Energy costs…our greatest financial grief

Average annual electricity bills in Australia hover around $1,600 per state, even hitting as high as almost $2,000 in South Australia.

For example, a family of five’s average annual electricity bills can climb to as much as $2,576.28.

Our varying Aussie climate coupled with a growing population place increased demand on energy use.

Q. How do you compare? Your energy bill may hold the answer

Most electricity providers publish helpful information on your bill statements including power used, what it costs and how your usage compares to customers in your area.

Q. What are the main factors that determine the average cost?

Electricity usage – how often energy efficient appliances and higher energy consuming appliances, such as clothes dryers and air conditioners, are used.

Electricity prices – the price you pay for power, along with the usage, will determine your overall costs.

Canstar blue, an online comparison site, offers an electricity comparison tool to help you get the best deal possible.

The power is in your hands (pardon the pun) to reduce your energy bills:

1. Get the best deal possible, and
2. Control your energy usage!

Q. How can you control your energy usage?

These tips from Energy Australia could help make a difference to your next energy bill.

Heating and cooling

Reduce the energy you use by

• Closing doors to unused rooms.

• Closing curtains or window shades.

• Using blankets, electric blankets, wheat bags or hot water bottles instead of heating the room.

• Cleaning your air conditioner or cooler so it doesn’t need as much energy to run.

• Turning off heating or cooling when you are not home and overnight.

The family room

Switch off appliances at the wall – appliances still use energy in standby mode.

Use a power board – switch off all appliances with the one switch.

Use lamps or spotlights – use these small amounts of light instead of main lights.

Use energy-saving globes – change old globes to fluorescent ones.

Too many lights on – turn off lights you are not using.

Kitchen

Microwave oven – uses less energy than an oven.

Stovetop – keep lids on to reduce the amount of time and energy used.

Dishwasher – use the economy cycle and only when full.

Laundry

Washer or dryer – only use with a full load. Use a clothesline instead of dryer whenever possible.

Bathroom

Water use – install water-saving showerheads, shorten showers, set the hot water temperature to 50 degrees.

Appliances – switch off when not in use.

Outside

Timers and sensors – to light outside areas.

Solar – for garden and outdoor areas.

Lighting – separate the lights to choose which areas to light.

Create good habits

Many of us set financial budgets to help manage our cash flow. We can take the same approach to our energy bills:

1. Set an energy spend in your yearly budget and track your spend

2. Make some of the changes mentioned to reduce your bills

3. Review your energy bills on a regular basis to keep on track

With smart budgeting and energy saving tips, you can manage your cash flow and put more dollars back in YOUR pocket.

Planning for your future is just as important as managing your budget and household expenses.

Call the office for your very own ‘Our Household energy rules poster’

Ease your investment property cashflow burden

Get them NOW – your investment property tax returns on pay day

Whether you are a first time property investor or a property portfolio owner, cash flow is critical. There are many ongoing, and sometimes surprising, costs associated with holding investment properties.

Numerous unending costs include insurance, body corporate/strata fees, council and water rates, property management fees, land tax, maintenance and repairs.

Let’s not forget other challenges of managing property investment cash flow:

• Vacancies – there may be times when your property is not tenanted and you may have to cover the costs yourself
• Interest rates – if interest rates rise, larger repayments could widen your income versus expenses gap

Plus there are considerations at the time of buying and selling such as entry and exit costs and property valuation fees.

Can you afford a cash flow shortfall?

Managing your income (rent from your tenant) versus your expenses is important in managing your overall surplus or shortfall.

As reported by CoreLogic in their ’25 years of housing trends report’ as of March 2018, property investors were 42.8% of the mortgage demand – more than double the proportion of 25 years ago. Now that’s a lot of investors having to manage their cash flow.

If you have negatively geared properties in your property portfolio (where the income from your investment is less than the expenses) then you would be contributing your own money to hold the property.

Most investors then boost their tax return at the end of the financial year through tax-deductible rental property expenses.

This may seem straight forward for single investment property owners, but for those with a portfolio, the ongoing costs could put a strain on their own funds and cash flow.

Let’s look at an example from ASIC’s Money Smart site:

Case study: Juhyan and Jennifer consider an investment property

Juhyan and Jennifer are considering buying an investment property. They spot a unit that ticks all of their boxes: it’s close to a train station and is a 10 minute walk to restaurants and shops.

