How to welcome a baby into the family and stay on budget

Welcoming a baby into your family is one of the most joyous occasions of your life. But just like anything worth celebrating (such as your wedding day or buying your first property), it’s not without its expenses.

How quickly they grow! The bills, that is.

Did you know it costs roughly $300,000 to raise a child from birth to age 17?

If you break that down, that’s $1470 a month.

This can put a significant strain on your monthly budget and mortgage repayments.

Rest assured, however, there are several steps you can take in advance to minimise the impact on your new family’s bottom line.

1. Obtain the essentials in advance

The upfront expenses are really going to whack your budget hard. So it’s best to obtain the items you’ll need well in advance to spread the cost.

Of course, you can purchase a brand new bassinet, playpen, clothing, car seat, cot, stroller, toys, high chair and changing table.

But chances are you don’t really need that fancy, brand new $1,000 cot. Focus on your needs instead of your wants, because wanting can quickly add up.

There’s absolutely nothing wrong with obtaining gently-used items second-hand, either at a substantial discount through trading websites or for free from a family member or friend. Remember that bub outgrows everything quickly anyway.

2. Check into paid paternal leave and corporate leave

If you worked before having your baby and made under $150,000 annually, you could be eligible for the government’s Paid Parental Leave program.

You do have to apply, but you get 18 weeks of minimum wage benefits (amounting to $719.35 per week before taxes).

There’s also a two-week partner and dad pay option available, and take time to check into your company’s leave programs.

3. Get on childcare waiting lists

Unless you plan to stay home with your children or have family members who will help provide childcare, get your name wait-listed at several childcare facilities.

Availability is a huge issue, so getting on the lists quicker will help in the long run. You can use the Childcare Subsidy Estimate Calculator to figure out if you’re eligible for entitlements.

4. Update your life insurance

It’s common for Australians to have total and permanent disability and death benefits through their super fund.

However, while the life insurance coverage may have been adequate pre-children, there’s a good chance it won’t be enough for a single parent to comfortably raise a child.

Additionally, you don’t want to fall into the trap of just insuring the breadwinner in your family. Everyone should have coverage in case something happens to one, or both, of the parents. This can be a complicated area to navigate alone though, so be sure to seek financial advice.

5. Make a will

Even if you don’t have significant assets or debts, you need a will if you have children.

Not only does a will specify what your family does with your belongings (including your super and insurance), but it also specifies who makes decisions if you can’t make them yourself, any wishes you may have, and who will take over raising your child or children if both parents pass.

6. Prioritise existing debt

If it’s possible before the baby comes, prioritise your existing debt and work on paying it down – or off – before the baby is born.

Once the baby arrives, you may not have a whole lot of spare cash to put toward any existing balances. Consider consolidating your debts or speaking to us about refinancing your loans or mortgages to one with a lower interest rate.

7. Update your monthly budget

One of the best things you can do is update your monthly budget with your newest family member in mind. It’s also great to start living on this budget before your bundle of joy arrives – start practising living on less.

You can update (or create) your budget using ASIC’s Budget Planner. Don’t forget to include your quotes for childcare and any new miscellaneous expenses you’re likely to incur.

8. Start an emergency fund

If you don’t have an emergency fund, start one. You’ll want to have at least three to six months worth of living expenses saved, with the goal of at least a year’s expenses.

This can provide a buffer that you and your family fall back on if you run into unexpected expenses like an accident, the car breaking down, or something in the house needing immediate replacement.

Final word

The last thing you want during this happy time is to worry about your finances. That’s why it’s so important to prepare as early as possible.

If you’d like help with any of the steps above, then please get in touch. We’d love to help make sure that your first few months as a new family are enjoyable ones!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

What the Royal Commission report means for you

More than 1000 pages and 76 recommendations – the Royal Commission final report doesn’t exactly make for light reading. Fortunately, we’ve cut to the chase with the key recommendations and how they’ll affect you.

Below we’ve outlined the biggest changes recommended by the Honourable Kenneth Madison Hayne AC QC in the banking and finance Royal Commission’s final report.

Keep in mind that these are only recommendations – the government of the day will still need to pass them, most likely after a May federal election.

1. If you want to buy property

Perhaps the biggest recommendation from the report is to ban trail commissions for mortgage brokers on all new loans by July 1st 2020.

Mr Hayne has recommended switching to a consumer-pays model whereby borrowers foot the bill – not the banks.

