Tap & Go -A Disconnect-

Gareth Daniels is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

Budgeting has always been a watch word for people who want to plan for a successful financial future.  At times it has even been a  bit of swear word for some as it has implications of being restrictive, a list of things that you can’t do if your serious about saving for a house, a holiday or just putting away for a rainy day.

As a planner I have always been more inclined to regard budgeting as a positive action, I need to know where my money is going in order to ensure I can keep enjoying my today whilst I build for my future.  This concept of staying on top of cashflow has never been easier or more difficult.

Apps such as Pocketbook; TrackMySpend; MoneyBrilliant; and Goodbudget mean that rather than having to keep receipts, take note in a book or fill in columns on a spread sheet you can link these apps’ to your bank accounts so they automatically track your cashflows by picking up the transactions that take place.

This is incredibly powerful particular if you really engage with the app’ as by categorising transactions (such as phone and groceries) they learn what those expenses are going forward meaning it has never been easier to see where your money is going.

And then comes the down side; the disconnect being how much you are spending and the ‘tap happy habit’ meaning it has also never been easier to spend

Talking to an older client the other night she spoke about how powerful it was to her to physically spend paper notes; she hated ‘breaking’ a $20 as she would then run the risk of frittering the rest of it away.  It was a reality check to actually take a note or even coins out of your purse or wallet and hand over your hard earned in order to buy something.

The reality is that people’s budgets don’t only blow up because of spending on big ticket items; it’s the odd $20, $10, $30, $10, $20 here and there.  And that is now a very easy thing to do without realising.

The ability to simply tap a card to complete a transaction has created a disconnect between the reality of what is being spent and the understanding or perception of what is being spent.

https://www.abc.net.au/news/2017-07-26/cash-usurped-by-credit-and-debit-cards/8744024

So what to do?  Well take the good with the bad…

  1. Understand what you earn; know your take home pay
  2. Use a cashflow management tool (like an app’) to track your outflows specifically identifying
    1. Non-negotiable expenses (rent or mortgage, utilities*, petrol, groceries etc)
    2. Set savings
    3. Discretionary spend (enjoying yourself!)
  3. Make informed choices about where your savings should go
  4. Draw a connection between how often you’re tapping and what that means for your true level of expenditure

Knowledge is power and power is control; you’re working hard and its your lifestyle; be in control of what your spending and enjoy life today while building for your future and don’t get sucked into spending too much just because the banks have made it easier to spend!

*You can make some strategic decision here too around what you ‘need’ to spend on your mobile phone and internet packages versus what you want!

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

What Financial Concerns Face Women?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

I find women are incredibly organised, they are usually good at the day-to-day finances from paying bills on time to working out the weekly budget for groceries whilst running the household and juggling a career.

We can sometimes lose focus of the long-term as we are so busy with what is happening right now. It is very important that we do consider the long-term because we all want to stop working one day and enjoy more time with our family and friends.

Statistics show that women these days live longer and retire with less super for various reasons. More than likely it is due to taking time off work to have a family and care for elderly parents therefore women often find themselves either stopping work altogether or working in a part-time capacity to allow them to juggle these responsibilities.

One of the biggest barriers for seeking financial advice is finding time to schedule an appointment when both you and your partner are available. To assist you we can be flexible around the time of the appointment and technology allows skype appointments if that is better suited to your schedule.

We have also built an online portal, my.solutions, this makes it easy to complete your profile online and upload your details in your own time. By using this tool we find it helps you get the most out of the appointment with your advisor.

At Income Solutions we are committed to helping you overcome these hurdles and assist you in taking the steps towards long-term planning and helping you to build a passive income stream for the future. A solid financial plan really does make a huge difference to helping you reach your goals.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Is Buying Time a Good Investment?

Alison Adam is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

 

I have just read a news article about the benefits of spending money on time savings items.  Talk about an alluring title – it was called “Money really can buy happiness, if spent on the right thing – time”.  One of the driving forces at Income Solutions is the belief that the amount of income you can achieve is the driving force that funds your lifestyle.  It is not the amount of capital wealth you have accumulated that will necessarily be the defining factor for whether you are able to enjoy a lifestyle of your choosing.  The term “asset rich and income poor” has certainly been around as long as my living memory stands, and most likely well beyond, supporting our belief.  We are called Income Solutions for a reason.

