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.

Making the most of the instant asset write-off

Cash flow is like your daily hit of caffeine. You don’t really notice how important it is for your business until you’ve got to try and operate without it. Today we’ll look at how the recently expanded instant asset write-off initiative can help out in that area.

Budget week is always hectic.

You’re bombarded with dozens of different promises and initiatives – so much so that it’s near impossible to keep track of them all, especially ahead of an impending federal election.

So today we’re going to home in on an initiative that was put into place by the government within 24 hours of the budget being released – the instant asset write-off increase.

What is the instant asset write-off?

Haven’t heard of instant asset write-off yet? You’re not alone. Research shows just half of businesses know about it.

The instant asset write-off allows small and medium businesses to claim immediate deductions of up to $30,000 for new or second-hand depreciable asset purchases.

This can include things like vehicles, tools and office equipment.

Now, the initiative has been around since 2015, but the threshold was recently increased from $25,000 to $30,000 for purchases made from April 3, thanks to the federal budget.

That means your business is eligible to claim an immediate deduction for the business portion of each asset that costs less than $30,000 if:

– you had a turnover less than $50 million (increased from $10 million after budget night), and

– the asset was first used (or installed ready for use) in the income year you are claiming it in.

Assets that cost $30,000 or more can’t be immediately deducted.

How can it help with cash flow?

Before you go out and buy a $29,990 company car, there are a few things you’ll need to consider.

The first of which is what impact this purchase may have on your cash flow.

Now, the good news is you can a business loan that will take into account your business’ current cash flow situation.

The even better news is that by using the instant asset write-off initiative, you can get the entire depreciation deduction back next tax year, which is just around the corner in July.

That’s much better for your business’ cash flow than the old fashioned way where you’d only be able to claim a small proportion each year.

These funds can then be used to further expand other parts of your business – so it’s definitely worth thinking about before the financial year ticks over on June 30.

Other key considerations

It’s important to keep in mind that “write-off” doesn’t mean “free asset”.

Basically, this initiative allows you to immediately claim all the tax deductions you would have claimed over the life of the asset.

As we touched upon earlier, getting this cash back sooner means you can re-inject it straight back into other parts of your business.

Also, say the asset will be used 80% of the time for business purposes and 20% for personal usage (examples might include a laptop or a car) then you can only claim deductions for 80% of the asset.

It’s also worth noting that if for example, you buy a $40,000 ute, half of which will be for used work and the other half for play, the asset won’t be eligible for you to immediately write-off the $20,000 business proportion.

Finally, you can take advantage of the instant asset write-off multiple times – the cap is $30,000 per purchase, not overall.

This means you can buy multiple assets that are worth under $30,000 each.

Final word

As we touched upon earlier, for many businesses it can make more sense to take advantage of these changes towards the back end of the financial year.

So if you’d like help obtaining finance that’s friendly on your business’ cash flow then please 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.

5 ideas to help first home buyers break into the property market

While housing affordability is improving across the country, for many young first home buyers cracking into the property market can feel like breaking into a fortress. Here are five ideas that can help bust down that door.

Housing affordability for new mortgage borrowers in Australia will continue to improve over the next 12 months because of declining housing prices, shows the latest research from Moody’s Investors Service.

That said, there’s no denying that hopeful first home buyers have a much harder time breaking into the market than those who house-hunted in decades past.

In fact, the dwelling price to income ratio showed a 78% increase between 1980 and 2015.

With that in mind, here are five tips to help you bang down the property market front door.

1. Consider “rentvesting”

Rentvesting is a term used to describe the act of renting a property in the neighbourhood you’d like to live in, while purchasing an investment property in a more affordable neighbourhood and renting it out to a tenant.

That way, you’re able to live where you want while building equity in a home at the same time.

This tactic has become so popular in recent years that conventions, seminars and dedicated property investment businesses have begun popping up to help people do it effectively.

2. Take advantage of government schemes and incentives

Government schemes and incentives, such as the First Home Owners Grant (FHOG), can be a great way for first-time home buyers to offset some of the cost of purchasing their first home.

