Downsizing your house just got a whole lot more appealing

Downsizing your house just got a whole lot more appealing

If you are over the age of 65 and considering downsizing your principal residence you now have access to the downsizer measure.

The downsizer measure allows you to contribute up to $300,000 each of the proceeds from the sale of your house into superannuation. This means you can grow your superannuation nest egg without having to meet the work test or be limited by the usual superannuation cap limits.

So why would you want to us the downsizer contribution? Well because superannuation is an extremely tax effective structure to house your retirement benefits. Not only will you pay zero tax in pension phase but your funds will also be invested in-line with your risk profile.

To be eligible for the downsizer measure you must be over the age of 65 and selling a home that you or your spouse have owned for 10 years or more. There are some additional requirements to consider so if you are seriously considering using this measure I would advise you to get in contact with me first so we can go through the nitty gritty.

What’s your new (financial) year’s resolution?

What’s your new (financial) year’s resolution?

The glow of New Year’s fireworks may be a distant memory, but there’s another new year upon us that for many of us is more important. That’s right, the new financial year is here, and now is the perfect time to get your finances in order.

Below are our tips to hit the ground running and get the most out of your hard-earned cash.

Time to plan

The new financial year presents a terrific opportunity to re-valuate your goals and aspirations as they may have shifted over time. Take stock of where you are now and start making a plan to work towards where you want to be.

Implement a forced savings plan

As many of you know, I am not a fan of budgeting. It is like a diet – hard to follow and often not practical in everyday living. Instead, start a forced savings plan!

A forced savings plan directs money, automatically, on a regular basis to where it needs to go. This might be to an offset account, into super, into an investment bond, off the mortgage, etc. Every person is different and their forced savings plan will be unique to them.

By implementing a forced savings plan you develop new spending habits as you essentially have less cash flow available to live off. This will automatically limit your expenditure, without having to track all your spending!

Topping up your superannuation

It’s never too early to start putting a little bit extra towards your retirement savings. Superannuation is one of the most tax effective retirement tools we have access to. This new financial year you should sit down and consider how you can better utilise your super.

For many people, the mandatory superannuation guaranteed contributions (SGC) are not enough to generate a sufficient nest egg. By tipping in a little extra to your super you can save tax and build wealth through the power of compounding investment returns.

Review your insurance

Over the past financial year your financial circumstances may have changed and now might be a good time to review your personal insurance needs to ensure you have the right cover to give you and your family peace of mind.

Life insurance today is not a one-size fits-all solution and you can tailor your insurance cover is to your lifestyle so look at your policy and see if it still fits your needs.

One thing to look at is how much debt you have – over time it may increase or decrease so a regular review will make sure you’re not underinsuring yourself or, conversely, paying for cover that you don’t really need.

It’s also a good idea to allow for future financial responsibilities, not just the ones you have currently. For example, consider your child’s long-term education needs or your spouse’s upcoming retirement.

Review your will

If you don’t have a will, you need one! If you do have a will, consider how your circumstances have changed and consider if this warrants reviewing your will.

A will is something we all procrastinate on and unfortunately it often means people die intestate. Don’t leave your family with this hassle, just get it sorted.

Looking ahead

Sometimes we all need a little push to do the things we’ve been putting off, and the new financial year presents a perfect deadline to make some new resolutions.

Once you’ve decided what your goals are for the new financial year, the next step is turning those dreams into reality. So why not sit down with me today and put your plans into action? It might just be something worth celebrating.

What is your risk tolerance – and why?

What is your risk tolerance – and why?

Risk is inherent in investing and there is no one size fits all approach to managing and dealing with risk. What keeps you awake at night might be well within someone else’s comfort level.

The central principal of investing is the higher the risk of a particular investment, the higher the possible return. Of course the flip side of that is that low risk investments typically offer low returns. Those that are attracted to high returns need to be sure that they can cope with the volatility that can accompany those types of investments and those who want stability need to ensure that they are prepared to compromise on return for investment.

It’s worth developing an understanding of how you feel about risk as your risk tolerance should dictate your investment strategy.

What is risk tolerance?

Risk tolerance is the degree of variability you’re willing to withstand with your investments. In other words, the ups and downs you can put up with. Risk tolerance varies from person to person as well as over time. For example, someone with a very short investment time frame and a very important investment goal might not be willing to put up with peaks and crashes. They might not have time to start again if something goes wrong with a risky investment. On the other hand, someone with a longer time frame (someone at the start of their career, for example) might be willing to take that risk, for a potentially higher payout.

