All posts by Robert Wright

How to help your children with buying property

By Robert Wright /July 16,2021/

With property prices rising at a record rate in many cities across Australia, the ‘bank of mum and dad’ is playing a bigger role than ever as many parents feel pressure to assist their children in buying a home.

For many Australians, home ownership is not just seen as the great Australian dream, but it also represents financial security and an important step in adulthood.

However, rapidly escalating prices, particularly in highly-desirable capital cities such as Sydney and Melbourne, has put that first step on to the property ladder out of reach for many young people. This in turn has led to many children turning to their parents for assistance.

According to the AFR, parental contributions are averaging more than $89,000, an increase of nearly 20 per cent in the past 12 months. In fact, the ‘bank of mum and dad’ has about $34 billion in loans, making it the nation’s ninth-largest residential mortgage lender.

For parents who want to help their children into home ownership, there are a number of strategies and pathways to consider.

Contributing to a deposit

Most lenders recommend prospective home buyers have 20% of their loan available as a deposit, and contributing to this deposit is often what first comes to mind when parents think of how they can help their children, as scraping together a deposit is generally considered the most difficult step in buying a first home.

If you are contributing a cash amount, make sure you have clear discussions with your children about any expectations related to your contribution – for instance, if you are making the contribution in lieu of leaving them money in your will, make this very clear and don’t hesitate to put it in writing, especially if you are doing this for one child but not others.

Acting as guarantor

A guarantor home loan is when someone, in this case a parent, offers up part of their home equity as security to top up the buyer’s cash deposit.

It means the buyer only needs a small deposit or sometimes none at all, and avoids paying costly lender’s mortgage insurance (LMI).

It’s crucial that you only agree to act as guarantor if you have full confidence in your child’s ability to make their loan repayments. If they default, you will be liable and your own home may be at risk.

Providing a loan

Whether through an official loan provider or a private agreement between parent and child, you may be in a position to loan your children the money they need to buy a home or for their deposit.

Keep in mind that this assumes they will be able to make their official home repayments as well as paying back the initial loan, and it is important to have honest discussions that clarify how they will manage this, and a timeframe for repayment.

Always put your well-being first

It may sound selfish and like it goes against what we’re told as parents, but it is crucial that older Australians put their own financial security first.

If you are simply not in a position to assist your child, do not feel pressured to put your financial wellbeing at risk in order to help them, especially if you have doubts about their ability to manage the repayments and responsibility of a home loan.

In this case, have a frank discussion with them about your will and what you will be able to provide for them after you have passed. You can also direct them to seek professional financial advice from your adviser which may help them understand how they can work within their own financial limits to move towards home ownership without your assistance.

Source: Money & Life

6 steps to help you feel more positive about your finances

By Robert Wright /July 16,2021/

With one in four Australians reporting more financial stress after COVID, it’s no surprise many of us are concerned about the future. Between mounting bills, unexpected expenses and a lack of understanding around our needs in retirement, getting our savings on track and seeing the big picture can seem overwhelming.

It doesn’t need to be. If you break things down into small, manageable actions, you can create a simple plan to take immediate positive steps towards a healthy financial future.

Assess your debts

Debt is a reality for many Australian households, whether it’s a home loan, credit card, student loan, car finance or personal loan. It’s not uncommon to lose track of how much you owe and how much interest you’re paying as a result.

Understanding your debts can help you put a plan into action to pay them off sooner and in the optimal order, potentially saving you a lot of money. There are steps you can work through to manage what you owe and work out your priorities – such as making a list of all debts and their sums and categorising each as ‘good’ or ‘bad’.

Plan how to pay your bills

Some 14% of Australians report they have been unable to pay one or more bills on time in recent months, a reality that may be compounded through winter as extra heating sees utilities skyrocket.

One way to manage irregular bill amounts and unexpected rate spikes is to consider bill smoothing, a process where you establish automated payments of a set (and known) amount to cover utilities over the course of a year.

Establish an emergency fund

Putting aside extra money for that rainy day sounds simple, but it’s one that many Australians neglect – in fact, one in four of us believe we wouldn’t be able to raise $2,000 in a week if we needed to do so in an emergency.

If you are that one in four, it’s a good idea to set up an emergency fund as a separate account  – it acts as a buffer from debt, helping you prepare for life’s curve balls. Keeping it away from your day-to-day savings account means you’re not tempted to dip into it for known, budgeted expenses such as rent or mortgage, groceries or school fees.

