Spring Cleaning Your Finances

SPRING CLEANING YOUR FINANCES

Who doesn’t love spring? The days are longer, the weather is getting warmer, and flowers and trees are starting to blossom.  And, it is often a time to clean those things we don’t do regularly.  I am going to suggest it is also a great time to spring clean your finances!  Here’s how:

  • Take stock of your current position by completing a budget. There are many free apps available that link to your bank account and do all the hard work for you!  They automatically categorise your spending into different segments.  If you notice an error, it is easy to reassign the transaction to the correct category and your app will remember the next time.
  • De-clutter financial paperwork around the house. You only need to keep tax related documents for seven years.  You could even go one step further and save the remaining required documents electronically.
  • Review your life insurance policies! How much cover do you need?  Do you have enough?  Do you still have insurance cover inside super?  Many people inadvertently lost their insurances held inside inactive super funds or funds with smaller balances when some sweeping rules were introduced during the past couple of years.
  • Consolidate bank accounts. If you have multiple accounts, is there a specific purpose? If there is no valid reason, simply your affairs and potentially save on bank fees in the process.
  • Review current debts. Have you approached your lender for a better rate? If you have credit card debt, can you switch to an interest free one until you pay it off?

Canny Group have an army of financial advisers and we are more than happy to help you give your finances a spring clean!  All you need to do it get in touch.

 

Samantha Butcher – Financial Adviser

BComs Dip FS

Financial Health + Wellness – Does It Matter?

Many of us are aware of the importance of improving our physical and emotional health. We have heard it many times, that regular exercise and eating balanced and healthy meals can result in long term health benefits. But did you know there is a direct correlation between our physical well-being and financial health?  

What is financial health and why is it important to a happy and successful life?  

Financial health is a term used to describe the state and stability of an individual’s personal finances and financial affairsGood financial health is about taking control of your finances, having the financial freedom to make choices now, and in the future, and being ready to cope with unforeseen changes to your financial circumstances, such as job loss. It is important to review your financial health as poor financial health can lead to financial stress. Stress in itself is not necessarily harmful but when we experience prolonged financial stress, it can affect our physical and mental health.  Financial stress can create emotional exhaustion, anxiety, insomnia, depression, and can affect our relationships with family and friends.  

Understanding your financial situation is the first step to improving your financial health. Below are 6 strategies to improve your financial health. 

1. KNOW YOUR BUDGET

If you don’t already have one, create a budget to help you plan your expenses and identify areas where you can cut back on. For example, can you cancel memberships you no longer use? Work out what are your needs and wants and avoid buying under stress or impulse. Stick to your budget even though your income increases. Do an annual health check on utilities, insurance, phone bank charges, and mortgage to ensure you are not paying for expenses any more than you need to. 

2. SET SAVINGS GOALS

Once you have worked out your budget, work out a savings plan. Perhaps you are saving for a house deposit, new investment, or for a holiday. Saving for something takes time and its important to be realistic about how long it will take. But having a savings plan and sticking to it will help you reach your savings goal sooner. It will also give you a sense of achievement and satisfaction that you have worked hard for something without needing to borrow funds. Some people found setting up automatic transfers to a separate savings account which they could not easily access was helpful. 

3. HAVE AN EMERGENCY FUND

Do you have an emergency fund for that rainy day that you have set aside to access in the case of unexpected costs, such as a loss of employment, major repairs, or medical emergency? Generally, it is recommended to set aside 3 to 6 months’ worth of expenses for your emergency fund.  

4. PRIORITISE HIGHER INTEREST DEBT

 Credit cards and personal loans often have higher interest rates that are not tax-deductible and therefore considered bad debt. Focus on paying off these debts first or if possible, consider consolidating the debt to reduce what you pay in fees and interest. 

5. PAY MORE THAN THE MINIMUM

Your home loan is also another bad debt. Consider reviewing your home loan to ensure that you are getting the best deal on the market and look at whether you can increase your repayments on a weekly or fortnightly basis. By increasing your minimum repayments and making home loan repayments weekly or fortnightly rather than monthly you can significantly reduce the interest you are paying in the long run and repay your debt faster. 

6. SEEKING HELP

If you are feeling overwhelmed, remember it’s ok to ask for support. You may want to seek professional help from a Financial Planner or avail yourself of free financial counselling offered by community organisations, community legal centres, and some government agencies. 

 

Helen Yau – Manager + Financial Planner

CA, BCom, Dip Fp, SSA

Super Women

RETIREMENT!  The very thought of it appeals to many hardworking persons.  They think about a time for doing the things that bring them pleasure, recreation and fun.  Sadly, many, in particularly women, will not have sufficient superannuation savings to fund the lifestyle they are hoping for in retirement.

