Helping your Family

If you or a family member is heading for retirement, this information will help.

Will you have enough super to retire and live the lifestyle you aspire to?

With the average life expectancy of Australians being 82.5 years, how long will their savings last? Recent ‘Super Shortage’ research indicated that a retirement age of 65 years could create a super shortage of 12.5 years for Australians to live the retirement lifestyle they aspire to from 65 years.

Will you find yourself asset rich but cash poor in your retirement?

There are many options to consider when planning your future retirement cash flow. HOW will you fund your ideal retirement lifestyle? WHEN do you make changes?

Just one retirement strategy is downsizing, but…

Is it time to downsize?

One of the biggest decisions for many retirees is whether to stay in the family home or purchase smaller or ‘retiree’ accommodation. It may be your most significant decision both financially and emotionally.

Ultimately, downsizing from your family home should provide you with a whole new way of life that is better than the one you left behind. With careful planning and a clear understanding of your future goals you will be well on the way to making it your best move yet!

Is the government’s ‘downsizing into superannuation’ for you?

From 1 July 2018, the Australian government allowed homeowners aged 65 years and over to downsize their family home and invest up to $300,000 of the surplus into their super (eligibility criteria apply).

It was announced by the government as part of reforms to reduce the pressure on housing affordability. It may also come as a relief and a welcomed strategy for many retirees, particularly those on the east coast who may have reaped the rewards of equity growth over the past decades.

About the downsizer measure

The downsizer contribution:

• Is not a non-concessional contribution and will not count towards your contributions caps

• Can still be made even if you have a total super balance greater than $1.6M

• Will not affect your total super balance until your total super is re-calculated to include all your contributions including downsizer contributions at the end of the financial year

• Will also count towards your transfer balance cap, currently set at $1.6M

• Is only applied for the sale of one home. You can’t access it again for the sale of a second home

• Must be made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement

• Is not tax deductible and will be taken into account for determining eligibility for the age pension

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

There are other eligibility criteria to meet and each individual’s circumstances must be assessed for suitability.

The ATO website explains all eligibility requirements. Or contact us and we can put you in contact with a specialist to help you.

Time will tell if this downsizing contribution into superannuation will be an attractive option for retirees.

As your finance specialist we welcome the opportunity to discuss your future plans or those of your parents!

Through our own knowledge and that of our networks, we can help you live your dream retirement lifestyle.

DID YOU SAY $1M TO EDUCATE MY CHILDREN?

You thought babies were expensive? Predictions show the cost of private education could be as high as a family home…

For most people, when starting to plan for a family, we usually consider the cost of babies and child care.

Cast your mind forward to when that baby is at primary and secondary school. Do you know how much he or she will cost to educate?

The cost of education has soared 61% in the past decade and is growing faster than average wages at 34%.

In fact, for a child born in 2018, the estimated cost for primary and secondary education is estimated at $66,320 in the public system and $475,342 for the private system per child.

If you have three children, the cost of educating them in our capital cities’ private education could top $1.6M – the same cost of some family homes!

Even conservative estimates from the Australian Institute of Family Studies show a couple with two children can expect to spend over $40,000 for 13 years of education .

Regardless of where you live and if you use public, faith-based or private education, school fees continue to be a major expense.
Many parents fail to appreciate the many additional expenses associated with funding a child’s education.

• Extracurricular activities

• School excursions

• Uniforms • Camps

• Technology (bring your own computer). iPads are required at some primary schools as young as year 3 and laptops at high school!

• School fundraising

• Travel expenses

Over the years, having worked with many clients who have children and have had to adjust to additional costs, we have at times observed the following:

• Mortgage payments reduce

• Personal debts and/or credit cards build up

• Refinancing options are limited due to lower servicing levels

• Investment plans placed on hold

Investments are typically the first item we see families put on hold while their children are young.

How can we change this?

Hidden savings from life after day care

For many, ‘big school’ also means no more childcare fees.

The usual average weekly cost of formal care for 16 hours per week in 2017 was $110.50 per week after subsidies. If your child is one of the almost 50%4 who attend care this could mean significant extra cash to redirect into contributing to education expenses.

The start of school is also an opportunity for a lot of parents to increase their hours of work or return to the workforce on a part or full time basis. This can also have a substantial effect on family income and lifestyle.

How do you best use these hidden savings?