The thing is, mortgage brokers have historically created a lot more competition within the industry by bringing ‘second tier’ lenders into the frame.

However, if customers are forced to pay a $2000 fee to engage the services of a mortgage broker, 96.5% of people say they won’t use them. That’s according to independent research cited by the MFAA.

Instead, people will head into their local bank branch – most likely a Big Four – for a loan.

Now, call us cynical, but what may happen over time is that banks start to increase mortgage rates because there is less competition.

2. If you take out insurance

In total, there were 15 recommendations relating to the insurance sector – many of which will hinge on a review by ASIC in 2022.

Mr Hayne has suggested that grandfathered commissions on all financial products should be scrapped and that commissions relating to life insurance should be reduced before being completely eliminated following the 2022 review.

If this were to occur, a scenario may play out similar to the mortgage broker example above – there will likely be fewer financial advisers offering services in this space and competition may be reduced.

It could also see more people rely on insurance from their superannuation fund, even though many of these policies are full of exclusions, poor definitions and poor claims handling.

There were, however, some positive recommendations when it came to insurance.

For instance, Mr Hayne has recommended replacing “the duty of disclosure with a duty to take reasonable care not to make a misrepresentation”.

In a nutshell that means the onus will be on insurance companies to get all relevant information from you when they’re selling insurance, instead of later penalising you if you forgot to mention something you didn’t think was all too important.

3. Your Superannuation

Mr Hayne has recommended that each person should have only one default superannuation account.

“Because some employees, especially those who are young and working part-time, do not make informed choices about their superannuation arrangements, default arrangements are essential,” he wrote.

Mr Hayne also recommends banning advice fees from MySuper accounts and limiting deduction of advice fees from choice accounts.

He also recommended “no hawking” when it comes superannuation accounts (as he did with insurance products too).

“Superannuation is not a product to be sold. It is a compulsory product,” he wrote.

Final word

Despite 61% of submissions to the Royal Commission relating to the banking sector, as you can see, many recommendations will affect the mortgage, insurance, superannuation and financial advice industries.

If you want to find out more about any of the above, don’t hesitate to get in touch. We’d be more than happy to talk you through it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Mortgages not holding Aussies back from travel

It’s no secret that Australians love to travel. The thing is, we also love to own our own home. Can you do both? It turns out most people can!

There’s this myth that once you take out a mortgage you’re locked down in Australia for good. Or at least for the foreseeable future.

It’s no doubt a major deterrent for young people embarking on home ownership.

But it turns out that’s simply not true: where there’s a will, there’s a way.

Research just out from InsureandGo shows most people (55%) go on at least one overseas holiday within three years of buying their home.

More interesting still, 21% of home owners travel overseas within their first year of buying a home, and 39% within two years.

Then there’s the 10% who are super keen to scratch that travel bug itch and go jet-setting within six months of buying a home.

How do they make it work?

Cheap airfares are a good start.

Nowadays you can get ahead of the pack and receive free email notifications when a jaw-dropping deal is going through services such as I Know the Pilot and Scott’s Cheap Flights.

They’ll send you an email alert when they’ve found a cheap airfare that matches any airports you’d like to depart from and arrive at.

Don’t forget to see Australia!

Rest assured that if the budget is tight, there’s always Australia to explore.

We take it for granted sometimes, but don’t forget that 8.8 million people travel from all across the world to visit our beautiful country each year.

The first few years of your mortgage may serve as the perfect chance to join them in exploring our vast continent.

In fact, that’s exactly what half of all new home owners do within the first year of taking out a mortgage, according to the InsureandGo report.

You don’t have to fly across the country and fork out hundreds of dollars, either. Every state has its own beautiful coastline and national parks, many of which are situated near affordable campgrounds.

Final word

Becoming a house-owner these days doesn’t mean you have to become house-bound.

Sure, meeting your mortgage repayments will always come first. But it’s also important to give yourself and your family a much needed holiday every now and then.

By combining clever budgeting, smart saving, good deals, and a dose of discipline, you don’t have to sacrifice travel for home ownership.

To find out more about budgeting with a mortgage, get in touch. We’d love to help out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

What is a Financial Advisor and how can we help?

What is a Financial Advisor and how can we help?

Financial Advisors come in different forms, you have your all-rounders and your specialists and making sure you are sat in front of the right one at the right time is crucial to getting the correct help.

