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.

Mortgages: lock in certainty, or roll the dice on savings?

Mortgages: lock in certainty, or roll the dice on savings?

Over the last few years, interest rates have dropped dramatically. They’re now around a quarter of what they were a decade ago, and half of what they were just a few years ago. The Reserve Bank’s lowering of rates has got some economists and commentators talking; could it be time for a rate rise soon? Or will global conditions mean they have to keep pushing the interest rate down?

Nobody knows exactly when (or even if) the Reserve Bank will raise interest rates again. The good news, however, is that you’ve got a choice that allows you to hedge your bets. Whether you’re establishing a new mortgage or switching from an old provider, you’ve got an opportunity to choose between stability and predictability, and the potential for savings.

Australia’s economy improving
The Aussie economy has been growing slowly but steadily over the last few months. Though some experts are still cautious, others have pointed out that Australia has fared much better than other countries in terms of economic recovery.

Other countries similar to Australia have raised rates. Over the last few years the US has began slowly raising rates. But on the other hand, the European Central Bank has rates hovering around zero. Our Reserve Bank bosses say we’ve got a bit further to go in terms of economic growth before it makes sense to put rates up. But if history tells us anything, they won’t stay this low in the longer term.

Fixed rates = security
One of the main benefits of choosing a fixed rate mortgage is that you’ll have predictability over your repayments for at least the term that the rate is fixed for – usually three years. A fixed rate might be a good choice if you don’t have a lot of wiggle room in your household budget.

The main downsides are that fixed rates are usually locked in at a rate slightly above the current standard variable rate. This helps banks cover themselves in case of an upswing in the interest rate cycle. And depending on the product you choose, you may also be prevented from making extra early repayments without attracting a penalty. You will also generally not have access to offset accounts against a fixed loan.

Despite these downsides, fixed mortgages are still popular. Especially amongst the budget conscious, including first home owners and conservative investors. According to the ABS’s housing finance stats, the percentage of dwellings financed by fixed rate loans has grown slowly over the last yeari.

Variable rates = the potential for savings
Variable rates have the potential to help you save in two ways. First, if official interest rates go down, your provider’s variable rate may go down too. This means lower regular mortgage payments. Second, if you have a windfall or even just a generous salary bump, you’ll be able to make extra repayments to save on total interest, without incurring any penalties. Lower initial payments may also help make those first few years of mortgage repayments a little easier. Alternatively, home buyers may be able to afford to borrow more with a variable rate loan.

However, especially if your mortgage balance is quite high, a sudden jump in your variable rate could mean extra repayments that are tricky to fit in to your budget. Your repayments could vary by several hundred dollars if your interest rate changed by just a few basis points.

Comparing your options
Perhaps you’ve weighed up the pros and cons of fixed and variable rates, and you’re still wondering what you should choose. That’s fair enough – after all, saving money and having a predictable plan are both attractive options. Your decision could depend on a variety of factors, from your household budget to (if you’re investing) the other assets in your portfolio. We’re here to help you get it sorted, so make an appointment today to get on the right mortgage track.

i ABS 5609.0 – Housing Finance, Australia

Get ready for the new financial year

Get ready for the new financial year

The end of the financial year is always a busy time, whether you’ve been hanging out to do your tax return for months, or are struggling to piece together random receipts and paperwork at the last minute. However, it’s also a good time to review your financial affairs more broadly. After all, the best planning is done when you’ve got all the information in front of you.

How much tax are you paying?

Let’s be honest – it can sting a bit when you look at your pay slip and see how much tax you’re paying. To make the most of your tax return, you need to know ahead of time what you can claim and keep records to back them up. What you can claim will depend on whether you’re an employee or a sole trader operating a business. The general principle is that you can claim certain expenses incurred in earning an income.

Some frequently overlooked deductions include the cost of managing tax affairs (i.e. last year’s accountant or tax agent bill), depreciation on essential work equipment, and professional education costs. Just make sure you check the ATO’s guidelines or get professional advice if you’re not sure.
TIP: You may want to bring forward some expenses you were planning, or delay receiving some income (if you have a choice), in order to maximise your tax return. For example, you may be able to pre-pay up to a year’s worth of some expenses.

Are you making the most of your super?

This year is even bigger than most when it comes to sorting out your super. A number of changes enacted in last year’s federal budget may mean you need to make some tough but swift decisions in the lead-up to June 30. For example, the current concessional contributions cap ($30,000 per financial year, or $35,000 for members aged 49 or over) lasts until June 30. This is the same deadline if you are considering channelling some extra after-tax money in to your super. You’ve got until the end of the financial year to put up to $180,000 in to your super.
TIP: Make the most of higher superannuation caps before June 30. Consider making a personal super contribution (after-tax) and receive a government co-contribution up to a maximum amount of $500 if you are a lower income earner.

