Category Archives: investing

What is Bitcoin all about?

Chances are by now you’ve heard all about Bitcoin… but you may not know too much about what it really is.

Bitcoin is a type of digital currency known as a cryptocurrency. It operates on a decentralised peer-to-peer networked program on your computer, meaning that transactions can be conducted between a buyer and seller without the need for any third party oversight such as a regulator or bank. The underlying technology that makes all cryptocurrencies possible is the blockchain.

Bitcoin’s ‘wild run’

Bitcoin’s value has oscillated wildly. It peaked at US$20,000 in mid-December 2017, lost 40 per cent of its value within a week, then bounced back and hasn’t stopped bouncing since.

What are the risks?

Bitcoin certainly has all of the hallmarks of a ‘speculative bubble’ and history is littered with plenty of examples of speculative fevers that ultimately collapsed. Another risk is regulation. Some cryptocurrencies are becoming the preferred medium of exchange for criminals due to anonymity, if governments can find a way to crack down they surely will.

Want to know more?

There’s lots of information now available.  Have a chat to your financial adviser who can help you work out if Bitcoin or cryptocurrency, merits further investigation or is worth leaving behind.

It’s Finally Here!

My latest baby has now arrived… and ok, it’s been 19 years between births and this one didn’t hurt quite so much, (or weigh over 4 kgs) but my first book has now hit the shelves!

Financial Secrets Revealed hit bookstores just before Xmas and features interviews with 20 pretty amazing people.

I’ve interviewed 8 amazing ladies who are kicking goals as business owners and asked the best advice they’ve ever been given.  I’ve spoken with Financial Advisers from Australia and the UK about their back stories, how they got involved in financial services, and the top tips they like to leave their clients.  I’ve also found four amazing everyday heroes who are happy to go about their daily lives, and also make a difference, whether to their families or globally.  I ask how they manage – on Centrelink pensions,  running an international charity or heading into space for NASA.

If you’d like to learn about the setbacks suffered by entrepreneurs and how they’ve recovered, how our beliefs around money affect our behaviour, if budgets are all they’re cracked up to be, then Financial Secrets Revealed  may just be the book you’ve been looking for.

A New Year is often the time we swear that this is the year we’ll finally get on top of our financial situation, so maybe this is the incentive you need to stay motivated and on track with your money goals.

If you’d love to get your hands on a copy, you can let me know directly, or find the book locally or on Amazon.com  Booktopia.com.au or Barnes & Noble.  Also available as an e-book.  I’d love to hear your key take-outs from the book and what you learnt from the interviews.  Stay in touch!

PS  If you’re in Sydney, I have my book launch coming up at Business Chicks HQ on Feb 7 from 5.30 and would love to see you there.  Get your tix here.

#FinCon17

So tomorrow I embark on adventure! (Ok, another one…)

A few years ago, I first heard about FinCon, a conference in the USA where money nerds,  and finance bloggers unite, and I figured I just had to be a part of that!… sometime.

I’m all about learning how to create more amazing content for my online platforms, and how to best promote this valuable information to reach my audience with marketing techniques, branding and networking.  I’d also love to pick up a few tips on pod-casting and interview some of the amazing people in my upcoming book Financial Secrets Revealed in a series.  There’s always so much to learn!

This year, the conference is being held in Dallas, Texas, meaning I’m taking one of the longest flights ever to get there!  A couple of years ago, this was a 17.5 hour flight and the longest flight on earth!  (Sydney – Dallas)  It’s now 15.5 hours long and has been pipped by an Auckland – Dubai trip, with more routes being offered that will beat that again in the coming year.

There’s a contingent of a few Aussies I know from the financial services profession, from advisers to product providers, who are also heading over and we’re sure to be picking up some amazing tips and sharing ideas amongst ourselves as well.  We might even fit in a a basketball game!  I hear the Philadelphia 76ers are playing the Dallas Mavericks while we’re there…

We’ve downloaded and signed up on the app, introduced ourselves and are ready to roll.  One more sleep and I’m off!

Now, I’m no stranger to long haul flights but would love to hear any tips you have for how you manage to stay sane onboard… and if there’s anything you’d love me to ask the amazing presenters and sharing crew at FinCon too.

