Tag Archives: Cash flow

Downsizer contributions: what are the rules?

By visual /May 13,2020/

In the first year since older Australians have been allowed to make downsizer contributions, 4,246 people have contributed a total of $1 billion in downsizer contributions to their super funds (1 July 2018 – 1 July 2019).

This not only allows retired people to have access to more money to fund their retirement, it’s also likely to have freed up new property for sale for first home buyers and young investors.

Although this is good news for people who have benefited from this scheme, some people have reportedly missed out because they didn’t understand the eligibility criteria.

Here’s a summary of the rules around making downsizer contributions:

• You need to be 65 or over at the time of making the contribution.
• You or your spouse need to have owned your home for more than 10 years prior to the sale.
• You don’t need to be working.
• Both you and your spouse can make a concessional downsizer contribution of $300,000 each if you both lived in the property at some point in time and the proceeds of the sale are exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or because you bought the property before 20 September 1985. If only you lived in the property at some point in time then only you, not your spouse, can make a downsizer contribution (as long as you meet all other conditions).An investment property that you haven’t lived in is not eligible.
• Houseboats, caravans or mobile homes are not eligible.
• The total super balance test of $1.6 million and the $100,000 non-concessional contributions cap restrictions don’t apply.
• You need to make all downsizer contributions within 90 days of receiving the proceeds of sale, usually the date of settlement.
• You can only downsize once.
• You don’t need to buy another property to use the scheme.

If you sell your home and put some of the proceeds into super, you need to consider how this will affect your Centrelink benefits. Your super balance is counted towards the means test so you could potentially lose some, or all, of your Centrelink benefit if your super balance goes up.

Source: IOOF

5 ways to help your grown-up children manage their finances better

By Robert Wright /July 24,2019/

We all love our children. So it can be tough to admit they may not be great with money. But be honest, do any of these ring a bell?

• They keep running out of money before their pay cheque comes in.
• They keep ‘borrowing’ money from you and others, and failing to pay it back.
• They have maxed out a bunch of credit cards.
• They have a bad credit history as a result of not paying back loans.
• They keep getting involved with ‘get rich quick’ schemes that end up losing them money.

If any of these seem familiar, is there anything you can do to help your children develop healthier financial habits?

How to turn off the money tap

It’s only natural to want to help your kids with big ticket items to give them a good start in life—particularly in an era when tuition fees and house prices make higher education and owning a home less affordable than in previous generations.

But it can be difficult to know when to start turning off the tap. If you have an adult child who isn’t very good with money, then giving them funds with no strings attached might not be the best approach. You might end up enabling their behaviour rather than encouraging better money habits.

Regardless of whether your adult kids still live at home, have moved out or are boomeranging back and forth, it’s never too late to start encouraging positive money habits that will help them save, spend and invest more wisely.

Here are some things you could consider to change the money dynamic in your family.

1. Start with the difficult conversation

If you’re determined to change the dynamic, it’s important to make this clear from the get-go. Sit down in a neutral venue and have an honest discussion. Explain what you’re going to do differently and why. It might not be an easy conversation. But in the long run it could help to clear the air and encourage a fresh approach. If your children are still living at home you’ve got the opportunity to set new ground rules like agreeing on a set amount out of their pay cheque every week for bed and board.

2. Ditch the gifts

If you’ve found in the past that gifting money doesn’t solve their problems long term, then you could try another approach. One option could be loaning them money in instalments, with future amounts dependent on achieving specific goals like saving for their first home, perhaps through the First Home Super Saver Scheme. Another approach could be matching their savings when they reach a pre-determined amount.

3. Focus on goals (short and long-term)

Talk to your children about their life goals. What do they want to do…travel the world? Buy a new car? Save up for a new home? Be open about money and talk about ways to save and invest. Short-term, an everyday bank account can help them set aside money to help them reach their goals.

You can also get your kids thinking long term about how their savings could be working better for them. These days if you want to invest, you don’t necessarily need a hefty starting figure or to fill in tedious reams of paperwork. From exchange traded funds to micro-investing platforms, there are plenty of online, digital ways to start small but think big.

4. Focus on the basics like debt

Like many of us in Australia, your kids may not have received a great education about finance. So when they think about borrowing money, they may not have much of a grasp of the difference between ‘good debt’ and ‘bad debt’. It could be worth explaining the difference between borrowing money for a car and for a house—once you’ve paid it back, what are you left with? A car that may have shed 75% of its value or a house that’s probably improved its value and most importantly provided a home to retire in?

5. Walk the walk

Your approach to your own finances can make a difference. If your kids see you splurging money without a real budget then they may feel it’s OK to do the same.

Source: AMP, 07 May 2019

Buy Swap Sell – How to make cash from your clear out

By Robert Wright /July 24,2019/

It’s official, a de-cluttering spree is sweeping the country, and Aussies are favouring a minimalist look over homes packed with possessions. This gives us an opportunity to turn our culled items into cash.

While the organising, agonising and piling can take time, selling your things can take no time at all! Garage sales and lemonade stands may be a thing of the past, but the internet is making it easier than ever to start selling.

So, here’s how to get started:

What can you sell?

When you do your clear out, make sure to look for things in good condition. This helps you to separate rubbish from things that could be sold. Look out for items that:

Could have value to others – Even if your items don’t have value to you any more, they may have value to others. So don’t discount last season’s clothing or that fancy dress stash just yet. Look for jewellery, furniture, recent technology or even camping gear, as they’re all things that others could make use of too.

