General Information about Financial Advice

Wealth Health Checklist

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Wealth-CheckAre you keeping your finances healthy by doing the right thing at the right time? Taking the best action at the optimum time can be crucial to your financial future.

 

 

Accumulators (aged 25–45)

Start a monthly investment plan

  • ‘Pay yourself first’ rather than create unrealistic budgets.
  • Salary sacrifice into super while other financial obligations are low and stop when current needs are more important.
  • Use any pay rises to fund your regular savings.
  • Be clear about what you’re saving for and the best structure and investment options for that.

Control debt

  • Reduce unnecessary spending.
  • Pay off the credit card, it’s probably costing you more than 15% pa interest.
  • Consider consolidating credit card debt into a personal loan and potentially paying less interest. If you do this, resist the temptation to accumulate more debt into your credit card.

Check out the government co-contribution

  • If eligible you could get up to $500 added to your super for free every year.

Consider using a mortgage offset account

  • This could reduce your loan interest while giving you access to the cash if you need it.
  • Make sure you have sufficient death, disability and income protection insurance.

 Builders/Pre-retirees (aged 45–65)

Stay cash flow positive

  • Live within your means.
  • Reduce the mortgage and other non-deductible debt such as credit cards and personal loans. This may free up cash flow for other investment opportunities.
  • Consider part-time work for a non-working spouse.

Increase contributions to super

  • At age 50, the concessional (pre-tax) contribution cap is $25,000.
  • Consider transferring non-super assets to super. You’ll need to take into account any capital gains tax on the transfer and the super rules covering what assets you can transfer.

Split income where possible to save tax

  • Consider investing money in the name of the spouse who pays the lowest tax.
  • Consider splitting super contributions between spouses. Up to 85% of concessional contributions within the contribution cap, including Super Guarantee and salary sacrifice contributions, can be split.

Look into a pre-retirement pension if you’re aged 55 or more

  • Consider salary sacrificing, and drawing down regular income from your super to replace the lost income – this saves tax and builds your super without affecting your cash flow.
  • Make sure you have sufficient death, disability and income protection insurance. Also consider taking out trauma insurance.

Retirees (aged 65+)

Ensure you don’t run out of money

  • Understand your plan for spending in retirement – set a budget for essential expenses and additional lifestyle expenses and how you’ll fund each.
  • Ask yourself if you’ve invested your assets too conservatively – maintaining and growing your capital today can help you provide the income you’ll need in the future.
  • Consider whether you need to downsize your home.
  • Investigate how your income and assets affect your Centrelink benefits. Simple changes can help ensure that you maximise your total income.
  • Consider setting up investments to help grandchildren with education costs, a deposit on their first home or an investment nest egg. You’ll need to include this in your retirement spending or estate plan.
  • Think about aged care now. When the time comes, decisions often have to be made very quickly, so plan ahead for which care options you’d like to use and how they’ll be paid for.

Review your estate plan

  • Consider a Non-Lapsing Death Benefit Nomination for your super or a reversionary beneficiary for your pension.

Ensure your Wills and enduring power are in order.

Credit Cards-The Game has Changed!

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THE CREDIT CARD GAME HAS CHANGED

CREDITgARDgAMEStories abound of people being caught up with credit card debt that seems to be on a continuous upward spiral. Perhaps you have experienced this yourself at some point.

New reforms introduced from 1 July 2012 might make getting the credit card back under control just a little bit easier and those unsolicited invitations from our credit card provider to increase our limit might be a thing of the past.

Some of the new arrangements only apply to new credit card contracts but others apply to both new and existing contracts. So everyone is expected to benefit from the reforms.

When applying for a new credit card, issuers are now required to give you a fact sheet that sets out key information in a standardised format. This should make it easier to compare offers from different credit card providers.

