Buying property with other people: Mine, yours or ours?

When people buy property together, particularly if it’s with a partner or spouse, they often register the title in both people’s names – especially if they’re going to live in the property.

But other arrangements are possible, several friends might opt to own individual shares in a property, for example, or a couple might choose to have only one of their names on an investment property title. The following information provides you with a good starting point to help you on your way. Also tax legislation and other Australian laws governing property ownership and investment are complex, so seek proper legal and financial advice before entering into any arrangement.

Joint-ownership titles

The two main types of joint-ownership titles in Australia are joint tenancy and tenancy in common.

Joint tenants own the whole property together. If one of them dies, ownership passes to the surviving tenant or tenants, you can’t sell or transfer your ‘share’ in a joint tenancy. This is the most common arrangement when a couple owns a family home.

Tenants in common own individual shares in a property, and those shares do not have to be equal. Shares in a common tenancy can be transferred to someone else. When one tenant dies, their shares pass to their heirs if they have a will.

Legal liabilities

Tenancy in common is a useful arrangement when a group of people want to buy property together. Each tenant can own a share proportionate to how much money they’ve contributed, and can sell or otherwise dispose of their share as they wish (unless the tenants have entered into a prior agreement that prohibits this).

Tenants in common can take out individual loans to finance the purchase of their share of a property, with each tenant repaying their own loan. However, tenants in common are “jointly and severally” responsible for all the loans – if one tenant falls behind in their payments, the other tenants are responsible for those payments. You should also be aware that a lender could force the sale of the property to recover money owed by one tenant.

One person’s name on the title

When you’re buying an investment property with a spouse or partner, there could be tax and other advantages to putting the title in only one person’s name. Capital gains tax is payable when you sell a property that is not your family home, such as an investment property. Tax on capital gains is calculated as part of your annual income in the year the gain is realised. If the property is in the name of the partner who has low or no income, less tax could be payable than if the income from the capital gain was shared with the partner with a higher income.

Future borrowing

If you already have an investment property, a lender will take into account both the income from the property and the loan you’ve taken out to buy it when assessing how much they can lend you. If you own a share in a property as tenant in common, a lender will count the whole debt on the property as your liability – not just your share of it. This could in turn decrease the amount of money they’re willing to lend you.

Holiday home or good investment? Can it be both?

Australians LOVE a holiday and while overseas travel is high on the list for many of us we are also blessed with an abundance of fabulous holiday destinations in our own backyard.
For some of us, when we find a piece of paradise on home turf the lure of our own holiday hideaway is strong. Be honest! Have you ever checked out real estate prices at your favourite holiday spot?

Have you ever wondered if a holiday home is a good investment? Glad you asked – that’s a really good question…

So what do you need to consider?

Q. Is it business or pleasure?

We generally buy lifestyle assets for pleasure – think nice cars, boats etc. On the other hand we usually buy financial assets, such as property, with a view to an eventual profit. Even if you never intend to sell your family home it’s generally purchased with an expectation of capital gain.
If you purchase a holiday home purely for your own lifestyle pleasure (and you can manage the holding costs of the property over time) that’s great. However, typically
a holiday home is not something you would consider as your first investment –
or maybe even your second or third – so seeking good advice is critical. It pays to consider ALL aspects of such a buy.

Q. What should you consider?

Some positive aspects of owning a holiday home may include:

  • Rent-free holidays for you, family or friends any time you like.
  • Potential profit from holiday rentals to others.
  • Even if you don’t make a profit, rental income may offset holding costs such as maintenance, loan repayments, management fees, insurance and rates.
  • Possible tax advantages.
  • Possible capital growth over time.

Some people may buy a holiday home earlier in life with a view to retiring there in the future.

Of course as with any investment it pays to consider the possible pitfalls as well. We certainly know of many cases where clients have made a purchase in the throes of holiday euphoria only to regret it further down the track.

