Category Archives: Wealth

Managing a Financial Windfall

We’ve all got that dream – we’ll have that massive lotto win, Great-Aunty Betty will die and leave us everything… or even that a spectacular tax return or bonus will come our way.

Although they’re aren’t regular occurrences, financial windfalls can come our way now and then… so instead of blowing it all, what’s the bet way to take advantage of a bonus or extra dollars that come our way?

The temptation to splurge can often be overwhelming, but your future self is hardly likely to thank you for replenishing a wardrobe or buying more “stuff” that is likely to end up in a charity bag in a year or two.  So what are some eminently sensible and grown-up ways of making that money work harder?

Here’s a few ways to spend this money that will give you long-term benefits.

  • If you have debt, especially non-deductible debt like credit cards or personal loans, pay them down first, followed closely by long-term debt like your Mortgage
  • If you’re really not sure what to do and everyone is putting their two cents worth in and confusing you ever more, put it in a high interest savings account until you can do some research and be comfortable with your decision
  • Can you put a bit extra in your super?  Retirement might be a long way off, but that means you have the benefit of long term compounding interest in your favour
  • Is there enough for you to start investing?  It may be worth kicking off a portfolio of shares, property or managed funds if there’s enough.
  • Getting financial advice can be of great benefit.  Financial professionals often have access to funds and research that are unavailable to many and they can ensure that you invest in line with your risk profile, not putting ‘all your eggs in one basket.’
  • Have you put off personal protection strategies like income protection, trauma cover or health insurance?  It may be worth investing in looking after yourself
  • Have you considered taking time out and learning new skills?  Maybe it’s time to invest in yourself and do that course.  Who know’s a career change might be just what you need!

And if you’d really like to still blow just a little of it – set a limit – maybe 10 – 20% and knock yourself out.  Have that splurge, but be smart too.

Do something that your future self with thank you for.

 

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?

Kids and Money

I think the education system needs a massive overhaul and is ripe for disruption.  No longer are we children of the British Empire training to be clerks in far flung places.  We’re a part of mass globalisation (whether we like it or not) and need the skills to be able to cope with the brave and constantly evolving new world.

No longer do we need to graduate being fluent in Algebra, all over Pythagoras’s theorem, knowing how to dissect a frog, being able to wrangle a Bunsen burner or able to recite Romeo & Juliet (Ok, maybe that.)

What we need is a mass of life skills – how to open bank accounts, understanding medicare and health insurance, learning when and how to switch off from devices and social media, defensive driving courses, how to cope with moods and emotions (our own and others,) getting job ready, learning about business and how to run a home.  You know, real world stuff.

And teaching kids about money is vitally important.  Yet often, we haven’t been taught ourselves to pass those lessons on.  Sometimes we’ve had to learn the hard way, but sometimes we wish we’d known a lot more a lot earlier.

Money permeates every part of what we do.  We work to earn money to make and living and a life.  We need it to put a roof over our head, food on the table, buy the shirt on our back, fund the phone and pay for those holidays and hobbies we want along the way.  Yet few of us know that insuring our income should be our top priority for without it, we can’t fund the rest of our lives.

We also seem to be moving ever closer to a cashless society.  Money is becoming invisible in the digital age.  (My sister tells me I’m considered a vagrant because you’re supposed to have at least 40 cents in your purse for a phone call, which I rarely do – but seeing I have a very capable mobile, I really don’t see the need!)  How much harder for children to understand the value when it’s not even a physical commodity anymore!

Fortunately, there’s also a lot of tools online now available to help.  Start talking to your children about money when you head to an ATM or you withdraw cash at the supermarket, even when writing up a shopping list.  Tell them how many hours you had to work to buy that week’s groceries and how banks and lenders give you money for big purchases but charge you extra for the privilege. Discuss online purchases and how to handle them securely and explain the difference between our needs and our wants.  Make it real and understandable in words they can comprehend and appropriate to their age.

Explain the relationship between leaving the lights on and the power bill you receive. Help them work out their first budget when they start work.  Do they need to pay board, cover debt, give to a charity, save for their first big purchase, make sure they put aside for petrol, registration and insurance?  Open lines of communication can be started with basic concepts introduced as early as preschool.

So, don’t leave it to the education system.  Be your babies first line of financial defense in the world that awaits them.

Get it Together!

There’s so many things that fall into the too hard basket!  Life is busy and there’s so many other priorities!  Just making it through each day and falling into bed at night is a good day’s work for a lot of people.

But, when a tragedy befalls someone near and dear to us, we often see the fallout when people don’t have their sh*t together.  I’m often approached for insurances or to update beneficiaries of a super fund prompted by the life events that happened to ‘someone else.’

So what are the main areas to ‘get on top of’ when it’s time to get your act together?

Here’s my top tips!

