Tag Archives: Lifestyle

How fit are your finances?

By Robert Wright /June 01,2020/

Wearable technology can monitor our heart rate and tell us how much sleep we’ve had, but what about our financial wellbeing? If you could benefit from a Fitbit for your finances, read on.

Just like your physical health, the more you can monitor what’s happening with your finances, the easier it will be to improve your financial fitness.

We all know that financial stress can have a negative impact on our physical and mental wellbeing, leading to stress, anxiety and depression. Research has even shown that employees suffering high financial stress are “more than four times as likely to complain of headaches, depression and other ailments.”

So, if you could get a Fitbit for your finances, what would it track? Keep an eye on these key metrics and you could be feeling financially fit in no time.

1. Spending

Expenses are a fact of life, but this is one area where things can easily get out of hand. Much like overeating, it’s all too easy to buy too much and spend on things you don’t really need, especially if you’re not keeping track of where your money is going. And technology sometimes makes it even easier to overspend.

Buy Now Pay Later and tap and go payments make it harder than ever to keep track of what’s leaving your account.

What to do:  

Make a list of your essential costs, such as rent or mortgage, utilities, food, fees and regular bills.

Try using a spreadsheet or budgeting app to make tracking your spending as easy as possible. Many banks now offer breakdowns of your spending by category in their apps, so take advantage of these free tools. By monitoring where you’re actually spending money each day, you’ll quickly get a true picture of your financial health. If your spending habits are putting you on the wrong path, learn how to plan and stick to a budget.

2. Debt

Like carrying a few extra kilos, debt can creep up on you and weigh you down more than you realise.

Reserve Bank data shows consumers have nearly twice as much household debt as income. Meanwhile, the average Aussie tips the scales at $3271 in credit card debt, adding huge pressure to their daily lives.

What to do:

• Detox your debt. The first step to financial health includes keeping levels of personal debt to a minimum.
• Look at consolidating your debts onto one card or personal loan, so that you’re only dealing with one repayment each month.
• Take advantage of interest free periods to pay down your debt.
• Put a repayment plan in place – and stick to it!

3. Savings

Once your debt reduction strategy is underway, you can focus on another key aspect of your financial health: Savings. How much you have stashed for a rainy day is a strong indicator of your overall financial health.

What to do:

Open a dedicated high-interest savings account that’s separate from all of your other accounts.

Make regular, consistent deposits – weekly, fortnightly or monthly. Add any extra cash windfalls to your savings account, such as tax returns or bonuses. Sit back and watch the power of compound interest at work.

4. Superannuation

If you want to stay financially fit and healthy into your old age, you need to lay the groundwork now. That means knowing how much you need to maintain the lifestyle you want and working towards that figure.

The Association of Superannuation Funds of Australia (ASFA) estimates that for a couple to have a ‘comfortable’ lifestyle they need at least $640,000, while a single person needs $545,000.

5. Emergency fund

Like health insurance for your finances, having an emergency fund gives you a buffer against unexpected hard times. You should aim to have enough in your emergency account to cover six months of living expenses, including housing, to protect you in the event of losing your job, falling ill or any other major disruption.

6. Insurance

If you should lose your income for longer, or permanently, there are several types of personal insurance that can help protect you and your family from financial hardship.

Life insurance, total and permanent disability (TPD) and income protection all have a role to play in your financial wellbeing. Depending on your stage of life, financial situation and responsibilities, it’s worth ensuring that you have a mix of all three types of insurance.

A financial planner can help you understand what you need and get the right level of cover to protect your lifestyle.

7. Credit rating

A good third-party check-up of your financial health is your credit rating. Compiled from your personal financial information by a credit reporting agency, it’s one important indicator of your overall financial fitness.

Several things can affect your credit score, including your borrowings, number of credit applications and whether you make repayments on time.

 

Source: Money and Life

Take stock of how much conveniences are costing you

By Robert Wright /June 01,2020/

With weeks, and perhaps months, of self-isolation ahead, many of life’s conveniences like streaming and delivery services will become our essentials. But if you’re used to spending unlimited amounts to make life that little bit easier, now is a good time to look at what you can live without to make your budget go further.

These days it’s easy to order just about anything on demand. With the tap of a button, you can stream the latest music, have food and drinks delivered to your door and choose a new outfit with next-day delivery. But convenience could be costing more than you realise, with serious consequences for your future financial security. And with the growing number of ‘set and forget’ payments for subscriptions and services consumers are often footing the bill for things even when they’re not really using them.

There are also costs to society and the environment that come with the convenience of online shopping. All that packaging and fuel consumption that comes with home deliveries can really add up to big problems for landfill and climate change.

If convenience is troubling your conscience, as well as your hip-pocket, take a closer look at these five areas where it’s easy to overdo it. Also, get these ideas on what you could do to put some sensible limits on your convenience spending.

1. Entertainment

The convenience of online streaming services has made them essential for many people looking to enjoy entertainment at home and on the go. Unfortunately, free trial periods and automated payment schedules make it easy to forget exactly what you’ve signed up for.

