Tag Archives: Cashflow

Five Financial habits to start

By Robert Wright /April 16,2021/

Like any habit, our financial behaviours are formed by doing the same actions repeatedly until they’re second nature. That’s great if you’ve got into the routine of saving regularly – but not so good if you’re one to whip out the credit card on impulse.

With the right approach, you can turn those less-than-helpful financial habits into healthy behaviours.

Research shows one way to avoid falling back into old ways is to replace them with healthier habits. Other useful strategies include:

• Making smaller changes rather than big, dramatic ones.
• Choosing specific actions like ‘I’m going to transfer $100 into a dedicated savings account every fortnight’ rather than vague goals, such as ‘I want to feel financially secure’.
• Triggering new behaviours with visual or sound cues – that’s why social media with its notifications can be so habit-forming.

Here’s how to use those strategies to set you up for a financially successful 2021.

1. It’s time to get organised

Knowing where you are financially gives you clarity around your money. This makes it easier to workout your financial goals – and what you need to meet them.

Start by having a place for everything. If you receive your bills electronically, save them in one place. Scan any other financial paperwork – or set up a folder if you prefer hard copies. Consider setting up direct debits or create calendar alerts to ensure you pay bills on time – and avoid late payment fees forever.

You can’t control your money if you have no idea where it’s going or how much is coming in. Using a budgeting app can help you easily track your expenses and get an accurate record of your monthly spend. You can use this information to create a realistic budget. You can also use your bank’s app to manage your day-to-day expenses and check your balance.

Don’t forget to record expenses as you go and photograph or scan receipts, so when tax time comes, you’ll have all the documents you need in one place.

2. Name your goals – And break them down into steps

What are your financial goals? Some common ones include:

• Buying a property or starting a business
• Going on a dream holiday
• Paying for the kids’ or grandkids’ education
• Leaving money for loved ones
• Retiring early
• Being free from debt/paying off the mortgage

Enjoying financial freedom. Once you know what your goals are, break them down into small, actionable steps. For example, say your goal is to buy a property. Work out first how much your ideal home will cost, how much you’ll need for a deposit and when you hope to purchase it. Next, decide how much you’ll need to set aside each fortnight for that goal. Don’t forget other sources of income that could add to your savings – like a tax return, bonus, or income from a second job.

3. Pay yourself first

One of the most important financial behaviours you can develop is the habit of saving regularly. You need some savings as a safety net – covering unexpected expenses like home or car repairs, or a trip to the dentist. You can then use additional savings to cover your financial goals, or to invest in assets like shares or property.

One of world’s most successful investors, Warren Buffett offers this advice on saving: “Don’t save what is left after spending; spend what is left after saving.” In other words, pay yourself first.

One way to do this is to automatically transfer a regular amount into a savings account each pay day. By taking the same amount out at the beginning of the pay cycle, you’ll get used to not having it. If money is tight, make the amount small.

Check the balance of your savings account regularly. This will give you the visual reward of seeing your savings account grow – helping motivate you to stay on track.

4. Set a debt repayment strategy

If you have credit card debt, try to pay off as much as you can each month. Make sure it’s more than the minimum, or you could end up paying a lot of money in interest.

If you have multiple debts, they may be easier to manage by consolidating them into one debt. Alternatively, pay off the debt with the highest interest rate first. Some people find paying off the smallest debt first, then moving onto the next smallest debt more motivating.

To avoid getting into more debt, try to avoid impulse buying. Consider having a credit card for emergencies only and relying on your everyday account to pay for groceries and other expenses. Even better, build up a rainy-day account and avoid credit cards altogether.

5. It’s never too late to learn

Do you find finances confusing, boring or stressful? Learning more about finances can take the hard work and mystery out of managing money.

Source: Colonial First State 

Change your spending habits and boost your happiness

By Robert Wright /March 10,2021/

After living through a year when our collective mental health took a beating, 2021 has brought with it a fresh sense of optimism and relief about what the future may hold. Like many people, you may be planning to do things differently this year.

But before you work on a wish list of things to buy and changes to make, you might like to take a look at the growing body of research into what we should spend our hard-earned cash on to bring us happiness.

Experiences, not consumption

Dr Thomas Gilovich, a professor of psychology at Cornell University in the US, has been exploring the relationship between spending and happiness for more than 20 years. After publishing a number of studies and reports, he offers important insights about how much happiness we can expect from buying stuff compared with spending on experiences.

“There’s a lot of work in the area of well-being and happiness showing that we adapt to most things,” Dr Gilovich says. “Therefore, things like a new material purchase make us happy initially, but very quickly we adapt to it, and it doesn’t bring us all that much joy. You could argue that adaptation is sort of an enemy of happiness. Other kinds of expenditures, such as experiential purchases, don’t seem as subject to adaptation.”

