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Does the value of the Aussie dollar affect you?

All / 18.12.2018

You might think that only importers and exporters pay attention to the value of the Aussie dollar, but movements in the exchange rate affect us all.

After peaking at US$0.81 in late January 2018 the Australian dollar fell as low as US$0.70 in October. It also fell against a number of other currencies.

A falling Aussie dollar makes it more costly to travel overseas and increases the local cost of imported goods. On the upside, it makes many of our exports less expensive for foreign buyers, giving a boost to our farmers and other exporters.

The reverse applies in the case of a rising dollar, but movements in exchange rates don’t just influence our living costs. Most people with superannuation will have a portion invested in overseas assets, and changes in currency values can also influence the performance of retirement savings – a lower dollar boosts the local value of our overseas investments while a higher dollar has the reverse effect.

So what are the main influences on exchange rates? Ultimately it comes down to supply and demand, and that can be determined by a number of things:

  1. Interest rates. Imagine an Australian investor earning 1% interest on her money. She looks across the Pacific and sees that she can earn 2% in the USA. Here’s an opportunity to double her income! To do so she needs to buy US dollars, increasing demand for the greenback and thus increasing its value against the Australian dollar. Exchange rates respond very quickly to both actual changes in official interest rates, and to expectations of where interest rates in different countries are heading.
  2. Commodity prices. From wheat and wool, to iron ore and natural gas, Australia produces a wealth of commodities. When demand for materials falls less money flows into Australia, and with decreased demand our dollar falls in value.
  3. The economy. If the economy is doing it tough the Reserve Bank of Australia may drop interest rates to encourage borrowing and stimulate investment. This takes us back to item 1. A weak economy relative to other countries attracts less overseas investment, causing the local currency to fall.
  4. Elections and referenda can create a climate of economic uncertainty that investors, on the whole, don’t like. However, if the market thinks that a more business-friendly government is likely to be elected, this could boost the value of our dollar.
  5. In times of market volatility and global political upheaval, investors flock to the US dollar as a ‘safe haven’ currency. Most other currencies, including ours, usually fall relative to the US currency.

But it’s not that simple

Other things can influence currency values, such as speculation or central bank intervention. There’s also a lot of interaction between the influences outlined above. For example, strong commodity prices may give a boost to the economy, which leads to higher interest rates. Throw in some political uncertainty add a touch of speculation and things quickly become very complicated.

Armies of analysts are employed to sift through massive amounts of data in their attempts to figure out where different currencies are headed. However, given all the complexities it is perhaps no surprise that they often arrive at very different conclusions.

So will the Aussie dollar rise or continue to fall? History suggests flipping a coin may provide as useful an answer as following the opinions of ‘experts’.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Everything you wanted to know about buying a home

All / 18.12.2018

Ready to make the leap from renting to buying a home? Well, before you begin the search for your perfect home there are lots of questions to find answers to. Here are some of the big ones.

Do you need to own your home?

For most people home ownership remains part of the great Australian dream, but that’s changing. Renting offers greater flexibility and can be an economically viable alternative to buying. Weigh up the pros and cons first to see if you really want or need to own your home.

If the answer is a definite yes, then…

What repayments can you afford?

To answer this question with any certainty you really do need to do a budget. This should show you exactly how much money is coming in, how much is going out, and how much is left to service your mortgage. Your budget will identify what you are spending money on and may reveal areas where you can save more. If your plans include starting a family at some stage, factor in the likely drop in income.

How much can you borrow?

Once you know how much you can spend on mortgage repayments you need to work out the size of the mortgage these repayments will support.

Plug your repayments into the mortgage calculator at www.moneysmart.gov.au. Use an interest rate of at least 7% per annum. While you may be able to borrow at a much lower rate, and therefore afford a larger mortgage now, banks are required to check that borrowers can comfortably service their loan if there is a significant rise in interest rates. The figure currently set by the government regulator (APRA) is 7%, but some lenders use even higher figures.

What’s it really going to cost?

Aside from the purchase price, buying a home comes with a whole lot of other costs, some upfront and many ongoing.

Stamp (or transfer) duty is usually the biggest of these. Remember to allow for it when setting your purchase limit. Conveyancing, loan establishment fees and removalists are other upfront costs.

