Financial check up

Three-Minute Financial Check-up

Updated on Budgeting

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress.

A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress. It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors.

There is nothing worse than that niggling feeling that you’re not in control of your financial situation or worse, the dread that you may not be able to meet your next home loan repayments or that you’ve maxed out your credit cards. For many people, it is simply that their lives are so busy they never have the time to focus on their financial position and so the constant pressure of earning money and paying bills can easily spin out of control.

Just as all financial situations can be improved, so all financial problems can be resolved and the earlier you act, the better. Just the simple step of reaching out for help will make you feel better about your financial situation. So, it may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you have created a debt mountain that you feel helpless to reduce.

If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help.

A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you should make time to discuss your financial situation with a qualified financial adviser. They will be able to tell you just how serious your situation is and more, how you can take steps immediately to improve your financial position and help you get you back on track, so you do feel in control.

Your Three Minute Financial Check-Up

Action
YES
NO
Do you pay all your credit cards off in full by their due date?
 
 
Do you sleep easy knowing all your bills will be paid when they fall due?
 
 
Do you have a budget, and do you stick to it?
 
 
Are you making all your loan repayments on time?
 
 
Do you know exactly how much your home loan is today?
 
 
Do you know what you would do if you lost your job tomorrow?
 
 
Are you confident about your children’s financial future?
 
 
Do you have life and total and permanent disability insurance in place?
 
 
Do you have income protection in place?
 
 
Do you know how much you have in super?
 
 
Are you and your partner in agreement about your finances?
 
 
Do you feel confident about your overall financial position?
 
 


The information provided in this article is general in nature only and does not constitute personal financial advice.

Similar Posts

What does it take to become a millionaire?

What does it take to become a millionaire?

Updated on Budgeting, Investing

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

Fixed rate mortgage expiring… Now what?

Fixed rate mortgage expiring… Now what?

Updated on Budgeting, Economy, Finance

If your fixed interest rate expiry is coming up, you might have started to think about what happens next and what action you need to take. Or you might be sticking your head in the sand and avoiding the topic entirely. Be warned! The worst thing you can do is take no action at all. If your fixed interest period is due to expire, then it’s time for a review of your finances – Revisit your budget A fixed rate expiry will mean a change to what is often one of our biggest expenses – the home loan repayment. In a rising interest rate environment, this likely means a bigger expense you will need to allow for. By revisiting your budget, you can make sure you can afford the new home loan repayment amount, or adjust your spending where needed. Know your financial situation Your financial situation is going to impact what options are available to you and what options might be best for you. If there’s been recent changes to your income position such as job loss, income reduction or maternity leave, for example, this may impact your ability to refinance your loan. As a result, you may have to stick with your current lender on terms you may not be happy with. If you have surplus cash flow that you want to use to reduce debt, a variable rate loan might be more appropriate so that you’re not as limited with the ability to make repayments. Alternatively, if cash flow is tight, you might appreciate the stability of a fixed rate loan, and knowing your repayment amounts won’t increase during the fixed rate period. By having a good understanding of your current financial position and future goals, you can determine what your needs are and what the best strategy is for you moving forward. Look at what the market is doing One of the main factors to consider when deciding between a fixed and variable interest rate is the current market. While no one has a crystal ball, it’s important to consider what is happening with the economy, housing markets and interest rates. Are interest rates trending up or down? And what might this mean for both fixed and variable interest rate loans? Get clear on your options When your fixed interest term expires, you will need to choose between either re-fixing your loan for a period or switching to a variable interest rate loan. This is also a good opportunity to review your existing loan provider against other loan providers, to ensure you are being offered a competitive rate. With your market research in hand, it’s time to call your existing lender to request a rate review. You can let them know you are considering refinancing your loan and want to know what the best they could offer is. It might be time to switch lenders if they’re not prepared to offer you a competitive rate.   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.  

6 steps to a sustainable Christmas

6 steps to a sustainable Christmas

Budgeting

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

Building financial resilience

Building financial resilience

Updated on Budgeting

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

The effect of rising inflation

The effect of rising inflation

Updated on Budgeting, Economy

The word ‘inflation’ doesn’t only dominate business news headlines but finds its way into general news reports too. So, what is inflation and how does it affect you? In simple terms, inflation signifies a rise in the price of goods and services, meaning you pay more for every purchase you make. Does the US influence Australia’s inflation rate? It is not a surprise that countries in today’s world are more connected than ever before. Therefore, a rise in US inflation rates will impact the Australian economy too. However, the degree and timing of its impact will vary. For example, a rise in labour costs in the US may have a limited impact on Australians; however, an increase in the price of iPhones or Nike shoes in the US will reflect in their price in Australia too. What will be the impact of rising US inflation on Australia’s economy? Interest rate movements made by the US Federal Reserve Bank (the Fed) are closely monitored by central banks worldwide, including the Reserve Bank of Australia (RBA). Over the past decade, many developed economies, including the US and Australia, have reduced interest rates to boost their economies. With rates rebounding from all-time lows there is an expectation that rates will continue increasing due to the strong performance of those economies. Quite often when the Fed increases its interest rate, Australia is quick to follow suit. The cost of borrowing funds will increase, leading to a rise in the inflation rate, making goods and services more expensive. Rising inflation rates can also negatively impact the Australian dollar, where one AUD buys less USD than it may have done previously. What will be the effect on investors? A rise in inflation affects investment markets negatively due to higher interest rates, volatility in the economy and uncertain share prices. For some investors, rising interest rates mean paying more interest on their home loan, which reduces their disposal income and, in turn reduces their capacity to invest. For retirees, an increase in the price of goods and services at a time of share market volatility can lead to having to sell more of their investment assets (potentially at a loss or reduced profit). Also, there could be uncertainty in dividend income, which many retirees often rely upon. Retiree investors will have fewer years to recover from a drop in their portfolios compared to younger investors. How should you prepare for a rise in inflation? It is important to first analyse your personal cashflow situation to understand where your money goes. Consider fixing at least part your home loan to limit your exposure to rising interest rates. Reconsider new personal loans, such as car loans. Do you need to take on new debt when interest rates are likely to increase? For the risk-taking investor, it can be tempting to invest more money into shares when prices are falling, but always consider averaging your position to avoid market timing risk. For investment purposes, consider having exposure in well established companies “blue chip stocks” vs riskier stock. Investors often find comfort knowing their funds are exposed to good quality companies with strong balance sheets. If the thought of rising inflation leaves you feeling unsettled, be sure to talk to a professional adviser. Your adviser will review your financial position, your ability to meet your financial obligations, as well as identify strategies to outpace inflation.   The information provided in this article is general in nature only and does not constitute personal financial advice.