Similarly, many states and territories offer stamp duty discounts for first home buyers, which can also save you thousands of dollars.

Each state and territory has different rules around who is eligible to apply for them, but by and large, they make buying your first home more affordable.

3. Live at home while you save for a deposit

As unappealing as it may first seem to live with your parents while saving for a home, the idea becomes a lot more digestible when you consider that the national median rental price in Australia is $450 a week.

That’s $23,400 a year.

If you include all the money you’ll save by splitting food and utility costs (including water, gas, electricity, internet and phone bills) with your parents, you could save up to $30,000 a year.

4. Share the cost of ownership with a friend

If the property you want is out of your reach, why not consider going in on it with a friend or relative?

Splitting the cost of a home purchase with another person can allow you to build equity in the home of your choice, without overstretching your resources.

Just keep in mind that you’ll want to speak with a lawyer and draw up an agreement regarding ownership and mortgage liability, plus things like how maintenance costs will be met and what happens if someone wants to sell in future.

5. Rent a room in your house out to a tenant

If you want to own the property you live in and don’t want the mess that can come with sharing ownership with another individual, then renting out a room in your house can be another great option.

By renting out the room for $200 a week you can make $10,000 a year – plus you’ll save on utility bill costs.

If you’re not too fond of having a full-time housemate, consider creating a guestroom and leasing it out on Airbnb.

Just be sure to take out appropriate insurance and keep accurate records of the income you earn from Airbnb as the ATO is cracking down on undeclared income from the platform.

Final word

The Australian housing market may have cooled off in recent months, but pricing is still high enough that it can be very challenging for first-time home purchasers to break into the market.

By getting creative with some of the tips in this post, you’ll stand a better chance at turning your dream of owning your first home into a reality.

If you’d like any other help cracking into the property market then please get in touch – we’d love to help out any way we can!

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.

Will the RBA cut the cash rate this month?

We don’t like to dust off the old crystal ball and speculate very often, but there’s been so much noise about whether the RBA will cut the official cash rate this Tuesday that we feel compelled to address it.

30 meetings in a row.

That’s how long the RBA has kept the record low official cash rate at 1.5%. All the way back to August 2016.

So with an uninterrupted streak like that, why are we putting this article out now?

Well, it’s fair to say that speculation has hit overdrive that the RBA will make a cut when it meets on Tuesday. But it’s certainly far from a given.

So today, let’s look at some of the main reasons for a cut to the official cash rate, some of the main reasons against, as well as what a rate cut might mean for your home loan.

For: Inflation (or lack thereof)

Australian Bureau of Statistics data showed inflation was totally static in the March quarter, with the consumer price index at 0.0 per cent, bringing the annualised rate down to 1.3 per cent.

The unexpected reading has financial markets and pundits predicting an increased likelihood that the RBA will cut the cash rate this Tuesday.

Basically, the thinking is that by cutting the cash rate, the RBA could give the economy a good ol’ hit with the defibrillators.

ANZ Bank chief executive Shayne Elliott backed the case for cutting official interest rates to a new record low, saying it would boost economic activity and give “breathing space” to people struggling to make their home loan repayments.

“Maybe it will just give a bit of juice into the economy, and get a bit more employment, and put a bit of money back into people’s pockets,” Elliott says.

That said, some people doubt that an official rate cut would be passed on to mortgage holders, as we’ll touch upon later.

For: Falling house prices

Nationally, we’re amidst the worst annual housing price fall since the GFC.

Over the year, median prices nationally fell by 7.2% in average weighted terms.

The declines in the combined capital cities over this period was even larger at 8.4%.

CoreLogic’s research director Tim Lawless says a rate cut could help give the property market a bit of a boost.

“The prospect for lower interest rates is another factor that could support an improvement in housing market activity later this year,” says Lawless, who also adds that “the worst of the housing market conditions are now behind us.”

Against: The federal election

Perhaps the biggest reason why we may not see the RBA announce a rate cut this month is because we’re in the middle of a federal election campaign.

