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by Jodie | Sep 4, 2014 | Debt Management, Finances, Money
Unfortunately, financial literacy still isn’t a staple part of our education system, and until that time comes, people will continue to struggle with Credit.
Want to finally understand how credit can work for you?
If you can actually afford to borrow?
Want to know how to find out if the people you’re dealing with are reputable?
What options do you have if things go bad and you can’t pay your debts?
Where can you turn to complain?
Download the MoneySmart brochure here and start investing in your financial literacy. Learn tips on credit cards, car loans, rent to buy schemes and mortgages.
Isn’t it time you took the challenge today to get a handle on your finances?
Download here: http://ja3g3rz5bt9fph259ux610b4.wpengine.netdna-cdn.com/wp-content/uploads/sites/13/2014/07/Credit-Loans-and-Debt.pdf
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by Jodie | Sep 1, 2014 | Budget, Budgeting, Debt Management, Finances, Insurance & Protection, Money, Women
What’s your biggest financial challenge?
We all have an area of our finances that we know could do with some attention but
let’s face it – most of us would rather think about something else. The problem is
that by doing that, we’re costing ourselves money – and more than likely causing
ourselves unnecessary stress.
For instance, if you have several superannuation accounts, you are probably paying
account and management fees across all of them, rather than having that money
working for you and building your retirement savings.
Similarly, if you have a credit card debt of $3,000 and you only make the minimum
repayments, this could cost you up to $6,000 in interest charges alone.
None of us like to cost ourselves money but the task of fixing the situation can seem
like too much hassle: “Where do I start? Who do I ask? Am I making a mistake?”
These are the questions we ask ourselves and without easy answers, we often opt to
do nothing.
MoneySmart Week understands these are common challenges and aims to do
something about them. Running from 1 – 7 September, MoneySmart Week is an
independent, not-for-profit initiative designed to raise awareness of the importance of
financial literacy and to encourage all Australians to take action on their finances. The
initiative was founded in 2012 by members of the Australian Government’s Financial
Literacy Board, led by Paul Clitheroe AM.
This year, they’re running the MoneySmart Week Challenge.
The MoneySmart Week Challenge asks people to pick one financial challenge to
address and provides a free, step-by-step guide to completing the challenge with a
range of great resources that can help answer any questions you have along the way.
People can sign-up online and pick from the following Challenges:
• Ditch Your Debt – credit and debt
• Sort Your Super – superannuation
• Manage Your Money – budgeting
• Protect What’s Precious – insurances
• Build Your Worth – saving and investing
• Plan Ahead – estate planning
• Female Financial Fitness
There’s even a savings Challenge for secondary school-aged students: Start Early.
The best way to deal with money stress is to become financially resilient and we all
know that resilience is built from facing up to our challenges. By taking simple steps
to improve your money health, you will save yourself money and build your resilience.
Take the first step today by signing up for the MoneySmart Week Challenge at www.
moneysmartweek.org.au 
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by Jodie | Aug 8, 2014 | Advisers, Australian Economy, Debt Management, Economy, Finances, Insurance & Protection, Investments, Self Managed Superannuation Funds
Lots of people are now very interested in the option of borrowing through their Self-Managed Superannuation Fund. An option that has come under the spotlight for the Financial System Inquiry.
The ability to borrow is a great benefit to having an SMSF, but should never be the core focus and certainly isn’t appropriate for all funds.
Since 2007, the Limited Recourse Borrowing Arrangement (LRBA) for loans by an SMSF, have been available.
The industry body SPAA (SMSF Professionals Association of Australia) has a set of guidelines to ensure responsible approach to borrowing.
Here’s their Top 5 for SMSF Trustees to ensure they check off:
1) Understand the technical rules
Four technical rules apply if trustees are to comply with the LRBA requirements:
– The loan must be limited recourse. This means the loan is taken out separately to other investments in the fund. Therefore, if the arrangement fails — for example, if the fund can’t make interest repayments — then the lender can only claim against the specific property, not the other assets in the fund;
– A single acquirable asset must be purchased;
-The asset must be held in trust for the fund: and
– The fund must have the right to buy the asset after the loan has been paid off.
2) Ensure it is a worthwhile investment
Putting a property in a super fund won’t make it a better investment. It’s important that trustees consider a number of factors in order to ensure the property is a good investment. Like the level of income expected, growth prospects for the area, possibility of finding tenants, ongoing expenses etc.