The property price is $550,000 with buying costs of $23,000. They have a deposit of $150,000 so they will need to borrow $423,000 to complete the purchase. Their monthly income and expenses are expected to be:

Income and Expenses $
Rental income $2,250
Less loan repayment -$2,725
Less allowance for expenses -$225
Less strata fees -$216
Less allowance for repairs and maintenance -$500
Monthly shortfall -$1,416

Juhyan and Jennifer can cover the monthly shortfall with Jennifer’s salary, which they currently save. They also have an emergency fund they can draw on if they were suddenly without tenants for a while.

If Juhyan and Jennifer were to purchase say another three similar negatively geared properties, then they would be in for quite a shortfall!

Did you know you can use the tax system to your advantage?

Instead of waiting for your end of financial year tax return, you may be better off paying less tax throughout the year to subsidise the continuing outgoing expenses of your properties.

By completing the ATO PAYG withholding variation application, you can vary or reduce the amount of pay as you go (PAYG) tax that is withheld from your salary each pay period. This may be preferable if your normal rate of taxation leads to a large refund at the end of the year because it does not take into account your investment deductions. See the ATO website for more details.

How does it work?

Your regular cash flow is increased (less tax paid each pay – so more in your pocket) allowing you to: accelerate your debt reduction; put more in your offset account to reduce the interest accumulating; build up a deposit along with your current property equity for your next purchase and of course to help you with any shortfall for covering your property costs each month.

Beware – conditions apply!

The Australian Tax office clearly states that “We will process your application only if you:
• have lodged all required tax returns and activity statements or notified us in writing if you were not required to lodge tax returns in prior years
• did not receive a debit assessment on your last tax assessment (if you also had an approved withholding variation for that year)
• do not have any outstanding tax debt owing to the Australian Government
• do not have any outstanding debts under any other Acts administered by us.”

The application is valid for one financial year only. So that better be on your to-do list each financial year if you intend to continue using this strategy.

Seek advice

Importantly, don’t dive into investment property ownership without assessing your overall asset strategy, cash flow and budget management – you don’t want to be caught short each month!

Investing in property can be daunting. Let us help you to make it a rewarding step in your life by starting with our ‘10 Steps to successful property investment’.

Changes looming in the Airbnb space

There is no doubt that Australians and visiting tourists have embraced
Airbnb accommodation sharing with gusto.

In fact, in 2017 there were 5,090,000 Airbnb bookings in Australia.

Globally, the company has enabled 260 million check-ins in 191 countries.

Airbnb is not just a city sensation

In 2017 Airbnb reported that Australia was the only major country in the world where regional Airbnb stays surpassed city bookings accounting for 56% of guest arrivals in the prior year.

According to The Australian, during that time popular regional destinations included Cairns, Noosa, Byron Bay, Great Ocean Road, Margaret River, Victor Harbour and Kangaroo Island.

There are many pros and cons of Airbnb hosting. The real motivator for most hosts is making money from available unused space in their home or investment property.

Links to housing and rental prices

There has been much attention on the effect that Airbnb has on long term rental availability, affordability and the supply versus demand scale. A concern held by many is that short-term tourism accommodation is infiltrating residential neighbourhoods, thereby reducing the permanent rental housing supply in high demand cities and increasing rental prices.

A global phenomenon

Withdrawing properties from the long term rental market for money making Airbnb rentals has caused a ripple effect in some cities around the world.

For instance, Barcelona, New York and Amsterdam have responded by placing restrictions on how long properties can be offered for Airbnb rental. In fact, Amsterdam will halve its limit to just 30 nights in 2019.

Local Airbnb reforms

The money making machine of Airbnb hosting is taking a different turn in Australia too… well, for some (for now).

The NSW State Government has handed down laws governing short-term holiday rentals for Greater Sydney.

In short:

• Airbnb properties in Sydney will be restricted to 180 nights a year
• A mandatory code of conduct will be enforced to address disruptive guests, noise levels and the effects on neighbourhoods
• A two-strike policy will be introduced whereby if hosts or guests breach the code twice within a two year period they will be banned for five years
• A dispute resolution process will be in place to resolve complaints
• Owners’ corporations can adopt a bylaw with a 75% majority to prevent property owners who do not live in their unit from short-term letting their property

For areas outside of Greater Sydney, councils will have the power to reduce the days a property can be short-term let down to a maximum of 180 days.