What are your long-term spending patterns like?

Whether you’re running a household or a business (or both), it’s hard to get an accurate view of your expenses based on any one month. Looking at your income and expenditure over the whole year can help you get some fresh perspective on where your money has been going. On the plus side, you’ll be able to identify opportunities to cut back on spending and save more towards your goals in the future. And the fun part (yes, there’s a fun part!) is that you can set fresh new goals to keep you motivated and disciplined.

TIP: It’s a good time of year to do a budget to see where your money is being spent and in doing so identify measures that can be taken to help you to achieve your financial goals.

Let us help…

 

Still feeling overwhelmed by end of financial year decisions? Or just wanting to make the most of the opportunity that this time of year brings? Either way we can help. Get in touch today to arrange a review.

i https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/

ii https://www.ato.gov.au/Forms/Deductions-for-prepaid-expenses-2016/?page=1#About_this_guide

iii https://www.ato.gov.au/super/self-managed-super-funds/contributions-and-rollovers/contribution-caps/

iv https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-my-super/Government-super-contributions/

Tips to make sure you’re financially prepared for a rainy day

Tips to make sure you’re financially prepared for a rainy day

Do you ever feel as though you’ve only just made it to pay day with a few dollars to spare in your wallet? According to the statistics, you’re not alone. Research has put the share of the population living pay day to pay day at between 32 per cent and 46 per cent.i What’s more, many Australians say they don’t have (or couldn’t raise) even $500 to pay for an unexpected expense.ii

In a way, these numbers reflect the laidback ‘she’ll be right’ attitude that pervades our culture. But the reality is that we all live with risks, both big and small, that we can’t avoid.

That’s where a financial safety net comes in handy. Making sure that you are prepared for financial setbacks or unanticipated costs does not come down to any single measure. Rather, it’s a comprehensive approach to risk that’s designed to protect you and your family’s financial wellbeing, come what may.

Maintain a rainy day fund

The first line of financial defence for households is to have some money tucked away in a ‘rainy day’ fund for emergencies and unexpected costs. If you are living from one pay day to the next and your hot water heater bursts or your car needs urgent repairs, the temptation is to whip out the credit card.

If you are only able to make the minimum monthly repayment you could be paying off that hot water heater for years to come. Whereas paying cash will save you money and make your financial goals that much easier to achieve.

Most experts suggest you aim to put aside three to six months’ living expenses. This can take a while to build up so one time-honoured strategy is to ‘pay yourself first’. It’s a good idea to keep your emergency cash in a separate account from your everyday money.

Reduce debt

Even with the best willpower in the world it can be difficult to save if you are weighed down with debt. The good news is that with interest rates at or near their historic lows, there is no better time than the present to tackle debt. Aim to pay down loans with the highest interest rate first – typically this will be your credit cards.

If you have a mortgage, aim to pay more than the minimum monthly payment. By keeping at least three months ahead of schedule you can build a buffer to provide some wriggle room with your lender if you experience financial difficulties.

Review insurance

No financial safety net is complete without adequate personal insurance. We tend to insure our car and our house before we think about our most precious possession, our health and our ability to earn an income.

While health insurance will cover some of your medical costs, it won’t pay the mortgage and food bills or take care of your family while you are unable to work. Worse still, what would happen if you were to die prematurely? That’s where personal insurance comes in, to cover your life, total and permanent disability, trauma and income protection. It’s possible you already have cover for some of these through your superannuation fund, but it may not be sufficient.

We can help you find the right approach for your lifestyle and circumstances, giving you peace of mind without breaking the bank. Contact us today to start the conversation.

i MLC, ‘Australia today: A look at lifestyle, financial security and retirement in Australia’

https://www.mlc.com.au/content/dam/mlc/documents/pdf/retirement/save-retirement-white-paper-release-1.pdf

Research from BT Financial Group as reported by Sophie Elsworth for NewsCorp, ‘Cash-strapped Australians are living pay cheque to pay cheque’ http://www.geelongadvertiser.com.au/business/cashstrapped-australians-are-living-pay-cheque-to-pay-cheque/news-story/0460424acc29452a13977eef1a641fa2

ii Finder.com.au, ‘How a $500 emergency could spell financial ruin for millions of cash-strapped Aussies’ https://www.finder.com.au/press-release-may-2016-rainy-day-savings