While LRBAs can offer flexibility, restrictions apply on improvements to the property or when replacing the property. Rent should also be at commercial rates and any residential property must be leased to unrelated parties, companies or trusts.
The type of property may also be an issue with the bank. The bank may not be prepared to lend on some types of commercial or residential property.
Also check legal fees and stamp duty, or property-related expenses such as rates and taxes. Trustees should also be mindful that a change in interest rates or loss of a tenant will affect the net income received.
3) Make sure you can service the debt
The most obvious consideration for trustees is to ensure that any gearing will not be excessive. Remember, borrowing to invest can magnify losses as well as gains.
If the property is negatively geared you really need to do your sums to make sure the fund will have enough cash flow to be able to pay the expenses, which are over and above the income that will be received from the renting of the property.
Cash flow could come from income on other investments of the fund or from contributions, such as those made by an employer, or personally.
Neutral or positive gearing is advantageous as it doesn’t deplete the fund’s resources.
4) Look at insurance needs
Insurance helps to protect the fund and the property against the loss of a member. Trustees should look at life insurance, total and permanent disability (TPD) insurance and income protection as part of their overall insurance needs.
Proceeds from an insurance policy can be used to contribute to the outstanding loan on the LRBA.
5) Finally — put an appropriate borrowing strategy in place
Besides the previous four tips, there’s a number of key criteria for an appropriate borrowing strategy:
– Age of the fund members. Questions around the fund’s ability to pay for loans are pertinent if the members are retired;
– Diversification. The age-old investment rule applies here. A diversified investment strategy simply reduces the investment risk of a fund;
– Don’t choose a property under the borrowing rules that will need modifications within a short timeframe as the whole arrangement may need to be restructured, which may prove costly; and
– Avoid property spruikers and seminars designed to ‘stitch you up.’ If it’s too good to be true, then it probably is.
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by Jodie | Jul 21, 2014 | Advisers, Debt Management, Finances, Insurance & Protection, Men, Money, Women
Aussies we know are a pretty easy going bunch and this is probably one of the main reasons we’re also a terribly under-insured nation.
The ‘she’ll be right mate’ attitude is pretty pervasive, with most of us thinking ‘it’ll never happen to me.’
And then, wondering what’ll happen to the family when you’re gone can be perceived as a little morbid. Some hubbies have told me that the missus can take care of herself and the kids, remarry or go back to work to deal with outstanding debts. (None of them I considered as potential ‘father of the year’ candidates.)
Consider the flipside tho – if your kids have just been deprived of their father – at huge emotional cost, then you’ll also depriving them of their mother, sentenced to work out of necessity, when a bit of cover could have taken care of the big debt items.
Think you can afford it? Seriously, if you can’t afford the$100 per month whilst you’re earning an income, it’s going to be even harder for the family to find the $1000 or $4000 per month without the bread-winner and their income. Nobody I know has ever gone bankrupt paying for insurance; but families can, because they weren’t!
Chat to an adviser today about appropriate levels of cover and funding options that may mean you will never personally be ‘out of pocket’ either.
by Jodie | Jun 23, 2014 | Advisers, Australian Economy, Budgeting, Finances, Insurance & Protection, Interest Rates, Investments, Superannuation, Taxation
Finance Minister, Mathias Cormann has delayed the introduction of ‘Super Dashboard and Disclosure’ legislation until 1 July 2015. The intention of this was for members to be able to choose a Superannuation fund, get full disclosure from their fund as to the fees they pay and what exactly they have in their portfolio. Government has obviously identified this as a gap in the Super industry and will be working toward fuller disclosure by Super funds.
This begs the question though, “how many Australians actually know the details of their Super portfolios, the costs and management fees of the investments held and how many actually care?”
The sobering reality for many of us is that we are now facing a budget that is going to leave us less well off, regardless of income or age. Minister Joe Hockey is unfortunately confronted by a double edged sword: he faces the problem of tackling the country’s debt burden and the growing cost of an ageing population, with less workers in the field supporting the ‘system.’
One way to reduce debt is to cutting spending on services and in turn, add various tax increases the government labels as levies. Most agree that the current situation is unsustainable, so the government will be left with very few options.
Most likely, one solution will be pushing up the pensionable age and where this will finally rest can only be speculated at. It is obvious that many Australians are going to have to retire much later, and possibly, with much less. Unless, you start taking charge of funding your own retirement – from now!