“Changing monetary policy during an election risks the central bank being caught up in a political fight,” says the AFR’s senior economics writers in an analysis piece.

“The RBA last raised interest rates during an election in 2007 and John Howard and Peter Costello never forgave then-governor Glenn Stevens. Howard had campaigned on keeping rates low.”

As we all know, Howard lost that election to Kevin Rudd, and the only other time there was an official cash rate change during a federal election was in 2013 – when Rudd lost to Tony Abbott.

So the track record for rate changes during election campaigns is not good for incumbents.

Against: Would lenders pass on the cuts?

So what would a cut mean for your home loan?

According to an analysis commissioned by the AFR, lenders would keep rates the same, or pass on only half the rate cut. That’s what they did after the last cash rate cut in July 2016, and it’s another reason the RBA might not end up making the cut this month.

If they did, however, and half the cut was passed on, the typical monthly repayment on a $1 million standard variable loan would reduce by just $65, the analysis finds. On the average $400,000 loan, the reduction would be just $26 a month.

Final word

So those are the main reasons for and against a cut to the official cash rate.

What’s a little more clear cut, however, is that most economists are predicting that if it doesn’t happen this month, it will most likely happen in the months to follow – and perhaps twice before the year’s end.

If you’d like to know more about what these potential upcoming cash rate cuts could mean for you and your family, please get in touch – we’d love to run 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.

The dangers of chasing investment returns

It can be a hard temptation to avoid; you sit there and watch while other investments outperform your own, and you begin to wonder… why don’t I just invest my money there instead?

The reality, though, is that chasing investment returns is a dangerous strategy that can wind up backfiring on you over the long term.

A common investing scenario

Meet Bill and Anna, a typical young couple who have invested $1,000 in shares.

During a particularly tough investing year for shares, the market happens to be down 30%.

Bill notices that fixed-income investments like bonds actually gained 5% over the year. He and Anna agree to sell their shares and buy bonds instead.

Bill and Anna are thrilled to see that, the following year, their bond investments net them a 7% return.

After dropping to $700, their investment is now worth $749.

There’s just one little problem. During the same period, shares rebounded and returned 37%.

If they had just left their money where it was, they would have $959 instead of the $749 they ended up with as a result of jumping ship.

Think of it like this: have you ever driven on a multi-lane highway, only to find yourself stopped dead in a lane while the others move forward around you?

Then, when you finally get fed up and switch lanes, your new lane stops while your old lane begins moving forward again.

It’s infuriating, and it’s what happens when you chase investment returns.

Now, let’s look at a more scientific example that illustrates the true risk of chasing performance instead of sticking to your decided-upon investing strategy.

Vanguard study

Vanguard is a US fund management company, and one of the largest in the world.

In an effort to quantify the true damage done to a portfolio by chasing investment performance instead of simply buying and holding, they commissioned a decade-long study that spanned a range of investments, from riskier small-cap funds to more reliable large-cap options.

During this study, they measured the results achieved by buying and holding an average cross-section of shares, compared to purchasing only top-performing investments from the past three years, and selling any investment that underperformed three years in a row.

What the company found was that, across every single type of investment category, buying and holding yielded a higher return than chasing investment performance, often by 2-3%.

Over an extended period of time, that variance can have a massive impact on the size of a family’s retirement nest egg.

You can view the full results of Vanguard’s study here.

The 2007-8 Global Financial Crisis

While the Bill and Anna example mentioned above is fictitious, the truth is that many families followed nearly the exact same path during the Global Financial Crisis of 2007-8.

They panicked when the market dropped, sold their investments in favour of safer ones, and then subsequently missed out when the markets inevitably rebounded.

While it can be difficult to manage when you’re watching your own investments drop and everyone around you is scrambling to sell, taking a contrarian approach and actually investing a little bit more in your planned investments while they’re down can actually be a great strategy to consider.

As the old adage goes, “What goes up, must come down”.

In investing, however, the opposite rings true as well. And those who are able to weather the storm and either leave their investments intact – or even add to them a little bit – are often the ones who benefit the most.

