Tag Archives: Cashflow

Boost your savings for spring

By Robert Wright /September 02,2019/

In the cooler months we spend a lot more time getting cosy inside. Why not use some of that quality indoors time to give your finances and future plans a little love?

Dust off your budget

Has your budget been gathering cobwebs? Or maybe you haven’t made one in a while, if at all? There’s no doubt that making a budget is easier than sticking to one, so it’s easy to lose sight of our best laid plans. Block out some time to review your budget and see where you’re killing it or where there’s room for improvement. Bucket budgeting, which involves setting up multiple personalised accounts for different types of spending and saving, is a popular tool that many Aussies are using to keep their budgeting on track.

Weed out bad spending habits

Now that you’ve busted out your budget and know where your trouble spots lie, it’s time to have a look over your credit and debit card statements to work out exactly where you’re overspending. A lot of overspending habits come down to convenience and being on autopilot. Sometimes, it’s easier to grab takeaways on a Friday night than cook or you’re just in the habit of picking up that daily latte on your way into the office. Once you’re aware of the things that trip you up, you can focus on building new behaviours that set you up for success, such as doing a weekly meal plan and shop.

Toss out old debts

If you don’t already have a debt payment plan in place, now’s the time to get on top of it. There’s nothing like defeating debt to give you newfound financial freedom. Some people make a list of all of their debts and what they cost, and then prioritise based on how much they can afford to pay off. If you are not sure, you should consider getting independent financial advice. 

Polish your savings plan

Okay, now it’s time to get creative about how you can boost your savings. Side hustles are all the rage these days. Besides being a nifty way to make extra cash they can also allow you to explore a passion or hobby on the side. Whether it’s making and selling jewellery on Etsy or taking on jobs for extra cash via sites such as Airtasker, there are a host of ways to make extra income outside of your day job (just remember a second income stream could impact your taxes, so always check with an accountant to be sure). It could be as simple as doing a big clear out and selling the excess on eBay or Gumtree. An ING Savings Maximiser is a great place to stash your newfound cash and keep it growing.

Gather your game plan

It’s much easier to stay on track when you have a clear view of your financial plan to keep you motivated. Sit down and really have a think about which financial goals are the most meaningful to you and why. Perhaps there are some you set previously that actually don’t hold as much weight for you anymore and can be de-prioritised? A solid financial plan will encompass all of your goals from the short term (saving for your next holiday) to the long term (thinking about your super) with milestones along the way to help keep you on track.

Source: ING, 2019

Should I borrow to invest in shares?

By Robert Wright /September 02,2019/

Borrowing, or gearing, can help you accelerate your wealth creation. It can allow you to buy assets such as an investment property, or shares that you may not be able to afford outright. However, borrowing to invest is considered a high risk strategy and can result in you losing more than your invested capital.

Before taking out a share investment loan, you should ensure that you can service the costs associated with the loan, including repayment of the loan principal. You should also seek professional financial and tax advice regarding the potential risks and benefits of geared investing.

How do I borrow to invest in shares?

You can take out a margin loan to invest in shares. A margin loan allows you to buy shares by paying only a fraction of the cost of the shares upfront, and the lender uses your shares as security for the loan.

The prices of shares move frequently and you risk losses if they fall in value. Lenders often express your level of gearing using a loan-to-value ratio (LVR) or gearing ratio. The LVR is the amount of your loan divided by the total value of your shares.

If the value of your shares falls to where LVR exceeds an approved maximum, you may be required to top-up your loan collateral or repay some of the loan. This is known as a margin call. If a margin call is not met within a timeframe set by the lender, your shares may be sold by the lender to satisfy your margin obligations. This may result in you suffering a loss.

How do I manage the risks associated with a margin loan?

There are a few strategies that can help you manage the risks associated with a margin loan:

• set a borrowing limit you are able to comfortably repay and stick to it
• make regular interest repayments on your loan to keep your loan balance within a manageable limit
• check your LVR regularly, because the value of your investments can change quickly
• have funds available to deposit if your lender makes a margin call and you do not wish to sell your shares

What are the benefits and risks of borrowing?