Superannuation will play an increasingly important role in all our futures. What we do today is going to affect our Super tomorrow. This brings us back to the choice of super fund we now make and the associated costs involved. Small percentage differences can have a huge impact at the end of our working lives. The Gatten Institute has recently reported that fees and costs in Australian Super funds are higher than those in most other countries with similar retirement systems, although these fees have started dropping in the last few years, they still have a long way to go.
As there are so many funds to choose from and most Australians are left confused through choice and probably reason that one fund is as good as another. But as we know, all birds have feathers, but not all birds can fly! Besides fees and costs, other aspects to consider are things such as investment options that funds offer, exit rules, ease of interaction, taxation concerns, control over investments, insurance options and transparency.
Financial Planners make it their business to know the intricate ins and outs of funds, they have the tools to compare funds as to the benefits and advantages of one fund over the other. It is a therefore, a ‘no-brainer’ that everyone who owns a superannuation fund should at least have one discussion with a professional who can assess your situation, and possibly set an action plan in place that can deliver the desired outcome for every Australian.
The team at Wealth Planning Partners make it their aim to stay up to date, so don’t hesitate to give us a call for a no obligation visit, to discuss your needs. Now’s the time to start taking charge of your financial future.
by Jodie | Jun 13, 2014 | Advisers, Australian Economy, Economy, Finances, General, Insurance & Protection, Investments, Money, Self Managed Superannuation Funds, Superannuation, Taxation, Term Deposit
So most of us have heard about Self Managed Super funds, but where do they fit in the somewhat complex world of superannuation funds?
Basically, there’s three options at the disposal of a working Aussie.
1. The Industry Fund, some refer to as a union fund. Typically, an industry will have a designated fund for members of a certain profession, such as the MTAA for motor trades employees or CBUS for those in the construction industry. Most come with a default amount of low cost insurance, low fees and have a limited range of investment options. A very vanilla, often cheap and very easy option, especially when just starting out.
2. A retail fund, Master Trust or Wrap is a platform that offers the ability to choose from a wide range of managed funds and direct share options. Often they are the choice of an engaged employer who likes to offer additional benefits to staff, or those working with the assistance of a financial adviser. Some allow capping of fees, family linking or taxation at a member level and a choice of investor directed insurance options. They’re certainly more sophisticated and come at a higher cost than an industry fund due to the extra ‘bells and whistles.’
3. The self managed super fund is different again with the members running, administering and managing their retirement savings. There are inherent dangers for getting it wrong, and many still choose to partner with professionals so their goals can be reached. Fees can be higher depending on choice of service provides, whilst others realise substantial savings. Control & flexibility, personalised insurance, streamlined admin and extra investment options including direct property are big draw cards.
There seems to be a lot of confusion and conflicting information in the market for people researching their options in regard to self managed superannuation funds. Some sites advise that you need at least $250k for the exercise to be worthwhile and others advise that as little as $70k will do the trick.
Truth is, it comes down to you.
Firstly analyse: What are your reasons for wanting to do a SMSF?
For most the answer comes down to two big issues – control and flexibility.
After that are secondary considerations such as fees, administration and taxation.
Since the GFC or global recession began in late 2007, most haven’t been able to fully recoup losses and fund returns remain lower on average with high volatility. Many clients express the feeling they’d be better off with a property or term deposit (which may or may not be true.) Others believe that constant government meddling with legislation changes, capping deposits allowable and possible tax alterations mean it’s all just too hard to keep up with.
Having control means you’re able to choose assets that aren’t typically available in a standard industry or retail fund, such as Exchange Traded Funds (ETFs) or residential and commercial property. Flexibility provides the options or being able to pick and choose, and buy and sell at your leisure.
Fees are often touted as the ‘be all and end all’ when investing and certainly can make a impact. We’ve all seen the ‘compare the pair’ ads where only fees are ever considered. No thought is given to the impact of tailored financial advice, a strategy that includes salary sacrifice, additional investments or co-contributions and having the investments match your personal risk profile. All of which may lead your fund ahead in leaps and bounds and sometimes negate a slightly higher cost structure.
So when comparing an industry fund to an SMSF, it’s highly possible the fees on the industry fund will be lower than the administration costs of an SMSF. This however doesn’t take into account the impact of suddenly being more engaged with the fund, loving the assets you’ve chosen, contributing more and the immediate ability to defer and possibly reduce the 15% tax payable on all contributions.
