Author: intrepid_dev

These days Christmas appears to be more of a retail festival than a festive event, and while it can be a season of joy for many, it is a time of stress or loneliness for others. 

If the ‘Xcesses of Xmas’ have been getting you down, or if you just want to shake up your usual routine, here are some ideas to help you re-write the rules, create a new meaning or start a new tradition for doing Christmas Day your way.

Have an “Orphan’s Christmas”.
If you have neighbours who live alone or don’t have family nearby, why not invite them to Christmas lunch with you? Ask guests to bring a plate of festive food to share and enjoy hearing new stories on Christmas Day.

Take the stress out of gift giving.
If it’s getting too difficult to buy gifts for family members, suggest that everyone buy one gift for one person. Or to make sure everyone gets something they want, what about ‘buy your own gift’? You can keep up the tradition of placing these presents under the Christmas tree and un-wrapping them together with each “recipient” sharing the story behind his or her gift choice. What’s lost in surprise value is made up for in satisfaction. 

Help the needy.
Volunteer at a homeless centre or other charity. Help out in the kitchen or serve a meal. Various websites help to connect volunteers with charities, so search online and see what comes up in your area. Keep in mind that charities can be inundated with volunteers for Christmas Day but need help before and after, so be flexible if you can.

Create your own purpose.
Whether religious or not, for most people Christmas is a time to spend with family. As a major break from usual routines there’s also an opportunity to add further purpose to the day. Make it a day of gratitude, for example, rather than a day of over-consumption. Taking the time to be consciously thankful for what we already have is a great mood lifter.

Do something completely different.
Leave the hot oven behind and opt for an outdoor picnic with summer fresh salads and seafood. Or head for the city early in the day and take in the magical Christmas window displays without the crowds. 

These are just a few ideas to get you thinking about how to put some extra sparkle into your festive season. 

However you choose to spend it – Merry Christmas!   

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress.

A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress while one in five reported experiencing mental distress.

It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors.

There is nothing worse than that niggling feeling that you’re not in control of your financial situation or worse, the dread that you may not be able to meet your next home loan repayments or that you’ve maxed out your credit cards.

For many people, it is simply that their lives are so busy they never have the time to focus on their financial position and so the constant pressure of earning money and paying bills can easily spin out of control.

Just as all financial situations can be improved, so all financial problems can be resolved and the earlier you act, the better. Just the simple step of reaching out for help will make you feel better about your financial situation.

So, it may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you have created a debt mountain that you feel helpless to reduce.

If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help.

A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you should make time to discuss your financial situation with a qualified financial planner.

They will be able to tell you just how serious your situation is and more, how you can take steps immediately to improve your financial position and help you get your financial position back on track, so you do feel in control.

This will allow you to move into the new year with confidence and the peace of mind that you have your financial situation under control, and you can embrace life with enthusiasm and gusto, free from financial worry.

Your Three Minute Financial Check-Up

Action	YES	NO
Do you pay all your credit cards off in full by their due date?
Do you sleep easy knowing all your bills will be paid when they fall due?
Do you have a budget, and do you stick to it?
Are you making all your loan repayments on time?
Do you know exactly how much your home loan is today?
Do you know what you would do if you lost your job tomorrow?
Are you confident about your children’s financial future?
Do you have life and total and permanent disability insurance in place?
Do you have income protection in place?
Do you know how much you have in super?
Are you and your partner in agreement about your finances?
Do you feel confident about your overall financial position?

If you’ve answered ‘no’ to any of these questions, then you need to speak to a financial planner. The sooner you do, the closer you will be to achieving peace of mind regarding your financial position.

Most people, when asked about retirement, will tell you they’re looking forward to it. However, for some women, the approach of retirement is viewed with uncertainty.

In recent times a spotlight has been shone on the gender pay gap, resulting in greater awareness of women’s conditions in the workforce. Yet we’re still overlooking how lower wages translate into a retirement savings gender gap.

Fact: 40% of single retired women live in poverty.

According to the Workplace Gender Equality Agency (WGEA), women make up 47% of Australia’s workforce, yet are 55% of people receiving the aged pension, indicating that although women have jobs, they don’t save enough super. 

Despite some improvements for working women, having and caring for children, often means working part-time, and limited opportunities for career development or promotion into better paying roles.