Q. What could possibly go wrong?

Key considerations before proceeding with such a purchase include:

  • Value for money. How often will you use it? If you go there one weekend per month and three weeks at Christmas (ie 43 days pa) it may be cheaper to go and pay normal rates. As of July 2017 travel expenses related to an investment property are also no longer deductible.
  •  Security. You may only ‘check’ on a holiday home a few times a year so there could be security issues with an unoccupied property. As a result insurance can often be higher. Make sure you have a local property manager.
  • Potential income vs reality. Will you rent it to others? When, how often and what is the potential income? How many other holiday lettings are in the area? How does your property compare? Would you forgo personal use in peak season to maximise rental income?
  • Holding costs. Ongoing costs include your loan repayments, rates, insurance and maintenance plus possible costs of property management and advertising. You could use local management or manage it yourself. Without a local managing agent how will you manage access to the property, cleaning and post-letting inspections?
  • Capital gains potential. Carefully research property trends – you usually won’t see capital gains like those with a city property. Also holiday homes can be difficult to sell. By their very nature holiday areas usually lack characteristics that underpin a good investment such as infrastructure, arterial roads, hospitals, schools and employment opportunities.
  • Beware of freeloaders! Managing the expectations of friends and family can be a tricky area. Best to set the ground rules right from the beginning.

The golden rule? If investment potential is part of your plan then it pays to be cautious of a property purchase driven by your heart rather than your head.

If you are thinking of purchasing a holiday home please contact us for a chat first. We can help you explore all the financial implications for your individual circumstances and long term financial goals.

Coffee Addiction! Can it be tamed?

Coffee is an essential part of daily life for many of us with caffeine often referred to as ‘the world’s most popular drug’. You only have to look around at the explosion of cafés and coffee trucks over the past 20 years to gauge its popularity. If you’re a traveller you will know coffee in Australia is some of the best in the world and our baristas are often seen as world leading in their profession.

Many of us wouldn’t get through a work day without coffee! Take a moment to look around your workplace and see how many coffee cups, energy drinks and chocolate bars you can find. A lot? So what is caffeine and why do many of us find ourselves wanting it on a daily basis?

Caffeine is a ‘psychoactive stimulant drug’ and is naturally found in the leaves, seed and fruits of over 60 plants worldwide. The most common sources in our diet are coffee, tea leaves, cola and energy drinks. Caffeine can also be produced synthetically and added to food, beverages, supplements and medications.

How much is too much?

One shot of espresso coffee in a cappuccino or latte equates to approximately 100mg of caffeine. The average Australian drinks two cups of coffee per day. While this is a healthy quantity and is enough to keep a person energised and feeling alert for the day, the problem is that most people who work in an office tend to consume more caffeine than the average Australian.

Why do we become addicted?

If you have coffee regularly over time your body becomes used to having caffeine in the system. If we then cut it out your body misses the caffeine and you start to show symptoms of withdrawal. At this point we usually race out for a coffee hit! And so the vicious cycle continues….

As well as being addictive, coffee consumption has become a very social habit. How often do we invite someone to catch up for a coffee?

Once the addiction has taken hold we begin to run the risk of burning out, crashing or getting what is commonly called ‘the afternoon slump’ at around 2pm or 3pm.

How does it affect us?

The reason people who consume considerable amounts of caffeine end up being more tired and having less energy than everyone else is due to two very important, very small glands in the body: the adrenal glands.

These little glands are responsible for producing adrenaline. And what gets pumped around the body every time we consume caffeine? You guessed it – adrenaline! If you push these little glands too far they will eventually run dry, and it is at this point where you will begin to burn out or become fatigued.

To make things worse, it’s not only caffeine that can strain your adrenal glands. Several other factors such as lack of sleep, high sugar intake and high levels of stress can leave you without anything left in the tank.

So, how do we protect ourselves from abusing our adrenal glands and burning out?

The simple answer is to consume the right type of caffeine, in the right amount and at the right time and gradually reduce your consumption.
• Try real brewed espresso – it contains natural caffeine, minerals and antioxidants.
• Don’t add extra sugar – it excretes too much adrenaline.
• Try to limit your caffeine intake to the morning – this will get you going and help you focus, and it will definitely not interfere with your sleep at night.

Are you suffering from DEBT LAG?

Aussies are a nation of international travellers. In fact, during 2016 a record breaking 10 million residents left Australia to travel overseas on a short term basis. That’s 41 out of every 100 of us!