Credit card contracts entered into on or after 1 July 2012 must include the following provisions, in addition to the fact sheet mentioned:

  • Customer will be asked to nominate their credit card limit, allowing you more control;
  • Fees charged on spending that exceeds the credit card limit (over-limit fees) are banned unless you specifically agree to this fee being charged when you apply for your credit card. Check the fine print carefully, or ask the issuer directly if over-limit fees apply;
  • If you exceed your card limit, your card provider must notify you within two business days, thereby giving you the opportunity to stop spending or make a repayment in order to control the increasing level of debt; and
  • Credit card providers are required to direct payments to the most expensive part of your credit card debt first. Many credit card contracts have different interest rates including one for standard purchases, another for cash advances and in some cases, an introductory rate that applies to transfers from other credit cards. Having payments directed to the most expensive items first will assist in making it easier to reduce debt.

While the foregoing conditions apply to new credit card contracts, there are some changes that will apply to both new and existing credit card customers.

If you have received a credit card statement since 1 July 2012, you may have noticed some changes. All credit card statements are now required to include a “minimum repayment warning”. This warning contains personalised information and states how long it will take to pay off your credit card if only making the minimum monthly payment and not adding any further charges.

In addition to the minimum payment warning, credit card providers will no longer be able to make offers to increase your credit card limit unless you agree and providers must clearly show how their interest free period works.

Hopefully managing your credit card might have become just a little bit easier.

DID YOU KNOW:

A credit card balance of $4,000, attracting an interest rate of 18%, will take three years and 11 months to repay based on a monthly repayment of $120. Total interest will amount to $1,586.

If the monthly repayment is increased to $200, the repayment period is slashed to two years and the interest paid is also halved.

Save or Invest? Which comes first

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WHICH COMES FIRST: SAVINGS OR INVESTING??

SaveOrInvestFinancial advisers say clients can save and invest simultaneously, irrespective of their financial situation.

Although this advice might sound like financial boot camp, the principles of this advice lay the foundations for effective cash flow management that will ultimately enable a brighter financial future.

The key is establishing and practicing the art of saving – setting funds aside beyond what is needed to pay bills, groceries, utilities, school fees and repayments.

To do this, clients need to get real about their true costs.

It’s difficult to stick to a budget but you need to be really transparent about spending.

Currently, Australians are saving more money than they ever have in the past 30 years. Since the Global Financial Crisis, there has been a dual trend of increased savings and the willingness by Australians to deleverage or to reduce debt.

This is the opposite of what was happening in the mid-1990s to the mid-2000s when Australians went into negative savings. That is, we spent more than we earned.

Financial advisers say most Australians should aim to save 10-15% of their after­tax savings.

Although this may be difficult in some stages of life, it is more important to stick to the practice of savings rather than the specifics of the amount.

Meanwhile, one of the most beneficial saving strategies continues to be salary sacrificing into superannuation. This allows investors to make more tax- effective contributions to superannuation and is subject to thresholds.

Another great saving strategy is reducing mortgage payments via an offset account. It allows you to use your savings account balance to reduce the amount you owe on your loan.

Stripping out money as soon as you get paid also reduces the likelihood of unaccountable spending.

Although the above strategies may seem quite simplistic, when utilised in a comprehensive financial plan put together by a qualified financial planner and tailored to your specific financial circumstances and goals, the results can be significant.

Source | BT

 

Making the most of your Retirement Income

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Making the most of your retirement income
retirementexitAfter you stop working, you can find yourself with time to do the things you may not have been able to do before, like travelling, volunteering or spending more time with loved ones. As you adjust to this new lifestyle, you will need to think differently about your finances. In retirement, your priority typically changes from saving in preparation for when you leave the workforce, to carefully spending those hard-earned savings. 

Age Pension

The Age Pension is an income support payment offered by the Government to older Australians who meet the relevant eligibility criteria.

With maximum payments of $21,018 p.a. for a single pensioner and $31,688 p.a. for pensioner couples (current for the period 20 March 2013 – 19 September 2013), the Age Pension probably won’t be enough to afford most people a modest post-work lifestyle of basic activities, let alone a comfortable lifestyle.