On average, women retire with 39% less super than men and surprisingly an estimated 40% of older single retired women live in poverty in retirement.  This group of single retired women are the fastest growing cohort of homeless people in Australia.  What are the reasons for this?  Australia’s gender pay gap is currently 13.9% so on average, women earn less than men and since compulsory employer super is based on wages, women will have less in super in retirement.  Women are also more likely to take time off work for maternity leave and to care for their families.  As a result, a lower superannuation balance may mean a reliance on receiving a government pension.  For some, this may limit their independence and affect their quality of life.

Alan Lakein, a well-known author on personal time management said, “Planning is bringing the future into the present, so you can do something about it now.”

What little steps can you take now to prepare for the kind of retirement you want?

  1. CONSOLIDATION… Do you have multiple super funds?  If so, consolidating your super will likely reduce the management fees you are paying to different funds.
  2. INVESTMENT CHOICE IN SUPER… Most super funds allow you to choose from a range of investment options and asset classes.  These may include, growth, balanced, conservative and cash.  Do you know what investment options are available to you and have you reviewed how your super is invested?  Your investment choice will affect the earnings in your super and ultimately will impact the balance you have in super in retirement.
  3. INSURANCE IN SUPER… Most super funds offer life, total permanent and disability and income protection insurance for their members.  Premiums are deducted from your super to pay for your insurance cover.  Have you reviewed your level of insurance cover?  Do you know if you are over or under insured?  Do you know how much you are paying in insurance premiums for your cover?
  4. CONTRIBUTIONS… You can boost your super and get the power of compounding to work for you by making additional contributions.  If you make personal [after tax] contributions, you may be eligible for the super co-contribution and the low-income super tax offset of up to $500 each.  You can also salary sacrifice part of your salary and have it paid to your super fund.  By salary sacrificing to super, you may be able to reduce your tax because you are only paying 15% tax on your contributions you make rather than your marginal tax rate.  Salary sacrifice to super is considered employer contributions so its important to ensure that you don’t exceed the annual contribution cap of $25,000 for concessional contributions.  From 1 July 2019, if your super balance is less than $500,000 and your employer contributions have not exceeded $25,000 for the year, you are able to carry forward the unused part of the contribution cap for up to 5 years.  This may be a valuable opportunity for those who suddenly have a lump sum assessable income resulting from a disposal of a property.

If you would like to know more or come in for a free 30 minute appointment to speak to one of our team on how you can make the most of your superannuation, get in touch here!

 

Helen Yau – Manager + Financial Planner

CA, BCom, Dip Fp, SSA

Health + Wealth

Health + Wealth is an informal presentation on the importance of looking at your financial health alongside your mental, physical and emotional wellbeing.

We have teamed up with Donna Lindsay of Bodhi & Co. who will be presenting alongside our own financial adviser Samantha Butcher to give you an overview on how all facets of wellbeing work together, including:

  • FINANCIAL HEALTH
  • FINANCIAL WELLBEING
  • APPROACH TO FOOD
  • NUTRITION vs DIET
  • MINDSET + FOOD
  • TIPS + TRICKS TO SAVE YOU MONEY + much more

FREE tickets are available via eventbrite: https://www.eventbrite.com.au/e/health-wealth-tickets-88979631473

REFRESHMENTS INCLUDED + ALL CHILDREN WELCOME!

 

New Years’ Finance Resolutions

The new year is a time when a lot of us make well intended resolutions to kick start the year.  These resolutions may relate to health, work, family, and/or your finances. I say ‘well intended’ because we make them with the best of intentions to commit to them and benefit from them in the long term.  However, come February or March, and we find ourselves feeling guilty because we have not fulfilled our goals.  There can be many reasons why we do not always follow through with our resolutions, but I want to hone in on one in particular – finances.

You may want to get professional help with your finances but something stops you from picking up the phone to make an appointment with a financial adviser– “I don’t have enough money to invest yet”, or “I can’t afford it”.  I would argue you can’t afford not to see one!  In terms of not having enough money to invest, there are many other reasons why you could be benefiting from professional advice:

  • A financial adviser can illustrate the benefits of compounding interest over the long term even if you are only able to save a small amount each month. It is never too soon to start saving and we all need to start somewhere.
  • You may have many competing financial goals but with limited funds, and not sure which way to go. For example, should you contribute to super or pay more off your home loan?  Should you start saving or reduce a personal loan?  A financial adviser can provide one off advice relating to a particular question/need you have.  We can help you formulate realistic goals and implement strategies to help you achieve your goals in order of priority.
  • Are your personal insurances up to date? Even if you have not yet built up a pool of assets, you still need to ensure your family, your income and your lifestyle is protected in case of illness, injury or death.

In summary, you do not need a large sum of money before you seek professional financial advice. What you do need to do is ensure what you are doing, or planning on doing, is the right option for you.  Is it the most tax effective option?  Is your super invested appropriately?  Are your insurances adequate?  Are you paying too much for your insurance?