  • Make sure your Will is current and reflects your wishes
  • Ensure you have appointed Powers of Attorney – Enduring and Medical
  • Make sure beneficiaries are nominated on Superannuation & Insurance Policies
  • Consolidate those Superannuation funds that you have lying around – or keep them if they have vital insurances
  • Ensure assets are owned correctly and your bank accounts are in order
  • Check over your Insurance Policies – especially Life, TPD, Trauma and Income Protection – are the levels of cover enough?
  • Bring the people who’ll be involved in sorting out your Estate up to date with your wishes
  • Ensure tax returns are up to date and completed annually – personally and for your business entities
  • If you have a partner or family, make them aware of what you’d like to happen
  • Let a couple of different people know where your important documents are stored in the event of the unexpected

Life changes.  Partners can come and go, children grow up and live their own lives, grandchildren arrive and significant people can waltz in and out of our lives.  It may be hassle to work through the list, and yes, some of it may be costly, but if you truly love those you’re leaving behind, one of the best gifts you can leave, is to have your sh*t together.

You really don’t want the crazy ex to benefit from your estate when your gorgeous new partner will be left destitute because you didn’t take the time to update your paperwork!

So, set a date to every year, ensure everything is just how you want it.  It could be on a birthday, an anniversary or at the turn of the calendar or financial year.  Get each area finalised then run an annual check to make sure they still reflect what you’d like to happen when you’re not there to arrange it.

I’ll bet there’s a few people who’ll be very thankful you did.

 

Top 5 Financial Tips

So it wasn’t that long ago that 2017 kicked in and you promised to get on top of your finances this year!  How’s that going for you now that we’re around six weeks in to the new calendar year?

You know what they say about “the best laid plans of mice and men” right?

If you want to break it down into a really easy to follow guide, I’ve got five top tips for you to help get on top of things over the rest of the year…

1. Set goals

Take charge of your financials this year by working out your goals, objectives and priorities and put a plan in place to reach them.  If you want to get rid of credit card debt, increase savings, pay off your mortgage more quickly or boost your superannuation savings, the MoneySmart site has tools to help you work out a plan.  Alternately, hooking up with a financial planner can help you work with a professional money coach to assist you to make it happen, articulate what you’d like to achieve, and give you someone to be accountable to.

2. Map with a budget

As any successful journey begins with a reliable map or an up to date GPS, the path to wealth starts with going back to basics and having an accurate budget.  The thought of doing a budget might make your eyes glaze over, but a budget helps you see where your money is being spent and where you can make changes that will help you build wealth. You can use MoneySmart’s simple money manager to create your budget.  I often recommend clients use it for their budgeting needs.  It’s online, simple to use and comes in a few different languages too.

3. Get a better deal

It’s good to regularly check and make sure you aren’t paying too much for your mortgage, investment or personal loans or insurance policies. Shopping around regularly for the best deals could save you thousands of dollars over the long term. Talk to your lender or mortgage broker about what they can offer.  Different banks have different deals, so they’ll search around for a better deal if they want to keep you as a customer. If they won’t help, feel free to shop around yourself and switch to another option or lender.

Before automatically renewing insurances, check whether your current insurer is giving you the best value for money. You might be able to get a better policy for a lower price or with better conditions.  Often it’s worth asking a broker or agent for help as they have access to different policies and can run comparisons for you based on what’s important to you.

4. Improve your knowledge

It’s long been acknowledged that “knowledge is power.”  Before you commit to any investment opportunity, make sure you understand the features, costs – upfront and ongoing, benefits to you, and all possible risks.  Does the investment fit in with your plan? Don’t invest in something you don’t understand, and “if it sounds too good to be true, it probably is.”

Forewarned if forearmed, so equip yourself with as much knowledge as possible. Subscribe to investment magazines, download popular books on the subject, follow experts on social media or if you still feel clueless, engage a financial adviser to assist.

5. Manage Risk

Investing wisely helps build your wealth for the future.  You’ve probably heard of the benefits of compounding interest, so the longer time frame you have, the better off you should be.  All investments involve an element of risk – and often, “higher the risk, the higher the potential return.” Before you invest any money, take the time to understand the risk versus return.  You need to work out your own personal style of investing.  Are you conservative?  balanced?  or an aggressive investor?  Often, we’ll have a different profile for different types of investment.  If you’re younger, you’re likely to have a much more aggressive approach with your superannuation than you would with funds being saved for a housing deposit.

You’ve probably heard “don’t put all your eggs in one basket.”  This is what diversification is all about. By spreading money across different asset classes and industry sectors, you are less likely to be affected by a particular economic event, like a drop in real estate prices, a fall in the share market or in a particular industry or sector.

So work your way through these five tips.  I’d love to hear how they’ve helped you get on top of your finances!!

Love & Money

Hello all you Valentines!!  Sending kisses and much love to you gorgeous couples!

Did you know though, that money issues rank constantly in the top 10 reasons for divorce? Probably something you don’t need reminding of on what’s supposed to be the most romantic day of the year!

But then, communication issues, infidelity and bedroom boredom also rank pretty highly…  And ok, I’m not here to give solutions to those marital woes…  I’ll leave that to the experts!

But love and money can be a tricky subject, and communication has a huge role to play in this area.

