Tag Archives: superannuation

Financial Things to do Before You Die

While it might not be as exciting a list as Bucket List inclusions like:

1. Head to Base Camp;

2. Dive the Great Barrier Reef;

3. Have a Champagne at the top of the Eiffel Tower;

4. Stay in a yurt in Mongolia;

5. or sleep in an Igloo under the Northern Lights… it’s definitely a very loving legacy to leave behind for those you care about.

Unfortunately, I’ve had to assist in unraveling affairs of those who instead leave behind a financial mess for their family to navigate.  On top of grief, it’s a bitter pill to swallow when your financial affairs have not been left ‘in order.’  I know I’ve covered this issue before, but it’s so important to have finalised.

And I understand, it’s not a popular question to ponder and is likely hard to imagine, but what if something were to happen to you? Would your loved ones be taken care of or would they face a tough financial future?  Do they know what your wishes are?  Do you even have your important documents sorted?

The greatest gift you can leave your family and loved ones, is having your affairs sorted out before you go.  Please don’t think of this as something morbid… it might seem like I’m backing up the hearse and asking you to smell the roses here… but this isn’t about you, I promise.

If you have made plans, do your loved ones know where to find them? Would they know what assets you have, what insurance policies are in place or how to access your superannuation or life insurance?  Have they met your trusted advisers and know who to get in touch with if something were to happen?  Have you kept them in touch with what your wishes are?

Here are some simple steps you can take to protect the important people in your life:

  • Consolidate your assets and sort your bank accounts out
  • Ensure your life insurance is adequate based on your current circumstances
  • Make sure beneficiaries have been nominated (where possible) on your superannuation and insurance policies
  • Chat with your partner about what you’d like to have happen in the event of the unexpected
  • Ensure your Will is current – circumstances can change quickly!
  • Have your arranged for an Enduring Power of Attorney or completed an Advanced Health Directive?
  • Make sure those who need to know are aware of where your important documents are stored

Not everything will pass through your estate, so it’s wise to ensure you understand what forms estate assets and what stays outside.

Work through the list steadily and once it’s done, make sure it’s reviewed regularly.  Your loved ones will be glad you did.

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?

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.

 

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!

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?

Traps with Default Life Cover in Super!

Many Aussies rely on their default cover in their superannuation to be ‘enough’ when things go wrong… if they give it much thought at all!

What a lot don’t realise though, is that cover can expire when an employer stops paying in to some funds, and that at age 65, cover may also cease altogether (especially if you plan to withdraw the funds at that stage!)

Another issue that many face, is that their cover is ‘unitised.’  This means that they may maintain a certain number of units of cover at a set cost per week, but these units decrease in value over time as you age, although premiums remain constant.

Premiums being deducted from super may be just what you need to have ‘some cover’ that doesn’t interfere with your cash flow too, but over time, the premiums also erode your retirement savings nest egg.

Relying solely on default insurance may leave you with nowhere near enough for your family’s needs, just when they need it most.

When thinking about how much is enough for your needs, many start with clearing debt as their main priority and this is hugely important.

Another vital area to consider is the level of income that the family will miss over the coming years.  e.g.  Put very simply, if you earn $50k per annum and have 20 years of working life left, there’s $1 million in income the family will never see (without any adjustments for inflation.)  Do you need to include this level of cover in your plans for future expenditure on school fees, retirement savings and more?  Maybe, or maybe not.

Working out ‘how much is enough?’ is vital, and chances are, you may well find there’s a gap with your default super settings.

Take the time to understand what you have, what you need and chat to a professional.  Advice is invaluable in arranging the most appropriate levels of cover for you.

Get your finances baby-ready

A pre-baby financial checklist can make all the difference to new mums, writes Sally Patten.

For the majority of women, having a baby is one of life’s magical moments. It is also a moment that brings new responsibilities, including those of the financial variety.

Ideally, planning for a baby in financial terms should start a year, or even two years, before birth to ensure there is enough money tucked away to cover maternity leave and that other arrangements, such as life insurance, are in place.

Being prepared will help mothers to revel in their newborns as they should.  “If you are stressed about money, the experience is not as enjoyable as it should be,” says Kellie Payne of RI Advice Group Caloundra.

In the early planning stages, it is important to investigate how much money you can expect to receive through work entitlements and the government’s parental-leave pay scheme. Taking into account your expected income, the amount of time you plan to take off, your current expenses and any additional expenses that come with having a baby will enable you to figure out what the shortfall might be and how much you need to save ahead of time.

“Be prepared for additional medical and pharmacy costs for both you and the baby,” warns Payne.

Adele Martin of Firefly Wealth recommends opening a separate bank account for parental expenses, or better still, put the money into a separate mortgage offset account.

Check your insurance levels

In the case of health insurance, not all contracts cover pregnancy and baby-related services and if you do need to raise your level of cover, a 12-month waiting period will typically apply.

If you want to be covered by private health insurance for pregnancy “you’ll need to be on a health cover that includes pregnancy at least three months before you start trying to fall pregnant”, warns health insurer nib health funds.

Having a child is also an ideal time to look at your life insurance, which may pay a sum of money in the event of death, and income-protection policies, which may pay a regular sum of money in the event of serious illness or injury. Both can be critical when there is a baby or child who will need providing for if something happens to you.

Finding the right life insurance and income-protection policies is no mean feat and advice is recommended.

Strategies for Life Queensland financial adviser Tanaya Bendall says in terms of income-protection policies, would-be mothers should consider whether the policy will pay an agreed amount without having to show proof of income.

Martin notes that many insurance companies won’t insure pregnant women after the last trimester because they are viewed as higher risk.

A convenient way to increase insurance levels may be through superannuation, because this won’t have any impact on your cash-flow levels.

Finally, Martin believes women should not ignore superannuation during this time. She suggests investigating whether they are eligible for various super contribution allowances, such as the government co-contribution and spouse contributions while they’re not working or working part-time.

How a baby changed Emily’s financial outlook

A lot changed for Emily Shields when she had her first child, not least her financial outlook.  The embryologist knew she did not want to go back to work full-time.

“I wanted to be able to spend that time with Evie. But it also makes you think about being able to provide for her,” says the 37-year-old.  “We were lucky when we were kids that we never had to want for anything, and I want to be able to provide that for Evie.”

Shields was in a fortunate position: her partner Sam could support them. He had just started his own financial-planning company when Evie was born, and Shields was able to take a year’s maternity leave from her position at one of Melbourne’s leading IVF clinics.

She extended this leave by becoming a home-based sales rep for a health and beauty company for six months.  Now back at work two-and-a-half days a week, Shields is pleased to have resumed her career, knowing Evie is well looked after.

“All I knew was that I didn’t want her going into childcare,” says Shields. “It’s been easy knowing she’s going to family and Sam’s aunt can work around us with times and dates.”

The immediate financial plan is to continue working part-time while keeping a long-held investment property “ticking over” until they are ready to buy a house.

“We’re quite happy with a public primary school but I’d like Evie to go to a private school for high school if we have the money.”

Case study: Natasha Hughes

This article is part of a series published in the Sydney Morning Heraldand The Age called Her Money, that aims to help women take control of their financial futures. This series has been created in partnership with ANZ.