The article is based around a study that has been undertaken by the Institute for Culture and Society at Western Sydney University.  The article goes on to say that the research has shown it doesn’t take a lot of money to improve your mood but it does need to be spent on the right thing.  The “right thing” has been defined as spending on small things which help buy back some time.  Some examples might be hiring a cleaner or a nanny to complete everyday tasks.  The benefit of spending money on outsourcing to a service is actually a purchase of free time for the spender.  This free time can then be spent doing something that makes the spender happy, such as spending time relaxing or spending quality time with family or friends.  Professor James Arvanitakis is quoted in the article as saying “Rather than looking at being busy and successful, we should look at success as having the time to do all the things we want: career, family and time with ourselves”.

The connection between Income Solutions and the key messages in this article is significant.  Income Solutions advocate goals based planning.  Every client is unique and the key to what separates one client from another is their goals.  While there are often recurring themes amongst our clients goals, often involving family or building wealth for the future, when you really dig a little bit deeper, a goal might evolve to become intensely personalised, such as “I want to buy a caravan in 2019, before my children enter high school, and travel around Australia for 6 months”.   Often, we see people who have similar dreams half formulated in their mind but think it’s something that they need to win Tattslotto to achieve.  This is where the other key message in the article comes into play: outsourcing to a professional service.  A Financial Planner can help define a half-formulated goal and put planning in place to achieve the goal.  It’s a very rewarding achievement for both a client and the Financial Planner and is truly a definition of spending money to buy happiness.

Goals obviously don’t just stop – they evolve, change course, are achieved and new goals formulated.  This is why Income Solutions seek long term relationships with our clients.  Goals are often long term and outsourcing the management of long term goals is definitely another aspect of spending money to buy happiness.  This can sometimes be hard, because there really isn’t any “big bang” moment where everything slots into place.  The reality of a long-term goals is that it takes time, commitment and focus.  It’s a journey.  It is hard to keep on track, especially if the achievement of the goal seems so far away and your everyday life keeps diverting your time and money off track.   Paying a professional Financial Planner to help you achieve a goal can seem like an expense you don’t need.  We have heard people who oppose paying for an ongoing service say “you’ve taught me a lot and I could see the value in learning it but now I think I can do the rest myself”.   This might be true, although if there hasn’t been a history of commitment and focus it is perhaps unlikely.  Even if it does prove to be true, how much time and energy will be dedicated to this task, taking precious time away from your personal and family life.

In a crazy modern world where there are so many distractions, spending money by outsourcing to a professional Financial Planner is actually buying you free time.  Free time…..  Makes me think of another saying “Money well spent.”

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Income Protection Insurance

Gareth Daniels from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

Are you looking at purchasing your first home or planning on starting a family soon? If so this is the perfect time to look at getting an income protection insurance policy in place or re-evaluating your current policy.

Buying a new home or starting a family, or both, is such an exciting time and you’re probably getting lots of different opinions from family and friends on what you should be doing, so let’s break down the facts.

What is Income Protection Insurance?

Essentially, it pays up to 75% of your income if you are unable to work due to injury or illness. If you have debt, dependants, or both. We all know that whether your income is coming in or not, the bills still need to be paid. It is advisable to have income protection insurance to help pay those bills and support your loved ones in unforeseen circumstances.

When paying your income protection insurance, you have main 2 options, paying through your superannuation fund or paying directly from your income.

Paying through your super fund

If you choose to pay your income protection through your super fund, it will cover the premium giving you more money in your pocket to pay for other things. This strategy is useful if you are trying to pay down your mortgage or have school fees to pay as the premium is coming from your superannuation, not your wage, so there is more money in your pocket to pay down your mortgage or pay for childcare or school fees.

However, there can be some restrictions on claims, dependant on your policy, we advise that you speak to your financial advisor to clarify these specifics.

Paying income protection from your wage

Alternatively, you can pay your premium straight from your wage, and in many cases, this can prove a greater tax deduction compared to the tax rebate that will be paid into your super fund.

For example, take the average Australian wage of $60,000. This person will pay around 32.5% tax each financial year (not including the Medicare levy). If they pay their income protection insurance from their wage they will get back about 32.5% of that premium at tax time.

How do I know if I have the right cover?