We often hear people say “no matter where you travel overseas you’ll run into an Australian”. You can see why!

Of course, the travel bug comes at a cost. Unless you have unlimited funds the more you plan, budget, save and pay towards your trip BEFORE you travel the better off you will be AFTER your holiday.

Nobody wants their dream trip to become a travel debt nightmare. Jet lag we expect – but ‘debt’ lag should be avoided at all costs!

The potential cost of debt lag

A 2016 travel report claimed Gen Y is the biggest spending generation with a holiday spend of $11 billion pa.

Gen Y is also our new generation of property buyers so it could come as quite a shock to some if their last overseas holiday continues to impact their future financial plans long after their plane lands!

All lenders assess your debt, repayment history and credit report during the home loan application process. A large travel balance could impact both your credit score and ultimately your ability to be approved for a home loan.

If you are a current homeowner you don’t want to find yourself drowning in holiday debt or experiencing an unexpected shift in interest rates that leaves you struggling to meet your repayments.

How do you AVOID debt lag?

Here are our top tips:

• Planning is the key. Create a holiday savings plan well ahead of your travel date. Look for early bird discounts.
• Avoid peak season. Travelling during the off-peak season may deliver extra savings.
• Research exchange rates. If rates are favourable against the $AUD then load currencies on a travel card BEFORE you leave.
• Consider ALL possible costs. It’s often the expenses you did NOT anticipate that sink your budget.

Managing debt lag

How can you pay off debt sooner? For one possible option check out Liz and David’s story…

There are a number of ways to manage credit card debt. Paying minimum repayments over a number of years is certainly not one of them.

Contact us for a chat and we can help explore a debt management solution for your individual circumstances.

Whether you are an existing property owner or a potential FUTURE property owner, managing credit card debt will help protect your financial future.

Disneyland almost broke the bank!

Liz and David always dreamed of taking the kids to Disneyland so when their eldest son started Year 6 they decided it was time to bite the bullet and go!

They HAD planned to get on top of their mortgage and then save for a trip. They reviewed their budget and decided if they cut some expenses they could pay for the trip with their credit card and manage the repayments. They estimated the trip would cost $8,000-$9,000.

The first setback was when their hot water heater blew up a week before they left! THAT was an expense they had not planned for. After arriving at Disneyland it soon became clear their 3 day pass wasn’t long enough so they added extra days. Transport was another cost that caught them unprepared.

Liz was also blown away by the cost of food at Disneyland… AND the shopping! Who knew you could buy the kids their annual clothing allowance in America SO MUCH cheaper than Australia? They arrived home from their trip of a lifetime with a $12,186 credit card balance!

Liz and David knew they had to rethink their plan. They chatted to their broker and consolidated their debt into their home loan to take advantage of the lower rate. Then they added their planned repayments (plus any extra they could afford) onto their mortgage to clear the debt as quickly as possible.

Need help with debt? Ask us for our article

‘Debt got you down? Take action NOW!’

Changes to credit reporting…What you need to know!

Does it seem like the finance world is dominating the news at the moment? Between the ongoing Royal Commission and the recent federal budget we wouldn’t really blame you if you were starting to ‘switch off’ to finance news.

Is there a problem with ‘switching off’? Well possibly – especially if changes in the finance world that could affect YOU end up slipping under the radar!

So what upcoming changes do you NEED to know about?

It’s probably fair to say that EVERYBODY should know about changes to credit reporting. Why?Because credit reporting could affect EVERYBODY!

And yes, changes are coming… 

From 1 July 2018 mandatory comprehensive credit reporting (CCR) comes into effect with the big 4 banks required to participate fully in the credit reporting system.

The mandatory credit reporting will give lenders access to a deeper, richer set of data enabling them to better assess a borrower’s true credit position and their ability to repay a loan.

What is CCR?

CCR was introduced in 2014 – at that time Australia shifted from a negative reporting system to a positive reporting system. However, up until now it has not been mandatory for lenders to adhere to the CCR guidelines. That has NOW changed for the big 4 banks.

What is the difference between the two systems?

