Friday, June 27, 2008

Women falling into a financial trap

Of all those who need a helping hand planning their financial future, women approaching retirement with a modest net worth are highest on the list. I was recently asked to contribute to an article on this subject for the Courier Mail Newspaper here in Brisbane.

You can view the full article here:,25479,23758162-5013953,00.html

Wednesday, June 25, 2008

Little interest in high interest

Recent research by Citibank indicates that 81 per cent of Australians don't know what rate of interest they are earning on their savings account. The survey of 1,100 people, shows that those on a household income below $40,000 were more likely to know exactly what rate of interest they get on their savings (30 per cent) than those earning a higher income of $70,000 or more (16 per cent). This suggests lower income households need to keep a closer eye on interest rates than their higher income-earning counterparts.

Men and Women

The research also shows that 24 percent of men know exactly what interest rate they are currently earning on their savings. While for women this figure drops to 15 per cent. One in five men (21 per cent) knew the interest rate when they opened their savings account but have since forgotten. For women, the corresponding result is more than one in three (34 per cent).

Women are also more conservative than men when it comes to knowing the top interest rates available in the market. When asked for the highest interest rate on offer at the moment, 20 per cent of men said 8 percent or more compared to 12 per cent of women.

Thursday, June 19, 2008

The cost of a little discipline

A personal loan may be more costly than home loan rates but they have the advantage of instilling discipline in certain borrowers when purchasing consumer items.

Consumer finance is by definition, finance for items that get consumed - things that get used up or wear out. It would be perfect if we could always access the cash when we needed it to buy these kind of items.

When you're looking at a new car, holiday, boat or other worthwhile purpose, the cheapest way to get it is to save. But when these items cost upwards of $20,000 saving might not be an option.
Borrowing for consumer items using credit that operates on a revolving basis, like credit cards or some home mortgages has its advantages. But when it's used by borrowers with limited or fixed income, often the principal remains unpaid for years or never gets paid off at all.

When you do need to borrow for consumer items a personal loan might be the best option. A personal loan allows you to access goods and services now, that you might not otherwise be able to take advantage of if you were forced to save. The repayment of the loan, both principal and interest is required to be made over a specific period of time, usually one to seven years.

Borrowing for consumer items can make good sense. If your car is older and is in need of constant maintenance and is costly to run, there may be good financial reasons to borrow funds for a newer and less costly vehicle. The running costs alone might be preventing you from saving any money towards a new vehicle. However, before you consider borrowing on this basis ask yourself a few questions first. Do I really need the item? Would it be possible to get something a little less expensive and save for it? Also consider the consequence additional debt will have on other financial goals you may have. If you are a first homebuyer looking to enter the mortgage market, it might be better to defer the decision to borrow for an overseas holiday until you are in your new home.

The simple fact is that some people do need the discipline of a certain payment every month for a set period of time to pay things off - and there's a lot to be said for that. But if you're on a higher income and you have the discipline and can afford to service new debt, then you've probably earned the right to make the choice to "consume now and pay later"

Tuesday, June 17, 2008

Tax breaks

Tax time is almost here so it makes sense to see what you can do to maximise your return. Consult you tax specialist and look at ideas to make the most of your refund.
  1. Pre-pay interest on an investment loan. Paying 12 months interest now means you receive the tax deduction this year
  2. Make a super contribution for your spouse. If they earn less than $13,800 and meet other criteria you can boost their super by $3000 and reduce the tax you pay by up to $540
  3. Defer income and bonuses until after July 1 if you can. This will push your tax down slightly when the new rates come into effect.
  4. Donate to your favourite charity before June 30 and claim the deduction this year.
  5. If you've made a profit on the sale of property or shares consider the rest of your investment portfolio. If you've got some dud investments, crytalising the loss now means they'll be claimable against your other profits.
Consult your tax specialist as soon as you can about your tax position and get their recomendation before the financial year closes. If you're self-employed, spend your valuable time maximising your revenue and profit and let the tax experts manage your tax - not vice versa.

Monday, June 16, 2008

Relationship breakdown and debt

If money wasn't the cause originally, problems with debt can occur when a relationship comes to an end. To reduce the financial impact of relationship breakdown, ensure that your ex-partner does not take savings and use available credit from any joint bank accounts, home loan redraw facilities and credit card accounts.

Five things you should do in the event a relationship turns sour.

  1. Establish a new transaction account in your name only and ensure that your salary and other payments are diverted to the new account immediately.
  2. Close joint accounts unless these are being used to pay joint debts of the relationship, childrens expenses etc.
  3. Tell your bank or lender about the relationship breakdown and demand, in writing, that it stop any further use of the any loan redraw facility. This will be critical if the redraw facility allows either party to access the available credit without the other borrower's authorisation.
  4. Cancel any right your ex-partner may have to access your credit card account as a secondary card-holder.
  5. Arrange for copies of all joint account statements to be sent to you in the event you change address.

If the breakdown is permanent, you will generally need advice from a family law lawyer about dividing the property of your marriage or de facto relationship.