Are small and simple, not just big and pricey – You may think that the bigger the better when it comes to making cash, but that’s not the case. Smaller items can add-up, so look for little things that may be simple to sell, such as phone cases or accessories.

Where can you sell it?

Selling your small things – To sell your smaller items, you can easily make use of local Facebook groups and Facebook marketplace. Not only are local pick-ups or postage easy to arrange, but you won’t be paying fees on items with smaller costs.

Selling your big things – For larger items like sofas, you’ll want a little more security. With EBay and Gumtree, you can place detailed adverts and photos, see the potential buyers, as well as organise the payments all though the websites.

Tips to get you started

No matter what you’re selling, make sure that you’ve got these basics down, giving yourself the best chance to make a sale.

Do your research – You’ve got the item, now you need to know if it’s worth selling. A quick online search can let you know if it’s in demand; the quality is up to scratch, and what people are paying. This’ll help you set yours up for sale too.

Set a fair price – Make sure you set a price that’s reflective of your item and its condition. High prices could turn off potential buyers, and you want to keep them keen.

Avoid high reserves – While eBay encourages people to bid, with Gumtree people can make you offers. Keep reserve prices reasonable too, so that you’re open to what people may offer.

Get descriptive – The more detail you can give buyers, the better. Include everything from its condition to how it’s been used, and you’ll make sure there’s no hiccups down the line.

Share some snaps – Photos are the best way to show buyers what they’re getting, so make sure to take bright, good quality photos. Some close-ups can’t hurt, so that detail or damage can be spotted.

Post at a good time – Share your advert online in the evening or at the weekend, so that as many people see it as possible when it’s uploaded, and don’t need to search later.

Answer questions – If people ask questions, try to answer them quickly to keep them keen. It may be that they pick-up on points that others may be thinking too, so you could update the item description afterwards to help others who may be looking.

Give buyers a peek – With some items, people may want to pop by and take a look at. If several people would like to, try to save time and schedule for them to all come by on one morning or afternoon.

Don’t be afraid to negotiate – Haggling, it’s going to happen. So be ready with how low you’d be prepared to go, and get your negotiate on. 

Look after your safety

Make sure that before you embark on a selling spree, you’re taking steps to look after your safety.

Posting your items is usually the safest way to send something that you’ve sold, but occasionally items may be too big and require pick-up. Always make sure that you don’t give out your address if you’re uncomfortable, and have a friend or partner present if you’ve arranged a pick-up. Simple steps can help keep you and your stuff, safe.

Then you’re ready to get selling, and start turning your clean-ups into cash.

Source: ING, March 2019

Changing money habits for good

By Robert Wright /July 01,2019/

Is sticking to a budget the money magic wand that can sort out your finances, once and for all? Discover what budgeting can and can’t do for you and how to turn new budget habits into positive lifestyle changes.

What’s a budget for?

Knowing how to budget is one thing. But what is the real point of a budget and how can it actually help you change your behaviour and get a fresh financial outlook on life? In the simplest possible terms, the purpose of a budget is to move money from one spending category to another. Instead of shelling out $50 for lunch at work every week, you put the money towards a weekly date night with your partner. Or you cut back on your grocery bill to give yourself more to save towards a deposit for your first home.

What a budget isn’t is an overnight transformation from money worries to wealth and peace of mind, particularly if you have debts to pay off. It’s more a ‘fake it until you make it’ way of redefining how you naturally behave with money.

Learn along the way

At first glance, a budget can seem too transactional to be a tool for behavioural change. You set yourself some targets for spending less here, saving more there and do your level best to stick to them. To many of us, this can feel like a test we’re never going to pass with flying colours. There’s always going to be some reason to blow up the best budget intentions. It could be a surprise bill for car or home repairs, or a moment of weakness when your favourite label has a sale. Before you know it, spending in the household or clothes category has gone way over and you feel like a failure.

But before you throw in the towel, it’s really important to realise that learning from your budget failures is the key to actually changing your lifestyle and finances in some very important ways. Missing a budget category target gives you the perfect opportunity to consider what got you off track. Was it buying something on sale for your wardrobe that you really could have done without? If this is the case, you can acknowledge that opportunistic spending is a problem for you and come up with ways to resist temptation or avoid it altogether. If it’s the unexpected bill that threw you off, this is a great reminder of the reason for having an emergency fund to dip into. With a decent savings buffer up your sleeve, you can deal with the occasional surprise in your budget without it having an impact on other spending.

Positive pay-offs

Without those budget targets in front of you, these moments come and go. Your debts grow or your savings shrink but nothing really changes in how you think or behave about money. When you have a budget to follow, on the other hand, spending more than you planned to can trigger thoughts and conversations about the positive priorities in your life. What are you working towards? What will help you sleep better at night and reduce your stress? Is it worth doing things differently next time so you can meet your targets and get a step closer to your goal – whether that’s to be debt-free, travel the world, buy a home or pay for your kids’ education.

From rigid to routine

This really highlights how your commitment to a budget is something you need to keep making, week after week, month after month. When you feel like you’ve failed, it’s definitely not a reason to give up on yourself and your journey towards better money management. Instead, see it as a prompt to change your financial behaviour, one routine at a time.

This is the goal of a good budget – to push you to change spending habits a little at a time.  When you overshoot your target, you make adjustments to your normal routine so you can hit the bulls eye next time. And although it won’t make you rich overnight, it will make you question and change behavior that has you spending your entire income each month.  Before you know it, having money leftover each month will become your new normal. As well as giving you more choice in how you spend that extra money in the future, you’re also getting peace of mind and less stress about money, here and now.

Source: FPA Money and Life, May 2019