Single women in particular, often find themselves in a desperate financial position, a situation that inevitably leads to lower retirement savings.

Kelly’s story

When Kelly, mother of two small children, found herself suddenly single, her financial security took a nose-dive. Even though she remained in the family home, her wages as a part-time administration assistant barely covered the mortgage and utilities.

Fortunately her mother assisted with childcare, so between her salary, and her ex-husband’s child-support, Kelly just scraped through, although she relied heavily on her credit card in the lead-up to payday.

Kelly could be forgiven for putting superannuation on the back-burner, but her situation was typical of many women who end up in dire circumstances in retirement.

Using the government’s superannuation calculator, Kelly projected her retirement savings as follows:

Kelly’s details
Age	35
Proposed retirement age	60
Monthly income	$2,400

Kelly’s superannuation fund	Amount
Current super balance	$72,000
Monthly superannuation guarantee (10%)	$240
Fund fees (per annum)	$74
Estimated Investment return (per annum)	7.5%
Projected fund balance at age 60	$215,570

The result was alarming, particularly as Kelly expected to still have a mortgage at retirement, and hoped to use her super to pay it off.

Her mother suggested Kelly speak to the family financial adviser. 

Kelly was reluctant, after all, only people with money went to financial advisers, right?

This is a common mistake. Qualified financial advisors are specialists through all life-stages and individual situations, including debt reduction and wealth generation. 

Kelly met Sandra, a financial adviser, who after spending time understanding Kelly’s personal finances, her obligations and goals, developed a strategy that not only supported Kelly’s current situation, but enabled her to save for her future.

Sandra helped Kelly create a budget to reduce her reliance on credit, then suggested Kelly consider:

• utilities instalment schemes – most utilities companies offer payment plans,
• government assistance, including single-parent support packages,
• using a debit card instead of a credit card – it’s impossible to overspend and there’s no interest,
• the government’s super co-contribution scheme where the government matches after-tax super contributions up to $500.

There’s no denying that Kelly’s post-divorce years were difficult, but Sandra regularly reviewed and updated Kelly’s strategy where needed. 

Eventually, as the children became older Kelly was able to take on full-time work, and these days, Kelly is adding items to her retirement bucket list. 

Financial advice is not just for the wealthy, nor is it just for families. Financial advisers, recognising that women, single or otherwise, have their own financial goals and retirement plans, are developing strategies that reflect our modern attitudes.

Given that women are expected to live well into their eighties, funding 20-plus years in retirement is a challenge best met with preparation. 

What lifestyle will your retirement savings afford you?

With over 4.4 million Australians living with a disability, most families either have a family member with a disability or know of a family supporting a disabled loved one. 

In 2018, the Australian Bureau of Statistics found 4.5 per cent, or approximately 211,200 children, aged between 0 to 14 years, have a profound or severe disability, placing enormous stress on parents as they care for, and also financially support, their child.

A family with a disabled loved one has also been found to have a significantly lower standard of living, than those without.

In the short term, a disabled person needed to increase their adult-equivalent disposable income by 50% to achieve the same standard of living as those living without a disability. 

However, this figure varies according to the severity of the disability – 19% for people without work-related limitations to 102% for people with severe limitations. 

The National Disability Insurance Scheme was introduced to make Government support both more adequate and to assist in lifting living standards for those in need.

However, beyond accessing Government support, there are a number of financial stresses that expert financial advice can help reduce.

A car accident

Jen and Warren are aged 60 and have a 15 year old son Reece. While driving home from work, Jen was involved in a car accident that left her permanently disabled. 

Sadly, Jen was unable to return to work, which dramatically impacted the family income. There were also expenses related to home and car modifications to make Jen more comfortable. 

Jen and Warren engaged a financial adviser to help explore their financial options. 

Their adviser reviewed their situation and helped in the following key areas: 

• Superannuation – Jen held Total and Permanent Disability (TPD) cover of $400,000 within her super account. Their adviser helped Jen claim on that policy.
• Tax effective withdrawal of insurance claim – Their adviser also advised on a tax-effective withdrawal of Jen’s $400,000 superannuation balance to assist in paying for Reece’s school fees, home and car modifications, and ongoing rehabilitation costs. 
• Centrelink – Assisted in applying for government payment services for Jen.
• Investment – Their adviser provided investment advice to help generate regular income from the balance of funds to offset some of Jen’s lost income. 
• Estate Planning – Worked with the family’s lawyer to update their estate planning structure (Wills, Powers of Attorneys, Guardianship for Reece, special disability trust, etc.)
• Retirement Planning – Warren wanted to bring forward his retirement plan to spend more time with Jen. Their adviser provided a range of financial projections to help determine an optimal solution.