Negative reporting system – recorded negative events in your credit history such as overdue debts, defaults, bankruptcy etc. Lenders based their assessment of your borrowing potential solely on this information. They could also access information on credit applications you have made but were unable to see whether those were approved or not.

Positive reporting system – this regime makes it easier for lenders to conduct a comprehensive and balanced assessment of your credit history. It now contains information on your repayment history for credit cards, home loans and personal loans including:
• whether you have made a payment or the
minimum payment required
• whether the payment was made on time

It also contains information on your consumer credit liability including:
• type of credit account opened
• when it was opened and closed
• the name of the credit provider, and
• the current limit on the credit account

Your repayment history is stored on your credit file for up to two years.

Why was CCR introduced?

CCR has brought our reporting system in line with many other Organisation for Economic Co operation and Development (OECD) countries. Under CCR it is now easier for lenders to conduct a comprehensive and balanced assessment of a borrower applicant’s credit history. The positive? If you have a good credit rating it could potentially allow you to negotiate a better deal on your mortgage, personal loan or business loan. The negative? If you have a poor credit rating you could find that obtaining credit becomes more difficult and/or expensive. On the other hand, it may also be easier to show you have recovered and stabilised your financial situation after a negative event such as a default.

Not with the big 4 banks?

It is expected most other lenders not currently adhering to CCR will follow suit – before they are required to do so! The government is also considering extending this mandatory reporting to gas, electricity and phone service providers. In short, at some point in the future ALL of your financial habits – both good AND bad – will be an open book to potential providers of finance and financial services.

The bottom line? There has never been a more important reason to pay attention to:
• your bill paying habits
• your credit card usage, and
• staying on top of debt…

It COULD make a world of difference to your future ability to be approved for finance.

Need some help to make sure your credit report is in tip top shape? Contact us for a chat about debt consolidation. It may not be suitable for your situation but could be worth exploring.

If it’s time to get on top of debt contact us for a copy of our debt consolidation spreadsheet and we’ll explain how it works.

Investment property checklist

We are all told that purchasing your home is the biggest financial decision you will ever make. Well that may be the case for most Australians. However for those 20% of us who invest, or those who are considering investing in property for the first time, it really is the NEXT biggest financial decision to make.

Investment considerations at any time are both exciting and scary. So to ensure you are on the right path a successful property investment experience, please use our checklist to avoid making any major mistakes along the way.

  • Take a look at a map of the region you are
    considering, identify the local CBD and draw
    a circle 15 kms around the central point. Start
    looking for your property within the circle.
  • Research, research, research! Review data
    showing median sale prices and rental yields on
    comparable properties.
  • To ensure affordability stay within the second
    and third quartile of prices in the suburb for
    price and rent.
  • Is the property within close proximity to
    schools, shopping centres, university or
    business hubs that are well established and
    likely to appeal to good quality tenants?
  • Does the area have an established public
    transport network and is it close to the main
    arterial road network?
  • Check the local government website for
    developments planned for the suburb/region,
    eg high density dwellings.
  • What is the land size? Is there potential for
    subdivision (or to increase the size of the
    existing dwelling) at a later stage to increase the
    marketability?
  • The newer the property the better the
    depreciation benefits.
  • If an older property, does it lend itself to a cheap
    make over?
  • Unit – best features: minimum two bedrooms,
    built in robes, bathroom + ensuite, internal
    laundry and lockup garage.
  • House – best features: minimum three
    bedrooms, built in robes, two bathrooms,
    lockup garage (parking for two), extra storage,
    low maintenance fully fenced yard.
  • Is there a current tenant and if so are they
    paying market rent?
  • Invest time to find a quality property manager.

These strategies are great guidelines, however your number 1 action is to speak to your finance specialist to help you identify:

  1. How much you can borrow for your investment property
  2. How you will fund your deposit
  3. How your finances will be structured for your longer term future
  4. Your long, medium or short term holding expectations
  5. The costs involved in holding property
  6. The tax advantages of investment property
  7. The pros and cons of positive and negative gearing and what may suit your circumstances best
  8. Recommended insurances to minimise risk (speak with our financial planning expert if you don’t already have one)
  9. Your exit strategy

THEN

We recommend you have LOAN PRE-APPROVAL
in place before you go shopping.