What shapes people’s risk tolerance?

Part of your risk tolerance is based on hard numbers. Put simply, it’s comparing your investment goal to the data available on your potential investment options. And then putting that in the context of other factors, like economic risk. It’s the other part that’s particularly interesting.

The psychology of risk tolerance draws from many different areas of behavioural psychology. Risk taking behaviour can be influenced by emotional factors; how the person is feeling at the time, or how they think they’ll feel if their decision pans out as expected. Your decisions can also be shaped by your past experiences.

It’s possible that your approach to some types of risk might be formed by an early age – when you’re in primary school.i By that age, you’ve already absorbed a lot from your parents and siblings. But that doesn’t mean you can’t understand more about where you’re coming from, and in doing so, get closer to your goals.

Balancing your risk tolerance and goals

In general, problems arise when your risk tolerance is low, and your goals are particularly ambitious. But when you have a more-than-high tolerance for risk – even a love of the thrill of chasing extraordinary returns – you may be tempted to break your medium to long term plans. Even when you’re on track to achieve your goals. In other words, balancing your risk tolerance and goals takes a consistent effort.

What is your risk tolerance?

Risk tolerance is different for everyone. ‘Know thyself’ is the adage, and a common and simple test is to think about how you’d be likely to react to a significant fall in the value of your investments.

Conservative investors are likely to want to sell and run, believing that this will mitigate their losses. Aggressive investors on the other hand might use the drop to increase their holdings. Most people are somewhere in between these two poles.

We can help you to work out your risk tolerance, and assist you to make investment choices based on your profile, situation and investment goals.

If this article has left you feeling like it’s time for a discussion – and maybe even a change – get in touch with us. We’re here to assist you in planning your investments in order to achieve your goals.

i In context of physical injury: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2610559/

Four things to remember when choosing a beneficiary

Four things to remember when choosing a beneficiary

Choosing a beneficiary is usually a simple task, but there are a few things you should keep in mind when you decide.

A beneficiary is the person who will receive your life insurance payment should you pass away. When choosing yours, it’s important to think about who would be most financially vulnerable without you in their life. For most people, this is their spouse or children.

If you’re yet to nominate your beneficiary for your Life Insurance, you can easily do so. Nominating a beneficiary may seem straightforward, but there are a number of things to be aware of and plan for.

  1. If you don’t have a beneficiary

If you hold the policy in your name, your benefit will go to your estate and be managed as part of your will.

If you have outstanding debts when you pass away, your benefit may be used to pay them before it is distributed to the people named in your will – this means your loved ones could miss out on the payment.

  1. Naming a beneficiary

Naming a beneficiary ensures your benefit is not paid to your estate and goes directly to the person you nominate.

It’s important to consider that if your beneficiary has any debts the proceeds might be used to pay them off. As well as this, keep in mind that if you nominate your children, they will only receive the full amount once they turn 18.

  1. Having multiple beneficiaries

You can easily name multiple people as beneficiaries to your policy – you can check with your insurer as to how many beneficiaries can be named on your policy.

If you do decide to choose several people, it’s useful to designate a percentage of the payment to each person, as opposed to a specific amount (as this may change).

You should also consider having a contingency beneficiary, should a primary beneficiary pass away before or around the time of your passing (for example, in an accident).

  1. Keeping your beneficiary up to date

You should evaluate your beneficiary and policy at any major life event – for example, purchasing a home, having children, getting married, or at the death of a loved one.

Remember, you can easily update your policy and beneficiary. And if you have any further questions concerning beneficiaries, feel free to contact me.

A little extra goes a long way

A little extra goes a long way

As you probably know, I am a big supporter of making extra repayments to your super fund. For many people, the mandatory 9.5% superannuation guaranteed contributions (SGC) are just not quite enough to provide a desirable standard of living in retirement. This is why we need to take our own initiative to tip a little extra in during our working lives.

Below are the three key reasons making additional contributions can greatly benefit you.

  1. Compounding investment returns.

Did you know that if you generate an investment return of 7% per annum, you will double your money every 10 years?! That is the power of compounding.

Many people leave their retirement saving until just before they retire. This is too late. You need time on your side to save for your retirement as time gives you compounding investment returns. So it is never too early to start adding a little extra to your super.

  1. Tax savings.

By making extra contributions to super you can save tax as the funds contributed to super as a concessional contribution are tax at 15% as opposed to your marginal tax rate which can be as high 47% inc. medicare levy. In addition, once inside super, earnings are taxed at a maximum rate of 15% which drops to 0% once you enter pension phase.