Seeking Financial Advice

The additional financial strain living with a disability can place on an individual, along with their immediate family, means it is imperative to thoroughly explore every possible financial support and investment option available.

To ensure your loved one is financially secure long into the future, speak with a financial adviser today for a tailored financial plan.

Buying a new home is undou

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience?

Expect the unexpected

Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver.

With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan.

Create buffers

You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments. 

Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover.

Cut costs

The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances. 

Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun.

Invest in quality

There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers.

This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again.

The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility.

With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal capital gain triggers a capital gains tax event and consequent reduction in portfolio value.

Take advice

Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience.

Buying a new home is undoubtedly one of the most exciting time in our lives. But, on the other hand, a mortgage application can be a stressful process as you dive into a world of unknowns.

Let’s look at five factors that may negatively affect your chance of being approved for a home loan.

Lying on your application

Lying about your financial situation is a big no-no in the eyes of any bank. For example, not disclosing childcare costs or disclosing only one credit card, when in fact you have three, can add a red flag to your application.

Lenders share information to prevent fraud, which can also affect any future applications.

High debt to income ratio

Lenders will compare your income level against any outstanding loans, including the loan you are applying for. It helps them measure your ability to repay the loan without putting you under financial stress.

For example, a couple earns $200,000 combined. They have a $20,000 car loan, $5000 credit card limit, and are applying for a $700,000 home loan. Their debt to income ratio is 3.62 ($725,000 divided by $200,000). Although it differs for every lender, generally, a debt to income ratio of more than 6 is considered risky.

Significant changes in your life

Lenders like to see stable employment with consistent income. If you have started a new job recently, it can reduce your chances of being approved.

Similarly, a significant expense close to your loan application date is not ideal either. For example, if you lease a new car or take out a loan on a new car, this can result in lenders rejecting your application.

Errors on the application paperwork

A loan application involves providing numerous documents and filling out loads of forms. Make an error in haste or provide documents that are inconsistent with your application, and it will attract additional scrutiny from lenders.

Buy now, pay later (BNPL) services

With BNPL services such as Afterpay and Zip becoming increasingly popular, banks are more cautious than ever when reviewing loan applications. This includes assessing your bank statements to ascertain if you use BNPL services.

A few factors to consider:

­Defaulting on your BNPL repayments can affect your credit score.
­Outstanding payments are considered financial commitments which can impact the amount you can borrow.

What if your loan application is rejected?
Understanding why your application was rejected is essential. Common reasons include a bad credit score, low deposit, or inability to service the loan.

You should avoid re-applying straightway after being rejected by a lender. Instead, take steps to set up a savings budget, extend your purchase timeline, or reduce existing debt.

Professional advice from a financial adviser or a mortgage broker can help to avoid another rejection.

Seek professional help to increase your chances of being approved

To improve your chances right from the beginning, consult a financial adviser who can help with budgeting, cash flow management and explaining the impact of a home loan on your overall financial goals.

When you are ready to apply for a loan, consider consulting a mortgage broker to guide you through the loan process. They can provide guidance around items lenders may flag, compare different lenders to get you the best deal, and apply for the loan on your behalf.

Sources:
a) Not for publication (for research purposes)
Writers’ knowledge

b) For publication (for readers’ information)

Just as the Grinch stole Christmas, excess spending can rob us all of yuletide happiness. Seasonal credit card splurges can create ballooning long term debt, while unnecessary consumption inevitably leads to a blow-out in rubbish bin waste.

The Commonwealth Bank of Australia estimates $11 billion is spent on presents each year, including some 20 million unwanted gifts. At the same time, seasonal celebrations boost landfill rubbish by a massive 30 per cent.

So, if you want to max out the ho, ho, ho in Christmas this year, think of applying more whoa, whoa, whoa to your spending and consumption ideas. Here are six simple tips Ebenezer Scrooge would be proud of.

1. Ninety per cent of Australians claim to recycle something, sometimes. What better way to do this than to shop for presents in one of Australia’s 2,500 opportunity shops?

