain a benefit. And take care when refinancing for debt consolidation or to free up equity. If you promptly max-out the credit card you’ve just paid off, you could be digging a deeper debt hole for yourself. To find out what would work best in your circumstances, please contact us today.   This is general information only  

When was the last time you paid cash?

When was the last time you paid cash?

Updated on Budgeting, Education

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

Financial Advice, Royal Commission and You

Financial Advice, Royal Commission and You

Updated on Finance

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 remunerationConflicted 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 commissionsInvestment 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 advisersNew 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 outcomesAnother 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, talk to us. We’re here to help.    This is general information only