All posts by Robert Wright

How to start saving for your future in your 20s

By Robert Wright /December 04,2020/

If you’re in your 20s, chances are that life could feel like a bit of a rollercoaster right now. The economic fallout of the coronavirus (COVID-19) may have knocked your personal finances for six and at the same time, you could be juggling new expenses and experiences for the first time, such as moving out of home and starting your first full-time job. Learning to juggle competing financial priorities and save for the future is essential.

While these lessons may be confronting at the moment, they can also teach valuable skills that your future self will thank you for. If you do things right in your 20s, you can lay the foundations for a solid financial future and set yourself up for life. Here’s how to put some sound plans in place to give yourself more choices about how you live your life in the years ahead. 

Get budgeting

It might seem obvious but getting in the habit of budgeting when you’re young is one of the best ways to boost your future financial wellbeing. 

Start by tracking what money you have coming in (your income) and going out (your expenses). It’s important to understand where your money is going and what proportion you’re spending on essentials, like rent, food and utilities, and non-essentials, like entertainment and clothes.

Practise mindful spending 

No matter what your financial situation is at the moment, this is an ideal time to learn savvy spending techniques. Practising mindful spending is an easy way to ‘trick yourself’ into saving money. And when you do need to buy a big-ticket item, do your research, shop around and where possible, look out for seasonal sales to help stretch your hard-earned dollars further. 

Compound your interest

When you’re in your 20s, your budget is usually pretty tight and there are plenty of other demands on your income. But if you can spare a few dollars from your pay, it can make a big difference later on. 

By starting to save in your 20s, you have a great opportunity to maximise the growth potential of compound interest. This means that you not only earn interest on whatever funds you deposit into your savings account, but you also earn interest on that interest. It’s extra money – without the extra effort. 

For example, if you begin with $100 in an account earning 2% interest a month, and deposit just $10 into the account every month, in 10 years you’ll have $1,449 in the account – $149 of that pure interest. If you keep doing that for your entire career, say 50 years, when you retire, you’ll have $10,568. Of that, $4,468 – almost half – is pure interest.

Watch your super grow

Once you earn over $450 a month, superannuation is compulsory in Australia for most employees, which typically means you’re in the fortunate position of being able to start planning for your retirement as soon as you get your first job – whether full-time, part-time or casual. 

So, rather than thinking of super as a burden, think of it as an easy way to save for retirement in your 20s. It can be tax effective and harnesses the benefits of compound savings.

If you withdrew your super early 

If you’ve been affected financially by the coronavirus (COVID-19), you may have withdrawn some of your super early, under the government’s early super access scheme.

While it might have helped in the short term, it’s important to consider the long-term implications of withdrawing any money from your super. Just as compound interest works to grow your retirement savings over time, the reverse is also true, and any money that was withdrawn this year could be worth much more by the time you’re ready to retire.

If you did withdraw some of your super early, think about whether you can commit to a plan for paying it back, once you’re back on your feet. You can do this by making personal contributions to your super. 

Ditch personal loans and credit card debt

Falling into credit card debt at an early age can quickly spiral into an unhealthy financial future.  If you do have any spare cash at the moment, it may be a good idea to prioritise debt repayments.

Write down all the money you owe, then rank each debt in terms of the interest rate on the amount. Payday loans and credit cards generally have higher interest rates, so you should prioritise paying them off first. 

Learn to invest wisely

While you’re in your 20s, retirement isn’t just around the corner, which means you have more flexibility with your finances than someone in their 60s who may be planning to leave the workforce in a few years.

With fewer financial responsibilities, you may be in a position to take a few more risks with your investments – the thinking being that if things don’t work out, you have time to fix them. 

Start early and consider talking to a financial adviser about choosing a mix of investments that will bring you gains you feel comfortable with, given your financial investment style.

Source: AMP

Majority of working Aussies to benefit from personal income tax cuts

By Robert Wright /December 04,2020/

Tax cuts proposed in the recent Federal Budget were passed in parliament on Friday 9 October, and you might see some of the benefits before Christmas.

The government has brought forward tax cuts originally planned for 1 July 2022 and backdated them to 1 July 2020. Plus, low and middle-income earners are still able to benefit from existing tax offsets.

Has my marginal tax rate changed?

The upper thresholds have increased for some tax brackets, as highlighted in the table below:

(*excluding 2 % Medicare Levy)

Can I benefit from the tax offsets?

If you earn up to $126,000 per year, you may be eligible for the low and middle income tax offset (LMITO). This was previously introduced as a temporary measure and scheduled to end when the 1 July 2022 tax cuts kicked off. But the good news is that despite bringing forward these tax cuts, the government has kept the LMITO for the 2020–21 financial year.

And, if you earn less than $66,667 per year, you may be eligible for an additional tax offset called the low income tax offset (LITO). As part of this package of tax cuts, this tax offset was increased from $450 to $700.

How much will I save from the tax cuts?

The below table shows indicative tax cuts, based on the legislative changes for an individual in 2020-21, to the tax rates, thresholds, and offsets that were applicable for 2020-21 (before these changes):

When will I receive the new tax savings?

Your take-home pay should reflect the new rates before Christmas. The Australian Taxation Office (ATO) has given employers until 16 November to make changes to payroll processes and systems.

