Tag Archives: Cashflow

5 common financial mistakes to avoid during a crisis

By Robert Wright /August 07,2020/

The economic impact of the COVID-19 pandemic is playing havoc with finances for many households. In an ideal world, the financial boost should be enough and assumes that everyone was financially prepared for tough times. But in times of crisis, it can all be a little overwhelming.

Here are 5 common financial mistakes to avoid during a crisis and help you get to the other side with minimal money stress:

1. Not paying attention to the household finances

According to a study by Deloitte Access Economics, a worrying 14 per cent of Aussies struggle to pay their bills (including rent, mortgage, utilities and credit cards). The study found that 26 per cent are spending more than they earn and live from pay cheque to pay cheque. Taking time to pay a little more attention to your household budget will help you stay afloat financially and not fall into unnecessary debt.

Start by listing all discretionary spending and reduce non-essential spending as much as you can. Identify those recurring direct debits to subscription services you no longer use. Perhaps home cooking will do rather than Uber Eats. Schedule a payment plan with essential providers such as utilities and rates. Discuss holiday repayment options with your bank or landlord.

Try using a spreadsheet or budgeting app to make it easier to track your spending during this time. You’ll quickly get a true picture of your financial health.

2. Not building up emergency funds

The Deloitte study also found 13.4 million Aussies don’t have emergency savings to fall back on if they are out of a job. While we could not have predicted a pandemic, it certainly has exposed the financial vulnerability of not ‘saving for a rainy day’. A general rule of thumb is keeping aside three to six months of living expenses.

With banks letting borrowers hit pause on their home loan repayments, and as many as 375,000 individuals applying for the repayment relief, saving any excess surplus into an emergency fund to cover delayed repayments will see you in a stronger financial position.

3. Making emotional investment decisions

Share market volatility has seen global markets bounce around, resulting in lower investor confidence. With markets falling as much as 37 per cent, you may be thinking of abandoning your long-term investment strategy and cashing in your portfolio. However, share markets have proven that a recovery follows a crisis. The Global Financial Crisis of 2007 and the Black Monday Crash of 1987 are good examples. So, it makes sense to stay the course with a quality investment strategy whilst reviewing it regularly in line with financial goals.

4. Assuming your estate is in order

Half of Australians do not have a will. Of these, 34 per cent said they ‘haven’t got around to it.’ Without a valid will, your estate affairs end up in chaos. In light of the current pandemic which can have fatal consequences, setting up your estate affairs should be high on your list. A simple will can be drafted up by a lawyer for as little as the cost of smart TV.

5. Not seeking professional advice

In times of financial crisis, it might seem more affordable to take a ‘Do-It-Yourself’ approach to save on costs, rather than seek the advice of a financial advice professional. During COVID-19 crisis, the Australian Government eased the rigid regulatory requirements to allow more access to professional advice. Working alongside a subject matter expert such as a financial planner, may help you achieve a better financial outcome as well as putting your mind at rest about the future.

Source: Money and Life

Why financial wellbeing is a pillar of good health

By Robert Wright /August 07,2020/

When we talk about financial wellbeing, what do we mean? More than just earning an income, financial wellbeing is about having financial security and the freedom to make choices. There are three interrelated aspects to good financial wellbeing:

1. The ability to meet your expenses and have money left over.
2. Feeling and acting in control of your finances.
3. Being financially secure and not needing to worry too much about money.

It’s considered normal for your financial wellbeing to vary over the course of your life. This is particularly true during major life events such as moving out of home, having a baby, changing jobs or retiring. Unexpected financial shocks can also have a big impact on your financial wellbeing.

How fit are our nation’s finances?

The Financial Wellbeing Australia report (2018) describes four categories of financial wellbeing. Around a quarter of all respondents (extrapolated to 4.5 million Aussies) were classed as having the highest level of financial wellbeing.

Around 40% (or 7.4 million Aussies) fell into the category of “doing ok”. They described their situation as “fair” or “good” and were relatively confident about the next 12-months. A further 23% of respondents (around 4.4 million people) were just getting by, while the remaining 13% (2.4 million people) were considered to be “struggling”.

How can I improve my finances?

Developing good financial habits will help you improve your financial health over time. That includes:

• Having a budget or spending plan.
• Making regular cash savings.
• Building an emergency fund of at least six months living expenses.
• Paying down debt and maintaining a good credit rating.
• Having adequate insurance.
• Building up enough superannuation to retire comfortably.

Much like your physical and mental health, your financial health needs regular check-ups to stay in good condition.

How can a financial planner help?

Think of your financial planner like your family doctor: as your partner in good health. Having the right financial planner on your team can help you navigate life’s ups and downs.

A financial planner is able to support your changing needs at every stage of life. For example, in your twenties and thirties a financial planner can help you save, invest and plan for a family. They can help you consolidate and protect your wealth into your forties and prepare for retirement in your 50s, 60s and 70s.

When you go to see a financial planning professional, they’ll look at your overall financial wellbeing and develop a plan tailored to your circumstances. Again, much like the family doctor, financial planning is an ongoing relationship, not just a one-off meeting. So, look for someone that you feel comfortable with and can work with long-term.

Source: Money and Life

What tax deductions can I claim working from home?

By Robert Wright /July 20,2020/

According to the Australian Taxation Office, there are three ways to claim your home office running expenses.