Our other observations are that these hidden savings are typically absorbed into everyday living. We forget that we have actually been managing ‘without’ for a while. When we stop paying day care fees, our retail shopping goes up, or that holiday is booked and/or we buy that new car we’ve been waiting for.

These hidden savings can contribute to many things that will help you with your plight for affording your children’s 13 years of education:

• Investing

• Paying off credit cards and other debt

• Paying down your mortgage (leaving you with more equity to invest)

Depending on your individual circumstances, we may be able to assist you to structure your finances and savings accounts to not only fulfil your home buying and investing goals, but ALSO help cover your children’s future education costs.

And let’s not start talking about university…

If your children’s future education costs concern you, why not call us for a chat?
You may be surprised how, by redirecting some hidden savings, we might actually get you on track with your family’s education costs and investment dreams.

Can you afford your lifestyle career?

Be financially prepared for success

The changing nature of technology, consumer behaviour and corporate policies has influenced an increase in parttime and work-for-yourself opportunities.

While the bright lights of flexibility, choice and creating your own success is very appealing, it is not without its risks – personally, professionally and financially.

According to a report by the Reserve Bank of Australia (RBA), one-third of total employment in Australia is part-time (less than 35 hours a week).

Furthermore, 97% of all businesses are small and 62% of those are nonemploying (sole traders). Before you downsize or go solo, consider the financial consequences – better still, prepare first!

How much will a career change cost you?

The cost will vary depending on your circumstances and how vast the change will be. Some considerations are:

Salary – this is the obvious one. How much will you be earning?

Super – reduced hours and income also mean reduced superannuation contributions and accruals. Accumulatively over time this can make a big impact on your retirement nest egg.

Additionally, for those working for themselves:

Benefits – Will you lose benefits from your current employer? For example any bonuses due, accrued sick leave, salary sacrificed items (mortgage, car leases), phone plan, subsidised gym memberships or day care and additional super if your current employer offers it.

Annual leave and public holiday pay– Working for yourself means exactly that – if you don’t work, you don’t get paid!

Possibility of irregular income – Irregularity of income may impact your cash flow, bills and loan repayments – and possibly your future lending options.

Changes in employment will be assessed by lenders and potentially hinder your future lending potential – whether it’s a new role with probationary periods to see out or working for yourself as a small businesses owner.

Of course as with most things in life, you take the good with the bad. There are many benefits to lifestyle careers.

What can you do financially BEFORE you make the change?

1. Avoid debt before the change

Minimising your debts BEFORE you make a career change will give you more financial breathing space and less financial stress in the future.

2. Save for an emergency fund

You don’t want to leave yourself short if any urgent or unexpected costs arise with life’s ups and downs.

3. Budget for your future

The more you save and budget for before a change, the easier and less stressful life will be.

The key to a successful career transition is setting a clear budget, timeline and strategy to achieve your goals.

We can help you set that strategy. Contact us to discuss your current financial situation, loans and savings to work out the best options for you to make a successful career transition.

Are you really cyber safe?

7 steps to keep you and your business safe from cyber threats

Both consumers and businesses, now more than ever, need to be aware and vigilant in managing their online security.

Despite consumer awareness of cyber security, many don’t take the necessary steps to protect their personal information.

In fact, a McAfee survey of 6,400 people globally found only 37% of consumers had signed up for identity theft protection and 28% had no plans to sign up to this service.

Consumer online concerns

For consumers, there are concerns around bank and credit card accounts, social media fraudulent posts and credit monitoring.

Of course the concerns extend to children who are now virtually glued to their tablets and smart phones.

The McAfee survey data is alarming. Almost one third of parents do not monitor their children’s connected device usage and 33% don’t know the risks well enough to explain the dangers.

Starting the cyber safety talk with children early is imperative.

Many households have multiple devices connected at any one time, but there are solutions to protect your data and your wireless home network.

The concern is just as real, if not more, for businesses.

2018 became the year of enforceable personal data guidelines at home and abroad.

For businesses, cyber security is a crucial part of overall business risk management policies and procedures particularly in an ever increasing mobile work force.

Notifiable Data Breaches (NDB) scheme

It is even more important for businesses with the recent enforceable Notifiable Data Breaches (NDB) scheme under the Privacy Act 1988.

The NDB, introduced in February 2018, applies to Australian agencies and organisations and requires them to take steps to secure certain categories of personal information.