(“Ultimately we’re seeing that Australians still hold faith in the long term investment benefits of property. Property is a great opportunity to build wealth, but it definitely pays to do your research, take your time, speak to the experts such as a mortgage broker or buyers’ agent, and focus on the financials of the investment rather than the emotions of a purchase.”)

Mark Woolnough, head of third party distribution, for ING Direct 2016

What should you know BEFORE you start investing in property?

We recently chatted to a client who has been investing in residential property for over 25 years. We asked her “What do you know NOW that you wish you knew BEFORE you started investing?” In fact she listed over 20 tips! We thought we would share with you her top seven insights…

1. Know the value of education

Firstly, she wishes she had access to the finance information now available! That’s the reason we love to share our finance tips and articles with you. Our aim is to help you navigate every financial stage of life with usable, educational information. Being financially savvy not only underpins our own future, it allows us to pass on important knowledge to our kids.

2. Be careful who you listen to

(including family, friends, bank tellers, accountants and real estate agents). Many successful investors may never have taken that step if they had listened to the naysayers. If they don’t have more properties than you, then find someone who does. Find your team of experts, research and ask questions. If you are learning something new from them they could be the right person!

3. I wish I had started sooner

We all know our first property is the hardest – you have to make sacrifices. Our client lived on bread and tinned soup, worked 3 jobs during university studies and worked weekends (while her friends were out spending THEIR cash). Time and property prices don’t wait for anyone.

4. I wish I’d bought an investment property before my home

Purchasing an investment property first (while living with parents, family or
renting with friends) may allow you to get into the market earlier than saving for a deposit for your first home. The rental income and the tax man will help pay off your investment property mortgage. This path isn’t for everyone but if you’d like to explore your options we’re here to assist.

5. Location. Be careful where you buy…

If you’re not highly educated about investing in property you can make big mistakes. As a rule of thumb you should stick to good old fashioned location guidelines such as:
• growing capital cities
• confirmed future infrastructure and transport plans
• favourable supply and demand statistics

Choosing the right location is crucial for future capital growth.

 6. Pay the LMI to get your foot in the door

If lenders’ mortgage insurance (LMI) will help you get into the market earlier with a smaller deposit it could be worth crunching the numbers. If property prices increase during the time you take to save the additional deposit the price increase will likely be far greater than the LMI you are asked to pay now. It’s worth a discussion with us.

7. Take out landlord insurance

Landlord insurance covers crucial items for investment property owners that may not be covered by other types of home and contents policies, eg theft, malicious damage or vandalism by tenants or their guests or loss of rent due to tenant default. If you have a mortgage on the property your lender may require you to take out insurance before you take on tenants.
Speak to us!

Lastly, make sure you find a brilliant finance specialist – like us – who understands property structuring and finance. We work with you to understand your long term financial goals and the structure suitable for your individual circumstances.

Please be aware however, this article is a personal opinion and NOT advice for you. Everyone’s situation is different. Please read our disclaimer below. It is always important to speak to us BEFORE ACTING on anything you read about financing an investment property.

Is upsizing on your wish list?

With a generation of baby boomers entering retirement there is no end of information on downsizing a home. On the other hand, for a generation of homeowners with entirely different needs what do YOU need to know when it comes to upsizing your home?

Common reasons for upsizing

Chances are you’ve been perfectly happy in your first little house or apartment, but life changes – along with our living requirements. Reasons for upsizing may include:

  • marriage
  • having children
  • a growing or blended family
  • starting a home business
  • additional family moving in
  • buying a larger property while
    keeping the first as an investment
  • windfall/inheritance

Before you start…

Moving on to a new stage of life can be both exciting AND scary. The most important task is to define your goals and do your homework BEFORE you proceed. Key points you should consider are:

Long term goals
What are your future plans in terms of lifestyle, kids’ schooling, additional children, potential investment or financial return?

When choosing the size, type and location of a property, asking yourself these questions will help you define the right property for both now and in the future.

Borrowing power

We can help you determine your current equity and potential borrowing capacity for your individual circumstances.