Accountants often charge around $2000 and upwards for the tax return and an additional $500 or more for your annual audit. But competition is a wonderful thing and in many cases has brought prices down. But pay peanuts and you may get monkeys. So, do be careful!
If in doubt, invest in the time to sit down with a professional who specialises in SMSF to discuss your goals and see whether it fits in your financial journey. Amanda from Wealth Planning Partners would be happy to assist, or check out the SPAA website for your closest qualified specialist Adviser.
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by Jodie | May 14, 2014 | Australian Economy, Budget, Budgeting, Business, Debt Management, Economy, Interest Rates, Money, Superannuation, Taxation
Well, we know that when times get tough, it makes get sense to stick to a budget, and ‘tighten one’s belt’ and that’s what the latest Australian Budget is all about. So what are some of the main changes and how will they affect you?
Pensions: Looks like we’ll be expected to work longer, but that’s cool with me. Not sure I could spend thirty years eating baked beans on a Superannuation Plan funded only by a percentage of forty-five years income. It’s also unlikely younger Aussies will get a Government Pension unless our workforce makeup alters. Changes include:
Pension payments will have the asset and income test thresholds frozen for 3 years from 1 July 2017
The Government will index pensions to inflation rather than wages from September 2017, this is expected to reduce increases.
The pension age will be increased to 70 by 1 July 2035, building on former Government’s move to increase the pension age to 67 by 1 July 2023.
Working Longer: The Government has acknowledged for older Australians to find jobs there needs to be a culture change. They’re offering up to $10,000 to businesses that employ Australians aged over 50 years who have been on unemployment or disability benefits for more than 6 months. I love that idea!
Healthcare: From 1 July 2015, previously bulk-billed patients can expect a charge of $7 per visit towards the cost of standard GP consultations and out-of-hospital pathology and imaging services. For concessional patients and children under 16, the contribution will be limited to the first 10 visits each calendar year. The Medicare levy will increase from 1 July 2014, to fund DisabilityCare, which was announced in last year’s budget.
Business gains and losses: The Government remains committed to cutting the company tax rate by 1.5% from 1 July 2015. For large companies this will offset the cost of the Paid Parental Leave Levy. For SMEs it will provide a boost to profits. The Government has also reinforced its promise to repeal the Minerals Resource Rent Tax (MRRT) and Carbon Tax. In addition, the Government introduced an Exploration Development Incentive to encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia.
High income earners levy: A 2% levy will apply to those earning an income above $180,000. This for three years only from 1 July 2014 to 30 June 2017 and means those earning above $180,000 will pay the extra 2% levy on all income in excess of $180,000. e.g. if you’re earning $200,000 you will be faced with an additional 2% on $20,000 – a total levy of $400. Not too harsh!
Higher education – good and bad: The Government has announced it will deregulate the higher education sector and from 1 January 2016 will allow providers in Australia to set their own tuition fees. This is likely to increase the cost of education in Australia. The Government will continue to provide students a way to defer costs of study through HELP and graduates will begin to repay the debt only once their income reaches $50,638 from 1 July 2016.
And, from 1 July 2014, a tertiary loan system will be extended to TAFE students who will have access to 4-year concessional trade support loans to help them complete their trade course. That’s pretty cool!
More super: The Super Guarantee will increase from 1 July 2014 to 9.5%. It will then remain frozen for 4 years, after which it will increase 0.5% a year until it reaches 12% in July 2022.
So as expected, some winners, some losers in a tight budget. However, the morning headlines were overwhelmingly negative and could indicate that consumer confidence is likely to take a hit, at least initially.
This in turn likely means the RBA keeps rates on hold – possibly for the rest of the year, and maybe beyond. Each state will also be affected with hospital funding cuts and cuts to payments for education also. This will likely increase debt burdens of individual states, who in turn could look at increasing revenue through raising taxes.
So, some of the changes may affect you, and if you’re worried about how, get in touch with your Adviser for an assessment of your situation.
by Jodie | May 14, 2014 | Australian Economy, Budget, Debt Management, Economy, Finances, General, Taxation
Are you a Mature Australian? Or would at least like to think so? Wondering how the budget changes will affect you – or those other Mature Australians around you?
Here’s a quick wrap of the main alterations that may impact you from Budget 2014:
- The Super Guarantee levy has been pushed back by one year. It will increase to 9.5% on 1 July 2014 and then be frozen until 1 July 2018. Previously, the levy was to reach 12% by 1 July 2019 under Labor proposals, 1 July 2021 under the Coalition promise, now 1 July 2022.