If you are concerned that your personal information may have been involved in a data breach, there are guidelines available from the Australian Government Office of the Australian Information Commissioner.

How to stay protected

Everyone who has a computer account, either for business, personal or both, is a potential target. It is important to be alert and assume ill intent until proven otherwise.

The best form of action is to help yourself by using some of our tips.

Thanks to Robert McAdam, Chief Executive Officer of CXO Security, here are 7 steps to keep yourself and/or your business safe online.

1. Beware of phishing emails Do not reply to, follow links or open attachments from any unexpected or suspicious emails – even if it’s from someone or a business you recognise. Cybercriminals often use the display name of major brands as a phishing tactic. If in doubt, check the source first and make sure the sender is genuine.

2. Stay safe on public WiFi Always check that the WiFi network you are connecting to is from a legitimate source. This can be hard or next to impossible for many non-technical folks. Consequently the preferred method of access is to use your own mobile data.

3. Be selective with social media Be careful about what you share on social media. Information about you, your family, friends and workplace can be used to socially engineer a phishing attack or you could be ‘giving away’ customer information.

4. Ensure robust password security Be sure to use different passwords for different accounts. Passwords need to be as long as possible and contain a combination of upper and lower case letters, numbers, symbols and be at least 12 characters long. Password managers can help.

5. Keep your home network secure When working from home, ensure your home network is kept secure. • When finished with the network connection, disconnect from the WiFi network – especially if it’s a shared machine at home. • Do not share keys or passwords with anyone (flat mate, neighbours etc). • Lock your screen after 15 minutes of non-use. No matter where you are working from, make sure you lock your computer screen when it is not in use or when you are away from it.

6. Safeguard your mobile security If you want to access work emails and information on your mobile phone, ensure your device has a pin, pattern or password. Try to use 3G or 4G internet access where possible to avoid unsecured WiFi networks.

7. Be aware of what you are plugging in Before plugging a USB memory stick or other removable media into your device, think about where it has come from. Only use encrypted media and ensure it has come from a trusted source. Viruses and malware can easily be spread this way.

It is important for consumers and business owners alike to ensure good cyber safety practices to protect personal data and safeguard against fraudulent activity.

Top ways to cut your expenses and increase your savings

Is the key to saving a home deposit as simple as giving up smashed avo toast for breakfast? Well not quite, but spending less does make a difference.

On top of a budget, a savings plan and strategies such as a high-interest savings account, an effective way to save is to reduce or eliminate expenses.

Start by understanding your spend

It can be easy to lose track of how you’re spending money, especially due to cashless payments and credit cards.

Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Or download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND.

Find savings in the essentials

Some costs can’t be avoided – but many everyday expenses can be reduced. For example you could:

• Move in with your parents/relatives, or move into a cheaper rental or share house (short-term discomfort can pay off in the long term).
• Implement tactics like meal planning, making grocery lists and buying in bulk to save money on food. Set aside a budget for eating out/take-away and stick to it.
• Shop around to reduce your regular bills – you may get better value if you switch, or tell current providers you intend to switch. Seek discounts for taking out multiple policies with one insurer.
• Use the car less: take public transport; carpool with colleagues; or try walking or riding. You’ll be amazed at how quickly it all adds up to savings.

Make sure you’re paying off debts or credit cards completely each month or as much as possible, to avoid the added expense of paying interest.

Reduce common overspending

If you spend excessively on things like buying clothes, going out or expensive hobbies, it may be unrealistic to cut the expense entirely. Set a weekly or monthly limit and reduce that limit over time.

A survey of more than 1000 Australians showed that 73 per cent have a problem with overspending. In particular, people tend to go overboard Christmas rolls around.

To reduce gift expenses, be like Santa: make a list (and a budget). Buy only planned items within your allocated budget – then stop! Ask your family for support; it’s easier to put a cap on gift values if everyone else does too.

Another common way Aussies overspend is on holidays. CommBank research has shown that a third of holidaymakers spent more on their trip than planned. Do your research and set a daily budget.

Costs that could be eliminated

Look for opportunities to eliminate costs. Cancel unused services. Update your internet or mobile plans if you’re always paying for excess data.

Ask yourself: are you really using that gym membership? Are you getting value from your subscriptions?

Remember, every wasted dollar is money you could be spending on your own home.

