Summer Savings l For An Endless Summer

2020, the year that was, then wasn’t, then was, then wasn’t again.  It is certainly a year to remember and to be forgotten.  Physically, emotionally, mentally and financially very testing for different reasons.  Bring on 2021!  We’ve pulled together some Summer Savings for an endless summer you really deserve!

One of the main things that I’ve been focusing on with my clients during the pandemic was budgeting.  Things became a lot tighter, and people had to really focus on what to spend and where.  Obviously, with the restrictions, it was a lot easier in some cases of where to cut expenses, but I don’t know about you, but we seemed to be getting packages delivered every few days!

BUDGETING

The important thing now that the restrictions are easing, and we return to some kind of (new) normal, is that we don’t go spending crazy!  It’s especially harder with Christmas around the corner.  We have to be mindful that we don’t undo any of the budgeting skills we’ve learnt by overspending, and accumulating a pile of credit card debt to start 2021.

According to the RBA in December 2018, spending on credit boomed to $30M.  If you calculate that on average, it is estimated that 27% of people will still be paying off this debt two years later, the interest accrued on this alone, is in excess of $100M.  This is why you can’t get too far ahead of yourselves, as you don’t want to ruin your summer, and the start of the year.

CREDIT CARDS

For those with credit cards, there is always the option of looking at those companies that let you roll over debt on to a 0% interest repayment for a period of time.  What you can do then, is every repayment you make, you are paying off 100% principal.  For example:

  • EDWINA had a $2,000 debt that was rolled over with a 0% interest rate for 18 months
  • Budgeting, she could pay $111 per month, and ensure that that debt was cleared entirely in that interest free period.

As a comparison;

  • PHOEBE had a $2,000 debt with a 17% interest rate
  • Budgeting, she could pay the minimum repayments on the debt and it would take 17 years to fully pay off that card.

This path is not trouble free though, because in some cases, any spending that occurs on these cards get placed behind the 0% interest rollover, meaning that you will not be paying off the debt that has high interested accrued on it.

SAVE SAVE SAVE!

A fun way to get the kids in to saving I’ve found useful is the Coke Bottle challenge.  Basically this is where you collect your $2 and keep them in a used (and cleaned) Coke bottle.  People have done the testing;

  • 600mL bottle you can get around $1,000 saved
  • 1.25L and 2L varieties, you can save $1,900 and almost $3,000 respectively

You can have them do it individually, or as a family and put it towards a holiday now that the pandemic is basically over!

Another one I like is where you start out by saving $1 in week one, $2 in week two, $3 in week three for example, for each week of the year.  By doing this, you will accumulate $1,378 over the year.  A fun way to do it is have a tally board off and cross off each donation.  That way you can spread out the weeks that you have to pay more in, as your budget dictates, especially as where you have November/December payments where money may be tighter due to upcoming Christmas.

UPDATE YOUR BENEFICIARIES!

Lastly, I’ve had a few cases recently where new clients have had no or invalid binding death nominations on their life insurances and superannuation funds.

Superannuation is a non-estate asset, so unless you have a beneficiary that is your Estate, your Will will not deal with your superannuation benefits.  This causes issues at time of claim, which is already a tough enough time for your loved ones, without delays and trouble with accessing funds at a time where it is urgent.  Take 5 minutes and check to make sure that you;

  • Have a beneficiary listed +
  • Make sure that it is a valid beneficiary

Give us a call to discuss whether or not the beneficiary is valid or not because your nominated superfund will not tell you if you have listed an invalid beneficiary.  Naming the incorrect person can be very costly!  Our team of experts can help you ensure you’re not making unknown costly decisions, get in touch now and we can help you with your Summer Savings for a stress-free endless summer you wont forget!

Have a great Christmas and a Happy New Year, and we’ll see you in a hopefully brighter and better 2021.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)

COVID-19 // Economic Stimulus + Survival Guide

The Federal Government and State Government have together announced multiple stimulus packages to help support everyone affected by Covid-19 [Corona Virus].  With that in mind, we want to try to provide you with a brief and up-to-date rundown of the benefits for individuals and Small to Medium Sized Businesses [SME’s].  Please note that this is not exhaustive, and we have provided links to original Government releases, so you can double check all information and keep abreast of developments.

