Tag Archives: Financial Planning
Why you need a Will
By Robert Wright /October 16,2020/
It’s no wonder people tend to avoid making a Will. We can find it hard to face the fact that death is part of our future and that there may be a time when we won’t be able to manage our own finances due to poor health.
However, the COVID-19 pandemic has made us all more aware of how life can change when we least expect it and our health is something we shouldn’t take for granted. So there really is no better time than now to get your estate plan in order.
What is an estate plan?
Your estate plan is a set of arrangements that sets out what will happen to your assets when you die and/or if you become unable to manage your own affairs. Your Will is just one part of your estate plan. It can also include a Power of Attorney arrangement giving someone else legal authority to manage your assets and finances if you become incapable of doing this yourself.
How do I make a Will?
You can take a DIY approach to making a Will with a Will kit. But not all your assets are covered in your Will. You super, for example is not an estate asset and you will need to make a separate arrangement – usually a binding nomination – to make sure your super death benefit is passed on according to your wishes.
Wills and estate plans can be fairly simple, but it depends on your particular family and financial situation. Owning a business, being married more than once or having children are just some circumstances that can demand a more complex estate plan. While it may take a lot more detail and structure to ensure all your assets are properly distributed, it’s worth doing to take care of everything that matters to you.
One of the best ways to make sure your estate plan covers everything it should, is to seek advice from a financial planning professional and a solicitor who specialises in estate planning. A financial planner can offer you guidance on growing and protecting your assets during your lifetime.
They can also talk to you about what to consider as you decide how you want your assets to be distributed among your family and loved ones, both before and after you die. This includes the tax consequences of transferring assets to your beneficiaries.
However, a financial planner cannot offer legal advice on your estate plan and they cannot draw up the legal documents you need to make sure your Will and estate plan are legal and binding. You’ll need to work with your solicitor or an organisation that specialises in estate planning.
COVID-19 and your estate plan
Each State and Territory has their own legislation that lays out how estate planning documents must be signed and witnessed. Your solicitor will be able to guide you through this process so that your Will can be considered valid in a court of law.
With social distancing and other restrictions in place due to COVID-19, it can be more difficult to make these arrangements for signing and witnessing your Will and other estate planning documents. In Queensland, New South Wales and Victoria, new legislation has been introduced to allow certain legal documents to be signed and witnessed via video conference. Your solicitor can get you up to speed on the details of this process and let you know what software and devices you’ll need to complete remote signing and witnessing to meet these legislative requirements.
This legislation does not allow you to have a binding nomination for your super death benefit witnessed via video conference. To make arrangements for this part of your estate plan, you’ll need to get in touch with your super fund and check their requirements for making a valid binding nomination.
What happens if I don’t have a Will?
If you die without a Will, your assets will be distributed according to the intestacy legislation for your State or Territory. Assets will be shared among family members according to these legal requirements. This is why it’s important to have a Will to make sure that your estate is passed on according to your wishes.
Source: Money & Life
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
How is your credit score affected by COVID-19?
By Robert Wright /August 28,2020/
If you’re one of the many Australians financially impacted by COVID-19, who have deferred $218 billion worth of payments this year – fear not. Your credit score is unlikely to be affected by payment deferrals or mortgage holidays due to the current state of the world.
While that’s good news, it’s still important to maintain a high credit score by understanding how it’s calculated and what you can do to maintain it in future.
So, what is a credit score?
A credit score is a number between zero and 1200 that reflects how much money you have borrowed, the way you use credit and your history paying off any loans and credit cards. This is calculated based on many sources of information including:
- Your personal details like your age, income and living arrangements.
- Financial information like how many loans and credit cards you have.
- Your bill paying history for expenses like energy and phone bills.
While your credit score is a record of positive information, such as your track record making repayments on time and in full, it also encompasses negative information such as late payments, court adjudications, bankruptcies and insolvencies.
All in all, the higher the score, the better and the more likely lenders will be to approve loan or credit card applications you might make. The lower the score, the riskier you will be perceived by lenders, making them less inclined to approve your application for a loan, which is why having a high credit score is important.
How is it calculated?
Credit bureau are responsible for consumers’ credit scores, which are calculated across the bands below:
- Excellent: 841 – 1,200
- Very good: 756 – 840
- Good: 666 – 755
- Average: 506 – 665
- Below average: 0 – 505
What is a credit report?
A credit report sits alongside your numeric credit score and contains all the information used to determine that number. The report includes detailed information about the way you handle credit, such as your repayment history, as well as any defaults or overdue payments. It also encompasses information about your active loans and credit cards such as their value and repayment amounts.
Be aware your credit report will include a record of any defaults if you miss a payment valued at $150 or more that’s overdue for more than 60 days.
What’s it used for?
Banks and other financial institutions check your credit score and your credit report to see how likely you are to be able to make your repayments on new loans or credit cards for which you apply. Banks, telcos and energy companies also check this information every time you apply for credit with them.