These days everyone has a super fund, and you may have a level of income protection insurance by default, however this policy may not be right for your personal situation. So, feel free to grab your super fund statement and come in for a coffee and a chat and we can look at the right coverage for your current situation.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

 

 

 

The “Trump Bump” – Myths Debunked

David Ramsay, Founder & CEO of Income Solutions

Income Solutions Pty Ltd, Authorised Representative, GWM Adviser Services Limited trading as Garvan Financial Planning, Australian Financial Services Licensee

I have been following Nick Murray for over 30 years, and he recently wrote an interesting article about the impact the “Trump Bump” has had on the US economy and it is very hard to argue with such clear and concise data.

Isn’t it funny, the power the media has on our society, they sell us doom and gloom on a daily basis, particularly when it comes to the finance sector, and we tend to believe them and follow their advice day-in day-out, very rarely checking the facts. Now I’m not here to rant about the media, but I am here to give a bit of perspective, and with the help of Nick Murray, break down some facts and figures.

The stats in his June newsletter really caught my eye and I have compiled a list of what I feel are the most relevant and interesting bits and pieces from this article.

Unemployment

  • U.S unemployment rate in April was 4.4% – down from 9.9% in April 2010
  • Part-time workers are increasingly able to find full-time work
  • Labour force participation rate is on the increase

Now isn’t that a great news story, this tells me that more people are working, they are happier and they are building their legacy. This also says to me that industry is booming, people are making more money, but they are also investing that money back into the economy.

Household Net Worth

  • In 2007 (pre-recession) the U.S household net worth peaked at $68 trillion
  • In the first quarter of 2017 this figure is over $95 trillion

Currently, “both single-family home values and financial assets making new all-time highs.”1 This figure astounds, as not only is it at an all-time high, it is set to exceed this peak by half as soon as the end of the year!

Debt Service Ratio

Nick also states that the “household debt service ratio – that is, household debt service as a percentage of disposable income – was a mere 10%, a level it has not seen since at least 1980.”1 So it looks like it’s not all doom and gloom in the finance sector as the media would have you believe, Americans are doing better than ever!

Corporate Cash

  • Corporate cash as a percentage of a current assets remains around 30%
  • This is twice what it was heading into the stock market collapse of 2000

Bank Reserves

  • Banks excess reserves stand at around $2.5trillion
  • The morning after the Lehman Brothers bankruptcy in September 2008 bank excess reserves were at zero

So, what does this mean? Essentially, these corporations and banks are making money, but they are hoarding this cash on their balance sheets.

S&P 500

  • The 2017 earnings estimate is at $131
  • The 2018 earnings estimate is currently at $147

Both figures will be records for the S&P 500, which is incredible as there was significant pause due to the global oil depression, but these new figures show that corporate earnings are now surging.

“Combining elements of points above, we may observe that never in American economic history have the balance sheets of banks, corporations and households been simultaneously stronger.”1

What does this mean for Australia?

Well, no one can really forecast what the market will do, and in the short term it is hard to predict what impact these results will have on the Australian economy. However, if we are looking long term and we take historical data into account, it shows that the Australian and U.S markets typically move in positive correlation to each other. Now, I’m not saying this will be the case but from where I sit it these figures do look promising.

 

  1. Murray, N. (2017). Nick Murray Newsletters. [online] Nickmurraynewsletters.com. Available at: https://www.nickmurraynewsletters.com/ [Accessed 27 Jun. 2017].

 

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Generations of Wealth

Alison Adams from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

 

