Tag Archives: money

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?

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 an Adviser really do?

The term financial adviser or financial planner has been around for a long while.

When I left school though, I’d never heard of a Financial Adviser and certainly didn’t know it was a career path, or that it was the one I would take.

I knew about Life Insurance Agents or Brokers, Accountants, Economists and not much else.  So if you’re like I was, and not really sure what a planner did, allow me to enlighten you…

Advisers are Authorised Representatives of an organisation that is licensed by ASIC (the Australian Securities and Investment Commission.)  Some choose to hold their own license, some are through non-aligned companies and others are through big corporates that you may recognise such as AMP, MLC (NAB) or ANZ.

The upshot is, you need to be licensed to give advice and that’s a role we take pretty seriously.  People pay us for what we know, meaning we’re in a very trusted position and one that we don’t take for granted.

When you initially meet or research an Adviser, chances are you’ll be provided with their Financial Services Guide and Adviser Profile.  This outlines what your Adviser is allowed to provide advice on.  Some are very limited and choose to specialise in a particular niche, such as Insurance or Self-Managed Super Funds (SMSF.)  Others are educated in many areas and are called ‘generalists.’  Additional accreditation may be achieved in areas such as Aged Care and SMSFs.

Most covered areas include investments, finances, budgeting, insurance, superannuation, retirement and pre-retirement planning, estate planning, risk management, business risk mitigation and taxation.  Advisers are usually only too happy to let you know the areas that they’re qualified in and can offer advice on.

Chances are, seeing an adviser can add value to your personal financial situation, so why not consider a meeting with a planner real soon!  Most offer their initial consultation at their own time and expense, so what have you got to lose?

Why chat with an Adviser?

With only around 20% of Australians thinking it’s worthwhile seeking professional financial advice, it begs the question – ‘what’s in it for me?’  ‘Why would I see a financial adviser?’

And I can give you 6 pretty good answers to that question!

Firstly, seeing an adviser can help you set and achieve personal financial goals.  Sure, you can do that on your own… but do you?   Most of us fare much better when we share our goals and feel accountable to someone for achieving them.  But then, some never think to set financial goals or have a clue about achieving them.  This is where an adviser can provide much value.

Secondly, we can help you make the most of your money.  Chances are, if your like most you live first and save last… if there’s anything left over.  Advisers can assist with salary packaging, planning, tax minimisation and ensuring you get paid and get to save.

We also know a bit about Centrelink, and have helped some who didn’t even know that they were entitled to the Pension or an Allowance to be able to claim what they’re entitled to.

One of my favourites tho is assisting you to feel more in control of your financial situation.  Knowing that you’ve got a plan, someone to keep you on track and that each year you can see that you’re getting ahead, is priceless!

We all make mistakes, it’s a part of living and learning.  But some of them can be extremely expensive.  Being able to run business, investment and financial deals past an expert who knows their numbers can potentially save hundreds or even thousands of dollars in expensive mistakes!

And finally, we know all about protection.  Having a brilliant financial plan is no good if all that you’ve already worked so hard for isn’t protected.  Ensuring that your own life and the wellbeing of your loved ones is taken care of means real peace of mind.

Now, aren’t they 6 good reasons to make an appointment today?

 

Do you insure your biggest asset?

It’s a sad fact that most Australians are dangerously under-insured.  And It may just be high time you reviewed your levels of insurance protection!

Take the example of Matt.  He is a clean-living 53-year-old who exercises regularly, doesn’t smoke, enjoys a healthy diet and only indulges his love of good wine at the weekend.

Yet things changed suddenly for Matt last year when he awoke one night to find he couldn’t breathe. His wife called for an ambulance and he was rushed to hospital, where he was taken into life-saving surgery following a heart attack.

After waking from his operation, Matt was in shock. He knew there was a family history of heart disease, but had gone to great lengths to prevent the onset of the illness and had definitely not properly thought through how his family would cope without him.

During recovery, Matt reviewed the insurance component of his super and discovered that in the event of his death his family would receive just $300,000, which would barely pay off the mortgage. He hadn’t taken into account daily living expenses, car loans, and his daughters’ school fees, his wife’s low income or their inadequate savings.

Fortunately for Matt, his story is a positive one. Now in better health and back at work, he has spoken to a financial adviser and taken out additional life insurance, albeit at a significant premium following the heart attack. He and his adviser are looking into critical illness cover, which would pay out a lump sum should he suffer another sudden illness, although he’s likely to now have a coronary exclusion.

Unfortunately, in Australia, Matt’s story is not uncommon.  Surveys have shown Australia has much lower levels of insurance than other developed nations including the United States and United Kingdom [1]. The required level of life insurance is now about $680,000, while the typical default cover is around $258,000 – a significant gap [2].

Maybe it’s time to ask… could your family make ends meet if you were unable to work, suffered a serious illness or died? Here are some things you should consider:

  • Ongoing Mortgage or rent payments
  • Daily living expenses – food, bills, transport, utilities, insurances
  • Childcare, school and university fees, text books and accommodation
  • Other expenses – house repair costs, medical expenses, personal health & grooming, replacement of white and brown goods

Make an appointment with your financial adviser to discuss your insurance needs and ensure you are adequately covered, or call the team at Wealth Planning Partners to discuss your needs on 07 5593 0855.  They help clients Australia wide with their protection strategies.

 

[1] Lloyd’s Global Underinsurance Report 2016

[2] Rice Warner Underinsurance Research Report 2014