To get a handle on your spending, do an audit of your subscriptions. Check your bank account and credit card statements for the last three-months at least to find any automatic payments. Then select the services you want to be using in line with your entertainment budget. If you don’t have a fixed amount in your budget for entertainment, try limiting it to one service per category.

2. Food and beverages

Consumers splurge a whopping $238 a month (or nearly $60 a week) on food delivery services, research shows, with a further $140 a month on takeaway and coffees.

If you find yourself regularly turning to apps to satisfy your hunger pangs, here are some strategies you can try to limit the splurge.

• Keep healthy snacks with you to curb those cravings when they hit. Things like fresh fruit, nuts and muesli bars can help take the edge off your appetite, so you’re not tempted to hit order when you get too hungry.
• Plan your meals a couple of days in advance, so you know what you’re going to make and can have the ingredients on hand.
• Take an online cooking class. Learning a bunch of fun new recipes can make it easier to enjoy some excitement with your home cooking instead of turning to take-away to add variety to your mealtimes.

Swapping even one home-delivered meal for a home-cooked meal each week really adds up. A saving of just $40 a week would put over $2000 back in your pocket over the course of a year.

3. Transport

On demand transport apps have changed the way we travel. If you live in a big city, chances are you use apps like Uber fairly often. But since the fees come directly out of your account, you may not even realise just how much you’re spending on travel.

There’s also the environmental impact to consider. Each private trip produces much more carbon pollution than public transport. When you weigh up the true cost, is it really worth it?

The answer is simple: when social distancing rules are relaxed you can swap private rides for public transport, walking or cycling wherever you can. There are some great public transport apps around that make it quick and easy to catch a bus or train, so you can still rely on technology to make travel simple.

4. Technology

Apps, games, smartphones, tablets, eReaders… how much do you spend on technology that you don’t even use?

With many devices costing upwards of $1000, delaying that upgrade until you really need it could be a win for your pocket – and for the environment.

App subscriptions are another sneaky expense that really adds up. They may seem inexpensive and often have free trial periods, so it’s really easy to forget what you actually end up paying for. Check your subscription list at least once a month and delete anything you don’t need. Your bank balance will thank you.

5. Easy payment services

Buy now, pay later (BNPL) arrangements have exploded onto the scene in recent years as a popular way to finance a variety of purchases. Figures show that 30% of Aussies have at least one BNPL account, spending around $7 billion a year. Most of that is going on fashion, followed by appliances, entertainment, food and drinks.

But there’s evidence that BNPL services lead to overspending. A full 60% of BNPL users surveyed by Mozo reported purchasing things they normally wouldn’t, thanks to the easy payment instalments.

If this sounds like you, it might be time to step away from Afterpay, Zip and other BNPL services and get back to good old-fashioned saving in order to get what you need.

 

Source: Money and Life

How to keep your head while keeping your distance

By Robert Wright /June 01,2020/

There are people who are better at the whole social distancing game than others. If you already normally work from home, for instance, you might be laughing into your elbow as you listen to the newly homebound lament that their desire to binge on Netflix on the weekend isn’t so appealing when they can do it 24/7.

But whether you’re an old hand at this or still an apprentice, the uncertain and often frightening course of this rapidly unfolding pandemic can upend even the most stoic of temperaments.

One thing we can control, however, is our behaviour. Hiding under the doona isn’t going to offer anything more than a temporary reprieve from reality, so it’s important to find ways to make the most of your quarantine.

Psychologist Dr Nellie Lucas says creating “opportunities for calm” in the storm of worry and stress can be done with a sense of purpose.

“Begin by noticing the small things – appreciating the sunshine in the garden, the smell of coffee in the morning,” says Lucas, who is principal clinical psychologist at Melbourne Clinical and Child Psychology.

“Schedule times for social media and the news. A morning slot and an afternoon slot can work well for most of us. Similarly try and plan your day so work does not flow into rest and other activities. Recognising a need for balance can sustain you at a time when worry can escalate,” she says.

Space patrol

If you’re literally boxed in, with few options for outdoor pursuits beyond the supermarket, it might be useful to seek guidance from someone with experience being confined in tight spaces.

Astronaut Anne McClain, who was a flight engineer on the International Space Station (ISS) in 2019, recently shared some of tips with her 125 million Twitter followers.

Most are surprisingly applicable to those of us here on earth and focus on basics like self-care, including “hygiene, managing time and personal stuff, getting sleep, and maintaining mood”.

And because she had to share the ISS, there was advice on team care and group living, from respecting roles and responsibilities to being accountable, giving praise freely and keeping calm in conflict.

Another tip from astronauts: keep busy. They don’t have a lot of time to sit around and stare into space. Okay, they do a bit of that. But like grandma used to say: an idle mind is the devil’s workshop. In other words, engaging in physical and mental activities is a great way to stop your mind wandering into worst-case scenarios or terminal boredom.

Setting tasks and sticking to them not only provides structure to your day, completion brings the satisfaction of seeing a job well done, no matter how mundane. Your challenge is to recognise when you’re slipping into an apathetic state (every now and then is fine) and refocus on a worthwhile pursuit.