The wave of change may be spreading

Potentially Sydney siders aren’t the only ones set for change. We are seeing other areas of Australia also considering such changes.

There is pressure on Victoria to follow Sydney’s lead. Some developers have taken it into their own hands and banned Airbnb and short-term holiday letting from their new Melbourne apartment developments.

At least three councils in WA are preparing to draft new policies on short-term accommodation.

For property investors..

Property investors using Airbnb for income should be aware of these changes in Sydney. Although some would say a 180 night maximum is still a fair income opportunity, it is a restriction nonetheless and one that will impact income.

Future apartment investors with Airbnb in their sights also beware. The new owners’ corporation bylaw could see your future income diminish.

As for other cities and regional areas throughout Australia, time will tell if the wave of change is coming to you. Lastly, as with all investment decisions, make sure you find a great finance specialist – like us – who understands property structuring and finance, and who keeps an eye on housing trends.

We work with you to understand your long term financial goals and the structure suitable for your individual circumstances. CONTACT US NOW!

The Value of Mortgage Broking

As housing affordability continues to challenge home buyers across all income levels and demographics, Australia’s experienced mortgage brokers help to drive choice, competition and valuable services for the Australians who need them most.

Mortgage brokers encourage competition between all lenders in the market, which has contributed to a fall in lenders’ net interest margins (NIMs) of more than three percentage points over the past 30 years. This benefit is enjoyed by all Australians looking to buy a home or invest in property, not only by mortgage broker customers.

Consumers benefit from the depth and breadth of experience their mortgage broker brings. With an average of 13.8 years of industry experience, mortgage brokers offer advice and support throughout the life of consumers’ home loans, which means lower search costs, more diversity of product choice and service.

At the same time, a key finding of this report is the average income of mortgage brokers who operate as sole traders. On average, these brokers earn a comparatively modest $86,417 after costs and before tax. This shows – like most small businesses in Australia – mortgage brokers run small businesses that rely on satisfied customers and a stable regulatory environment.

Customer satisfaction is the most critical element of a mortgage broker’s success, with more than 70 per cent of mortgage brokers’ business coming from existing customers. This is (at least partly) driven by customer satisfaction, with more than 90 per cent of customers reporting that they are happy with the service they receive from their mortgage broker.

With more than half of all home loans each year originating from the mortgage broking channel, this report highlights the importance of the industry to the broader Australian economy. The mortgage broking industry contributes $2.9 billion to the economy each year and directly employs more than 27,100 full-time equivalent jobs.

Mortgage brokers play an important role in driving competition between lenders, making it cheaper for all Australians to finance their homes. The average mortgage broker has access to 34 lenders and uses an average of 10 lenders on their panel. This choice and competition is demonstrated most clearly by the fact that market share of broker-originated loans for lenders who are not major banks – or their affiliates – has increased from 21.4 per cent to 27.9 per cent in just four years.

This increased competition powered by mortgage brokers is an enormous benefit for small lenders. Without mortgage brokers, these smaller lenders would need to significantly increase their branch footprint to maintain their existing market share. On average, each small lender would need to build 118 new branches to maintain their current share.

The mortgage broking industry also has a positive impact on rural and regional Australians. Three in 10 mortgages arranged by mortgage brokers are for customers based in rural and regional areas. Without brokers, regional Australians would have significantly reduced access to home loan financing options.

The report provides an in-depth understanding of the role mortgage brokers play in Australia. It demonstrates how mortgage brokers strengthen the entire Australian mortgage lending industry by fostering competition, providing service over the life of a loan, strengthening access to smaller lenders and supporting all Australian home buyers.

To find out more, read the full The Value of Mortgage Broking report on the Deloitte Access Economics website, bit.ly/ValueofMortgageBroking.

The Value of Mortgage Broking report was prepared for the Mortgage Broking Industry Group (MBIG) by Deloitte Access Economics.

Start planning NOW for your future lifestyle!

In a recent survey 48% of our respondents told us they have an investment property! That’s music to a finance specialist’s ears – it’s satisfying to hear those people have a financial strategy that could lead to a more comfortable retirement.

However, 66% of respondents also said they are worried about not having enough money in retirement. This is a concern for many of us as almost 80% of Australians over 65 receive the aged pension. For 66% of those retirees the pension is their main source of income. Coincidence?