Final word

It’s human nature to want to chase the shiny new object that seems to be outperforming everything else.

The data doesn’t lie, however; those who do decide to chase these glittering prizes, do so at their own peril.

To maximise your chances of securing the greatest long-term returns possible, it’s tough to beat a simple, patient, buy-and-hold investing strategy.

If you’d like to know more, then 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.

Protecting Your Super package – What the heck is it?

Recently, the Federal Government introduced the Protecting Your Super package, designed (in theory) to ensure that members of Super funds are not paying for insurance cover that they do not know about or premiums that inappropriately diminish their retirement savings.

Whilst we think it was a stupid and short-sighted change – some people who don’t respond will lose the only insurance cover they have – the reality is all of us (myself included) need to take action to keep the cover we have in place.

 What the heck is it??

In a nutshell, the ‘package’ says that any Super account, with Insurance in it, that hasn’t been active for a continuous period of 16 months, will have that insurance cancelled automatically unless the member (you guys) tell the Superfund that you want to keep the cover in place.  You will then receive a notification from your super fund to remind you about this insurance every 12months. The cancellations take effect from 1^st July 2019.

This may not affect all of you, but a large number of our clients have some form of insurance cover through a Super Fund that either doesn’t receive contributions into it or hasn’t received a ‘top-up’ rollover into it, over the past 16 months.  There are various different reasons as to why you would want to keep these insurances (i.e. no medical restrictions, can’t get new cover due to medical underwriting, or simply better value for money than newer policies.)

What do we need to do?

Ok… so what you need to do now, will depend on the Superfund your insurance is with… some of them get you to confirm you want to keep the cover in place, even if you’ve got a regular rollover going into the fund to ‘top’ it up.  Some will only need you to confirm you want to keep the cover if no activity has happened in the fund for 16 months.

So… when you get an email from one or more of your Super funds with a subject line like “Your ABC insurance will be switched off” or “Your insurance cover with ABC is about to be turned off”… you need to take the steps (as outlined in the email) to “Keep my cover” or any similar language they use.    Some of them will make it very easy to do, some less easy… but most should be as simple as a couple of button clicks.

Please make sure you take the steps to ‘keep my cover in place’…. Because if you don’t and it gets cancelled, you may not be able to put it back in place, if your circumstances have changed.

 If in doubt… Contact us here at Humblebee Financial Planning and we can review your current insurances and make sure you have the best protection in place!

Adulting: mapping out your financial road to retirement from your 20s

‘Adulting’ is a real thing. It has even made it to the Oxford dictionary where it’s defined as “behaving in a way characteristic of a responsible adult, especially the accomplishment of mundane but necessary tasks”.

So today we’re kicking off a series of articles on adulting from a financial perspective.

Starting from your first decade of adulthood, we will step you through what you should be focussing on financially at each life stage.

Think of it as a financial road map that will steer you towards your ideal retirement.

Your 20s and early 30s

When you’re in your 20s and early 30s, retirement can seem a long way off.

However, with a little bit of forward planning when you’re young, you can set yourself up to really enjoy your ‘golden years’.

Here are 5 steps to help you get the ball rolling when you’re in your 20s and early 30s.

Checkpoint 1: Set goals and create a budget

Planning for your financial future starts with setting short, medium and long term goals. And yep, that includes thinking about retirement.

When do you want to retire? How much money will you need when you get there? What kind of lifestyle do you want when you retire?

It might seem like you’re getting ahead of yourself, but think about it this way: you can’t kick a goal if you don’t know where the goalposts are.

Once you have your goals figured out, create a budget that documents all of your spending each month.

ASIC has a handy budget planner that can get you started. We can also help you put a more comprehensive one together.

Checkpoint 2: Build healthy spending habits

Now that you’ve got a budget, it’s important to respect it.

Don’t spend more than you’ve budgeted for in each category, such as food, entertainment or (gulp) alcohol.

Every time you do, you’re shooting your future self in the foot.