  1. Forced savings.

Many people save to buy something. A new car, a holiday, some fancy clothes. It is very rare that you hear of someone intentionally saving to create a future passive income stream. That is why super is so great because its sole purpose it to provide you an income in retirement.

If you are the kind of person that finds it difficult to save, super is a great tool for you as once the money is contributed to your super you can’t access it until you meet a condition of release (which for most of us is retirement).

If you would like to consider contributing more to your super, please get in touch. I will help you assess whether or not it is appropriate for your situation and ensure you work within the superannuation contribution limits.

Be different today so you can be different tomorrow

Be different today so you can be different tomorrow

Every generation thinks life will be different – and of course, each one is right – but when it comes to planning for the future, while we’re young we have a habit of thinking there is still plenty of time. After all, when you’re in your mid-thirties or even early forties, retirement is still decades away; later if the government decides so!

However, like anything forgotten too long, the years pass quickly and the time we could have used constructively has disappeared. For example, early Generation X is now on the countdown to retirement.

If you want to be different today, plan to be different tomorrow.

Start with your grandparents…

What did their working life and retirement look like?

Let’s imagine your grandparents are both in their eighties. It’s likely that Grandad started working in his teens and stayed with one employer for most of his life. Structured superannuation was available to the very few. He retired at 55. Grandma may not have had much paid employment, if any. Their lives can be broken into three phases – education, work and leisure.

But they didn’t anticipate retirement being as long as it’s turned out to be. They’re still healthy, have outlived their savings and are relying solely on the age pension to fund their frugal lifestyle.

Then your parents…

What did their working life look like? How will their retirement be different?

We’ll envisage your parents are aged in their sixties – typical baby boomers. They were better educated than their parents and both worked; though Mum took years off to raise the kids. They accumulated quite a bit of superannuation; Dad has more than Mum.

Their lives can be broken into the same three phases. Education may have extended into their early twenties or they studied later during their working lives. They worked for a couple of employers and, thanks to technology, ended up in careers they never imagined in their youth.

Whilst they have long talked about retirement, now that it’s almost here they face it with some trepidation. They may consider moving to part-time work that will give them more freedom, keep their minds stimulated and still have enough to pay the bills. After all, now they are independent and the mortgage is paid off, life is cheaper.

It would be nice to have more time to travel and do the things they would like to do. They’re both fit and healthy and if they live as long as their parents that will be 20 or 25 years of leisure.

Will Mum and Dad have enough money to live a comfortable lifestyle for that long?

And what about you?

You and your siblings are not going to rely on one employer or one lifetime career. Balancing life and work is more important as you take time off to travel, do volunteer work or try new adventures earlier in life. And being so versatile, when you resume your career you simply re-train.

What this means is that you will have multiple periods of education-work-leisure in your life, and as you will probably be much healthier than previous generations you don’t see working longer as a problem.

But will you be able to afford 20 or 30 years with no income? That’s a sobering thought at any age.

It’s time to be different now.

Many social commentators class Generation X as stuck in between the two “noisier” and more well-known generations – Baby Boomers and Gen Y – but that doesn’t mean you should fade into insignificance. Be the first generation to truly take control of your retirement at a younger age. Stop the trend and talk to us about the many strategies available to give your retirement savings the boost it needs.

Be different today so you can be different tomorrow.

“Tap and go” and then what?

“Tap and go” and then what?

Talk about hammering the plastic. In May 2017 Australia’s 16.7 million credit card accounts were used to make 239 million transactions with a total value of $29.2 billion. We are currently paying interest on $31.7 billion worth of credit card debt, running up an annual interest bill of over $5.4 billion (that’s $5,400,000,000!).

It’s not just the easy money that cards provide; it’s the easy form of delivery via “tap and go” that’s pushing our debt to extraordinary levels. The quicker the transaction, the less thought or planning required. Pay now and think about it (and deal with it) later.

Don’t become a statistic – here are some things to look out for plus a few tips.

Traps

  • Over 40% of credit card spending goes on groceries and utilities. While this isn’t a problem if you pay off your card balance in full each month, if you’re paying interest just so you can buy the necessities of life, it’s a real danger sign that you may be living beyond your means.
  • Most credit limits are well beyond cardholder needs. On average, Australians only use about a third of their available credit limits each month. However, by giving you a higher credit limit card issuers hope temptation will get the better of you. If that means you can’t pay off your entire balance each month you’ll end up paying them lots of interest.Also bear in mind that if you apply for a personal loan or mortgage in the future, lenders will look at your combined card limits, not just the balances. High credit limits will affect the size of loan approved. Reduce the temptation and reduce your limits to appropriate amounts.
  • Beware the bonus card. Yet another credit card may come with a new mortgage. Look out for annual fees or other costs and make sure you understand what’s involved. If you don’t need it, cancel it.