So have YOU started thinking about retirement? It is NEVER too early to start planning for retirement – but it can certainly be too late.

Where do you start?

And when should you start? Firstly, you need to focus on the lifestyle you want in retirement and then how you plan on getting there financially.

What if your plan changes?

That’s fine. You can make goal adjustments along the way. In fact, a retirement plan shouldn’t be a ‘set and forget’ strategy. Chances are your imagined needs in your 20’s may look quite different by the time you reach your 50’s.

How much do you need?

A good starting point is to calculate how much you need to provide for comfortable retirement years.

For most of us this means being able to pay bills without financial stress, the odd holiday, maintain a house and car and an occasional indulgence. You will generally require 60-80% of your pre-retirement income to lead the type
of active lifestyle you probably desire IF you have paid off your mortgage. It was previously assumed the first ten years of retirement would be our most active and costly. With longer life spans and a possible increase in health or mobility issues as we age our later years could end up costing more.

What should a plan include?

There is no ‘one size fits all’ plan for future financial stability. If you are in your 20’s and plan to retire at 65 your options may be more diverse than if you’re approaching 50.

Superannuation

Many Baby Boomers will outlive their superannuation savings. While younger generations will have more time to maximise super balances at retirement they may also have significant HECS debts. This was generally not an issue for previous generations.

As you approach your retirement years, salary sacrifice,
a transition to retirement strategy or property investment through a self managed super fund (SMSF) could help build your superannuation balance. But do not make these decisions without talking to your financial planner.

Property investment

Property has long been considered a proven road to personal wealth, yet only around 20% of Australians successfully invest in property outside the family home. There may be more than one way to get your foot on the property ladder:

Save a deposit – Budget and stick to a savings plan. Gen Y’s living at home should maximise the opportunity to save and invest. Increase your savings each time you receive a pay rise.

Ask your parents to help – There are several ways parents might help their children into their first property including a cash gift/loan or acting as guarantor. There are also new mortgage products such as a family pledge or family guarantee. If you have elderly parents perhaps they can contribute some of your inheritance now to help you get ahead?

Use rent as a savings plan – A continuous rental history of 12 months may be taken into account when assessing your ability to service a loan so keep those receipts.

Co-ownership – Perhaps explore investing with family or friends? But be warned – do it properly and get a loan agreement in place first.

Already a home owner? Access the deposit for your NEXT property by using the equity in your current home or property.

See – there ARE options!

The earlier you start planning for retirement the greater your chance of living the comfortable future lifestyle most of us desire.

Is it possible to get ahead financially while still enjoying life?

Getting ahead financially doesn’t have to be a choice between living life to the fullest right now or being tied down in your own home with a huge mortgage.

Did you know you could possibly get your foot in the door of the investment property market without having to save for a huge deposit? The tax man and your tenant’s rent could help you pay off your investment loan.

You may only need to be a little more disciplined with your budget and finances, and before you know it you could be sitting on a nice little investment property – a property that is making you money until you are ready to buy your dream home.

Have you heard of the saying ‘making money while you sleep’?
Well it could happen!

Yes you can buy an investment as your first property!

Buying a small house or apartment in a low cost area and renting it out can be a good way to build some equity over the next few years. You could even do it again and then eventually buy your own place in an area where you want to live.

It is a strategy appealing to many young Australians. While their lifestyle and work commitments are flexible, so too can be their living habits.

You can buy an investment property in another suburb, city or even state while you keep renting in an area that’s convenient and where you prefer to live. Even staying at home for a while longer can be attractive while you purchase your first
investment property.

Home ownership is a goal for most of us but it can seem out of reach when you are struggling to save a 20% deposit. However, property ownership MAY be realistic if you consider starting out with an investment property.

How it works

• Lending institutions include a percentage of the expected rent from your tenants as part of the income towards servicing your investment loan (so you can probably borrow more than you could if purchasing a home).

• Loans for 90% (or higher) of the property value are available for property investors, meaning you don’t need to have such a big lump sum available. This may require you to only fund the legal costs, stamp duty and lenders’ mortgage insurance (often around 4-5% of the purchase price) in addition to your
small deposit. When you talk to us we can calculate this figure for you and work out your most suitable options.