The easiest way to think about this is to think of the all-rounders as your GP, they can help you with almost everything you need when it comes to financial advice – Budgeting and Money Management, Superannuation, Investments, Personal Insurances, Debt Management, Retirement Plans, saving plans etc…

However, at certain times they will need to refer you to a specialist, to get the correct advice for your situation.

You then have your specialist who Specialises in one or two areas, much in the same way an Anaesthesiologist or oncologist does – they have specific expertise in one area and that is where they focus their time and efforts, for example – Self-Managed Superannuation specialist, investment specialist, Retirement specialists and aged care specialist. These advisors will be able to help you in their relevant speciality and refer you to other professionals when more help is needed.

So not all Advisors are created equal and it pays to find out what your Advisor is qualified and registered to give advice in, before meeting with them. Make sure you ask your advisor during your first meeting if this is an area of advice that they are familiar with.

Asics Moneysmart website has a find an advisor tool which is a great place to start –

www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register

So, at Humblebee Financial Planning what can we help you with?

We are all-rounders and can help in many areas. The easiest way for us to explain how we help is to break down our clientele into age brackets – or life stage events – and show you what we typically help these clients with:

Age 25-35 – Clients are typically first home buyers or thinking about buying, either with young families or looking to start a family. Areas of concern include:

• Savings plans – How to save for a deposit
• Money Management – wanting to get ahead early and make their money work for them.
• Family Protection – Personal Insurances – Risk Management
• Investment advice – To buy a house or not to buy a house
• Superannuation advice – Education and understanding

Age 35-55 – Clients typically have families, have debt against there home, are earning and working at there full capacity and trying to get ahead whilst also enjoying life. Areas of concern include:

• Family Protection – Personal insurance – risk management
• Money Management – How to handle the cash flow of the household – They want to get ahead but also enjoy the money they are working hard for
• Debt management and reduction strategies
• Investment strategies – how to build wealth
• Superannuation and looking towards the future

Age 55+ – Clients are typically coming towards the end of their working life, want more choice around what they do with their time, kids are grown up and moving out and they need to plan for the next stage of their life. Areas of concern are:

• Superannuation – To add to it or not to add to it
• Retirement planning – what does retirement look like? Do I have enough money? Do I want to retire?
• Debt management – How can I be debt free by retirement? Do I downsize or stay where I am?
• Investment strategies – Looking at building wealth to use in retirement outside of superannuation and the family home
• Legacy – Estate planning and what happens to my family after I am no longer here and making sure your money goes to the right people.

Everyone is different and advice given should be different to everyone, it should consider your personal circumstances and goals and be tailored to suit you. At Humblebee Financial Planning we use a goals-based approach to our advice, working with you on what your goals are now and, in the future, and tailoring our advice to help you achieve your goals.

If you feel that we could be well placed to help you, contact us for a complimentary first appointment and see how we can.

Luke Grundy

0401637907

luke@humblebeefinancialplanning.com.au

Choosing the right investment ownership model

We all know that choosing the perfect investment and getting the timing right are both critical. What people often overlook, however, is selecting the right investment ownership model.

How you own your investment – and with whom – is a decision you’ll want to nail from the outset.

That’s because the asset ownership structure you select can dictate the tax you pay, access to finance, estate planning, control of your investment, costs associated with maintaining it, and the risks you face.

Today we’re going to take a quick look at your options when it comes to asset and investment ownership.

Personal ownership – sole or joint

Sole ownership is the complete ownership of an asset by one individual. This is perhaps the simplest and least costly form of asset ownership.

You’re entirely responsible for the asset, which means you carry full liability for all debts, finances and taxes.

Joint ownership involves two or more individuals owning a share of the asset.

Depending on your situation there may be tax benefits or tax discounts associated with joint ownership. For example, joint ownership of a property by a husband and wife may qualify for a tax benefit. You may also receive a 50% discount on Capital Gains Tax (CGT).

One of the main disadvantages of personal asset ownership is that it offers little protection for your investment if you become bankrupt or are sued.

Trust ownership

A trust is an investment structure that obliges a person, or group of people (trustees) to hold assets for the benefit of others.

Trust ownership can offer additional asset protection, allow for profit sharing and tax benefits, including a 50% discount on CGT. It can also help with estate planning and reduce the costs associated with transferring asset ownership.

Trusts, however, can be costly and complicated to establish and are also associated with more reporting and administrative responsibilities than personal ownership. Depending on the trust structure you select, it can also be more complicated to secure an investment loan.