If you haven’t had a property valuation for a while it’s possible that during that time, capital growth or renovations have resulted in equity you didn’t realise you had! Ask us for a property report for your area!

If you require a valuation we can assist you with a referral to our property valuation specialist to determine what potential equity you may have.

Additional costs

Of course a larger home will also translate into increased costs. Just some of the costs that should be factored into your financial considerations are:

  • Maintenance costs – lawns, gardens, painting etc. Swimming pool? Make sure you add pool maintenance!
  • Utilities – include transfer costs, plus heating and cooling a bigger space will probably mean larger ongoing utility bills.
  • Property taxes – council rates will most likely increase. Don’t forget stamp duty either – this is often a significant cost in a property purchase. Land tax may also be applicable.
  • Home insurance – home insurance premiums will increase exponentially with the value of your new property.
  • Furnishings – with more rooms to fill you may need to factor in not only more furnishings, fixtures and appliances but home and contents insurance will also need to be reviewed.
  • Renovations – are renovations part of the plan in order to ensure your new ‘dream home’ matches your dream?

Research and consideration of all possible costs involved in upsizing your property will help you move forward with confidence.

As your finance specialist it is our role to help you explore finance and structure options most suitable to your individual circumstances and your future financial goals.

Getting ready!

So… you’ve explored your financial options and you’re almost ready to take the leap. What’s next? Now is the perfect time to start preparing for your big move, especially if you’re contemplating listing your current property for sale (or lease) in the next peak selling/buying season…

Decluttering

This can be both necessary and cathartic but remember you will also be filling a larger space. Assess items on usefulness – no point in tossing it only to have to buy a replacement! Start packing and storing now – not only will you declutter your home ready for market you’ll also be ahead of the game come moving time!

Painting and repairs

Ideally, you will only want to spend as much as is necessary to ensure or improve the market appeal of your property. Seek guidance from our experts with knowledge of similar properties.

If upsizing your property is on your wish list this year then call the office and we would be pleased to book you in for a chat!

Selling and buying…Do you need to Bridge the GAP?

Many property owners sell their existing property to purchase a new property at some point in their lives. In a perfect world, the sale of one and purchase of the other will happen in a smooth, seamless sequence. In reality it doesn’t always happen like that!

What are your options if you find the perfect property and your current property is still waiting for a buyer?

Perhaps you believe you can’t buy without selling but you don’t want to miss out on your dream home? One option you may have heard about is bridging finance.

What is bridging finance?

Bridging finance can be used to ‘bridge the gap’ between the purchase of your new home and sale of your current home.

The size of the bridging loan is calculated by adding the value of your new home loan onto your existing outstanding mortgage less the predicted sale price of your existing home. This is referred to as the ongoing balance.

Bridging finance is typically an interest only loan with a limited loan term.

As you are essentially carrying two loans at once a bridging loan isn’t for everyone –
it is imperative you seek expert advice. As your finance specialist we can explore whether this finance type is suitable for your individual circumstances and
financial situation.

What you should know…

  • You generally require a minimum of 50% equity in your current property to avoid a high interest rate.
  • Careful analysis of possible price fluctuations, auction clearance rates, general market conditions and selling seasons is essential.
  • As an interest only loan, interest is compounded monthly on the ongoing balance at the standard variable rate. The final interest bill will be added to the mortgage on your new home when you sell your existing home.
  • A maximum loan term will apply.
  • There are generally restrictions on this type of purchase, eg not suitable for construction loans, strata title or company purchases.
  • When your existing home is sold the bridging loan is converted to a regular principal and interest home loan for your new home. You then commence making repayments into your new home loan.
  • Costs and fees should be considered. Upfront costs of buying your new home, eg stamp duty, pest and building inspection and legal fees, can usually be added to the bridging loan.

Traditionally, interest rates have been higher for bridging finance due to a greater element of risk. There are some lenders offering products at standard variable rates depending on your individual circumstances.

Risk factors of bridging finance
One of the biggest risks with this loan type is overestimating the eventual sale price of your existing home. Should market conditions shift during the loan term and there is a shortfall when paying out the bridging loan it could cost you dearly.