Seven tips for securing a business loan

Securing a business loan in Australia isn’t necessarily difficult but knowing how to navigate your way can be the difference between success and failure.

Banks and other financial institutions offer a wide range of business finance options, from commercial property loans, commercial vehicle leases, and commercial and equipment leases, to simpler options such as letters of credit, overdrafts and lines of credit. Here are some tips on how to improve your chances of success.

  1.    Work out what is realistic

It’s a good idea to find and compare credit options based on the amount of money you need to borrow, how you want it supplied and the type of security you want to provide (residential, non-residential or none at all).

  1.    Find a Finance Broker

The next step is to speak to an MFAA accredited finance broker, who can help you work out what loan type and lender are appropriate for your business and you. finance brokers work with clients to determine their borrowing needs and abilities, select a loan suited to their circumstances and manage the process through to settlement. They also do a lot of the legal and other paperwork, they have access to a wide range of loans and are experts in the area.

  1.    Have a credit history and make it good

Lenders are looking for two things when it comes to your credit status: an existing credit relationship and a relatively clear history. If a borrower already has an existing loan which they’re servicing on time, they are much more likely to be successful. Of course, there are options for those who are either credit impaired or just don’t have a documented credit history, and a finance broker can help clarify these.

  1.    Actively show how risk will be minimised

Demonstrate how you will lessen the risk to you and to the lender. Your finance broker can help.

  1.    Be prepared

For your first meeting with your finance broker, have up-to-date paperwork and tax records, make sure you’ve done your research and have a fair idea how much you want to borrow and how you plan to spend it. You should also know your total worth, listing your assets and liabilities.

  1.    Have a plan

Lenders like to see a business plan that shows that you know what you want to achieve and have a clear idea of how you can achieve it.

  1.    Provide more than one exit strategy

Lenders want to know how they’re going to get their money back and some want up to three scenarios for what is called the ‘exit strategy’.

To give your business a good chance of success, talk to the team at Indigo Finance about finding the right commercial financing options for you.

 

First meeting with a broker

If you’re looking for a home loan but are inexperienced with finance brokers, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer. There are lots of brokers around and there is a lot to learn. But there are many steps you can take to be confident that your appointment will be a success.

A good starting point is to familiarise yourself with the expectations of the first appointment between brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

Call us today to schedule your first meeting with us!!

 

 

Investing interstate….

Investing interstate

When people think of buying an investment property, many only think locally. Investing in a property interstate could possibly be a smarter idea, potentially resulting in a better return on your investment. It may also be a potential way to snaffle a bargain. You could be buying into an area with greater potential capital growth compared to your home state – as each state reaches different stages of the property cycle at different points.

2015 figures from LJ Hooker’s Investor/Tenant Survey indicated only 14 percent of Australian investors surveyed own an interstate investment property.

Some of the key issues to keep in mind include:

The logistics of property management

Some may find it hard to manage their investment property from another state. It can be costly maintaining a property and finding tenants if you regularly need to travel between states. Although employing a property management service may be able to help here.

Property managers undertake several jobs that can be difficult for an interstate investor to do. They can screen your tenants, source the best local tradespeople for repairs and, by inspecting the property on your behalf; can save you the expense of flights for site visits.

While you may be recommended a property manager by your real estate agent, it’s a good idea to shop around, given there’s usually some variation in the nature and quality of the service that managers provide.

Some, for example, might provide an annual market rent review but others might go to the next level and give you feedback on how you can optimise the rental income on your interstate investment. Not all property managers will be as effective at managing the property or screening tenants – while others could be better qualified and so the fee they charge for their services could vary.

Get a pre-approval

Pre-approval is important because it informs you about barriers you can encounter when you seek to arrange finance for an interstate investment.

Certain lenders can be restrictive in the terms and conditions they attach to loan approvals in different parts of the country.

The location of the property could impact the amount you can borrow from a lender – and it’s important to remember different states have different fees and taxes.

Getting a pre-approval can give you the confidence you need to make a sound investment decision.

Visiting the property

Visiting the property and seeing it is more telling than simply viewing pictures. But the travel and cost associated with investing in interstate property obviously imposes limits on the time you can spend seeing the property.

A buyer’s agent is one potential fix, but it’s costly to pay a buyer’s agent to tell you a property is potentially a poor investment once, let alone several times. Likewise, it’s expensive to make the discovery yourself after you shell out for flights and associated travel expenses, so it pays to research the property and area as diligently as possible prior to undertaking closer physical checks.