Bills, bills, bills

Until very recently, few of us would have imagined that not having to spend hours commuting would result in an abundance of spare time to sort out all those pesky admin tasks we typically put off until they’re overdue.

She advocates the time-honoured practice of allocating one-third of your income for housing costs, one-third for lifestyle-related activities, and one-third for savings.

Structuring your day when you’re isolated can restore a sense of purpose and normality to your daily life. The Australian Psychological Association recommends scheduling chores and activities you enjoy helping you stick to your routine.

As it happens, precarious times call for a keen eye on one’s financial situation, so get stuck in. Drag out those receipts and take a deep dive into your taxes. Before you know it, you’ll have everything ready to send to the accountant months before your return is due.

Household budgets, bank accounts, insurance policies and superannuation are also good candidates for review.

Don’t try to do everything at once. Set aside a few hours a day and imagine that once this crisis is over, you’ll be so organised you can focus on getting back to normal, whatever that may be.

Structuring activities around mealtimes and bedtime can also help you keep to your schedule while ensuring you eat regularly and get enough sleep.

Another way to celebrate your achievements is to shift gears and take your focus off you. It turns out altruism is often an unexpectedly beautiful benefit of calamity. We saw it during the recent bushfires and floods and the Australian Psychological Society says positive social connections can help us cope in times of stress, especially when we’re being asked to distance ourselves from others.

Maintaining social networks can be as simple and easy as phoning a friend to share your experience, using video conferencing technology to check in on an elderly relative, or spending quality time with the people you live with.

“As our worries build this can flow into stress upon our relationships,” says Lucas. “Making time to plan and problem solve your approach to the day can ease this stress. It can also get you into the habit of problem solving rather than worrying and feeling compassion rather than frustration.”

And if you find you sometimes still struggle with bouts of stress or anxiety, it’s normal. But don’t be afraid to seek professional support. A psychologist or counsellor may be able to help.

 

Source: Colonial First State

Planning, not panic: managing retirement portfolios through the pandemic

By visual /May 13,2020/

Despite the recent wild ride for markets coping with the uncertainty of the coronavirus pandemic, many investors are well-versed in the need to “sit tight”.

They understand that moving out of positions in falling markets risks crystallising losses at the bottom and missing out on the recovery.

For retirees it’s not so simple, where portfolios are particularly vulnerable to sequencing and behavioural risks that are not so apparent for those in the accumulation phase. If investors continue to contribute to their super fund in the current environment, they are potentially buying into the market at bargain prices every time they receive their salary.

Gains might take some time to materialise and losses some time to overcome, but with a long-time horizon there is more opportunity for an investor’s portfolio to recover.

If, on the other hand, investors draw down on their portfolio they may experience the sharp end of sequencing risk. Losses affect the entire nest egg, a proportion of which will be invested in assets acquired at higher points in the market cycle. In our view, most retirees have less of an opportunity to buy back in and take advantage of the future upside to current low prices. Crucially, most also have no choice but to draw-down to fund their costs of living – meaning they have to liquidate positions in a falling market.

Watching the dollar value of their life savings fluctuating over the course of a single day can be gut-wrenching for retirees, and these emotions are compounded by the ongoing health and societal crises raging around us. The fight or flight instinct is very strong in times like these. In our view, it creates a very strong behavioural risk for retirees who may act against their own best interests by switching out of growth assets at the worst possible time to “protect” what remains of their nest egg.

Shoring up your position without selling the silverware

These two risks create a conundrum for the retiree. On one hand, there is an imperative to reduce their exposure to market falls in order to minimise sequencing risk, and on the other hand there also exists a significant behavioural risk in shifting to lower risk asset classes at this point in time. It’s a tough time to make a decision but investors should be aware of the options available to them.

Diversify into other value assets

We believe one way to manage risk and lower an investor’s exposure to falling equity markets is to diversify. The key at the moment is to look to other asset classes where discounted pricing might be available, diversifying into areas such as infrastructure, property, credit and other alternatives.

Use protection

There are a number of funds and products offering forms of protection for capital or income. Investors retain some level of exposure to market gains, but could also be insulated from more significant losses to their portfolio.

Adjust expenditure

Research shows that one of the most powerful tools retirees have to secure the stability and sustainability of retirement income is to know how much they can safely spend. This depends on many variables such as age, health, social security, wealth – to which a financial advisor can guide retirees. It also might surprise retirees that even a large fall in markets may only require a small adjustment in weekly expenditure to ensure their retirement income lasts.

Reconsider what is ‘defensive’

The traditional approach to retirement investing is to move further into traditional ‘defensive’ assets such as cash and bonds. We would like to emphasise that while these assets in the short term have the least likelihood of a negative return and therefore could be considered ‘safe’, the future returns of cash and bonds are relatively low. A large allocation to this group may reduce long term returns and jeopardise the sustainability of a retirement income strategy.

Investors stand to lose when they move a large proportion of their assets to defensive positions such as cash and bonds in the current environment, locking in lower returns for their portfolio. It may feel comfortable in the short term, but over the long run it could seriously jeopardise the longevity of their retirement income.

We believe an investor could improve their retirement strategy over time by considering the steps above and always on the basis of sound financial advice.

Source: AMP