Look at your super

The government’s Early Release Scheme in 2020 saw 3.5 million Australians take advantage of the ability to dip into their super early. For many, having access to these funds helped ease immediate financial stress. If you’re not sure how to build this money back, you’re not alone – 30% of those who accessed their fund report a lack of awareness of how to recover their balances.

A good first step is to calculate how much money you’ll need in retirement – there are various online tools to help you do this – then you can consider some of the ways you could rebuild your super and work out which one suits your circumstances.

Work on a savings plan

Deciding to pay yourself first – say, 10% of your income – is one simple way to boost your savings and improve your financial future, making you contribute a set amount of money into a savings account before you manage other household expenses.

 It’s also a good idea to set up a separate savings account with a high interest rate. Then make sure that set amount of your salary, as well as any surplus in your day-to-day account, is automatically rolled over into your savings at the end of the month. Automating your accounts allows you to set and forget, so your nest egg will automatically grow every time money is deposited.

Think about any long-term financial goals

At what age do you want to be able to buy your first house? When do you want to retire? Do you know how much you need in your superannuation fund to retire comfortably? Many of us sweep these big questions under the carpet, but understanding them can help you prepare for your financial future.

Once you’ve mapped out your current financial position and established your long-term goals, you can use a range of online tools and calculators to help you get there.

You can also speak with your financial adviser to help get your savings goals on track and make sure you head toward retirement with peace of mind.  Source: AMP

How to save for retirement in your 60s

By Robert Wright /June 11,2021/

Your 60s are the time in which you’re most likely to retire – according to the Australian Bureau of Statistics, of the Aussies who are planning their retirement, the average age they intend to retire is 65.5 years. But just because you’re getting close to retirement age, doesn’t mean you can afford to stop being proactive about building your nest egg.

Alternatively, you might decide to follow through with your plans, and accept that your retirement income might be smaller. No matter which approach you choose, keeping an open mind and a flexible approach can make it easier to adapt to the current global economic situation.

Have a financial plan for your dream retirement

Many people love what they do and may not be looking forward to the prospect of walking away from full-time work. Others might be counting down the minutes until they can leave the office behind or be keen to scale back to part-time hours. Regardless of which category you fall into, as you start planning for retirement more seriously, now is the time to start picturing what your dream retirement will look like.

You can also use this time to turn your skills and hobbies – such as consulting or mentoring others – into additional retirement income. Whether you’re looking for part-time work or a hobby that brings in a little extra, why not get creative, keep busy, make new friends, and earn extra cash on the side, all at the same time?

Learn to live more frugally

Just because retirement is in your sights doesn’t mean you no longer need a retirement budget – in fact, retirement planning becomes essential in your final years in the workforce. To make sure your retirement savings are sufficiently healthy to support you through the rest of your life, it’s a good idea to revisit your budget and look at all the extra ways you can cut back on spending to give your finances a final boost.

Switching to online banking and shopping can be a sound way to keep track of your income and expenses so you have a better idea of where every dollar is being spent.

Now that you’re less likely to have dependants living with you, consider downsizing into an apartment or a smaller home – you’ll save money (reduced utility bills) and time (less space to clean). Think about selling furniture and other objects that you no longer need, including big-ticket items like a second car. Tightening your belt on the big things means you’ll still be able to afford the luxuries you’ve been counting on enjoying in retirement.

Fine-tune your passive income in retirement

Having a passive income stream – that is, income you earn from an investment, such as property or shares, rather than income you earn by working – is a great way to maintain your finances when you’re no longer in full-time employment.

Start by working out what style of investor you are, and then consider the type of portfolio that will best match your risk tolerance and the number of years you have left in the workforce. Talk to a financial adviser if you need more guidance on how to structure your investments.

Set up an emergency fund

Unexpected costs arise at all stages of life, whether related to your property or your health. In fact, recent research estimates that an Australian couple will spend between $4,700 and $9,500 a year on healthcare in retirement.

When you no longer have a steady income stream, dealing with these potentially hefty expenses can mean dipping into your savings. To avoid this, set up an emergency fund to cover any unplanned bills. Based on the average healthcare amounts mentioned above, you should be budgeting around $25 a day for an individual or, for a couple, $780 a month. Here’s how you can plan for unexpected healthcare costs in retirement.