Women & Superannuation

I’ve met plenty of people skeptical about our superannuation system over my years as a planner and I get it.  Believe me, I have to devote hours ever year to keeping up with the annual federal budget, managing legislative changes and getting my head around constantly changing tax and super laws.  It can be a drag!

It’s also true that we retire with about half the retirement savings of most men, and some women retire with no super at all!  But the reality is this, women live longer than men, making it even more essential that they accumulate enough superannuation to last them through retirement.

Having said that, women also face unique challenges when it comes to putting away retirement savings. Chances are, you’re still on lower pay than your male counterparts, you’ll take more time out of the workforce to raise the kids or care for your parents, and for those running a single-parent household, it can make it even more challenging to build a reasonable amount of super savings.

However, there are some simple strategies make it possible for women to overcome some of these hurdles, or make them less of an issue anyway…

Try and remember, that superannuation is actually your friend.  It is a very tax-effective way to save retirement. Your super fund pays a low rate of tax on contributions and investment earnings while growing your nest egg.  From age 60, you can withdraw your super tax-free.

Without any superannuation savings, many women are forced to rely solely on the age pension in their senior years.  Remember, the pension is designed as a safety net and won’t provide at all for a comfortable old age.  I’m not sure I could go back to a lifestyle that’s funded on around $23,000 per annum and you probably don’t want to either!

Firstly, don’t let your super funds get ‘lost.’  Try and ensure your funds are consolidated – this can help save on fees, but make sure you’re not losing valuable insurance coverage when doing so.  When possible, try to put extra away into super.  The ATO and website MyGov are making it easier than ever now to stay on top of your funds.

Affording an extra $20 – $50 per week now may not take food off the table but the additional money, plus years of compound interest will add up, and after all, your investing in your future self.  Sounds like a win to me!

Understand your fund and make sure your employer is putting your full entitlements in regularly on your behalf.  At the time of writing, this was 9.5% of your gross wage. Mostly now, we have super choice meaning that we’re able to choose the fund we want, and then check where your money is invested within the fund.  Is it in line with your investment profile?

To grow your fund, you’re often able to make pre-tax contributions (Salary Sacrifice) or even post-tax contributions where no tax is charged.  Depending on your circumstances, your partner may also be able to make contributions on your behalf and receive a tax offset for their efforts.

However you go about it, remember that you’re investing in your future and that superannuation is your money.  It certainly pays to be savvy with your super!  Sitting down with your financial adviser may reveal new and innovative ways you can make the most of your retirement savings!

How Budget 2017 may affect Small Businesses

The announcements in this update are proposals unless stated otherwise. These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process.

What’s in and what’s out!

• Small businesses with a turnover up to $10 million can write off expenditure up to $20,000 for a further year

• No changes to negative gearing or capital gains tax

• Depreciation deductions for plant and equipment on residential investment properties will be limited

• Accommodation and travel deductions for residential rental property will be disallowed

• An annual foreign worker levy of $1,200 or $1,800 will apply per worker per year on temporary work visas and a $3,000 or $5,000 one-off levy for those on a permanent skilled visa

• The Government will spend $75 billion in infrastructure funding and financing over the next 10 years

• A $472 million Regional Growth Fund will be established.

The main change for small businesses with aggregate annual turnover of less than $10 million was the extension of the ability to immediately deduct eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018. Certain assets are not eligible, for example horticultural plants and in-house software. Assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools). From 1 July 2018, the thresholds for the immediate deduction of assets and the value of the pool will revert to $1,000. A major new levy on the five biggest banks with liabilities above $100 billion will raise $6.2 billion over the Budget forward estimates. It will not apply to additional Tier 1 capital and deposits of individuals, businesses and other entities protected by the Financial Claims Scheme. The Australian Competition and Consumer Commission will undertake a residential mortgage pricing inquiry until 30 June 2018 in conjunction with the levy.

Legislation to support a reduction in the company tax rate over 10 years starting on 1 July 2016 passed Parliament on 9 May 2017. The first companies to benefit were those with turnover of less than $10 million, which moved to the 27.5% rate on 1 July 2016. The tax rate for companies with annual turnover below $25 million will be 27.5% from 1 July 2017 and those with turnover of less than $50 million will be taxed at 27% from 1 July 2018. Legislation to support an increase in the tax offset for unincorporated small businesses over 10 years to 16% from 5% passed Parliament on 9 May 2017. This offset applies to the tax payable on the business income and it benefits unincorporated small businesses that do not receive a reduced company tax rate.