• Investors have typically used interest only loans making mortgage payments much lower – allowing you to gain equity while minimising cash outflow in a medium to longer term capital growth strategy. However lenders have
introduced restrictions on interest only loans over the past year so it’s worth having a chat to us about this.

• Negative gearing tax benefits are available in cases where the costs of your borrowing to invest are greater than your income from the property. This means a rebate from the tax man. Way to go!

But you don’t want to miss out on the First Home Owner Grant?

The First Home Owner Grant (FHOG) is a national scheme funded by the states and territories and administered under their own legislation. Changes to the FHOG took effect from 1 July 2017 – some states and territories provide additional grants and subsidies under certain conditions. In some states you need to live in the property first to qualify for the FHOG so this may rule out the FHOG as a future option if you elect to go ahead with an investment property strategy.

This is a reasonable concern. Ultimately, you need to weigh up whether being in the property market could be better than not being in it. You may find that the capital growth you could experience over time is well in excess of the FHOG.

Alternatively you could focus on the potential for capital gain and rental income to help you start building wealth now. You could find that by investing this way you will be ready to buy your own dream home sooner. With possible additional tax advantages you might even get back more than the amount of the grant! You should seek advice from your accountant to confirm your individual tax position.

On the other hand, in some states if you purchase an investment property first and have never occupied it, you may still qualify for your FHOG later on. We suggest you visit www.firsthome.gov.au to see if it applies to you. If that’s too
confusing, we encourage you to call our office for a chat.

Debt got you down?

In January 2018 there were over 16.7 million credit cards in
Australia and 70.19% of us have a credit card1. In addition:

• Australian households have the fourth highest debt levels in the world after Denmark, The Netherlands and Norway.

• The ratio of average household debt to income has almost tripled since 1988 from 64% to 199.7% of annual disposable income.

• Average debt levels are $4,181 per person for credit card balances and $18,409 for car loans.

So what does this mean for the ‘average’ Australian?

Did you know if you are a prospective home buyer and have ‘average’ levels of accumulated debt it could affect your borrowing power by almost $100,000?

With the median Australian house price at $818,4164 what impact might this have on your home ownership dreams?

Perhaps ask yourself these questions…

• Is your debt growing faster than your assets?
• Are you concerned about your debt situation?
• Are you struggling to make your monthly repayments?
• Does it always seem like your bills amount to more than your wages?

If you answered yes to one or more of these questions, then
perhaps it’s time to look at a solution for your debt situation
NOW – before it’s too late.

Why do so many of us have debt problems?

Some people fail to recognise that using credit to purchase items for use TODAY means they are spending their future earnings before they have even received them.

In the past lenders offered credit cards, with pre-approved limits, without thoroughly checking credit histories or capacity to repay. With debt levels on the rise the government is currently reviewing credit card rules – there is a push for lenders to assess suitability based on a consumer’s ability to repay within a reasonable period.

How have times changed? In the past we saved up or used the lay-by method, ie we used money we already HAVE for items we wanted. Now, as an ‘instant gratification’ society with an abundance of credit at our finger tips we are tempted to use it without considering future consequences. Little wonder many people experience high levels of debt.

What are the first signs of trouble?

• You think it is unlikely you will be able to repay your existing debt with your foreseeable future income.

• You have multiple credit cards.

• You are no longer paying the full balance of your debt each month – you just pay the minimum amount.

• You arranged for more credit cards (or a personal loan) to help pay off the other cards.

• You added a store card(s) because there was no room left on the credit cards….

Eventually your repayments start to approach – or even exceed – your income.

What is the solution?

We all know that good budgeting and discretionary spending discipline is the real answer, but sometimes it doesn’t matter how well you budget there’s just not enough money to make ends meet.

One solution (and this is NOT for everyone) may be debt consolidation.

For some of us it may be too late for budgeting because the debt level is already greater than your income and there is nothing that can be done. In this instance, debt consolidation may be an option for you.

What is debt consolidation?

This is when you take multiple debts (where the majority of the debt has a much higher interest rate) and consolidate the debt into one loan with a lower average interest rate. Generally most people opt for refinancing against their home (using existing equity) as it has the lowest interest rate. For example, your home loan rate may be 5.0% or even lower as opposed to a personal loan that might be 10.95% or higher (definitely lower than most credit cards).

How can we help?

1. If your debt levels are a concern and you think you
may be experiencing the first signs of trouble CALL US
NOW before it is too late. We don’t judge. We are here
to help.