The actual cost method

Under this method, your tax deductions include the actual costs of work-related expenses. This applies to things such as the costs of your home office furniture and fittings, as well as equipment such as computers and desks.

If the cost of depreciable home office items is less than $300 you may claim the full cost of these items as a tax deduction. If the cost of depreciable home office items is over $300, you may claim a deduction for the depreciation of these items.

If you regularly phone your employer or clients while you are away from your usual place of work, you can also claim a full tax deduction for the work-related portion of the phone calls you make at home and the cost of renting your phone.

Other costs you can claim a deduction for under the actual cost method include:

• Internet access charges.
• Printer and printer cartridges.
• The cost of heating, cooling and lighting your home office, over and above the amount you would ordinarily pay if you did not work from home.
• Any repairs to your home office furniture and fittings.

As your home isn’t considered to be a place of business, you can’t claim non work-related expenses under this method. This includes rent, the interest you pay on your mortgage and the cost of any insurance premiums.

The fixed cost method

Under this method, instead of tax deductions relating to the work portion of costs incurred at home, you can claim a rate of 52 cents per hour for expenses such as heating, lighting and cooling, come tax time. You can also apply the same rate when claiming a depreciation of home expenses, for example any furniture you’re now using in your home office.

The shortcut method

At the moment a special method, known as the shortcut method, is available to people working from home to claim work-related expenses as tax deductions. Please note however, that the special rate is only available from 1 March 2020 to 30 June 2020.

Under this method, each person in a household can claim expenses based on a rate of 80 cents an hour. So more than one person in a household – flatmates or members of the same family – can each claim a deduction for their expenses incurred that directly related to working from home. All that’s required to do so, is keeping a log of the hours you work.

The 80 cents per hour shortcut method seems like an easy way to work out your home office expenses come tax time. However, the risk for people using this method is that they won’t claim as much as they are entitled to under the other two methods. You also can’t claim the cost of equipment such as webcams and office furniture, as well as stationery or computer consumables like printer cartridges.

Whichever method you choose, it’s a good idea to keep accurate records of all your actual expenses, plus the hours you have worked. That will allow you to choose the best method when you or your tax agent prepares your tax return.

Source: BT

Essential apps for budgeting and saving money

By Robert Wright /July 20,2020/

Determined to master your money and stick to a budget in 2020? It doesn’t have to be boring or difficult if you keep it simple, and easier still if you let technology do the heavy lifting for you.

1. Pocketbook

Pocketbook automatically organises your spending into categories like clothes, groceries and fuel, showing you where money is being spent. You can also set up budgets for each category, see your balances and view your transactions. The app ensures all your bills are automatically detected and in the one place. Plus, you get notified when bill payments are coming up and if you have enough money to cover them.

2. MoneyBrilliant

Want to have a personal financial assistant in your pocket? According to their website, that’s just what you’ll get with MoneyBrilliant. This app is similar to Pocketbook as it connects your bank accounts to help you monitor your finances. The basic version also allows you to connect your credit cards, loans, superannuation and investment accounts. Other basic features include creating budgets, getting bill notifications, categorizing expenses, working out your net worth, and generating spending reports.

With the plus plan, you get access to a whole host of other features and services. The upgrade provides alerts for better deals from service providers, recommendations for optimising your accounts and products to making your finances simpler and sorts your expenses into tax deduction categories.

 3. PocketSmith

In its basic version PocketSmith is similar to MoneyBrilliant and Pocketbook, with automatic imports of bank transactions and access to reports summarising your financial activity. It also offers features like digital and cash spending projections, calendars and a choice of either daily, weekly or monthly flexible budgeting options to suit your lifestyle and financial needs.

4. Goodbudget

If you’re a fan of the old-fashioned ways of managing your finances, this could be the app for you. And as you can’t sync it to your bank accounts, you might also prefer Goodbudget if you’re not completely comfortable with sharing bank details with an app.

Goodbudget takes the envelope system digital. Instead of dividing cash for rent, bills and savings between paper envelopes, you get to create up to 10 virtual ones with the basic version of this app. By doing this you can direct your income to where it’s needed, making sure essential expenses are covered and stopping you from overspending on extras. The Plus plan gives you access to unlimited envelopes and the ability to use the app from more devices.

 5. WiseList

With more of a focus on helping you save this app brings a couple of extra elements to managing your budget and bills. It’s designed to help you spend less on your food bills, with features for comparing product prices and getting family members working together on shopping lists.

You can also keep track of loyalty points you’re earning as you shop and plan to save even more with app notifications when your favourite products are on special. It has some handy features for keeping on top of your other bills too. Simply take a photo of each bill and the app will store all the important information and alert you before the due date.

6. Finder

Launched in 2020, the Finder app brings together the money-tracking capability seen in other apps with their well-known comparison data for financial products and services. Not only can this app sync with your bank accounts, it also gives you regular updates on your credit score and savings tips based on analysis of what you’re spending money on.

7. Beem It

An independent company backed by Commonwealth Bank, NAB and Westpac, Beem It is an Aussie version of the popular US bill-splitting app, SplitWise. With Beem It, you can take the hassle and awkwardness out of sharing expenses with friends by making it easy to calculate each person’s share and make requests for payment as well as transfers.

Source: Money and Life