Sometimes financial advice is not about dollars and cents but instead becomes more about goals and objectives.   As Financial Advisors, in the business of building wealth for our clients, we felt it was important to define “wealth” What is wealth   The concept sounds simple enough, and in many ways it is simple. We like to quote John C Bogle, the author of The little book of Common Sense Investing, “simple but not easy”.  Often, the “not easy” part involves the goal of leaving a meaningful legacy to those whom you love.  We find this is a common theme amongst our clients. It is one thing to invest for your own future but once you have successfully taken that journey, commonly thoughts turn to making sure your hard work benefits your children and grandchildren. So, what is needed?  Successful estate planning takes an investment of time, careful consideration of your desired outcomes and the assistance of a quality Financial Advisor and specialist Estate Planning Lawyer. Did you know that your superannuation account balance and jointly held assets are not administered by your Will?   For estate planning purposes, these types of financial assets are called “non estate assets”. For the majority of people, their superannuation account is likely to be one of their biggest assets. Another contender for biggest asset may be the family home, commonly jointly owned.  In summary, the two assets often representing the bulk of an individual’s wealth may not be dealt with by their Will.  What about if the bulk of your financial assets are deemed “estate assets” and in the event of your death, these assets will be distributed to your loved ones in accordance with your Will. That should set them up for a financially sound future, right?  One of the biggest destroyers of wealth is the transfer of wealth from generation to generation. Consider your own family circumstances. Even if your family has so far been lucky enough to have escaped the statistics around relationship breakdowns, gambling or drug addiction, how do you know what the future holds for your children or even for your grandchildren?  There are ways that a quality Will can provide a regular income stream to your loved ones and at the same time, protect their inheritance.  David Ramsay, founder and Principal Financial Advisor at Income Solutions likes to say “you love your children and grandchildren; at best, you hope to like their partners”. Here’s some food for thought, consider these scenarios:

  1. Sadly your father passes away and in accordance with his Will, you and your brother inherit the family home. The home sits in prime real estate, with upcoming re-zoning changes making you and your brother think it’s a good idea to rent the house out for a couple of years and sell when all of the changes have passed, holding out for a bigger profit. It’s currently worth $1m, however you believe your strategy could triple that value. Your father had a very simple Will and the home passes to you and your brother, held jointly at 50% each (currently a $500,00 inheritance to each brother). Both you and your brother are married, with young children.  3 months later, you unfortunately pass away in a car accident. Your Will makes provisions for your wife and young family.  Your wife meets with the lawyer and lists all of your assets, including the $500,000 share of the inherited family house. Her Lawyer tells her that unfortunately a jointly held asset is not governed by the Will, and by law, the surviving brother is now the sole owner of the inherited family home. Your wife and children have no legal claim over your share of the house.
  1. 6 years ago you met your second wife, married and now have 3 beautiful girls together. You believe that your family is complete; you have your 3 girls and also 2 sons from your first marriage.  Your ex-wife lives nearby and, although you’ve had rough patches in the past, your 2 sons come and stay every other weekend and because you live nearby you are able to attend their various sporting and school events and enjoy a good relationship with them. The boys have a good relationship with their step sisters, however as they are entering their late teens, lately the relationship between your second wife and the boys is often strained.  Your motto is that things will improve once they get through their teenage years. Unfortunately you have an industrial accident at work and pass away.  You have a current Will which makes provisions for your current wife to inherit the majority of your assets, with smaller amounts distributed to all of your children.  You’ve had discussions with your second wife about how you would like her look after all of your children, and upon her passing, distribute your assets evenly. These wishes were reflected in her Will, drafted at the same time you drafted your Will. Your second wife is advised that, following your death, her existing Will is invalid and she makes arrangements with her Lawyer to draft a new Will immediately. After all, she’s the only parent left for her girls.  The new Will is drawn, making provisions for your 3 daughters but excluding any provisions for your 2 sons.
  1. You have worked hard and sacrificed through the years to build a sizeable investment portfolio. The portfolio derives enough income to support your lifestyle and consists of growth assets that should continue to support both your children and grandchildren when you pass.  You have never been in the business of spending money “for the sake of it” and when you hear about DIY Will kits that you can purchase for $69.95 at the local newsagents, you go for it. After all, it’s pretty simple – you want your kids to inherit it, don’t touch it and live off the income, just as you have. When they pass, you want their Will to provide the same directions to their children. You’ve even sat all of your kids down and told them as much and they all agreed.  You pass away a contented man, proud of your life’s achievements and the way you’ve provided for your family’s future. Only problem is:
  • Daughter number 1 has a marriage breakdown 2 years after you pass away.  She directly inherited your assets in her own name, meaning they formed part of the divorce settlement. Half of your inheritance has now been distributed to her ex-husband, who, truth be known, you never really liked anyway.
  • Son number 2 has never been good at managing his money. Before you passed, you asked your other children to keep an eye on him, but they’re so busy with their own lives that they can’t keep track of him as well.  A few ill advised investment decisions later and he’s lost at least 3/4 of his inheritance.
  • Son number 3 is self employed and just prior to your passing, he ran one of the biggest engineering businesses in town (a great source of pride for you). Unfortunately the majority of his business involved supplying and servicing the machinery at 2 local car manufacturers. Since those manufacturers have closed down, he’s put on a brave face but in truth, new business has proved too hard to find and he’s just about to declare bankruptcy.  The only thing that can save him is your inheritance but due to a quirk of bad timing, he is forced to use the inheritance to pay his debts and close his business. He’s not in debt, however he has no business and no inheritance.