Tips

  • Financial institutions can only offer to increase your credit limit if you specifically ‘opt in’. This can be done in writing or over the phone. However, it’s prudent to withhold this permission to keep your limit under control. You can always apply for a once-off increase if you really need to.
  • Switch to a reloadable (pre-paid) credit card. Like a debit card it means you are using your own money with the added advantages that you can pre-set a limit on your spending and reduce the risks associated with buying online. Reloadable cards are available from banks, other financial institutions and major retailers.
  • If you sign up for a new card for a 12-month interest-free purchase, pay it off in the first year then cancel the card before the renewal fee is automatically charged. There is no point paying an annual fee if you’re not going to use the card.

And a myth

Many people think that it is only lower income earners who are susceptible to the siren call of easy credit. But like the Sirens of Greek folklore themselves, it’s a myth. In fact, higher income earners also rack up huge balances on gold, platinum and diamond cards, and can experience real difficulty in paying them off.

If your credit cards are more an enemy than a friend, we can suggest a range of solutions to get you back on track.

Sources: ASIC’s MoneySmart website www.moneysmart.gov.au

Top 3 reasons to have a Will

Top 3 reasons to have a Will

As you get older you might find yourself wondering whether or not you should have a Will, is it really that important? Well, the short answer is YES! It is very important and I’m about to tell you why.

So, what exactly is a Will? A Will is a legal document stating your wishes to be carried out when you pass away, it ensures that your hard-earned assets are distributed and managed according to those wishes outlined in the document. Surprisingly almost half of all Australian’s do not have a Will, so if they were to pass away unexpectedly there is no guarantee that their assets would be distributed in accordance with their intentions, instead an executor would distribute the Estate according to relevant legislation.

If you don’t have a Will, hopefully by the time you finish reading the Top 3 Reasons to have a Will you will change your mind.

  1. You get to decide how your estate is Distributed

As a Will is legally binding, you will get to set out exactly how you want your estate to be handled. This will ensure that no one can inherit a portion of the estate unless you have specified them in the document. If you do not have a Will there are laws stating who gets what and how much they receive.

For example: Let’s say you were to pass away without a valid Will, under Western Australian Law the estate will be inherited by your spouse if worth less than $50K. If it’s worth more, and you have children your spouse will receive a portion and then the rest will be split evenly amongst your children. If you don’t have children it then goes down the line looking at your parents, siblings, nieces/nephews and whether they are entitled to a portion of your estate. This may potentially result in someone you did not intend on, inheriting some of your estate.

  1. Minimise legal challenges & avoid a lengthy probate process.

All Estate’s go through the probate process, having a Will ensures this process can be sped up by informing the Court exactly how you want your assets divided. A probate court’s purpose is to administer your estate, and if you die as an intestate i.e. without a will, the court will then take a long time to decide how to divide the estate, possibly leaving your family in a bad financial situation.

Legal challenges may arise if you pass away without a Will, seeing people you did not intend inheriting some of your estate, or others fighting over how much they deserve to inherit. Unless there is a clear discrepancy in a Will, such as one child receiving 25% of the estate whilst the other receives 50%, it will not be successfully contested, and your Estate will be divided exactly how you wanted.

  1. To make a difficult time less difficult

Losing a family member is a difficult time already without the added stress of consulting lawyers or arguing with family members.  As tomorrow is never promised, having a valid Will can ensure that the process of distributing your Estate is not any more complicated than it needs to be with your intentions laid out to be followed just as you wanted.

If you don’t have a valid Will you should make it your New Year’s resolution to get it sorted!

Thinking about finances in your thirties

Thinking about finances in your thirties

Whatever the goal, reaching age 30 is a turning point for many of us. Whilst it may mean life is getting more serious, by the time we’re in our 30s we’re keen to retain our individuality and remain determined to have fun. With a little planning you can make this age even more enjoyable.

The following stories may inspire you to start now to build a stronger financial future.

And now there are three

Jake and Sara have just had their first baby and two salaries are now one. Expenses have shot up and together with the emotional challenges a young baby brings, they have to juggle their money to cope. Not wanting to return to full-time work yet, Sara applies for Family Tax Benefits to help make ends meet. Both now realise they should have thought of that earlier and adjusted their budget accordingly.