Remember though, this isn’t about cutting out all the fun – it’s about finding a balance between enjoying yourself now, and really enjoying yourself later. So make sure your budget includes treats for the here and now.

When it comes to debt, try to never keep a negative balance on your credit card. These cards carry insanely high-interest rates, and you’ll be accomplishing nothing more than giving your hard-earned money to the credit card company.

Checkpoint 3: Start investing now, not later

By investing even a little bit of money now, you give compound interest a longer time to work its magic.

The best way to illustrate this is by looking at an example featuring two brothers we’ll call Lewis and Clark.

Lewis decides to start saving early, and invests $2,000 a year for 10 years, then does nothing at all for the next 20.

Clark, on the other hand, procrastinates for 10 years, then invests $2,000 each year for the next 20 years. Both brothers earn a clean 7% interest each year.

Who do you think ends up with more money after their 30 years are up?

Well, Clark did pretty well. He put a total of $40,000 of his own money in and ended up with $81,991 at the end of it all.

Lewis on the other hand, only put $20,000 of his own money in, but after the same timeframe he ended up with $106,930 – over $20,000 more than his brother Clark!

That’s the power of compound interest.

The moral of the story is: start investing now, even if you can only afford a little bit, and you’ll thank yourself later.

Checkpoint 4: Learn the basics of investing

It’s ok to start investing by putting your money into a savings account, but before long you’re going to want to move your money into an investment vehicle that works harder for you.

Take some time to research the different types of investments that exist in the market, and give some thought to which ones might be best for your needs.

Do you want to start a property portfolio? Perhaps a few steady performers on the ASX 100 have caught your eye? Or maybe you like the look of ETFs?

Whatever you choose, make sure you do your research beforehand. And then start putting your savings towards it!

If you need a starting point on where to conduct your research, get in touch and we’ll point you in the right direction.

Checkpoint 5: Choose your own superannuation fund

When it comes to your superannuation, it pays to never settle for the default option. You want to choose an option that best reflects you and your risk profile.

As such, here are some quick tips to help you choose a super fund.

– Identify your risk level: Are you a ‘slow and steady wins the race’ kind of person? Or are you willing to accept a little more risk for the potential of higher returns?

– Create a shortlist: Narrow the field to make the task less overwhelming. Super comparison websites can help you refine your list, but you should never make your decision on a website rating alone.

– Look at the long-term performance: Try and pick out a fund that has performed consistently well over 5-10 years, not a fund that had a bumper year in 2018.

– Compare fees and costs: ASIC has written this report to help you avoid the sting of hidden fees and costs.

– Any additional benefits or services? Before you decide to make the move to a particular super fund it’s worth calling the fund directly to see what other services or benefits they offer.

Final word

Saving for retirement can seem daunting, especially in your 20s and 30s, but it doesn’t have to be.

Start by taking baby steps: set a goal and budget, spend wisely, and save whatever you can afford each month. Before long you’ll start to see progress.

And of course, educate yourself! Be sure to check out our next article on this series on adulting, which shifts the focus to your mid-30s and 40s.

If you have any questions in the meantime, don’t hesitate to 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.

So, you’re thinking of starting a family! Let’s get Financial.

Starting a family is one of life’s big decisions if you are lucky enough to get the chance to plan this or even if you have just received a happy surprise there are a few things you need to think about in a financial sense before Bubs comes along.

Here are our top five tips on what to start planning:

1.Planning for one Income

This may seem like a very obvious place to start but a lot of people don’t take this into account and don’t plan well enough for this. If you are currently struggling to pay your bills with 2 salaries then life is only going to get harder when you go down to one income.  Even if you are currently comfortable with your budget, losing a salary is going to have a major impact.

What you need to do is really understand what it costs you to live at the moment and start getting rid of anything that you do not really need in your budget, then you need to budget using one salary and potentially any other income you may receive and see what your budget looks like then, if needed start reducing more costs and repeat until you have a budget you can work with.

2. Emergency Fund

Whilst an emergency fund is always something that we recommend for our clients, when you are planning for a family this is imperative.

