Look before you leap and plan ahead before you retire.

There is no end of financial advice on preparing for retirement: superannuation, investments, tax minimisation, age pension eligibility, funding your desired lifestyle – the list goes on. All these areas of advice highlight the importance of planning ahead – the sooner you start the better prepared you will be.
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 their most significant decision both financially and emotionally.

Is it better to plan ahead? In the years prior to retirement many homeowners find themselves with substantial equity in the family home and fewer expenses as kids (hopefully!) leave home. It’s an ideal time to consider using the equity in your home to buy that retirement property now. In the years leading up to your retirement, the rental income and possible tax benefits will help pay for your property.
With the potential benefit of positive movement in the housing market – and now having two properties – this may place you in a good position to increase your retirement nest egg if you choose to sell your family home when you downsize. Depending on your situation you may even be able to keep the family home as an investment.

Downsizing is on the move According to the Productivity Commission, approximately 20% of Australians aged 60 or over have sold their home and purchased a less expensive one since turning 501. It is expected this percentage will increase as more Baby Boomers move into retirement.
As a result, there has been increased demand for suitable housing for retirees such as villas, townhouses and units. Growing competition for limited stock in many established areas has increased prices – in some locations the cost of a villa can be as expensive as a three bedroom house. This trend may continue.
But beware – the reverse can happen in an off the plan situation. Some off the plan properties are valued lower than purchase price upon completion and lenders have restricted lending in certain areas.

Why downsize? The decision may be as simple as living in a property that is easier to maintain, closer to family or one that supports your lifestyle choice – many grey nomads LOVE being able to lock up their small pad and hit the road!
Selling could also release money for other investments that provide you with additional income in the future. This may give you more choices in retirement and avoid alternative equity raising options such as a reverse mortgage on your current property.

Look before you leap Before putting your home on the market you should consider the following:
Understand your reasons for selling. Don’t just consider short term needs – factor in potential long term needs.
Explore ALL the implications of selling your house – financial and otherwise.
What are the advantages to YOU? If you’re moving to be near family what will happen if they move elsewhere?

Smaller isn’t always cheaper. Explore all the costs of moving and maintaining a new home. Will you be ahead?
Have you sought financial advice? How will funds from the sale of your home affect your Centrelink assets and income tests? Will selling impact your Age Pension?
You may miss people, activities and services in your current area if you relocate to another region. Make plans to re-establish yourself or keep contact with your social circle.
You will need to cull a lifetime of possessions. ‘Letting go’ can be difficult. Try doing without items or living in a confined area of your house for a bit to see how you adjust to ‘smaller living’.
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 could be well on the way to making it your best move yet!

Keeping your credit score healthy

Your credit file is one of your most important financial assets.  Safeguarding this file is an important part of the finance application process.

Your credit file contains credit applications, overdue credit accounts, payment defaults, clearouts (as a missing debtor), commercial credit information and public record information. You will have a credit score calculated from your credit file.
From September 2018, there is additional information about the credit products you hold on your credit report including:

• The type of credit products you have held in the last two years
• Your usual repayment amount
• How often you make your repayments and if you make them by the due date.

Did you know that a score of less than 500 will severely affect your ability to gain finance from many lenders?

Do you even know what your score is or how easily it can be affected?

What is your credit score?

Credit scoring is a mathematical assessment of the data included in your credit report. The credit score is calculated by the credit reporting agency using a number of complex formulas. The score shows the likelihood of an adverse event recorded in the next 12 months. Scores range from zero to 1,200.

The higher your credit score the lower the risk that you will default. A ‘good’ credit score is between 622 and 725.
Credit reporting
The credit report is the basis for your credit score. In Australia there are four credit reporting agencies: Equifax, Experian, Dunn & Bradstreet and Tasmanian Collection Service.
You can access a free copy of your personal credit report through the following online providers: Creditsavvy, Creditsimple, Finder, Getcreditscore and WisrCredit.