Forget the old days of chipped crockery and stained used clothing. Op shops are full of trendy, mint condition items and are the perfect place to find something slightly offbeat or unusual for your loved one. 

2. Save on postage and reduce needless paper usage by sending clever and original e-Christmas cards. 

Head online to create your seasonal messages to email to friends and family. Many websites provide free cards, while others offer designer, animated versions that would even put a smile on Scut Farkus’ face.

3. Instead of giving a physical gift, give an experience such as tickets to a concert or a voucher to use at a favourite restaurant. Better still, why not gift something special of yourself by offering to cook a meal or provide free babysitting for a family member.

Giving an experience rather than a physical gift also means you don’t need to waste precious paper by wrapping the present or spend money on postage getting it to that special someone.

4. If you do give a physical present, think of some clever ways to wrap it, so you’re not adding to the 150,000 km of wrapping paper Australians needlessly use each year – that’s enough paper to circle the equator 4 times.

Wrap your gift in a re-usable patterned tea towel or scarf, or better still, invest in some brightly patterned boxes to hold your present that can be recycled from one Christmas to the next.

5. Stop for a moment and look around your home to see what you can re-use and turn into a gift. A great place to start is the garden. Many plants can be easily divided and, in doing so, will create new plants you can pot up in a re-usable pot to give away.

6. Take time to plan your meals this season and, wherever possible, cut down on buying heavily packaged or processed foods. Instead, buy fresh foods that can be eaten without much cooking, re-used as leftovers, or frozen for later consumption.

It’s estimated that ninety per cent of Australians discard some 25 per cent of all the food they buy during December – that’s food that has been needlessly produced only to end up in Australia’s landfills.

As young Kevin found in Home Alone, what really matters is remembering how blessed we are to be enjoying the festive season in whatever way we can and being with the people we care about most. 

Anyone who has helped an elderly relative make the move into aged care knows that it can be a traumatic experience. It involves a move from the familiar – a home that a loved one may have lived in for decades – to the unfamiliar, a care facility with many residents and staff. On top of that, there are substantial fees to be paid. 

The biggest fee, the accommodation payment, usually exceeds $300,000 when paid as a lump sum. Not surprisingly, when that sort of cash is not available, many people believe the only way to pay this fee is to sell the family home. That prospect can add further stress to the situation. 

Fortunately the system allows for much greater flexibility than this. While you can make a lump sum up-front payment in the form of a bond, called a Refundable Accommodation Deposit or RAD, you also have the option of paying a Daily Accommodation Payment, or DAP. This is similar to paying rent. Importantly, you can elect to pay any combination of the RAD and DAP. Depending on overall financial circumstances, the DAP makes it viable for many people to retain the family home when going into aged care. 

There are a number of reasons why this may be desirable. 

While it’s unlikely, knowing that there’s a home to return to if aged care doesn’t work out can make it that little bit easier and less stressful to make the move. Renting the home will generate an income stream that will help to pay the DAP. If the property market is running hot there’s an opportunity to capture further capital gains on the property. Or there may be estate-planning objectives that depend on retention of the home. 

However, with the flexibility comes complexity. Whether you keep or sell your home has income tax, age pension, aged care cost and capital gains tax implications. For example keeping the home and renting it out may generate taxable income. The proceeds of selling the home will count towards the age pension assets test. A RAD is exempt from the age pension assets test, but it is counted as an asset when calculating the means-tested aged care fee. 

The need for aged care can arise suddenly and unexpectedly, and while it may not be possible to make detailed plans in advance it will pay to have a good idea of the options available and their various pros and cons. Your financial adviser will be able to help you understand the alternatives available to you.

It’s a sad but unavoidable fact: one day we are all going to die. You will most likely have clear ideas as to how you would like your hard-earned wealth – your ‘estate’ – to be divided amongst your loved ones or other beneficiaries. However, estate planning is a complex area of law and basic mistakes can see Wills declared invalid, money end up with unintended recipients, or benefits reduced by avoidable tax bills. So how can you avoid making some of these mistakes?

Make a Will

Only around half of Australian adults have a valid Will. If you don’t have one, make one. Otherwise your estate will be distributed according to a government formula, and if no beneficiaries can be identified your life’s savings will end up in state government coffers. 