Babies are expensive and also, they are very unpredictable. There are always costs that you haven’t foreseen and your best-laid plans are always waylaid. Having an emergency fund will relieve a lot of stress from the situation.

3. Government help or not?

Depending on your circumstances you will receive help from the government in the form of Family Tax Benefit A & B, Newborn upfront payment, Parental leave payment and Dad and Partner pay.

There rules around who is eligible for the above payments, but finding out if you are and then factoring this into your budget as soon as possible will help relieve the stress of having to handle all this once you have a newborn in your care as well.

4. How flexible is your employer?

Understanding and working through the rules and payments that your employer will give you is an important point of the financial planning part of starting a family. How long will your employer pay you for whilst on Maternity leave? Do they offer extended Maternity leave at a reduced pay? Do they offer Paternity leave for your partner? How flexible is your work arrangement when you return to work and what are your options around this?

A lot of people become stressed and scared to discuss these subjects with their employer out of fear of them being looked at differently if they are looking to take time off – but understanding your rights whilst on Maternity leave is crucial.

5. Returning to work – Does it make sense?

The first question we ask new mums about returning to work is –

“Are you returning to work for financial gain, or for your own personal gain?”

What we mean by this is, is the reason for you returning to work because you need the extra money to help out around the house and with the budget, or are you returning to work because it will help your career or you just want to be around other adults and take back some of your own life?

Either is perfectly acceptable answers and the choice is always a personal one, however from a Financial Planning standpoint the planning element is vastly different.

If you are returning to work for personal reasons then the money you are gaining from the work isn’t the main priority. However, if financial gain is what we are after we need to look at the cost of care whilst you are in work, does it make sense to go back 3 days or 5days – what does the cost of childcare look like and are you earning more than the cost of childcare. Is the financial benefit you are gaining worth it?

As with everything we do with our clients, all of these questions need to be answered by you and the advice based on your relevant circumstances as each person’s family and wishes are different from the next.

The ATO has some amazing resources on this very subject and Centrelink can be very helpful as well, check out this website below for a good starting point:

https://www.humanservices.gov.au/individuals/subjects/having-baby/birth-your-baby

As always we’re here to help, if this is a decision you are looking to make or a decision that has recently been put on you then do not hesitate to come on in for a coffee and a chat and find out how the team at Humblebee Financial Planning can help you.

Luke

Principal Advisor

Humblebee Financial Planning

info@humblebeefinancialplanning.com.au

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 the re-elected Coalition government has promised

No doubt, like most, you’re suffering from a bit of election fatigue. But stick with us – here’s one last article that explains what you can expect from the 46th parliament of Australia.

With the Coalition securing enough seats to form a majority Morrison government, this week we thought we’d recap a number of key election promises and how they may impact your financials.

Now, we understand that politics can be somewhat of a … polarising issue, especially straight off the back of a hotly contested election campaign.

So we’ve done our best to take the politics completely out of this and just break it down into simple facts on what‘s been promised moving forward.

1. The big election issues that will remain unchanged

Perhaps the biggest talking point from this election is not what’s changing, but what’s staying the same.

Labor had entered the election campaign promising to halve the capital gains tax discount for investments entered into after 1 January 2020, and limit negative gearing to new housing.

However, the re-elected Coalition government opposed both these policies, so expect them to remain unchanged.

Labor had also planned to abolish the franking credit refund, which would have had an impact on shareholders and self-funded retirees. However, the Coalition campaigned strongly against Labor’s plan.

2. Tax relief

This is a bit of a tricky one.

The Coalition’s pledge to cut personal income tax was perhaps its biggest election promise.

Now, the good news is that last year the government passed a $530 tax cut for people earning up to $90,000 this financial year.

The bad news, however, is that it looks unlikely that the government will be able to pass legislation before the end-of-financial-year deadline to provide an extra $550 in tax relief.

That’s because it’s extremely unlikely that federal parliament will return before June 30, as the writs for the election won’t be returned until late June.

That said, the federal government is looking into other options for delivering the tax cuts, such as having the ATO retrospectively amend assessments once legislation has been passed.