Not only do experiences leave us with lasting happy memories, anticipation of an experience can substantially increase your happiness, often more than the experience itself.

What kind of experiences?

If experiences define who we are, how can we determine what sort of experiences we should be having to make us happiest?

Much of the recent research on happiness has revealed that it’s “inextricably linked to having strong social ties and contributing to something bigger than yourself – the greater good.”

So it makes sense that experiences you share with others bring you more happiness than solitary ones.

Author and leading expert in positive psychology Martin Seligman has another theory. He divides experiences that bring us happiness into two categories: pleasures and gratifications. Pleasures bring us immediate contentment and enjoyment – things like a delicious meal or glass of wine, a massage or relaxing in a warm bath. There’s no doubt we’ll enjoy these experiences in the moment and remember them with appreciation, but they won’t bring us an enduring sense of satisfaction the way gratifications can. By challenging and engaging us, things like rock-climbing, dancing or restoring an old armchair can have a much longer lasting impact on our happiness.

Getting the best from experiences on a budget

The good news is that many gratifications don’t cost much, especially when compared with pleasures like expensive restaurant meals and holidays.

In his more happiness bang for your buck blog, Chairman of the Australian Government Financial Literacy Board, Paul Clitheroe offers a couple of useful tips for discovering new ways to experience happiness without spending big:

The $50 test

Take time to plan three activities costing less than $50 each during the next month. Ideas include going to the movies, buying art supplies, doing a cooking class or planting a small vegetable garden. For each activity rate how happy you think it will make you, how happy it makes you immediately after and how happy it makes you a month later. You’ll soon start to learn which experiences are contributing more to your overall happiness.

Keep a happiness diary

During the next month write down everything you buy and do in a notebook. Include how much it costs and how happy it makes you both immediately after and a month later. Now look at what you’re spending most of your money on. Does it match up with what makes you most happy?

When you take stock of what you’re spending money on and how happy you end up being as a result, you’ll have the insights you need to make changes to your budget and invest more wisely in your happiness.

Source: Money & Life

Aussies saving for a rainy day instead of a holiday

By Robert Wright /November 03,2020/

Not many people can say they’ve been unaffected by COVID-19. Whether you’ve lost work, had hours reduced or been fortunate to maintain employment, COVID has been a wake-up call for how we manage our money and set financial goals.

How are we managing?

Many of us are doing smart things such as:

• 29% are cancelling non-essential services
• 25% are reducing spending/expenses
• 42% are putting money aside for unforeseen events

But worryingly there’s been an increase in people relying on credit cards to pay for everyday expenses and taking out personal loans. And 23% of 18-35yr olds surveyed had also accessed some of their superannuation early.

How has it changed our goals?

For starters, more of us are actually setting goals than before COVID. It’s made us more determined to gain control of our money and be better prepared for whatever life throws our way. And the goals we’re aiming for now are all about paying down debt and saving.

Goals we’re mostly on track for:

• 73% have reduced spending/expenses
• 65% have paid off the mortgage
• 61% have paid off personal loan/credit card
• 60% have put extra money aside for retirement

However, the COVID curveball has meant we’ve had to do a bit of fine-tuning. We’re extending the timeframe it’ll take for us to reach our goal, or we’re abandoning it altogether if it no longer suits our situation.

• 43% have stopped saving for an investment property
• 40% are no longer saving for a big-ticket item like a holiday
• 35% postponed investing in the stock market
• 31% decided to put on hold saving for a house deposit

Goodbye holiday, hello rainy day

Pre-COVID, saving for a holiday was a priority goal for almost half of us. Whether it was an annual trip overseas or regular cheeky getaways, Aussies were big travellers. But with the world shut down and travel greatly restricted, we’re realigning that goal to something that makes us feel more secure – saving for a rainy day.

Because we’re more focused on saving, we’re watching our spending more closely too. Things we used to think we needed have been recategorised as nice-to-haves. And it’s not just the overhanging threat of job losses that have made us feel this way. Stay at home orders and have allowed us space to take stock and start appreciating the simple things in life once again. We’re valuing time with our family, a slower pace, and being debt free over buying things for the sake of it, or that we might not be able to afford.

Whatever your situation, now could be an ideal time to revisit your financial goals and decide if they’re still right for you.

Source: AMP

What to do next if you’re facing redundancy

By Robert Wright /October 16,2020/

Uncertainty around COVID-19 might be increasing your stress levels about losing your job, but here are five ways to soften the financial blow.

In April, Australia hit its highest unemployment rate in five years, and with the Federal Treasurer expecting an unemployment rate of around 10% by the end of the year, many Aussies may be feeling a little uneasy about their future job prospects.

Which sectors have been hardest hit?

COVID-19 has affected all areas of the workforce, but analysis by AMP reveals recruitment, retail and hospitality make up almost half of all early super release withdrawals, suggesting people in these sectors may have been more greatly affected by job losses.