Benefits

• You can build a larger portfolio than if you were using just your own funds.
• Some lenders allow you to borrow using an existing share portfolio as collateral. This allows you to increase the size of your investment without having to deposit additional cash.
• Manage concentration risk by diversifying your portfolio. For example, if your share portfolio is overweight in a certain sector and you do not want to sell the shares, you could use the equity in your current portfolio to borrow and invest in companies in other sectors.
• Potential tax efficiencies associated with borrowing.

Risks

• While a share investment loan can help accelerate the growth of your portfolio, it can also magnify losses if prices move against you and you can lose more than your invested capital
• Interest costs associated with your loan may reduce your profits. Interest rates are also subject to change, and can result in an increase in the cost of servicing your loan.
• LVRs, or margin rates, are subject to change at the lender’s discretion. This can lead to a requirement for you to deposit additional cash at short notice. In some cases, your shares can be sold by the lender to satisfy your margin obligations. This can result in your shares being sold at a loss and you will still be required to repay the outstanding balance of the loan.

To find out whether gearing may be a suitable strategy for you, please contact us.

Source: Macquarie Group Limited

How much do I need to retire?

By Robert Wright /May 31,2019/

When you plan to retire will often be determined by whether you can afford to stop working and still have enough income to maintain your lifestyle. Latest figures from the Australian Bureau of Statistics show the majority of men (36%) and women (22%) chose to retire at the time when they became eligible to draw on their superannuation and/or the age pension. And their average age at retirement was 63.5 years.

If you’re planning to delay retirement until your super balance reaches an amount you can comfortably live on, just how do you determine what that target should be? There are a number of factors that will affect how far your money will go, including your life expectancy, how your money is invested and other choices you make for managing your income. But one of the most important steps to planning for a secure financial future in retirement is to be realistic about your living costs.

How your living costs might change

As you stop working and have more time to yourself, your routine will change and you might save on some costs as a result. Spending on transport could fall as you no longer have to commute. If buying lunch and takeaway coffees has been a daily habit while working, you could also make significant savings by leaving these out of your retirement routine. Other living expenses, such as buying groceries and clothes and paying household bills are likely to be much the same before and after retirement.

Thinking about how you’ll spend time in retirement and where you’re planning to live will also give you clues about how your spending might go up or down. If a few trips overseas are on the cards, you’ll need to allow for these occasional costs in your overall budget. But if you’re planning to limit travel to domestic holidays only, then you won’t need to allow for these expenses in your financial plan.

Start with a ballpark estimate

How much travel you plan to be doing is just one of the many daily and one-off costs taken into account in the Retirement Standard estimates for annual expenses. Updated every quarter by the Association of Superannuation Funds of Australia (ASFA), these figures can give you a rough idea of what you can expect to be spending day-to-day in retirement.

There are two estimates available, a higher one for a comfortable lifestyle and a lower amount for a modest lifestyle. As at December 2018, the amount you’d spend as a single person aged around 65 years enjoying a comfortable lifestyle is $43,317 and for a modest lifestyle the annual budget is $27,648. The estimate for couples is $60,977 and $39,775 for comfortable and modest lifestyles respectively.

To give you an idea of how differences between a modest and comfortable budget might impact on your retirement plans, the annual travel budget is a good place to start. A couple living modestly can expect to spend approximately $2,500, with no allowance for overseas trips. On a comfortable budget, a couple can splash out more than $5,000 each year on travel, with roughly a third going towards international travel.

The cost of lifestyle changes

Although it’s wise to build a budget based on what you expect to be doing in early retirement, your overall plan should also take into account potential for lifestyle changes as you age. Travelling for longer periods, dining out and entertainment and taking part in sports and hobbies could taper off as you grow older. Health and aged care costs, on the other hand, could make up a larger share of your budget in the later years of retirement.