What might cause your credit score to drop?
There are a range of reasons your credit score could drop, such as when you pay off a loan or cancel a credit card. While this might be confusing, this is because lenders have less information to assess how reliable you are at paying off debts or assessing loan applications.
Your credit score can also drop when you successfully take out new credit. This is because the average ‘age’ of your debt drops with the new loan. Over time, when lenders see you making regular payments on your new card or loan, your credit score should increase once more. Your credit score will also drop if you miss a payment, are routinely late making payments, or, if you go bankrupt.
How can I improve my credit score?
There are lots of steps to take to improve your credit score, including:
Pay your bills and loan repayments on time, and, in full. It’s an idea to set up direct debits so all of your obligations are automatically paid. This could help minimise the risk of missing a repayment and having this affect your credit score.
Don’t apply for too many new lines of credit, for instance multiple credit cards, at the same time. Lenders can take this as a sign you’re experiencing a cash flow crisis and need access to money fast, which can put you in the higher-risk category as a borrower.
Lower your credit limit. Lenders like to see borrowers using credit responsibly by paying off their repayments on time, and, in full.
Will my credit score be affected if I have deferred my mortgage repayments?
Banks have allowed borrowers who have been affected by COVID-19 shutdowns to defer loan and mortgage repayments for up to six months. Rest assured your credit score will not be affected if you have deferred your loan repayments.
This means that your credit report will not include a record that you have missed a payment as a result of deferring your repayments due to COVID-19. However, your credit score may be impacted if you have missed a payment on a loan or credit card for other reasons.
What should I do if I think my credit score is wrong?
You can take steps to correct your credit score if you think it’s wrong. Contact the credit reporting agencies to amend details such as your name and address. If the error involves incorrect defaults or information on your file that is a result of identity theft, contact your credit provider.
Source: BT
Don’t let overspending be your undoing
By Robert Wright /August 28,2020/
Do you struggle to control your spending around your friends and family? If the urge to ‘keep up’ with a certain lifestyle is stretching your finances, it could be time to take action.
From splitting the bill at an expensive restaurant, to having the ‘right’ house, car and clothes, many of us fall victim to overspending. But if you regularly suffer from buyer’s remorse, or spend over and above your means, it’s time for a serious reality check.
Overspending can quickly spiral into long-term debt, especially if you use credit cards to try and bridge the gap.
Young Australians are particularly at risk, taking on debt at a far earlier age and carrying it longer than ever before. Research by RateCity shows that 42 per cent of those aged under 24 have between $10,000 and $30,000 in personal debt, not including a mortgage.
Even if you’re not living paycheck to paycheck, overspending will prevent you from reaching your longer term financial goals, like financial security and financial freedom.
Fortunately spending habits are just that – habits – and they can be changed. Here’s how to avoid the debt spiral and get your finances on track.
1. Identify your risky behaviours
Do a financial health check and work out where the majority of your overspending happens.
Is it a penchant for designer clothes? An addiction to expensive electronics? Or a love of fine dining? We all have vices that threaten to throw us off track, so look at the numbers and be honest with yourself about which behaviours are forcing your finances off course.
If those behaviours are closely associated with certain friends, family or work colleagues, it could be time to re-evaluate your unhealthy relationships.
2. Associate with people who share your values
Once you know what’s driving your poor spending habits, use it to take action. Distance yourself from any negative influences and find others who better fit in with your long term plans. Being surrounded by likeminded people will help restore your bank balance in no time.
3. Find alternatives
If your social life is at the centre of your overspending it could be time to make some healthy swaps. Try suggesting low-cost alternatives such as bush walking, art classes or the beach. You might even meet new people who share your values.
Lead by example and encourage good financial practices among your friends and family. Be upfront about your goals and values, without being pushy. True friends will be supportive and want to spend time with you anyway.
4. Make a financial plan
Taking control of your spending starts with evaluating your priorities and setting long-term goals. By making a financial plan, you’ll identify what is really important to you – and the steps you need to take to get there.
You can do much of the groundwork on your own, although consulting a financial planning professional can help you to nail the details and act on your plans. You could be experiencing financial freedom sooner than you realise.
5. Stick to a budget
It’s much easier to maintain your new spending habits and make a real change if you have a budget in place. Make sure to allocate funds for clothing, entertainment and ‘fun’, so that you still get to indulge in some of your favourite interests.
6. Create a ‘want to buy’ list
Every time something comes up that you want to buy, add it to your list then wait at least seven days before purchasing the item. In the meantime, find at least three prices for the same item. This reduces the risk of splurging on things you don’t really need and makes it more likely that you’ll get a good deal.
7. Focus on the bigger picture
It’s easy to get carried away trying to keep up with a certain lifestyle and you may not even realise it’s happening until you’re already in debt. Good financial planning and a focus on the bigger picture will help keep your overspending in check.
Source: Money & Life