And whether you’re a big marshmallow preparing for the most romantic day ever… or it’s just commercial hype and gets a big miss in your house, it’s always worth chatting about money.  Not sexy perhaps, but certainly smart.

Although discussing finances is a must before moving in together, committing to a relationship or opening a joint bank account… it’s an ongoing area that affects nearly every part of our daily lives.  Without the dosh, there’s no food on the table, roof over the head, annual holidays or even the hint of a lifestyle.

Being upfront early can also open your eyes to traits in your potential partner that you might want to know about sooner rather than later.

If there has to be a Top Tip, it’s to discuss money issues with your partner and that’s long before it gets to the shouting match stage.  Relationship goals are usually a joint decision that need sane and calm discussion (sometimes easier said than done… “honey, I’m pregnant!”)

People can have incredibly different attitudes to spending and saving which can cause much friction.  It’s great to be upfront with each other and admit which style is more yours.  Savers hate it when spenders come home with a new impulse purchase and the rates and water bills have just come in.

Helping spenders understand the needs of the family budget may help curb spending, or having a set amount to spend on ‘whatever’ may allow for the bills to be met, and have a little fun too.

If you’re not brave enough to pool your resources, based on previous trust issues, it’s a good idea to sit down and work out what your joint expenses will be.  You can either have a joint account that you both put an equal or set amount into each pay frequency or commit to paying certain bills instead.  That way, living expenses are covered, but ‘what’s yours is yours’ and remains that way.  My mother much preferred ‘what’s yours is mine and what’s mine’s mine,” so whatever works for you!

And when you’ve both been through the wringer before and are looking at starting over, especially if you both have your own families, it can be really smart, if not terribly romantic, to arrange a Binding Financial Agreement (also known as a pre-nup) so if things don’t work out, you both know exactly what you’ll get on exit and protect what you’ve brought into the relationship for your children.  It’s worth getting legal and financial advice for this one, and can put everyone’s mind at ease.  It may not send you to the dance floor for a tango in a fabulous dress with a rose in your teeth, but it’s certainly practical.

In many families, there’s one partner who’s a little more money savvy and the other often delegates the family finances to that one.  But not knowing what’s going on may be fine while everything is roses, but you’ll be kicking yourself if things go wrong and you’re clueless about what you have.  So talk about it, and make sure you’re ‘kept in the loop!’

And if your partner isn’t willing to share about your joint finances and everyday budget and spending and savings, something is likely off, so start sniffing around.  Intercept mail and let the bloodhounds loose.

Other families have issues where one partner is a much higher earner than the other. Being ‘with someone’ doesn’t mean you need to lose your financial identity though.  It’s important to work out what your shared goals are as a couple and how they’ll be addressed but it’s critical to have your own goals too.

So, it’s not rocket science, and if you want your current honey to still be your Valentine in years to come… start the talk, and never stop.

What does a Brighter Financial Future Look like for You?

What lights your fire financially?  Everyone’s financial future looks different.

For some people, it might be as simple as being completely debt free.  Others couldn’t live without an annual holiday.  Many want the security of a small nest egg or emergency fund being available.  Others would love an investment property.  Whatever it means to you, a brighter financial future can start with a few small changes to how you currently deal with money. The key is usually to establish some good financial habits – no matter where you are right now.

What are some steps you can personally take towards a brighter financial future?   Most often, it starts with living within your means, or spending less than you earn.  I’ll outline a few options and suggest you try a couple to begin with and see what a difference it makes in your personal circumstances.

  1. Track your daily spending habits – get a receipt for everything you purchase and pop it on a spike or in a box for a month.  See what’s really going on with your spending!
  2. Begin a budget.  And before your eyes glaze over, there’s plenty of online calculators that can help you, so you don’t need to do it alone.  Try the ASIC MoneySmart option to kick things off.
  3. Review your spending habits – Do you have the best phone plan?  Are your insurances the best value for coverage and cost?  Are your bank accounts and fees cost effective?  Do you have a low cost loan and a good deal on your mortgage?  Can you cancel some subscriptions you no longer need? There’s lots of comparison sites now available to help!  Where can you cut back?
  4. Start clearing debt – work out what’s the highest interest rate across your various debts – quite often, it’s the credit card or personal loan.  Especially if the debt if not tax-deductible, work out a plan to bring it down more quickly.  Paying the minimum each month, you’ll never get rid of what you owe!  As one clears, cancel or reduce the facility and then start directing those funds towards the next debt.
  5. Is it time to start investing?  As your debt comes down and you no longer need to fund those large payments, can these be directed towards an investment portfolio?  Find out if you’re ready to start investing here.
  6. Take care of your future!  Have you given due care or attention to your retirement savings?  It’s easy to put it on the back burner thinking it’s so far off, but it is your money and needs to be nurtured.  Chances are, the Government’s pension plan will be less and less available over time, so taking care of number one should be higher on your list than it likely already is.  And the longer you have to go, the better compounding interest will work in your favour.

Hopefully, these tips will help set you on the way to a brighter financial future.  I’d love to know if you’ve tried one out and let me know how it’s worked for you!