A plan to see you through retirement

Your expenses are just one side of the whole budget planning process. Taking a good look at all your retirement income options is just as important to figuring out how much you’ll need and when you’ll be ready to take that step. From the age pension to the equity in your home to retirement income products such as annuities and account based pensions, there are all sorts of ways to support yourself financially towards having the lifestyle you want.  A qualified professional who specialises in retirement planning can support you in exploring these opportunities to manage your income for your whole retirement so you can make better choices for a secure financial future.

Source: FPA Money and Life, 02 April 2019

Dust off your lunch boxes

By Robert Wright /March 22,2019/

If you want to get ahead with your savings goals in 2019, packing a lunch each day is a great place to start. (And forget the soggy cheese sandwich, as with a bit of planning and thought, you’ll be guaranteed to give your colleagues lunch box envy.) With ING research showing that Australian employees spend a whopping $129 on average per month filling their bellies at lunchtime, you could tuck away over $1,500 in your savings account in one year alone, just by getting a little lunchbox virtuous…

So why dust off the lunch box?

Tuck into the savings

With the average lunch being $15 a day, it’s not hard to give your savings a major boost by cutting out the daily pilgrimage to the sandwich shop. And it’s not just money that you’ll be saving, there’s more…

Quality ‘you’ time

People often say buying lunch is an excuse to get out of the office. However, instead of spending half your lunchtime standing in a cafe queue, you could spend that time meaningfully. Go for a run or walk around the nearest park. You’ll not only fit in your 10,000 steps but it will clear your head. The best way to come back alert and refreshed to work.

Underwhelming, indeed

How often do you get excited about getting take away, and then feel underwhelmed or like you need a decontamination shower afterwards? As well as being more expensive than bringing food in from home, takeaway food can often be less fresh and nutritious than your own pantry. It’s also hard to justify buying fruit from a takeaway cafe or shop too because it’s often more expensive then supermarkets. So to guarantee your daily ‘five’ veggies and ‘two’ fruit intake, it’s worth being ready to pack and go.

Waste wars

In our waste conscious society, it’s good to look at our food wastage. Packing up a lunch each day is a great way to decrease food waste and save leftovers from going furry in the fridge. You can take last night’s meal as is, or be creative and give the dish a lunchtime twist.

Gain savings, lose pounds

With a combination of having more time to exercise at lunchtime and by bringing in nutritious and controlled amounts of food (without the temptation of buying that banana cake at the counter) your healthier lifestyle could convert to diminished kilos.

How to create lunch box envy

Plan A

Planning is key to rolling out enviable packed lunches each day. Shop for your lunches on the weekend, and batch cook and freeze/chill items such as salads, frittatas, soup and rice paper rolls so you can grab and run during the week. You can even freeze sandwiches in advance (yep you heard right)! Just seal them well. Take it one step further and divide and store your food into individual containers in advance to make mornings more relaxed.

Go naked and nude

Treat yourself to some quality Tupperware or splash out on a state of the art Bento box. The beauty of Bento boxes is that you can reduce plastic wrapping waste and go with nude food! The environment will thank you for it. Why not keep your lunch cool with a frozen bottle of water or for extra nutrients, coconut water.

Pick and mix it up

Inject as much variety as you can into your lunchtime treats. If you don’t, you’ll be back in the foodcourt queue quicker than you can butter your bread. Get out of your comfort zone and enjoy the process. Go crazy in the fruit and vegetable aisle, and treat yourself to healthy snacks you wouldn’t usually buy. Try baby cucumbers, snow peas, or baby sweetcorn for quick grab and go snacks. And prep-free fruits, fresh or dried, like lychees, apricots, dates or cranberries. Swap recipes with colleagues and find the perfect sweet treat, such as Taste’s Cacao Coconut Date Balls or Coconut Sesame and Sultana Bar.

Stuck for ideas?

Ditch the daily egg sandwich and be inventive. There’s a wealth of free lunch box ideas online to give you inspiration. Explore making items such as vegetable patties, savoury slices and try quinoa as a base for salads. As well as go-to recipe sites such as Taste and All Recipes, government health and association websites such as the Dieticians Association of Australia are great for recipes and nutrition insight. The Healthy Eating Advisory Service has a great lunch box guide for kids and adults.

Source: ING February 2019