- Excess non-concessional contributions – excess contributions tax eliminated (positive) – now refunded, any earnings taxed at marginal rate.
- Increase in caps (positive) – concessional $30,000, non-concessional $180,000.
- Australian Defence Force Super – new recruits from 1 July 2016 end of defined benefit.
A couple of other Tax Changes:
- The Mature Age Tax Offset abolished from 1 July 2014 (previously restricted).
- Dependent Spouse Tax Offset abolished from 1 July 2014 (previously restricted).
Changes to the Pension include:
- The pension age will rise to 70 by 2035.
- Indexation by CPI (rather than average male OTE) from September 2017.
- Indexation of asset test/income test thresholds frozen for three years from 2017.
- Deeming rates (for income test) reset to $30,000/$50,000 from 2017 (currently $46,600/$77,400).
Updates to the Commonwealth Seniors Health Card will be:
- Superannuation balances are to be counted in the income test (presumably at the deeming rate) – which makes it harder for non-pensioners to qualify (income limits currently $50.000/$80,000).
- No Seniors supplement – abolished from 1/7/14 ($876.20 for single, $1,320.80 couple).
It’s been a tough budget, but perhaps not as tough as some were expecting. All Australians have been told to bear the burden. According to Federal Treasurer Joe Hockey, “the economy is growing at less than normal speed and the time to fix the budget is now.”
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by Jodie | Apr 17, 2014 | Advisers, Budget, Debt Management, Finances, General, Insurance & Protection, Money
It’s possibly unfortunate, but most things we do in our lives we rely on money. And money is definitely required to maintain our family’s standard of living.
The issue is not about how much we earn or what we take home at the end of the day. It’s about living within our means and even the consistency of what and how much we earn.
Travelling broadens our view on the issue of material wealth, especially when we see the lives of people who have substantially less then we do. This was brought home to me on a recent trip to Bali, although the happiness and smiles of the locals often put us to shame. That’s where we realize that it’s not about money to find family happiness. Rather, it’s about the security of our income, and the ability to live within our means.
It’s no secret that the greatest cause of stress in most families stems from money or a lack thereof. That’s why at Wealth Planning Partners, one of our values is to assist our clients maintain family happiness by keeping their heath, income and their wealth financially secure.
One effective way to achieve this, is through income protection, something that when put in its place can save our family from unnecessary stress and pain in the unfortunate but common case of the family income being put on hold. Often, due to unforeseen occurrences, such as illnesses or injury that strikes out of left field!
Although we can’t take the stress out of major illness or injury, being able to assist with continuity of income, gives the team at Wealth Planning Partners great satisfaction, knowing it’s one less thing for our clients to worry about. We’re there at claim time for you, assisting with the forms, liaising with doctors and ensuring processing whenever you need us. Don’t hesitate to get in touch for a price, or complete the insurance quotation tool on the www.wealthplanningpartners.com.au website.
by Jodie | Mar 30, 2014 | Advisers, Australian Economy, Debt Management, Economy, Finances, Insurance & Protection, Money
The fact that 95% of Australian families do not have adequate insurance is likely a direct result of the “She’ll be right, mate” attitude and is also directly coupled to an over-generous social system.
The post baby-boomer generations have grown up under this system, resulting in the expectation that the Government will always be there in time of need or financial difficulty. This in turn, has led to an under-insurance epidemic!
A few statistics from the financial industry are quite sobering and have highlighted under-insurance as one of the biggest security threats facing Australians.
According to OnePath’s Insurance Fundamentals:
• One in five families will be impacted by the death of a parent, or a serious accident or illness that renders a parent unable to work;
• The typical Australian family will lose half or more of their income following a serious illness, injury or the loss of one parent as a result of under-insurance;
• Under-insurance is expected to cost the federal government $1.3 billion over the next 10 years.
As Australia’s debt levels continue to rise and the government has committed to paying down debt, the social system we have all become accustomed to will, and is very rapidly shrinking. Australians are going to have to face the fact that they are responsible for their own financial health, their financial futures and eventually their own funded retirement.
This is where the importance of a Financial Planner for every person or family will become vital. The current situation presents itself as a major opportunity for Financial Planners going forward and many are already offering better engagement with clients through marketing and social media. Ongoing contact will enhance the experience for the client and additionally build trust ensuring more families embrace risk protection strategies to help in time of need.
These are exciting times with many positive changes in store for both the consumer and adviser. Carpe diem…..