Wednesday, June 11, 2008

The super self-employed

By Jaeneen Cunningham

A report by the Association of Superannuation Funds of Australia (ASFA) says that Many self-employed Australians remain unprepared for retirement with little or no superannuation or other appropriate savings. According to the chief executive of ASFA, Pauline Vamos, the research has revealed a significant gap in the retirement savings of the self-employed when compared to wage and salary earners in Australia. The report shows that while the self-employed sector makes up over 10 per cent of labour force, 28 per cent of the sector has no superannuation at all, while a further 53 per cent has a super balance of less than $40,000.

We know small business is under greater financial pressure than ever but given the tax incentives aimed at boosting contributions, self-employed people should consider superannuation as part of a strategy to increase their retirement savings. If you're self-employed its imperative you dont let all the years of hard work slip away by not providing adequately for youself in retirement. Look at your expenditure and find a little to make those important contributions now!

Tuesday, June 10, 2008

Creating Wealth with regular savings

With rising interest rates and rising house prices, your dream of one day buying your own home is possibly just that - a dream. You can give your medium term financial goals a kick start by setting up a regular savings plan now.

A regular savings plan is an arrangement you make with a fund manager or someone similar to invest an initial lump sum followed by regular investment installments; the most common installment period being monthly. A lump sum amount of $1,000.00 will get you started and minimum monthly amounts usually start at around $100.00. You can invest anything above these amounts according to what you can comfortably save. If you're like most of us, it can be a good idea to have your monthly payments direct debited from your bank account to make sure you stick with the plan.

Tuesday, June 3, 2008

Your Money Personality

By Jaeneen Cunningham

Have you ever wondered why money seems to work so well in some people’s lives and so destructively in others? Why some people control money while others allow it to control them? Or why some of us can manage it so effortlessly to fulfill life’s plans and goals, while others never stop to question how they want money to serve them?

Kathleen Miller says that its because for many of us, money is never just money. It can represent many things: love, power, happiness, security, self-esteem. As a result, we have intense feelings about money: feelings we sometimes hide from which keep us from dealing with it productively.

Just as our feelings about money can vary, so can our behaviour towards it. Some people hoard it while others spend it like a drunken sailor. Some people take great care with their financial responsibilities, while others avoid the same tasks as if avoiding some great pain. Some people make no effort to invest, some very conservatively, and others take significant risks - often at their peril. In my time as a Finance Coach it has become apparent that it is important for each of us to understand our issues surrounding money.

In business, I have had great success using the psychology of persoanlity profiling to better understand my strengths and the strengths of my co-workers. Once I understood where these strengths lay, I stopped beating myself up because I couldn't do one thing or another and focused on the things that I was good at. I also stopped beating up on my co-workers which was also a good thing. Now I use the same psychological pricples to help understand my clients needs by conducting a Money Personality Diagnostic.

"Money can enhance happiness and prosperity, or it can destroy them. No one simply drifts to the pinnacle of success—you have to climb." Kathleen Gurney

Why do I want you to understanding your 'money self'? Because it will help you gain insight into how and why you react emotionally to money - why you have those reactions and how they affect your financial successes. If you don't know your money strengths, you can't use them. If you don't know what's preventing you from getting money, you will remain a money victim. If you don't know what you want from money, you may never reach your financial goals. If you aren't willing to change your money attitudes and habits, you will stay in your financial status quo.

Sunday, June 1, 2008

Tame your mortgage monster

by Jaeneen Cunningham

Getting debt under control is not as difficult or as daunting as it seems. Coming up with strategies to tame your mortgage monster is easy - it is implementing them and sticking to them that requires will power.

Home loan customers have probably known for some time that the best way to save money on a mortgage is to pay it off as fast as you can. The longer you take paying back the principal loan amount the more interest you pay along the way, the higher the overall cost of the loan. You can do this in a number of ways: you can pay slightly higher repayments on a regular basis. You can make your payments more regularly than required – say weekly instead of monthly. This means two things: there will be a slightly lower interest charge as your loan balance reduces each week, and more significantly, you will be making one full extra repayment each year.

You can get even more savings if you 'park' your spare cash in your mortgage. A popular product to help achieve this has been the Line of Credit. A loan like this lets you put all you money directly into the loan account and then lets you access your money as you need it through a debit or credit card. In theory the result is a lower regular loan balance and therefore less interest charges. No set repayment amount is required as long as you pay the interest each month. On some loans the interest can even be 'capitalised' up the limit of the original loan that was first approved.

However, we have found many customers using a line of credit have tended to pay the interest charges only. It has only been with the passage of time that they have come to realise that the loan isn't coming down the way they planned. The idea that you would pay more into the loan than you were taking out seemed like a good idea at the inception of the loan. However, as time passes so do priorities and maybe those goals that were set three or four years ago have had to make way for other important life changes like career moves or family.

In general there are really only two simple ways to clear debt quickly and save money: use a product with the lowest possible interest rate that fits with your current circumstances, and pay the bank more than you are required to under the terms of your loan. With the booming property market many customers have not been concerned about the persistent level of their line of credit debt and if it suits your lifestyle, why not spend a little of the capital gain that you are making now rather than later when you sell the property. On the other hand, If you have found yourself struggling with a line of credit limit that just wont come down and you are concerned, then maybe its time to restructure your debt into a loan that is a bit more restrictive on your spending habits.