To afford even a modest lifestyle in retirement, many people will need to supplement the Age Pension with other income. This could come from an annuity, an account-based pension or other investments.

An annuity [from within or outside super]

An annuity is a simple, secure financial product that guarantees a series of payments for a fixed term or for life, in return for an upfront investment. The earnings rate is fixed at the outset and this applies for the length of the annuity, regardless of share market movements or interest rate fluctuations. Capital can be returned at the end of the agreed term or gradually during the term of the annuity as part of the regular payments.

An account-based pension [from super]

This is an investment account which gives you the ability to choose from a range of investments and can vary the level of income you wish to draw subject to the minimum annual withdrawal amounts set by the Government. These are usually market linked, meaning that the capital value is linked to the performance of the underlying investments, which can impact the level and duration of your savings and the income produced. Account-based pension providers, which may include your super fund, charge management and administration fees for these products.

Other investments

These are just some of the types of investments that can sit within your super fund or outside superannuation.

  • Term deposits: A term deposit is a fixed term, fixed interest savings account. Terms generally range from one month to five years.
  • Shares: Shares pay income in the form of dividends. You can invest in shares directly or via managed funds (or account- based pensions).
  • Property: An investment property is real estate which has been purchased with the intention of earning a return on the investment, either through rent, the future resale of the property, or both. Another type of property investment is a property trust, which is a managed fund that enables investors to pool their money to purchase an interest in a portfolio of real estate assets.

Income from various sources can be ‘layered’ to meet your income requirements. This can be set up so that more secure income, such as from the Age Pension or an annuity, can cover your essential costs of living, while your income from other sources can fund your discretionary spending.

More than one investment strategy and product may be required, so it’s important to receive professional help from a financial adviser – it can make all the difference to your financial success in retirement.

 

Redundancy

Making the best of redundancy

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Redundancy

Redundacy

Making the best of redundancy

Have you been made redundant or suspect it may happen? You could be faced with new emotional and financial issues that you need to make informed decisions about. It’s not an easy thing to sort through but the following information provides a quick overview of some things to consider

COMING TO TERMS WITH REDUNDANCY

Being ‘retrenched’ is a shock. You could be in a state of disbelief, acceptance or happy at the thought of a payout. It may sound ridiculous, but redundancy could provide you with the money and the opportunity to change direction. The key is to emotionally and financially handle the transition. Generally, a redundancy payment is where:

• You are required to leave your job because your role is no longer needed or no longer required in a certain location

•You are under age 65 at the time of receipt of the payment

•There is no arrangement for future employment made on \ your behalf or by your employer

•The amount paid must not exceed an amount for a dismissal that is reasonable ‘on an arm’s length basis

If the conditions above are satisfied, then you may be entitled to a tax free amount.

In the 2012-13 financial year, the tax-free amount of a genuine redundancy payout is defined as the first $8,806 received plus $4,404 for every year of completed service. Any redundancy payments exceeding this are described as an ‘employment termination payment’ (ETP) and are subject to different tax rates when cashed out. You can only take your ETP amount in cash.

CHECK YOUR PAYMENT AMOUNT

It’s important to have someone check your employer’s calculations to ensure that you are being paid the correct amount. Make sure all your relevant years of service have been included and that the payment is consistent with your company’s stated redundancy policy or your contract. You should speak to your financial adviser as early as possible to make sure you are receiving all the benefits you are entitled to.

WHAT SHOULD YOU DO WITH YOUR MONEY?

It’s tempting to view a redundancy payout as an opportunity to have a holiday or pay off some debts. Before doing that you need to make sure that you can cover your living expenses for the next few months until you find a new job. If you have large debts, and you do want to reduce them, make sure you pay off the most costly ones first.

SOME OPTIONS TO CONSIDER

If your home loan provider offers a mortgage offset account, this can be an excellent way of reducing your loan interest payments while still being able to access the money. Even if you are an aggressive investor by nature, using the proceeds to have a flutter on the share market can be a risky move.

Before making any changes, you should speak to your financial adviser to ensure you get the best outcome for you.