Housing and superannuation

Individuals will be able to make voluntary contributions to their superannuation accounts to help buy their first home from 1 July 2017. Generally, pre–tax contributions (personal deductible or salary sacrifice) of up to $15,000 per year and $30,000 in total can be made. First-home super saver scheme contributions must be made within the concessional contributions cap ($25,000 in 2017-18) and will be taxed at 15%. Contributions and deemed earnings can be withdrawn from 1 July 2018 and will be taxed at the member’s marginal rate less a 30% tax offset. Non-concessional contributions can also be made but will not benefit from the tax concessions apart from earnings being taxed at the concessional super rate of 15% and these will be tax-free when withdrawn.

Housing supply target

The States will be required to deliver on housing supply targets and reform their planning systems and a $1 billion National Housing Infrastructure Facility will aim to remove infrastructure impediments to developing new homes. In Melbourne, Defence Department land at Maribyrnong will be released for a new suburb that could cater for 6,000 new homes. A new National Housing Finance and Investment Corporation will be established by 1 July 2018, to provide long-term, low-cost finance for more affordable rental housing. States and Territories will be encouraged to transfer stock to the community housing sector and managed Investment trusts will be allowed to develop and own affordable housing. The incentive for investors will include a capital gains tax discount of 60%, and direct deduction of welfare payments from tenants.

There are no changes to negative gearing, but tougher rules on foreign investment in residential real estate remove the main residence capital gains tax exemption and tighten compliance. An annual levy of at least $5,000 will also apply to all future foreign-owned properties that are vacant for at least six months each year. As well, developers also won’t be allowed to sell more than 50% of new developments to foreign investors.

Education and health care

This Budget will invest $18.6 billion in extra schools funding over the next 10 years, in accordance with the Gonski needs-based standard. Funding for each student across all sectors will grow at an average of 4.1% a year. However, university fees will rise by $2,000 to $3,600 for a four-year course and students will have to start paying back their debt when they earn more than $42,000 from July next year, down from the current level of $55,000. A 2.5% efficiency dividend will be applied to universities for the next two years. In health care, the Medicare levy will increase on 1 July 2019 by 0.5% to 2.5% of taxable income to help fund the $22 billion National Disability Insurance Scheme (NDIS). The Treasurer says all Australians have a role to play in supporting the disability scheme, even if they aren’t directly affected. The Budget lifts the freeze on the indexation of the Medicare Benefits Schedule and reinstates bulk billing for diagnostic imaging and pathology services. Hospital funding will increase by an additional $2.8 billion over four years and an additional $115 million will be spent on mental health initiatives. Another $1.4 billion will be spent on health research over the next four years.

What’s next?

Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, you should consider seeking professional advice. A financial adviser can give you a clear understanding of where you stand and how you can manage your cash flow, super and investments in light of proposed changes.

Saving for the Kids’ Education

Preparing for higher education

Like most parents, you want your children to have the best education possible, yet school and university expenses and fees are undeniably costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.  Depending on where you’re based, it may be right up there with your Mortgage repayments.

Not that many of us begrudge the spend, viewing it more of an investment in our children’s futures.

Some will need to decide whether 12 years of formal schooling will be undertaken in the private space or whether just the high school years will be funded.  Others are also happy to help with University costs and some allow Fee Help (formerly known as HECS) to pick up that tab.  Whatever you choose, there’s costs attached and it’s best to be prepared.

Once you’ve worked out your family’s preference, starting to save early will help your children have a high-quality learning experience.

It pays to do your homework.  Research what schools in your area charge each term so you have an understanding of what is required.  Will you need to move to be in the catchment area of your preferred school?  Do you know other parents or students of the school you can ask for testimonials about their experience there?  Do you need to register your child years in advance to get into your preferred school?  Knowing your costs early will give you greater time to save and help avoid disappointment.

The decision to send your children to public or private schools and then to university will determine just how much you need to put aside to start saving.  Despite your wishes, it’s also hard to know whether your children will want to go on to University until they’re some way into their academic career and begin to form some idea about what they’d like to do for a living.  Will a gap year needed to figured into the equation with money for travel?  Or will they fund that by working a part-time job from when they’re able.