3. First Home Loan Deposit Scheme

It was a policy announcement made late in the election race, but it will be welcomed by many young first home buyers eager to crack the property market.

Up to 10,000 first homebuyers will be given a leg-up into the property market under the First Home Loan Deposit Scheme.

The scheme, which will commence on 1 January 2020, will help eligible first home buyers purchase a house with a deposit as low as 5%, without having to pay Lenders Mortgage Insurance (LMI).

That means many first home buyers could save around $10,000 in LMI under the scheme.

4. Small business tax relief

For businesses with a turnover of less than $50 million, the government has promised to further reduce the 27.5% tax rate to 26% in 2020–21 and then to 25% the following financial year.

For unincorporated businesses with a turnover less than $5 million, they have introduced a tax discount of 8% (capped at $1,000), which will further increase to 16%.

The Coalition says this small business tax relief plan should benefit 3.4 million businesses employing over 7 million Australians.

Meanwhile, the government has also extended the Instant Asset Write-Off scheme until 30 June 2020.

The scheme allows small and medium businesses to claim immediate deductions of up to $30,000 for new or second-hand depreciable asset purchases, helping them with their cash flow.

Final word

As we’ve outlined above, there are a number of Morrison government policies that may trigger a re-assessment of your finances and tweaks to where money is allocated in your monthly budget.

Perhaps you’ll have a bit extra to pay off your monthly mortgage, small business loan, or to put away for a rainy day.

Whatever the case, if you need our help in any way, you know where to find us. We’d be more than happy to run through your query with you.

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

APRA suggests banks relax key lending criteria

Here’s a bit of good news: you may be able to borrow more for your next home loan after the prudential regulator sent a letter to the banks asking them to relax a key lending criteria.

In a letter to lenders, the Australian Prudential Regulation Authority (APRA) has proposed removing its guidance that lenders should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7% (although most ADIs currently use 7.25%).

Instead, APRA has proposed that authorised deposit-taking institutions (ADIs) use an interest rate buffer of 2.5% over the loan’s actual interest rate when assessing a customer’s ability to manage repayments.

How you’ll be assessed

CoreLogic research analyst Cameron Kusher has done a pretty good job of breaking down how you’ll be assessed under these proposed changes:

“If someone is looking to borrow at an interest rate 3.9%, the borrower would previously have been assessed on their ability to repay the mortgage at an interest rate of 7.25%,” he said.

“Now they would be assessed on their ability to repay at a lower 6.4% (3.9% + 2.5% buffer).”

Kusher added that the proposed APRA changes seem sensible given the interest rate environment with the expectation that rates will fall from here and remain lower for longer.

“Furthermore, since 2014 it has become much more difficult to get a mortgage, that is partly because of this serviceability assessment,” he said.

Why the change?

APRA chair Wayne Byres said the operating environment for ADIs had evolved since 2014, prompting APRA to review the ongoing appropriateness of the current guidance.

“APRA introduced this guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” said Mr Byres.

“Although many of those risk factors remain – high house prices, low interest rates, high household debt, and subdued income growth – two more recent developments have led us to review the appropriateness of the interest rate floor.”

Mr Byres said with interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7% floor and actual rates paid had become quite wide in some cases, and “possibly unnecessarily so”.

What does this mean for borrowers?

Mr Byres said the changes are likely to increase the maximum borrowing capacity for a given borrower.

However, he warned banks that the changes are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.

“The proposed changes will provide ADIs with greater flexibility to set their own serviceability floors, while still maintaining a measure of prudence through the application of an appropriate buffer to reflect the inherent uncertainty in credit assessments,” Mr Byres said.

What next?

A four-week consultation will close on 18 June, ahead of APRA releasing a final version of the updated guidance.

CoreLogic’s Kusher said the changes will allow some borrowers who can’t quite access a mortgage currently to get one.

“Overall for the housing market, it will mean more people are able to get a mortgage. These proposed changes in conjunction with the uncertainty of the election now behind will potentially provide additional positives for the housing market,” Kusher said.