The internet is a great source of valuable information, including property guides and market updates.

As with any property, local or interstate, there are pros and cons and you need to conduct your due diligence to ensure you make a good decision.

To decide if interstate property is a suitable investment for you, it’s worthwhile consulting with us about the considerations to be mindful of before applying for finance.

When you’re confident you’ve identified a suitable interstate investment property, our team will be on hand to support you to get an appropriate loan for your needs.

Our household energy rules

Heating and cooling

  • Close doors to unused rooms
  • Close curtains or window shades
  • Use blankets, electric blankets, wheat bags or hot water bottles instead of heating the room
  • Clean your air conditioner or cooler so it doesn’t take as much energy to run
  • Turn off heating or cooling when you are not home and overnight

The family room

  • Switch off appliances at the wall
  • Use a power board
  • Use lamps or spotlights
  • Use energy-saving globes
  • Turn off lights you are not using

Kitchen

  • Use microwave instead of an oven
  • Stove-top – keep lids on to reduce the amount of time and energy used
  • Dishwasher – use the economy cycle and only when full

Laundry

  • Only wash when you have a full load
  • Use a clothesline whenever possible

Bathroom

  • Install water-saving shower heads, shorten showers, set the hot water temperature to 50 degrees.
  • Appliances – switch off when not in use

Outside

  • Use timers and sensors for lighting
  • Solar – for garden and outdoor areas
  • Use separate lights for different areas

If you only knew the truth about your interest rate…

At a time of almost constant changes in the finance world – and an absolute overload of information online – it’s easy to see why some consumers are becoming ‘switched off’.

A recent study about financial literacy found 36% of respondents didn’t realise if they reduced the length of their loan they would also have reduced the amount of interest they paid! It also found 35% had done nothing to educate themselves on banking products and services.

What does that tell us? Well…

It tells us there are potentially a LOT of people who could be enjoying savings on their home loan AND other loan products – if only they knew how.

So how important is financial literacy? Let’s face it, many of us find the ever changing world of finance and banking complex. And yes… pretty dull. But a lack of interest in educating ourselves about our home loan – usually the BIGGEST financial commitment we have – is often costing us money!

It’s interesting that the same survey found 74% of us don’t know what a comparison rate is…

Do you? And what SHOULD you know?

Comparison rates

Lenders are legally required to display a comparison rate
when advertising most loans.

This is a tool to help identify the true cost of a loan by combining all components into a single percentage rate*. It also takes into account loans with a lower introductory rate that reverts to a different interest rate after a set period of
time.

It includes:

• the loan amount
• the loan term
• the repayment frequency
• the interest rate, and
• the fees and charges connected with the loan**

For example at the time of writing this article, one lender was advertising an interest rate of 4.44%., but the comparison rate was 5.49%. Now that’s a difference of $1,050 interest each year for every $100,000 of borrowing you have. That is a little over $4,100² per annum on the average Australian loan.

The mandatory comparison rate was initially introduced to stop lenders advertising very low interest rates that lured borrowers into loans that actually ended up costing more than they expected. A low rate may look attractive at first glance but it doesn’t always mean it is the cheapest rate.

While the comparison rate can be used as a guide it is also important to consider the features of the loan and how these may benefit your particular circumstances and future goals. The rate alone should NOT be your sole consideration when obtaining finance.

Remember, whether you are looking to buy your first home, upgrade, downsize, refinance, invest in property or even buying a new car, as your finance specialist it is our job to do the research for you to determine the loan product most suitable for your circumstances.

Mortgage brokers now account for more than 50% of the home loan market. There is a good reason for that! We have to constantly adapt with the times, the lending policies and the changing finance market to provide more than just a loan
service.

We are your finance concierge, educator, confidant and specialist working for YOUR best finance options without the trickery of advertising low interest rates as a lure for your business.

If you are thinking of reviewing your current loan – DON’T do
it alone!

Our role as your finance specialist is to help you make the best financial decision for your personal situation. We consider factors such as:

• how long you are planning on having the loan
• your employment status, age and financial position
• what job/personal circumstances may be happening in
your future
• your family situation and potential future financial expenses (known and unforeseen)

AND we look at more than one lender for your solution.

Call us TODAY. We’re here to answer any financial queries you may have.