Company ownership

A company can own a stake, or the entirety, of an asset.

Again, company ownership can help protect assets from personal losses and liabilities. It can also deliver tax benefits because any income and capital gains is taxed at the company tax rate of 30% (which may be significantly less than your personal marginal tax rate).

On the other hand, companies miss out on the 50% discount on CGT that is possible through personal or trust ownership.

Your control over the asset – including when you buy and sell – may also be diluted via a company structure.

Superannuation ownership

Investing through a superannuation structure can deliver significant tax benefits as any income earned via super can be taxed at as little as 15%. CGT from investments via super may be discounted by a third.

Investing through your super is also an estate planning strategy that many people consider.

That said, there are complex rules around super contribution caps, tax treatment and borrowing arrangements when investing via super. The location, type and liquidity of your investment may also be restricted.

Get in touch

Understanding which ownership option is the best fit for you and your asset can be complex. As you can see, it’s not straightforward – there’s a lot of considerations and no two situations will be the same.

So if you want to get it right from day dot, get in touch.

We can take into account all relevant information to help you decide what option to choose so your asset is owned in the most beneficial way.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Black Swan events: never try to predict the unpredictable

Hindsight is 20/20, right? The Global Financial Crisis, Trump’s election and the rise and fall of Bitcoin all seem obvious enough in retrospect. But here’s the thing: very few people ever make money from random and unexpected events, despite many trying!

Black Swan events are ones that are almost completely unpredictable yet have profound and lingering effects on people – not to mention a disproportionate amount of people trying (and failing) to cash in on them.

The origin of the term

The term was recently popularised by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader.

But it dates back much, much further than that.

In fact, the term ‘Black Swan’ dates all the way back to the 2nd century when it was coined by Roman poet Juvenal.

It was written in Latin, and when translated to English, went something along the lines of “a rare bird in the lands and very much like a black swan”.

The phrase was pretty common for something ‘impossible’ in England during the 16th century, when it was still assumed that only white swans existed.

However, in 1967 Dutch explorers became the first Europeans to see black swans: in none other than Western Australia.

As a result, the term morphed into a saying for something that was once deemed impossible but later disproven.

What is a Black Swan event nowadays?

As mentioned earlier, Taleb popularised the phrase once more around the turn of this century.

He did so with his book ‘Fooled By Randomness’, which concerned financial events, and again with his 2007 book ‘The Black Swan’, which highlights events outside the financial sphere.

Taleb says Black Swan events are made up of three key attributes.

First, they are an outlier – basically an event that’s so outside the usual that no past indicators could have pointed to it as a possibility.

Second, they have catastrophic ramifications on the world. And third, despite being completely unpredictable events, we humans try to rationalise them as something that should have been completely predictable after the fact.

Examples of Black Swan events

– The unprecedented rise and fall of Bitcoin in 2017.

– Donald Trump’s run to the White House in 2015-16.

– The Global Financial Crisis in 2008.

– The dot-com bubble burst of 2001.

So why don’t Black Swan events make for good investments?

In a nutshell: the horse has usually already bolted.

You see, by nature Black Swan events cannot be predicted.

To successfully predict one, you’d need to either get extremely lucky, or bet on a large number of speculative investments until one finally worked out – and neither are sensible investment strategies.

And by the time people usually want to put their hard earned money towards it, so has every other man and his dog and the market becomes extremely unstable (think Bitcoin 2017).

That’s why when you invest you shouldn’t waste time, money and effort trying to predict the unpredictable.

Because if you see something that walks like a Black Swan and grunts like a Black Swan, it probably is. And it’s therefore worth checking with us before you put your savings on it.

Where you should focus your attention

Your focus should always remain on the things you can control.

They include your risk profile, investment horizon, fees and tax structures.

By planning ahead you can stick to the things you know and leave the speculation to those who have left their run towards retirement way too late.

And if you haven’t started planning your run to a blissful retirement yet? Get in touch. We’d love to show you how you can live your ‘golden years’ without having to try and get lucky striking gold.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

6 ways to bridge the Super gender gap

The superannuation gender gap has narrowed over the past decade, but more work still needs to be done. Here’s how you can help close the gap even further.

Women have narrowed the superannuation gender gap by making significantly higher voluntary contributions to their funds as they near retirement, latest Rice Warner research shows.