2. Ask us for our debt consolidation spreadsheet
to see how much we can potentially save you each
month to go towards the payment of your debt.
You may be surprised.

3. Even if you are managing your current debt, it never
hurts to review your finances to see how your cash
flow can be impacted favourably.

4. If you have friends or family who you think could
benefit from reading this article, please forward it
to them.

Planning a single retirement?

A 2017 report found that about 52% of people aged between 25 and 64 can expect a ‘comfortable retirement’. On the flip side
that leaves over 47% of us (or 5.1 million people) unlikely to have enough put aside to live comfortably in our retirement years.

However, the story it tells for single people is even more disturbing with claims that only 22% of single women and 31% of single men can expect a comfortable retirement.

What is ‘comfortable’?

In 2017 the superannuation balance required for a comfortable retirement was estimated at $640,000 for a couple and $545,000 for singles. This figure assumes the retiree(s) will draw down all their capital and receive a partial age pension.

Based on 2016 figures the average superannuation balance for a woman at retirement is $231,000. For men it is $454,000 – still significantly short of the required threshold. You can see why singles, particularly women, may find retirement more financially challenging than others!

Is the age pension important?

The answer? VERY. Without it, only 20% of couples, 17% of single males and 9% of single females could afford a comfortable retirement. As our policy makers struggle with the costs of supporting both present and future ageing populations, what will happen to the age pension? A heavy reliance on the pension may be to your disadvantage.

Of course prior to compulsory super guarantee contributions, people expected that retirement meant living on the pension. So what has changed?

We are:
• Living longer – with women on average living longer than men.
• Healthier and therefore more active.

Longevity and good health have created a ‘new vision’ of our retirement lifestyles.

Retirement ‘risk’ factors…

Lower super balances are certainly a risk for single women. The imbalance between women and men is usually due to factors such as lower incomes, time out of the workforce caring for families and part time work.

Renters will need more retirement savings to cover the cost of rent. A female retiree may also be paying rent for longer.

Divorce after 50. Divorce at any age can set you back financially but the older you are the less time you have to replace what was lost in the division of assets. This can significantly impact a previously well planned retirement.

Financial goals

If you’re building your retirement nest egg on a single income and making financial decisions solo the following tips may help:
Become financially confident. Educate yourself about finances. Know what assets and liabilities you have and plan for your future goals. Having goals helps you make better financial decisions.
Manage your debt. Spiralling debt can derail your financial goals. If debt becomes a problem take action to get back on track sooner rather than later. Don’t be embarrassed – ask us how!
Learn about investing. You don’t need a lot of money to invest. Consider starting small and add to your investments over time.
Boost your super. Consider making extra super contributions such as salary sacrifice. Seek advice from your accountant and financial planner first.

Think you are too young to worry?

You may think you don’t need to worry yet. However with advances in medical technology it is predicted younger
generations will live even longer than baby boomers.

They should also have the benefit of a lifetime of super contributions to boost retirement balances. But did you know the
Australian government recently passed a law that will delay the introduction of the 12% super guarantee until July 20254? That’s 7 years later than the date set out in previous laws! Who knows if it will change again?

Planning is the key

Whether you are a couple, single, male or female the question is: will your super balance be enough in retirement? If the current generation is any guide – probably not.

The Value of Mortgage Broking

Mortgage brokers drive competition and reduce prices

• The mortgage broker channel works for all Australians by driving competition, which helps to make interest rates more competitive for everyone. It has contributed to a fall in lenders’ net interest margins of more than three percentage points in the past 30 years.

• Mortgage brokers bring competition to the mortgage industry by improving access to lenders that are not major banks or their affiliates. The share for these lenders increased from 21.4 per cent in 2013 to 27.9 per cent in the past four years.

• The average mortgage broker has access to 34 lenders and uses an average of 10 lenders on their panel, bringing more choice to Australian home buyers.

• Without mortgage brokers, smaller lenders would need to expand their branch footprint across Australia with an additional 118 branches each – on average – to maintain their current market share.

Australians love their mortgage brokers

• More than 90 per cent of mortgage broker customers are happy with their mortgage broker.

• More than 70 per cent of mortgage brokers’ business comes from existing customers.

• Mortgage brokers arrange more than half of all home loans each year, and this number continues to grow.