Your credit report is very important as it provides the information used to calculate your credit score.

You will have a credit report if you have applied for any form of credit.

This can include:
1. phone contracts
2. credit cards
3. residential or personal loans, or
4. hire purchase

So what affects my credit score?

There are some behaviours you can control that will affect your score:
1. late payments,
2. overuse of credit, and
3. limiting the number of credit applications

We have had clients lodge a loan application with us only to be rejected due to a poor credit score. When we investigated the cases we found there had been multiple credit enquiries listed in a short period of time. What the clients didn’t realise was that every time they were offered (and accepted) a new credit card (at their local grocery store and service station) these services were individually lodged as a credit enquiry.

Our clients had also sought pre-approval from various lenders while they were searching for a new home. These pre-approvals were also listed as a credit enquiry. When the time finally arrived to acquire their home loan, it appeared they had submitted many applications for a range of credit over a very short period. This history resulted in a low credit score and subsequent rejection by the lender.

Surely the lender can understand  what really happened?

Unfortunately many major lenders are now treating credit scores as a black and white decision. If your score is too low then the loan application will be rejected – no questions or discussion!

What should I be doing?

You need to be conscious of your credit report. Make sure you meet all your credit obligations. If you are considering refinancing in the next couple of years, be aware of all agreements, pre-approvals and enquiries you make (where you sign a privacy agreement) as these will generally result in an entry on your credit report. These entries  stay on your file for 5 years.

Is ‘free’ credit card travel insurance worth it?

Do your research and watch your spend!

‘Complimentary’ travel insurance is an increasingly used feature on many premium credit cards.

According to ASIC’s Money Smart, 20% of travel insurance is used through a credit card compared to 19% through a travel agent and 31% direct from an insurer.

Traveller beware Credit cards with complimentary travel insurance can be a great way to save money, but it is important to check the eligibility criteria and what the policy will cover.

Travel insurance that comes with credit cards may not in some cases cover as much as a stand alone travel insurance policy you buy separately.

There’s the old saying that nothing comes for free…

Complimentary travel insurance isn’t really ‘free’. The travel insurance premium is usually paid through the annual fee on the card. So you might as well take advantage of something you have already paid for – right?

Do your homework first!

As with all types of insurance, it is advisable to do your homework, compare policies and always read the terms and conditions.

Generally, travel insurance covers you for medical expenses, loss of luggage or personal items, disruptions to travel and theft. Always check the limits and exclusions before you buy.

A travel insurance policy included on a credit card offers varying levels of cover when travelling domestically and internationally.

In many cases, for the credit card travel insurance to kick in, you need to satisfy certain terms and conditions. For example, you may need to pay for your departure ticket on your card to activate cover, while other cards require you to exceed a minimum spend threshold of trip expenses on your card before that particular journey will be covered.

Activation requirements, where consumers are required to use their credit card to pay for travel arrangements, vary from provider to provider.

Do your own research with travel agencies, direct with insurers or through online insurance comparison sites to help you make the right decision between stand alone and credit card travel insurance. These online sites provide further details about pros and cons of ‘free’ credit card travel insurance.

They will help answer questions like:

• How do credit card travel insurance and stand alone travel insurance compare?

• Who is covered?

• What is covered?

• What are the price comparisons?

• What excess will you pay if you make a claim?

• How much of your luggage and valuables are covered?

• What is the maximum period you can travel?

• What is the limit of your medical expenses?

Take control of your travel spending

The activation requirements (eg paying for that plane ticket), minimum spend requirements and on-the-go holiday spending and shopping could lead you to a hefty credit card bill at the end of your travels. Budget well upfront!

You don’t want to be one of the one in six Australians drowning in credit card debt or going over your credit card limit as a result of your holiday spending.

If you need to fund your holiday, talk to us first before you overload your credit card. There are other options to pay for those big ticket items!