One of our advisers would be happy to meet you to discuss your goals and put you on the right path.  Now, pick up the phone…

 

Samantha Butcher – Financial Adviser

BComm DipFS

Christmas + Gift Giving

Christmas is a weird and wonderful time of the year, filled with family, friends, good times, presents, and that confusion of what day of the week is it, and how many days of leave are left.  Not to mention the confusion of still writing 2019 down as a date, three weeks in to the new year.

Christmas can also be very stressful when it comes to the awful topic of money, and spending money.  For those that are running a tight ship, it’s a stressful time, because they might not be able to do everything they can or want to.  Then there are those people that won’t be able to achieve what they can or want to.

The age-old adage of Charity begins at home doesn’t hold true as much as it may have in the past.  There are a lot of people doing it tough, and they need a hand through times such as this.  There are many great ways in which this can be done, whether it’s buying extra presents to donate under wishing trees, making up hampers as a work place, and donating to families in need, or simply through a cash donation to one of the many charities that help families have a great Christmas as well.  I know this is something we do at the Canny Group, and something that I do personally as well.

One hangover that you don’t want to have to deal with after Christmas, is the debt that we tend to rack up from overspending.  It’s not just credit cards, it is zip pay and afterpay as well.  As of 30 June, there was almost a billion outstanding in afterpay, and 60% of that was attributed to people aged between 18-34, which is staggering.

In December last year, $30 million was borrowed in Credit Cards.  Want to hear something scary?  If you owe $2,000 on a credit card and make the minimum repayments, it takes 17 years to clear the debt!  I guess the moral of the story is to not overspend or start planning earlier.  I know that in my family, on one side we do Kris Kringle, that way everyone gets one good present, rather than lots of presents that end up being forgotten or put away to never see the light of day again. Try not to let this time of the year overwhelm you and have loads of fun!

See you in 2020!

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS[FP]

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)

Superannuation – Is It Still Worthwhile?

The constant changes to superannuation can be frustrating to many as they find it difficult to maintain their confidence in the superannuation industry.  Many have chosen to put the bare minimum into superannuation with their preference to build for their nest egg outside superannuation where they have full control and access without impact from the changes to superannuation.  However, is superannuation still a worthwhile consideration?

Currently, compared to other tax structures available, such as companies, trusts and partnerships, and personal tax, superannuation is still one the best tax structures available for many and should not be discounted.  All income in superannuation is taxed at a fixed rate of 15% and capital gains can be taxed as low as 10%.  If you commence receiving a pension for superannuation then all the income and capitals gains will be taxed at 0% up to the $1.6 million cap.

So are you taking full advantage of the changes to superannuation available to you?  Due to the many changes, it can be easy to overlook what you may be eligible for and what may impact you. Below are some things that may be relevant to you:

  • Tax Deduction for personal contributions – You may claim a tax deduction for personal contributions up to the concessional contributions cap of $25,000. Note, if you aged between 65-75 years you will need to meet a work test in order to claim a tax deduction.
  • Super Co-contribution – you may be eligible for a co-contribution of $500 if your total income is less than $37,697 and you make personal contribution of $1000 to your super. If your income exceeds $37,697 but is below $52,697, you will receive a reduced co-contribution.
  • Low Income Superannuation Tax Offset – a tax offset up a maximum of $500 is available to individuals with an adjusted taxable income of $37,000 or less. As long as your fund has received and reported a concessional contribution and you have lodged your tax return, the ATO will pay this directly to your superannuation account.
  • Low Income Spouse Tax Offset – a tax offset up to a maximum of $540 is available to individuals who make personal contributions to super on behalf of their spouse and their spouse’s income (including fringe benefits and reportable employer super contributions) is $37,000 or less. Where the spouse’s income is $40,000 or less but exceeds $37,000, a reduced tax offset is available.
  • Downsizer contributions – if you are aged 65 years or over and have sold your personal home, you may be eligible to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home.
  • Rolling 5 year concessional contributions – If you have a super balance of less than $500,000, you can make additional catch-up concessional contributions if you have not reached your concessional contributions cap in previous years. This applies from 1 July 2018.
  • Division 293 tax – high income earners pay an additional tax if their income exceeds $250,000. Income for the purposes of Division 293 tax includes taxable income, reportable fringe benefits, net financial investment/rental property loss, net amount of which family trust distribution tax has been paid, super lump taxed elements with zero tax rate.

If you have the long term goal to build for wealth and your retirement, superannuation should be considered as part of your financial plan.

If you would like further information on how to do this or would like to discuss a self-managed superannuation fund, please contact our team.

 

Helen Yau – Accountant Manager & Financial Planner

CA, BComm, Dip FP, SSA

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)