The broker channel helps those who need it most

• Three in 10 mortgages arranged by mortgage brokers are in rural and regional areas, improving access to home lending for rural and regional Australians – in locations where there may be few or no bank branches.

• Mortgage brokers help first-home buyers enter the housing market. Around 23 per cent of broker customers are first-home buyers and the ABS estimated that FHB’s accounted for around 18% of all housing finance in November 2017.

Mortgage broking supports Australian jobs

• The mortgage broking industry contributes $2.9 billion to the Australian economy each year and supports more than 27,100 (full-time equivalent) jobs.

Mortgage brokers are industry experts

• Mortgage brokers have an average of 13.8 years of industry experience helping Australians finance their homes.

• 64 per cent of brokers have education and training above and beyond their required broker-related qualifications:

  • 36 per cent have another diploma or certificate qualification.
  • 40 per cent have an advanced diploma or bachelor’s degree.
  • 24 per cent have post graduate qualifications.

Mortgage brokers are everyday Australians

• Brokers that are sole traders earn an average income after costs and before tax of $86,417.

Findings from Deloitte Access Economics report, The Value of Mortgage Broking

The real world……Life after GRADUATION

Congratulations! There you are in your cap and gown, degree in hand. This is what you’ve been working towards these past few years. So… what’s next?

Completing tertiary study can be both the most exciting AND daunting time of a graduate’s life. Some may head off for poststudy travel (read our article about ‘debt lag’!) but for most, graduation marks the transition to their chosen career and first step into the ‘real world’.

Getting started

Finding a job will be top of mind for most graduates. The first challenge could be expectations vs the reality of the job market, however a 2016 student survey found:

  • 70% of graduates agreed it was more important to feel fulfilled at work than earn lots of money.
  • 64% were willing to make sacrifices in their personal life to develop their career, and
  • 66% expected to work 41 hours or more per week in their first professional role to get ahead.

It seems the future of our workforce is in good hands!

Becoming independent

This is also a time when some young adults move out of home. Perhaps you need to relocate for a job or it’s simply time for independence? Regardless of the reason, learning to be responsible for our own finances and expenses for the first time in our life can be confronting.

It’s important to plan, budget and consider all costs you will incur BEFORE you move,
including:

  • Will you live alone or share? Your weekly rental limit will determine the location and property type.
  • One off costs such as rental bond (usually 4 weeks rent), rent in advance (usually 2 weeks rent), removalist, connection fees for phone, internet, utilities plus furniture, linen, kitchenware, household supplies etc.
  • Ongoing costs such as rent, gas, electricity and water bills, food, entertainment, transport and/or car costs and home contents insurance.

If you have an informal arrangement in a share house there are usually no real legal ties. If you sign a lease there are binding legal and financial obligations. If you are sub-letting under your lease YOU are responsible for the care and upkeep of the property. Make sure you understand what you’re signing.

How to manage AND get ahead

What are the ‘golden rules’ to help you manage your money AND protect your financial future?

1.Create a budget and live by it

Try to divide your salary into 50% for essentials, 30% for lifestyle and 20% for savings. If you can’t manage to live AND save perhaps revise your plans?

2. Avoid ‘dumb’ debt

Credit and store cards can lead to a financial disaster. If you have a credit card ensure you are disciplined about usage and repayments.

3. Protect your credit rating

Pay your bills on time – that means BEFORE the bill is due – not at the 2nd final notice! Poor financial habits could affect your ability to qualify for a home loan.

4. Don’t ignore superannuation

It’s wise to understand NOW the role super could play in your future. It should be part of your financial planning from your 20s – not your 40s.

Remember your student loan…

This can be the ‘elephant in the room’ for students, so what are the facts? Compulsory repayments through your tax return are required when your income exceeds a minimum repayment threshold. You can also make voluntary payments at any time. Student loan repayments should be factored into your long term financial planning.

As of January 2016, if you have moved overseas your repayment obligations will remain the same as if you are living in Australia.

Protecting your future

Living life on a single income could leave you open to one critical risk you may not have considered. How would you afford your lifestyle if something happens to you and you cannot work? How do you protect the income you are now dependent on?

We don’t think about anything going wrong when we’re young and healthy so if you would like to understand how to protect your income we’re always here for a chat. If you have graduating friends who could benefit from this article ask us for a copy to send on to them!