If you do have a Will make sure you review it regularly and update as required. Just a few of the key events for revising your Will include entering or leaving a marriage or de facto relationship, starting a family, establishing investment vehicles such as companies or trusts, changes to the financial or health status of adult beneficiaries or to add gifts to charities.

Appoint an Appropriate Executer

Administering an estate can be a major undertaking. Ideally you will want an executor who is competent, organised, honest and unbiased. Often this will be a spouse who is also the sole beneficiary, and administration of the estate may be relatively straightforward. But it’s common to also nominate an alternative executor should your spouse die before you. This may be an adult child or other close relative, and not necessarily a beneficiary. Whoever you nominate make sure you tell them that they are a (potential) executor and to provide them with important information such as the location of the original Will, and contact details for your lawyer, accountant and financial planner. 

Identify Assets that may not be Dealt with by your Will

Any assets that you jointly own automatically pass to the surviving owner(s) on your death. They are not subject to your Will.

If you have provided your super fund with a binding death benefit nomination your death benefit will be paid to the nominated beneficiary. This can be anyone, and not necessarily a beneficiary of your Will. If you nominate your ‘personal legal representative’ (i.e. your executor), the death benefit will be paid to the estate and dealt with according to your Will. If you don’t make a binding nomination the trustees of your super fund are obliged to pay the benefit to your dependents, as defined by superannuation law. This may not coincide with your wishes.

Be Fair

If someone has reasonable grounds to believe they should receive something from your estate but you have not provided for them in your Will, then they may be able to legally challenge your Will. Legal fees may be paid by the estate, eroding its value, so you’ll want to minimise the chances of the Will being contested.

Also be wary of ‘ruling from the grave’, for example by making any gifts dependent on a beneficiary either doing something (marrying a specific person, say), or not doing something.

Get Expert Advice

Estate planning throws up many other traps for the unwary, from paying too much tax on a superannuation death benefit to not making provision for beneficiaries who are unable to adequately manage their own affairs. With so much at stake, it pays to consult a specialist estate planning lawyer.  

It’s the most common story financial professionals hear. Unfortunately, too many people fail to set aside emergency savings to see them through life’s hiccups. So when the inevitable happens, and an unexpected bill arrives, they are put under pressure to find the funds to pay it.

In turn, this leads to maxed out credit cards or taking out expensive short term loans. And so begins the bitter downward cycle of falling behind on essential bills and other regular payments.

The Household Financial Comfort Report, published by ME Bank, found 21 per cent of Australian households had less than $1,000 in cash savings.

Additionally, 24% of households reported that if they lost their income, they’d only be able to maintain their current lifestyle for one month, and 11% for just two weeks, which is the equivalent of living life on the financial edge. 

Financial professionals recommend having emergency savings set aside for life’s unexpected bills, but how do you go about doing this, and just how much money should you set aside for rainy day expenses?

The best place to start is to work out just how much money you have now and what income you can expect to earn over the next twelve months. Against this, determine what your expenses are likely to be and hopefully, they are less than what you earn. If not, you need to cut back.

Then decide how much you need in an emergency fund. Just how much you set aside will depend on your circumstances. Most experts suggest you should have the equivalent of between three to six months of living expenses set aside.

The best way to achieve this is to break it down into achievable goals. For example, try to set aside one month’s worth of living expenses or, say, $2,000. That means saving $330 a month or going without two takeaway coffees each day for the next six months.

Once you’ve achieved that, try to save a second amount of $2,000 until you reach your goal. 

A clever way to fast track this is to think about holding a garage sale or selling those things you have sitting around that you no longer need or perhaps even take up a part-time job for a few hours each week and put these wages towards the creation of your emergency fund. 

The next step is to decide where you should keep these funds. Ideally, you want them to be separate from your day-to-day finances but still within easy reach, should you need them.

If you have a home loan, establish a mortgage-linked offset account. In doing so, these funds will not attract interest, which would be taxed at your marginal tax rate, but instead will work to reduce the cost of your overall mortgage.

Another option is to establish a ‘micro’ savings account. The rules on these vary, but most are based on rounding up every purchase made on a debit card and setting these ‘cents’ aside in a free savings account.

Whichever strategy you adopt, remember having a small amount set aside as rainy-day money, no matter how small that amount might seem, is better than having no funds set aside at all.