Advantages of bridging finance:

  • Allows you to buy a new property before your current property sells.
  • Avoids rental costs between selling existing property and buying your new home.
  • Usually only repayments on current mortgage balance are made during bridging period.

Disadvantages of bridging finance:

  • You may require two property valuations resulting in two sets of valuation fees.
  • If your existing home doesn’t sell within the loan term you will usually be charged a higher interest rate.
  • The longer it takes to sell your existing home the higher the final interest bill.
  • If your current lender does not offer a bridging loan they may impose early exit fees if you choose an alternate lender. Analysis of all fees and costs applicable will be part of our assessment of the most suitable loan product for your situation.

Of course, it’s always worth investigating whether you are in a position to buy a new property AND keep your original property as an investment.
If you HAVEN’T explored the current equity in your home for a while then make sure you call us BEFORE you make any future property buying decisions. We are always here to help you on the path to future wealth creation!

Contact us to book in for a chat about your finance options. 

The cost of pets…Are you patting YOUR DEPOSIT?

If you are one of the 3 in 5 Australian households who owns a pet you probably won’t be surprised to know Aussies spent $12.2 billion dollars on pet products in 2016. That’s a lot of money that could be used elsewhere. So how do we manage the cost of owning our furry friends?

The main reasons many love to have pets are:

• companionship
• teaching kids responsibility
• relaxation and
• security

The main reasons some of us DON’T choose to have pets are:

• home or lifestyle not suitable
• cost
• body corporate rules or
• we don’t want the responsibility

The positives of pet ownership

There is no doubt our Aussie lifestyle and climate is perfect for a pet-loving nation. In fact we have one of the highest rates of pet ownership in the world. Research also shows there are various health benefits that may be associated with pet ownership including:
• increased cardiovascular health
• more physical activity (especially dog owners)
• fewer visits to the doctor
• strengthened immune system and reduced risk of allergies (when growing up with a dog)

Research has also shown owning a pet can have psychological benefits including:

• children who own pets seem more empathetic and have higher self esteem
• teenagers with pets have a more positive outlook on life and show fewer signs of loneliness, despair and boredom
• enhanced social connectedness and social skills

In a digital world rife with bullying it’s good to hear pets have a positive effect on kids and teens.

Pet owners generally report less depression and appear to cope with grief, stress and loss better than those who don’t own pets. The role of pets in the lives of the elderly has been proven to have a positive effect for those in nursing homes or assisted care.

The cost of owning pets

Before embarking on pet ownership it’s important to factor the cost into your household budget. Many of us may have been caught off guard when that cute puppy or kitten translated into many hundreds of dollars in food, care and vet bills each year. Perhaps even new fencing? One client recently took her cat to the vet and ended up with a $1,000 bill. Ouch!

Research shows the average cost of owning a pet is $1,475 pa per dog and $1,029 pa per cat – not including unexpected costs. The cheapest pet? A goldfish comes in at around $50 pa.

Based on these figures a household with a dog and a cat could spend $25,000+ over their lifespan!

Budgeting for our furry friends

Depending on the breed or source of your pet your initial purchase cost alone could be between $200 and $3,500+.

The average ongoing costs per annum per dog are: food ($622), vet care ($397), health products ($248), grooming ($129) and boarding ($86)1. Estimating your costs, allocating these in your budget and exploring where you can save on other expenses to compensate for your furry friend will help ensure your beloved pet does not result in a cost blowout.

The role of pet insurance

As medical technology and level of veterinary care advance, so too has the cost of treatments. Sadly, an unexpected illness or injury could result in the heartbreaking decision to have a pet euthanised if the cost of treatment is simply unaffordable.

Pet insurance is a growing industry with a number of providers. In 2016 about 25% of dog owners and 20% of cat owners had pet insurance at an average annual cost less than $3001.

As with all insurances it pays to do your research and know the terms and conditions of the policy. It is not always available for older pets and may not cover routine visits such as vaccinations, dental and desexing. Premiums could also be higher for certain breeds.

Need help with your family budget? We’re always here to assist. Being prepared for the cost of owning our beloved pets will ensure we enjoy them for many years.