Uncertainty around the reopening of interstate and international borders makes any tourism rebound also hard to predict.

How to get on the front foot with your situation?

It’s important to know that a genuine redundancy payment is made when you’ve been retrenched because there’s no longer a need for the job that you’re doing.

Here are some ways to help make sure you get what’s yours if you’re faced with a redundancy so you can be well prepared for the future.

1. Know what you’re entitled to

What your employer is required to pay you will depend on your conditions of employment, so ask your boss or HR department (which might be easier if you’re still working), or be sure to check your redundancy payment summary carefully to ensure you get what it is you’re owed.

Fair Work’s redundancy calculator (www.calculate.fairwork.gov.au/endingemployment) can help you find what redundancy pay and entitlements to expect. It’s also a good place to find details of pay and conditions if you’re covered by a registered agreement.

Meanwhile, keep in mind that apart from your actual redundancy payment, you may be eligible for things like payout of accrued annual leave and long service leave.

When the redundancy happens, if you’re under your Centrelink Age Pension age (which will be between 65 and 67 depending on when you were born), special tax treatment is also given to genuine redundancy payouts, which means some payments you receive will be tax free up to a certain limit based on your years of service.

2. Sort out your money situation, including benefits and super

The size of your payout may determine the time you can afford to be out of work, what you’ll be able to live on from week to week, along with how you’ll tackle financial responsibilities until you find another job. With that in mind you may want to:

Create a workable budget

You can do this by writing down your daily living expenses, and what you estimate any upcoming bills and loan repayments will total. This way you’ll be across all your outgoings, as well as where you may be able to make minimum repayments and cut back on other forms of spending.

Put your money somewhere useful

It might be tempting to go on a holiday, undertake renovations or pay off all existing debts with your redundancy packet, but if you don’t find work within a certain timeframe, you may leave yourself short.

Think about where you could put your money, still have access to it and potentially reap added benefits. Options may include high-interest savings accounts or a mortgage offset account that allows you to redraw funds while reducing what you pay in interest on your home loan.

Apply for financial hardship with your lenders

If your redundancy payout starts to run out and you’re struggling to make repayments, you may be able to seek assistance from your lenders by claiming financial hardship.

All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.

Find out if you’re eligible for government assistance

There’s a range of Federal and State government assistance available related to COVID-19. Make sure you’re across these and don’t miss out on support you might be able to access straight away.

These may change as the economy emerges from hibernation, so bookmark the pages relevant to you, in case you’re out of work for longer than you anticipate.

Depending on your age, different benefits may be appropriate at different ages – for instance most workers may look to JobSeeker payments where they’re out of work, while the Age Pension may be more appropriate for older Aussies.

Waiting periods may apply to some benefits, so keep that in mind when it comes to any payout you receive, as you may need it to cover your living expenses for a while.

Loss of a job and income in the family could also mean that you may qualify for Family Tax Benefits, or for a higher rate of payment.

Look into your super situation

See how much money you have in super and think about the effect a break from work may have on your balance.

If you have insurance inside super and are paying premiums with your super money, consider how this may affect your retirement savings if the premiums aren’t being offset by contributions.

You might also be considering early access to super during COVID-19, where the Federal Government is allowing eligible people affected by the outbreak to access up to $10,000 of their super as a tax-free payout between 1 July and 31 December 2020.

There may be short-term advantages to this, but there may also be some disadvantages that you’ll want to make sure you’re across.

3. Create a plan for your return to work

You might have a bit of leeway to take some time off, but when you do look to join the workforce again, a good place to start will be your resume. Make sure your previous roles and responsibilities are up to date and that you’ve listed all your skills and achievements.

In the meantime, set up relevant online job searches, tidy up your LinkedIn profile, touch base with recruiters in your field and don’t be afraid to target companies directly.

4. Contemplate the benefits of training

Depending on whether you want to remain in your industry or make a career change, further training could help you gain new qualifications, keeping in mind this can still cost time and money.

A new education assistance package has recently been made available to help displaced workers upskill and retrain during COVID-19. A number of free online courses are also available from TAFE, while Open University offers a range of short and longer education courses for all levels.

5. Seek further support

There’s a range of support and resources available.

Talk to your financial adviser as they may pick up on things that could otherwise be missed 

Check out AMP’s free webinar – Managing through a redundancy

Find a range of articles on AMP’s COVID-19 support hub

Check out our FAQs on ways AMP is helping clients experiencing financial hardship 

Seek free financial counselling from the National Debt Helpline on 1800 007 007 

Take a look at the government’s Moneysmart website for further financial education.

If you’re finding it difficult to cope and need to speak to someone, there’s a range of mental health and family support services available through: 

Beyond Blue – 1300 22 4636 

1800 RESPECT – 1800 737 732

Lifeline – 13 11 14

Source: AMP Insights