What will you need?

As an example… if you send two children to private high school for six years each, which costs around $20,000 a year for each child, by the time they graduate you’ll have spent $240,000 on school fees. And that doesn’t take into account any extras like school uniforms, textbooks, trips and excursions, tutoring, extra-curricular activities, sporting clinics and the like.  This could see costs closer to $275,000 by the time they’re through.

If you only wish to save only for high-school years, you’ll have around 11 to 12 years to save for each child.  If the figures seem out of reach, you may need to rethink what you have to put aside, or review the schools your child will attend.

Public schools are much cheaper but there’s still no such thing as ‘free education.  There are extra fees for textbooks, uniforms, trips, stationery and school camps to pay for. These can easily add up around $1,000 per annum.

Trade Colleges are dearer than public schooling but for those looking to enter trade’s or take over dad’s business, these can be a great option for later high school years.  Often they’re around $4 – $7,000 and only two years is required.

The cost of going to university or college can also vary. If your child is eligible for HECS-HELP (a government loan available to tertiary students) they can choose to defer payment of university fees until they’re earning a living.  Entering the work force with large student loans may not be ideal, but in many cases is unavoidable.

Even if you (or they) aren’t paying upfront tuition fees, there’s still books, textbooks and materials, union and sports fees, lunches, accommodation and transport costs. Contact the university or college and find out how much each of these things will cost each semester, so you have an idea of how much money you will need to save.  And if you’re thinking ahead, don’t forget to allow for inflation too.

The earlier you start saving for your children’s education, the better. Education costs are usually a long-term goal that can take more than 5 years to achieve so stashing early is your best bet.

Then, once you’ve got a ballpark figure in mind to reach for, work out where you’ll put that money.  Are you happy with high interest, web based savings accounts and term deposits or want to invest in education funds or bonds for the longer term?  With interest rates at historical lows, it’s hard to find good returns on conservative styles of investments.

If there’s a top tip to getting set for education costs, it would be to research, plan, track and manage your savings goals on the go.  And be sure to review on at least a half yearly basis to make sure you’re on target.

My Top Financial Tip

If there’s one tip I’m constantly asked for, it’s what’s the best way to get on top of your finances?  And for me, that’s easy to answer – “Live Within Your Means!”  Good money management boils down to harnessing the cash flow and getting on top of debt – with the biggest gremlin being credit cards.

If the word ‘budget’ annoys you and has you running for the door, try ‘spending plan’ instead.  A budget/plan should be divided between fixed regular costs (those you MUST meet) and discretionary spending (the WANTS and nice to have stuff.)

Work out first what it costs for mortgage or rent payments, food, clothing, utility bills and loans.  This means you’ll have a much better idea of where you stand and how much you are spending on fun stuff like entertainment and non-essentials.

Losing the credit cards should be a top priority.  Learning that if you can’t afford it now, you can’t have it, is a great skill to take through life.  That’s not to say lay-buy or payment plans can’t work, but we need to move on from the ‘I want it now’ mentality.

Learn what you’re capable of when you’ve got less commitments like interest payments for items you’ve forgotten that you’ve even bought.  You may be pleasantly surprised at what you can achieve with better spending and saving habits.

Did you know, that if you’re 25 and have a nest egg of around $5000 and you’re able to save $50 – $75 a week at around 7% average interest (compounding over the long-term) you could have yourself a cool $1 million by retirement at 65?  It might be a while off, but it does highlight the opportunity cost of spending around $200 to $300 a month on eating out, movies, drinks and ‘stuff.’  Add that to your compulsory super and that’s not a bad way to enjoy post-work life.

Most however don’t really start thinking about retirement until they’re 40 plus and suddenly realise they’re half way through their working life and have been wasting the ready for over 20 years.  It’s time to analyse those poor financial habits now!

Reducing debt and saving as much as possible is imperative if you want to maintain a certain standing of living both now, and when you retire, and living within your means makes life a lot easier.  Life without ongoing financial stresses also helps you sleep easier now. Chances are, the Centrelink age pension will be harder and harder to come by and eventually disappear.

It’s up to us to take charge of our financial future, and the sooner, the better.  Living within your means from now, is vital.  Are you?