In the meantime, if you’d like to find out if these changes might help increase your borrowing capacity, then get in touch. We’d be more than happy to run through your situation with you.

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.

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.

Getting hounded by ATO impersonators? Don’t get scammed this tax season

Tax time is just around the corner, which means ATO impersonators are pulling out their bag of tricks to try and scam you. Here are the main scams currently doing the rounds.

It’s fair to say that no one likes getting on the wrong side of the ATO. And this is one of the main reasons why ATO tax scams are so effective.

The other main reason is that these scams are becoming increasingly sophisticated and tech-savvy.

Not only do they look more convincing, but they’re also reaching more people through a wider number of distribution channels, such as SMS, robo-calls, and emails.

Below we’ve outlined some of the latest scams to ensure your monthly budget, mortgage repayments or savings account doesn’t get thrown into disarray.

Fake tax agent (phone scam)

The scam: a scammer pretending to be from the ATO sets up a three-way phone call between themselves, the victim and another scammer, who pretends to be an accountant who works at the same practice as the victim’s tax agent (the fake tax agent advises that the victim’s actual tax agent is currently unavailable).

The two scammers then work together to convince the victim that they owe thousands of dollars to the ATO, and that they need to immediately pay off the debt to avoid going to jail.

They’ll then ask the victim to pay using unusual methods of payment such as iTunes, Bitcoin cryptocurrency, store gift cards or pre-paid visa cards.

Avoid being scammed: know the status of your tax affairs by checking your details via myGov. Or hang up and independently call your tax agent or the ATO on 1800 008 540.

Extra tip: a variation of this scam is when the scammer offers a tax refund but advises that you have to provide a personal credit card number for the funds to be deposited into. Instead of the scammer depositing money they’ll instead steal funds from these cards.

Tax refund notification (SMS scam)

The scam: scammers are texting people informing them that they are due to receive a tax refund.

However, if you click on the link it will take you to a fake ‘Tax Refund’ form, where it will ask you to fill out your personal information (which the scammers will then steal!).

Avoid being scammed: the ATO doesn’t have an online ‘Tax Refund’ form and will never send you an email or SMS that asks you to access online services via a hyperlink.

Extra tip: all online management of your tax affairs should be carried out via your genuine myGov account, which you should only ever access by typing out my.gov.au into your URL address bar.

Imitating ATO phone numbers (phone scam)

The scam: the ATO is reporting an increased number of scammers contacting people using phone numbers that make it look like they’re genuinely from the ATO.

The numbers that have been appearing most frequently are 6216 1111 and 1800 467 033, but numbers for individual ATO staff members have been used as well.

The scammer will usually claim the potential victim has an outstanding tax debt and threaten them with arrest if it’s not paid immediately. Sometimes voicemail messages are left.

Avoid being scammed: remember that the ATO will never threaten you with arrest, demand immediate payment, refuse to allow you to speak with a trusted advisor or tax agent, or present a phone number on caller ID.

Extra tip: never call a scammer back on the number they provide. If you are in any doubt about an ATO call, hang up and phone the ATO directly (on 1800 008 540) to check if the call was legitimate.

myGov tax refund notification (email scam)

The scam: scammers are emailing people from a fake myGov email address, asking them to fill out an application to receive a tax refund – similar to the SMS scam above.

This scam is currently tricking victims because it displays the ATO’s myGov logo and the links look as though they’ll send you to the myGov website (spoiler: they don’t).

Avoid being scammed: do not click anywhere in these emails as they contain malicious links. As mentioned in the SMS scam, the ATO doesn’t have an online ‘Tax Refund’ form.

Extra tip: if the bottom of the suspected scammer’s email contains a line that says ‘If you feel you received this email by mistake or wish to unsubscribe, click here’, don’t click. It’s most likely another nefarious link.

Final word

If you ever suspect that you’re being scammed, don’t feel obliged to stay on the phone to be polite.

Simply hang up the phone straight away (or close the email) and either check your myGov account or directly contact your accountant or financial adviser.

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