These 3 scenarios are fictitious, however similar scenarios are happening each and every day.  Sadly, they are preventable. Advice from a good quality Financial Advisor and specialist Estate Planning Lawyer would ensure sound investment strategies could accompany estate planning protections. The outcome being that the transfer of wealth through generations can successfully be achieved.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

The Ingredients to Achieving Great Things

Looking for something to read as I ate my lunch today, I settled on the latest edition of Time magazine titled “The 100 Most Influential People”; a couple of things struck me…

One was that they had a world map, pinpointing the country of origin of everyone who had been selected.  Time is an American publication and, in my opinion, there was an over-representation of the USA.  The spread of dots pinpointing where the 100 people originated however, highlighted that we truly do live in a global village.  Nationality, religion and even wealth don’t appear to have been defining factors for the people who have been selected.  The other thing that struck me was the passion demonstrated by many of those selected.

Guus Velders, an atmospheric chemist exploring how small and extremely common pollutants have the power to harm our natural world, or Glenda Gray, who’s inclusive attitude and tireless efforts have contributed to the mother to child transmission of HIV drop from 600,000 births a year to 150,000.  There is the story of Hamdi Ulukaya, a Kurd born in Turkey who moved to the US & started the Chobani yogurt company.  He has created an engaged workforce by deliberating locating his factories in areas that industry has long abandoned, re-engaging disconnected people.  In addition, he has actively expanded his team through hiring refugees to work alongside his local workforce.

What a great example of how respecting and empowering your workforce contributes to success.

I love basketball and particularly enjoyed the LeBron James documentary “More Than a Game”, which follows LeBron in his high school basketball team.  Perhaps the respect he has for those who helped him and his teammates succeed are what drives him to invest in the promise of future generations through his foundation.

There was the story of Raed Saleh, who leads the “White Helmets”, a group who provide emergency services in war torn Syria, helping injured residents get to safety.  Saleh’s mission has been quoted as getting more people to “work on the side of life”.

It was a very humbling lunch time read.  It prompted me to reflect on how sometimes great things are achieved by everyday people who are just diligently practicing and perfecting what they do until they are doing it so well they have managed to achieve great things.  In a way, this mirrors the message Income Solutions provides to our clients.  First, set a goal then we’ll work with you over the long term to achieve it.  Every step taken towards the goal is a step in the right direction.  It is an absolute privilege when we see clients achieve their financial goals and it is particularly rewarding to know that we’ve been there for the journey.

Like the people in my lunch time read, the majority of clients who achieve financial success have not started with great wealth, but rather they have taken accountability for their goals, they have gained knowledge along the way and have respected the advice they have received.  All great ingredients for achieving great things!

By Alison Adams

A Reality Check for Accessing Super Early

So as the dream of home ownership continues to recede further into the financial distance for younger Australians in our major cities it is not surprising that the public debate about levels of housing affordability is increasing in volume.

Australians have an ingrained faith in property – both on the shelter front and as an investment.

Residential property is like other investment markets and it moves in cycles and it is strongly influenced by things like interest rate rises or jumps in unemployment but convincing younger Australians that property prices may fall in the future is one of the great communication challenges of our time.

Today we are living in a record low interest rate environment. That – as someone who had their first mortgage application rejected at a time of 16% variable rates – has not always been the case nor can it be relied on to stay that way forever.

The economics of supply and demand will play out over time particularly as house price growth outpaces household income levels and we are already hearing warnings about oversupply particularly in apartment markets in Melbourne and Sydney.

This is not to dismiss the need for a public debate on the issue of housing affordability. Clearly that is a significant social issue and a key challenge facing our state and federal political leaders.

It also impacts different parts of our community in different ways – there is the obvious challenge to the aspiring new home buyer but increasingly it can also involve parents providing loans or guarantees to enable children to enter the property market.