As you’ll have already paid personal income tax at the original rate since 1 July this year, you’ll receive your entitlement to the reduced tax payable for the entire 2020–21 income year when you lodge your income tax return.

Source: AMP

The right times for financial advice

By Robert Wright /December 04,2020/

COVID-19 has created uncertainty everywhere and impacted not just our health but our wealth too. From millennials to retirees, we’ve had to review our finances and adapt to the changing environment.

We’ve seen volatile share markets, slashed dividends on bank stocks, record-low interest rates and sectors like airlines, tourism and traditional retail struggling to survive. On the other hand, online shopping and e-commerce have surged, and more people are saving now than before the pandemic.

During this uncertainty, many people have found their financial adviser to be a critical source of guidance and a valuable sounding board. In many cases, the adviser-client relationship has been a long-term connection. It’s built over many years and based on trust and confidence that the adviser has the client’s best interest at the centre of every decision.

Demand for advice doubles

The financial advice industry is full of examples of clients reaching out to their advisers in recent months, leveraging these long-term relationships at a time of worry and crisis.

Recent research from the Investment Trends 2020 Financial Advice Report showed three in four financial advice clients had been in contact with their adviser to discuss the impact of the COVID-19 pandemic.

Advisers are also fielding an unprecedented number of calls from potential clients who are confused by the current markets and understand they need help.

The instability of recent times has undermined the confidence of those who are retired or are about to retire, with many wondering if they’ll be left with enough superannuation savings for a comfortable retirement. But those who have a long-term relationship with their adviser can rely on the fact their adviser knows them well, understands their unique circumstances and life goals, and can deliver advice tailored to them.

Advice for different life stages

Financial advice can be helpful at a range of life stages, not just when thinking about retirement. Some common things advisers can help navigate financially are:

• saving for and preparing to buy your first home
• getting married or starting a family
• budgeting and money management
• growing wealth
• estate planning
• planning for retirement
• retirement and aged care.

Advisers can help with practical advice in all these scenarios. But more importantly, they can help you focus on your financial priorities and goals and create a plan to achieve them.

Life’s journey has many twists and turns and points at which priorities change. For many people, it’s a journey best navigated not only with partners, family and friends but with a trusted financial adviser by their side.

Source: AMP

How to get Aged Care at Home

By Robert Wright /November 18,2020/

Older people who are struggling to live at home and take care of themselves often face a dilemma. Many don’t want to move into aged care accommodation, but they recognise the gardening, cleaning, cooking or showering is impossible or becoming more difficult.

Some worry about placing a burden on their loved ones, others can’t afford the services they need. This year in particular with coronavirus health concerns for the elderly, many people who were looking to move into an aged care facility may have decided to stay home instead.

For those who might be weighing up or delaying moving into an aged care facility this year, these Government-funded care programs may be of interest.

Commonwealth Home Support Program

For those who are having trouble with everyday tasks and needing a little extra help, the Commonwealth Home Support Program might be useful.

The program is available to anyone aged 65 or older (50 years or older for Aboriginal or Torres Strait Islander people). It’s also open to anyone on a low income or homeless and 50 years or older (45 years or older for Aboriginal and Torres Strait Islander people).

It’s not a free service. You may need to help pay for the cost of services if you can afford it, but you won’t need to pay the full cost.

The program covers services such as meals and other food services, help with showering and grooming, help with medicines, health and therapy services and respite care.

Home Care Packages

Another government-funded service provides a higher level of support for older people living in their own homes.

Home Care Packages are for older people with more complex care needs. The package will help fund and organise many of the same services covered by the Commonwealth Home Support Program but you’ll need to be assessed first to determine your level of need. There are four levels ranging from basic care to high care.

The assessment will also consider how much you can contribute to the cost of your care. There are two types of fees:

• A basic daily fee (up to $10.75).
• An income-tested fee (up to $30.86 per day) is applicable for some. If you have to pay this fee, there are annual and lifetime limits on how much you can be asked to pay.

Where to begin?

Once your level under the Home Care Packages has been assessed and funding has been allocated, it’s up to you to choose a service provider in your area from an approved list on the Home Care Packages website. The government then pays the provider a subsidy to arrange the care that suits you.

Look for flexibility

The providers of Home Care Packages might all be following the same regulations set by the government, but they’re a mix of private and not-for-profit organisations and all operate quite differently, says Dana Sawyer, CEO of My CarePath, a private service that provides advice on aged care options.

Sawyer says it’s important to find a provider that is flexible and “will actually deliver true consumer directed care”.

Everyone’s needs are different, says Sawyer. “For example, you might have someone who will need assistance every morning to shower, dress and get ready for the day. But once they’re up and going, they’re pretty good for the day and they can manage on their own. So, they’ll need an hour of service every day.

“Whereas someone else might live with a partner or family member who helps with showering and dressing. But the helper needs a break, so they might need someone to come in for three hours twice a week so they can go out to shops,” she says.

Understanding the financial intricacies of Home Care Packages is also important, says Sawyer. Providers charge different case management and administration fees, which comes out of the government funding allocated to you.

“Often we find people are in a very vulnerable position when they’re looking at aged care services. They may have had a fall or a hospital admission, or suddenly realise they can’t cope at home or even worse, there may be abuse happening within the home,” she says.

The thing to remember, is that there is plenty of help available – both private and government-funded.

Source: Colonial First State