April 2020

April Announcements
If you are an EMPLOYER – click here.  

Also important for employers to register with the ATO here AND here.  If you are an employer and have a State Revenue Office payroll tax registration click here.

If you are an EMPLOYEE – click here

If you are a SOLE TRADER – click here.  

Also important to for sole traders to register with the ATO here AND here.

If you need information on ACCESS TO CREDIT for small business – click here

If you employ APPRENTICES – click here

If your income falls BENEATH $1,075 p/fortnight you may be entitled to the Coronavirus Supplement – click here

If you are a VICTORIAN small business with a turnover of +$75,000 – click here

If you are a TENANT – click here

 

March 2020

March Announcements
Small – Medium Businesses – https://treasury.gov.au/coronavirus/businesses

  1. Businesses with turnover of less than $50M who employ workers will be eligible for the “Boosting Cash Flow for Employers Package”.  All employers will receive a minimum payment of $10,000 [increased from the initial $2,000 announced in mid-March] and the maximum is calculated as 100% of the PAYG withholding withheld from employee wages up to a maximum of $50,000.  The amount is calculated on PAYG withheld between January and June 2020 and calculation varies depending on how often you lodge your activity statements.
  2. An additional payment is being introduced from the July – October 2020 period.  This amount will be exactly the same as the original amount received by the business.  This effectively doubles the amount received to a minimum of $20,000 and a maximum of $100,000 https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf.
  3. The Victorian Government has announced that SME’s with a yearly payroll of less than $3M, will be provided with 12 months Payroll Tax relief.  Businesses that currently pay payroll tax [ie. business with payroll, including superannuation, of greater than $54,166 per month] will receive a refund to their bank account of any payroll tax paid for the period 1 July 2019 to 29 February 2020.  In addition, there will be no further payroll tax payable up to 30 June 2020.  The Victorian Government advises that refunds will be accessed by 27 March 2020 https://www.premier.vic.gov.au/economic-survival-package-to-support-businesses-and-jobs/.
  4. There are also measures to temporarily assist businesses in financial distress, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf.
  5. Instant asset write-off is increased from $30,000 to $150,000 for those of you who are not concerned about cash-flow and view this as a good time to invest in assets for your business, https://treasury.gov.au/sites/default/files/2020-03/Fact_Sheet-Delivering_support_for_business_investment.pdf.  There are also measures around depreciating fixed assets faster, https://treasury.gov.au/sites/default/files/2020-03/Fact_Sheet-Delivering_support_for_business_investment.pdf.
  6. Wage subsidies are available for up to 50% of an apprentice or trainee’s wage for the nine months from 1 January to 30 September 2020.  Employers will be reimbursed to a maximum of $7,000 per quarter per apprentice/trainee, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf.

March Announcements
Support for Cash Flow Needs for Small – Medium Businesses – https://treasury.gov.au/coronavirus/business-investment

  1. The Federal Government will provide a guarantee of up to 50% of loans made to SME’s https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf.
  2. Lenders will be provided with a temporary exemption from the responsible lending obligations to provide loans to existing small business clients to enable faster approval and provision of loans to SME’s, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf.

March Announcements
Individuals + Households – https://treasury.gov.au/coronavirus/households

  1. Income support payments and coronavirus supplements to existing and new recipients of some Centrelink payments, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Income_Support_for_Individuals.pdf.  There will also be streamlined application for Centrelink benefits and reduced waiting times for payments.
  2. Two separate payments to recipients of social security, veteran and other support payments from Centrelink.  These are due to be paid as $750 on 31 March 2020 and $750 on 13 July 2020, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf.
  3. Temporary early release of superannuation amounts up to $10,000 for the financial year 2019-20 and again for the financial year 2020-21.  There will be no tax payable on the amounts withdrawn and they will also not effect Centrelink or Veterans’ Affairs payments, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Early_Access_to_Super_1.pdf.
  4. Temporary reduction in superannuation minimum drawdown amounts for those receiving a pension from their super fund, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdf.
  5. Reduced Centrelink deeming rates to support retirees, https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdf.