Stay insured when you stop working

More than 70% of Australians with life insurance hold it through their superannuation. But in most cases, this ends when you turn 65. If you haven’t taken out separate life insurance, you may want to do it before you stop working.

The purpose of this type of insurance is to provide you and your family with financial security if you were to die or become terminally ill. Your premiums will be higher in your 60s, but you’ll have financial peace of mind knowing that things like living expenses will be taken care of if there’s an emergency.

Source: AMP

What you can claim when working from home

By Robert Wright /June 11,2021/

Setting up a home office? Here’s how to create a comfortable workspace, while offsetting the extra costs of working remotely. If you’re among those who’s decided to say ‘so-long’ to the office, you’ve probably also realised that having the right home-office set up is essential for your productivity – and sanity.

As many of us learnt during lockdown, trying to fit in a full day’s work at the dining room table isn’t always the most productive option.

You might also have noticed what many freelancers have known for years: Working from home comes with extra costs, as does setting up your home office.

So, what do you need to do to get your workspace set up for productivity – and comfort – and how can you offset the extra costs that come with working from home?

Getting ergonomic

For most computer work, there’s a few key areas you need to customise to suit you:

1. The height of your desk and chair. You’ll know you’ve gotten this right when your forearms are parallel to the ground, with your wrists either straight, at or below shoulder level. Your knees should be level with your hips and feet flat on the ground, or on a footrest.
2. Your monitor set up. Your monitor needs to be straight in front of you, an arm’s length away. The top of the screen should be at or slightly below eye level. Use a monitor riser if needed to get your monitor to the right height. Also consider the brightness of your display – it should be just a little brighter than surrounding ambient light.
3. Location of key objects. Place your keyboard and mouse on the same level surface and keep other items you use often within easy reach. If you use the phone a lot, put it on speaker or use a headset to avoid neck and shoulder strain.
4. Light sources. You’ll need sufficient ambient light to illuminate your workspace, so that you’re not straining your eyes. Beware of indirect lighting from windows that can cause glare on your monitor screen.

Getting (and expensing) equipment

Setting up an ergonomic workspace can involve a bit of gear, even if there are some inexpensive home solutions. At the very least you’ll need a computer, decent office chair, full size monitor, keyboard, and mouse. You may also need to add in a footrest, monitor riser, laptop dock or stand, headset, lighting, and any other office equipment you use regularly, like a printer.

This can add up to quite a hefty price tag! But don’t worry, it’s unlikely you’ll need to foot the entire bill yourself.

If you’re a company employee, start by speaking to your employer. Many companies will offer to either source equipment for you, lend it to you or reimburse you for purchase/s you make.

Under Workplace Health and Safety Laws, employers still have a duty to ensure the health and safety of workers, even if they’re working from home. In fact, some companies will already have occupational health and safety policies that mandate an ergonomic set up using a certain type of office equipment.

Tax deductions: What can I claim?

While you can save money by working from home (less transport costs, homemade lunches, no need for fancy clothes) it does come with other costs (and paperwork) you may not have thought about.

Fortunately, you’re allowed to offset many of these costs against your earnings by claiming a deduction in your annual tax return. According to the ATO, expenses you can claim a deduction for include:

• the cost of electricity for heating, cooling, and lighting the area you’re working in, and running items you’re using for work.
• cleaning costs for a dedicated work area.
• phone and internet expenses
• computer consumables (for example, printer paper and ink) and stationery
• home office equipment, including computers, printers, phones, furniture, and furnishings. You can claim either the
  • full cost of items up to $300
  • decline in value (depreciation) for items over $300.

To make a claim, you need to have spent the money and have a record to prove it. You can’t claim a deduction where you’ve been reimbursed by your employer for the expense.

Tax deductions: How do I claim?

Because it can be tricky to track and report on your expenses when working from home, the ATO has introduced a temporary ‘shortcut method’. This is now in place up until 30 June 2021 (and may be extended further).

The shortcut method allows you to claim a deduction of 80 cents for each hour you work from home. It covers all the deductible expenses listed above. You’ll need to keep a record of the hours you worked, in the form of a roster, diary, timesheet or similar.

With remote work now widely accepted, many people can’t wait to give hour-long commutes, open plan offices and office politics the flick for good. Just make sure you take the time to get your office set-up right and avoid those nasty repetitive strain injuries in years to come.

Source: FPA Money and Life