Getting treatment when you want it

Mike is an all-round sportsman and at age 35 his niggling injuries send him to the physio more often than he’d like. He enquires about private health insurance and learns that, on top of his premium, he will pay a Lifetime Health Cover loading of 2% for every year over 30 where he didn’t have private hospital cover. This means he will pay an extra 10%. Although he qualifies for a tax rebate which gives some reprieve, Mike wishes he had taken out health cover before he turned 30.

Play safe with loved ones

Lucy always wanted kids and now has three under the age of six. Being a stay-at-home mum is her passion. Husband Chris loves his young family and would do anything for them. One day he is knocked off his bike riding to work and spends a month in a coma after which he faces a long period recuperating. Chris had Total and Permanent Disablement cover in his super fund but it didn’t pay out because he is expected to recover. His leave entitlements were quickly used up and Lucy and the kids struggled. Income protection insurance would have made life more bearable for this family during this awful time.

Keeping what you’ve earned

34-year-old Jennifer has hit the jackpot. Her career took off two years ago and she’s earning more money than she ever imagined. But she’s horrified at how much tax she’s now paying. A friend refers Jen to a financial planner and she learns about strategies like salary packaging, salary sacrificing, and that investing in shares and property can save her tax as well as build her personal wealth. If only she’d asked earlier.

Every person will be at a different stage in meeting their lifestyle and financial goals by age 30. Regardless of whether you are well on the way, just getting started or haven’t even set your goals, there’s no time like the present to come and have a chat to us about how you can make the most of this exciting time in your life.

Spring cleaning your finances

Spring cleaning your finances

The sun is shining, the days are getting longer, flowers are blooming, the department stores are bringing in their Christmas stuff… yes, spring is finally here. Everyone knows that spring is the season of fresh starts. Most people will take the opportunity to do a bit of spring cleaning, getting to all those pesky once-or-twice-a-year jobs around the house. But right now is also a great time of year to review your finances.

Why now? Well, with the end of the last financial year and your tax return well behind you, you’ve got some great data to help you reset your goals and measure your progress by. You’ve also got a little breathing room before the end of the calendar year so hopefully you’ll be a little less pressed for time when you’re making some important decisions. It’ll also give you enough time to sustainably budget for bigger expenses in the new calendar year, from home improvements to holidays. Here’s how to get started.

Clear out the cobwebs
Take a minute to sit down and review your budget. Make sure you have all the relevant information from your bank statements, tax notice of assessment, budgeting app, etc. In the last twelve months, have you stuck to your spending and saving guidelines? If not, what patterns can you see that you’ll want to ‘clear out’ of your spending habits for the coming year? This is your chance to develop a plan for avoiding wasteful spending. For example, if you notice that you’ve spent a lot on takeaway meal delivery, perhaps you could try planning a week of meals or signing up for that cooking class you’ve always wanted to take.

Fix that safety net
Just like you fix all those broken hinges, cracked tiles and split frames around the house come spring, now’s a great time to fix your financial safety net – your insurance. The fact is, the various risks and liabilities in your life change all the time. Sometimes it’s a little more obvious, like welcoming a new baby, or moving house. But some of the risks you can insure against shift a little more subtly. For example, you may have made a few purchases that you should have included in your contents insurance, but didn’t add them individually at the time.

Plant seeds for the future
Herbs, fruits, veggies, flowers – all the best stuff is planted in spring for harvesting weeks or months down the track! While you’re in the ‘planning ahead’ mindset, have a think about your retirement income too. Chances are that by now, you’ll have received a statement from your super fund with the details of your contributions, returns, fees paid and more. Take this opportunity to review whether your super is on track according to your long term goals. Use the budget info you gathered earlier to see whether there’s room for you to make some extra contributions on a regular basis. If you do find that you’re on track, think about other ways to put your money to work for your financial future. For example, you may consider a type of investment that’s now right for your changed circumstances.

Reset and revamp
Working out whether you’re on track with your budget and goals is a great start. But when was the last time you thought about what those goals should look like? Everyone’s circumstances, desires and priorities change. It’s normal to not have the exact same financial goals from one year to the next. That’s why it’s a good idea to review your previous benchmarks, even if you don’t end up changing what you’re aiming for. Carve some time out of your schedule, sit down with your partner/family, and have a chat about your ideas of financial success or independence. Better still, make an appointment to come in and see us. We’ll help you get the fresh perspective you need for the coming year and beyond.