It is also not surprising that when housing affordability is being discussed alternative funding solutions are often raised. Recently the idea of allowing access to superannuation accounts to help finance house purchases has again surfaced.

In investing, as in life, it is all about trade-offs. The appeal of allowing part of your super balance to be used to buy a home is understandable. For a start as a younger person your super is locked away for what seems a long, long time. So being able to access it to do something useful and personally beneficial right now is instantly appealing.

The immediate risk is that markets will adjust accordingly and all you will achieve is artificially inflating house prices to allow for the additional loan from the super account. Beneficiaries are more likely to be the sales agents courtesy of the commission structures in the industry rather than new home buyers.

But the longer term risk is that by taking a lump sum out of the super account investors will lose the impact of compound earnings over several decades. You do not have to be much of a mathematician to work out that your retirement account balance will be significantly lower than it otherwise would be.

Independent consulting firm Rice Warner modelled the impact on a fund member aged 35 who is earning average wages and takes $100,000 out of their super account to use as a housing deposit.

The loss of compounding investment earnings over many years would dramatically affect the young member’s retirement balance. Rice Warner calculates that allowing someone to withdraw $100,000 from their super account would mean the federal government would have to pay them an additional $92,000 in age pension.

What is often not well understood is that the investment earnings usually represents a larger component of the retirement benefit than your contributions.

So a short-term solution on housing could mean long term pain on retirement savings.

 

Source:
Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2017 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.

 

How to Avoid a Centrelink Overpayment

Many of you may have heard in the news recently about Centrelink sending debt recovery letters to many government benefit recipients, including Family Tax Benefit recipients. This can be a distressing time for the families when they realise they may have to repay the overpayments.

What many people aren’t aware is that Centrelink relies on the income information we provide to make their benefit calculations, and if the information they have is out of date, over or under payments may arise.

Household income affects family payments such as Child Care Benefit and Family Tax Benefit A & B. Centrelink state – ‘The payments you receive will be checked against your actual income after the end of the financial year.If you have received more than you are entitled to, this amount will need to be repaid.’

On the flip side, if you have received less than you were entitled to, this will be rectified at the end of the year when Centrelink balance payments.

How to stop a discrepancy occurring:

  • Log on to your My Gov account and access Centrelink
  • Click on the My Profile box and make sure all your information is up to date including relationship status, contact details and that all children are listed correctly
  • The Family Assistance and Estimates box shows what income Centrelink are calculating their benefits from.IS THIS CORRECT?
  • If not, in the top left hand corner, select the Menu drop down and click on Family Assistance / Update Family Income Estimate
  • Click the ‘Update Income’ box and update what you expect your income to be for that financial year

Come July, it will be a good idea to revisit your income estimate for the coming financial year considering any probable salary increases. This is especially important if you have opted to receive your Family Tax Benefit fortnightly to ensure you are not being overpaid.
Lastly, if you are unsure of anything, give your Adviser a call to clarify your situation.

 

Lee Nickelson, Certified Financial Planner®

 

Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

 

Women and Super – the Facts!

Did you know that around 90 per cent of women end up with not enough superannuation savings to fund the lifestyle they want in retirement? In fact, the average superannuation account balance for women when they retire is around $90,000 less than the average for men. There are a number of reasons why this is the case. For example, many women take time out of the workforce to have children or care for family members, and they are also more likely to be in part-time or low-paid employment. No matter what the reason is, there’s no doubt women have a much bigger task when it comes to saving for their retirement. This is why it’s important all women take simple steps to help boost their super savings. GenderGapFacts_all                   Taking sixty minutes today to sort to your super could add thousands to your retirement savings. Here are three simple steps you can take:

  • Check your super savings Get to know your super better by checking your balance regularly, as well as the insurance and investment options you have to make sure they are the best fit for your circumstances.
  • Simplify your super by rolling all your super accounts into one Consolidating your accounts and/or tracking down your lost or unclaimed super could save you thousands of dollars in unnecessary super fund administration fees, which over time can make a massive difference to your retirement savings
  • Plan to save more Even small additional contributions to your super over time can help boost your retirement savings by thousands of dollars. These extra contributions can help you catch up on the savings time you missed, for example when you take time out to have a baby.

Reproduced with permission of The Association of Superannuation Funds of Australia Limited. https://www.superguru.com.au Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

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