That Thing Called… Work/Life Balance

When I ask my clients who are fathers, what their most important goal or objective is, more often than not it is to provide for their family should anything happen to them.  Whether they be the sole income earner, or in a family with two members generating income, they want to ensure that if anything happens and they can’t work, they have the ability to still pay their mortgage, education costs, and put food on the table.

A person’s ability to earn an income is their greatest asset, and often for a small percentage of total income, they could cover up to 75% of what they’re earning.  In more serious cases of premature death, or being totally and permanently disabled, they want to ensure that mortgages are cleared, any future education costs are provided for, and that lifestyle expenses are there for any surviving spouses or children to ensure that nothing is left out, for a predetermined amount of time.

Work life balance is also important for families, as they want to ensure that they provide for their families, but the mother or father can still have time to attend any dance recitals, sports events, or any other extra-curricular activity that their children participate in.  As an example, I have a client in his 50s, who I have worked with for just on 10 years, and we created some investments outside of superannuation, so he could take some time off work as his son is an amazing basketballer, and needed help being taken to training and matches.  He made some sacrifices earlier on, and is now reaping the rewards.  I have the same situation of a client in his 60s, who has started a transition to retirement strategy to help babysit his grandchildren, as that is the next important phase in his life.  Regardless of age or situation, you need to make sure that you have the work life balance.  You are not what you do.

 

Happy father’s day to the fathers out there, and the mothers pulling double duty. Especially to my father, who retires at the end of the month.  I look forward to punishing him on the golf course!

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)

Love + Insurance… Looking After The Ones You Love

When you think of love, it’s not common to think straight away of your insurance!  You think of family, friends, and good times.  However, should something happen to you, it is important that your loved ones be protected and looked out for.

In Australia, there is a massive underinsurance issue. Approximately 95% of Australians are underinsured.  Only a third of the working population (12.5M) have income protection, which means that there are around 8.3M workers that are not adequately insured if they were unable to work due to injury or illness.  Employees have sick leave, but self employed people don’t get that luxury meaning if they are sick and can’t work, they don’t get any income.  A survey by finder.com.au was undertaken and it’s results showed that 55% of the population couldn’t survive not working after a period of 3 months.  This is an average, because older people that are more financially sound have greater scope, whereas the younger population have lesser scope to cover that period of time.

If you think as an example that the average default superannuation cover provided by industry funds lies around the $200,000 mark, and the average sum insured deemed relevant by a 2015 Rice Warner study was $680,000, you can see that there is a massive shortfall.  In a family with a mortgage and children involved, only holding $200,000 of cover would leave them in a detrimental hole.

There are some myths around having insurance, and that I feel is partly the reason why people tend to avoid it:

1. Insurance policies are extremely costly – What people don’t understand is that more often than not, knowing someone that has insurance and is paying $x in premiums, has a completely different set of circumstances to you.  Whether this relates to age, sex, smoking status, occupation, income, or health situation.  All of these factors impact on what premiums will come out to be.  On top of this, people don’t realise that they necessarily have to fund the premiums from their personal cash flow, there are other alternatives to explore.

2. Insurance companies never pay out claims – This is a huge fallacy when it comes to insurance.  You really only ever hear about the non paid claims on A Current Affair or the ABC, not the hundreds of millions and even billions in insurance claims that companies pay out each and every year.  Each company releases these stats on a periodic basis and it is easily attainable.  The main reason that cover may not be paid out is due to non-disclosure.

3. It’ll never happen to me – Around 20% of Australian families will be hit by an unforeseen event that will leave them unable to work, whether it is the death of a parent, injury, accident or illness.  Everybody knows someone that has been affected by cancer, or had a friend, family member or colleague that has known someone that has tragically passed away, leaving behind a trail of destruction for their surviving family members.

Ensure that you look after your loved ones and review your insurances.  Whilst there is a strong case of under insurance in Australia, there are people that are over insured, and paying more than they need to.

Please get in touch with our team to review your situation, there is no cost associated with doing so, and we may be even able to save some money, or re-structure your situation.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)