This is backed up by Roy Morgan research, which shows the average superannuation balance held by females in 2008 was $68,000 – just 59.1% of the male average of $115,000.

Since 2008, however, awareness campaigns have helped increase the average female superannuation balance to $127,000 – 72.2% of the average male average balance ($176,000).

Why the gap?

The recent report from Rice Warner says the superannuation gender gap is a result of many factors, including lower salaries, lengthy career breaks, and more periods of part-time work.

“Unfortunately, this trend is exacerbated, as statistics show that women retire earlier than men, and live nearly three years longer, giving them a longer period in retirement over which to spend their retirement benefit,” the report states.

Leaving it late

Women can – and do – narrow the gap by making higher super contributions later in life.

While both sexes tend to make similar voluntary contribution amounts before they hit 50-years-old, from then on females tend to make significantly higher voluntary contributions.

In fact, for the 60 to 64-year-old cohort, females tend to make $37,000 in average voluntary contributions compared to $22,000 for males – a $15,000 difference.

Still plenty to be done

In the absence of immediate social change and equality, here are six key strategies you can use to help close the gap.

1. Start making voluntary contributions earlier in life. The laws of compounding interest mean that $10,000 in voluntary contributions in your 30s grows into a much bigger nest egg when you reach your 70s than it does if you start in your 50s.

2. Leverage Low Income Superannuation Tax Offset (LISTO). Low-balance members can receive up to $500 in government contributions per year with females being favoured for these contributions as a result of their lower balances.

3. Leverage government superannuation co-contribution. The government makes available $500 per annum to match contributions for low to medium income members who make personal contributions.

4. Salary sacrifice. Check with your employer to see if they will let you salary sacrifice into superannuation. Doing so can boost your retirement nest egg in a tax effective way.

5. Reconsider your risk appetite. A 2016 NAB survey found that women across the country are “missing out on tens of thousands of dollars in savings during their lifetime because of their tendency to shy away from taking appropriate levels of risk in their portfolio”.

6. Check how your fund is performing. Don’t settle for any old super fund. Do a little digging to see how its performance stacks up against its competitors. APRA just announced that it will turn its attention towards underperforming super funds – but don’t wait for them, get on the front foot yourself!

Get in touch

If your household would like help closing the superannuation gender gap then don’t hesitate to get in touch.

We’d be more than happy to help you get the ball rolling on any of the above options – as well as a few others we have up our sleeve – to help set you up for a comfortable retirement.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

2019 Federal Budget Snapshot

2019 Budget Snapshot!

Treasurer Josh Frydenberg’s first Budget focuses on reducing the tax burden for the majority of working Australians, greater superannuation flexibility for retirees and a one-off energy relief payment for eligible income support recipients.

Note: These changes are proposals only and may or may not be made law.

Personal tax savings
Immediate tax relief
Low and middle-income earners will receive a tax saving of up to $1,080 per person. This can be claimed in the 2018/19 tax return.

Preservation of tax relief for low and middle-income earners
From 1 July 2022, the 19 per cent tax bracket will increase from $41,000 to $45,000, with an increase in the low-income tax offset from $645 to $700.

Reduction in key marginal tax rate
From 1 July 2024, the current 32.5 per cent marginal tax rate will drop to 30 per cent for income between $45,000 and $200,000.

Minimisation of bracket creep
The Government estimates that from 1 July 2024, 94 per cent of taxpayers will have a marginal tax rate of no more than30 per cent.

Greater superannuation flexibility for retirees

Changes to voluntary super contributions

Australians aged 65 and 66 will be able to make voluntary super contributions without meeting the Work Test – removing the need for people of this age to work a minimum of 40 hours over a 30 day period.

Increasing age limit for spouse contributions
The age limit for people to receive contributions made by their spouse on their behalf increases from 69 to 74 years.

Extended access to bring-forward arrangements
People aged 66 and under will now be able to make three years’ worth of non-concessional contributions to their super in a single year, capped at $100,000 a year.

Small to medium business
Increase in instant asset write-off
The threshold for the instant asset write-off increases to $30,000 from $20,000. It has also been broadened to include businesses with up to $50 million in turnover, making it available to around 3.4 million Australian businesses.

Pensioners and welfare recipients
Energy Assistance Payment
Over 3.9 million eligible Australians will automatically receive a one-off payment of $75 for singles and $125 for couples (combined) to assist with their energy bills. This payment will be exempt from income tax and not counted as income for social