Buying an apartment or unit? Body corporate fees will need to be paid. These, along with other ongoing costs such as council rates and insurance premiums must be included in your budget.

If this purchase will be your first home, check out details on first home buyer grants in your state or territory here www.firsthome.gov.au. Stamp duty concessions may also be available. Combining these initiatives can save you tens of thousands of dollars. Make sure you understand the conditions that apply, such as limits on the value of the property. If eligible for a grant, factor this into your calculations.

What deposit do you need?

While you may still find lenders willing to loan up to 90% of the value of a property, 80% is a more likely and sensible limit. That leaves you to come up with 20% of the purchase price plus upfront costs.

Have you saved your deposit, or do you still have some way to go? If the latter, review your budget to see how much you can save. Then set some savings goals and document how you will achieve them.

What’s your savings record?

Your lender will want to see your bank account and credit card statements. Do they reveal a good savings history and responsible use of debt; or the habits of a reckless spender with a poor credit rating? If it’s going to take time to save your deposit, it’s not too late to build a good savings history that will impress your lender.

Try to clear current debts as quickly as possible. Cancel any unnecessary credit cards, and consider cutting back the spending limit on other cards. When you apply for a mortgage your lender will include your credit card limits, not the actual balances, in their calculation of your current debt.

Do you know how mortgages and interest rates work?

If not, start learning from independent sources.

Get as much information as possible from the lender, with details of all the fees that apply – including any early repayment charges (yes, you can be charged for paying off your mortgage early!). If the loan comes with any ‘sweeteners’ or other features, make sure you understand them and any potential costs. Understand comparison rates and their limitations.

Aside from the purchase price, the biggest influence on how much your home will eventually cost you is the interest rate. On a $400,000 mortgage at 4% per annum over 25 years with monthly repayments (and ignoring fees), you’ll end up repaying a total of $633,404 of which $233,404 is interest. At an interest rate of 7% that interest bill rises to $448,135! [1]

Fixed or variable?

Your lender may offer you the opportunity to fix the interest rate on at least a portion of your loan for up to five years. A fixed rate will be an advantage if interest rates rise. If they fall, you’ll end up paying more interest than if you opted for a variable rate on the entire loan. Investigate the option of splitting your loan between variable and fixed rates.

Interest rates tend to rise when the economy is strong, unemployment low and the inflation rate is increasing. They tend to fall when the opposite conditions prevail. That said; it’s extremely difficult to predict future interest rate movements. Should rates fall, you may face significant fees on any early repayment of the fixed component of your mortgage.

How can you reduce your interest payments?

Your interest is calculated on your outstanding loan balance, so anything you can do to reduce that balance will help reduce your total interest bill. Many loans offer a linked 100% offset account. The balance in your offset account is subtracted from your outstanding loan amount when the interest is being calculated. It therefore makes sense to keep as much of your spare cash as possible in your offset account.

As financial circumstances allow, you could increase your mortgage repayments to pay off the loan sooner. Using the previous example of a $400,000 loan at 4% interest, if you paid it off in 20 years rather than 25, the interest component would be only $181,741, a saving of more than $51,000.

Another option is to make fortnightly or weekly repayments, rather than monthly.

Ready to buy?

Be aware that it is now more difficult to get a loan due to lender and regulator concerns over high levels of household debt. However, there are still plenty of lenders to choose from, including your current bank, other banks, non-bank and online lenders. It can pay to shop around, whether you do it yourself or use a licensed mortgage broker.

When it comes to applying for a loan be prepared to provide your lender with a lot of information – pay slips, credit card and bank statements, and details of your assets and any debts you have. Then, before you start visiting open houses, consider seeking pre-approval from your intended lender. Be aware that pre-approval may not guarantee that your loan application will be successful, particularly if it’s an instant appraisal based solely on the information you provide. Check with your lender what their pre-approval actually means. If it’s a full assessment it will provide you with more certainty when making an offer. Even then, pre-approval may not protect you if, say, the property is unacceptable to the lender. Also be aware that making multiple pre-assessment applications can affect your credit rating.

Do you understand everything, including all the fine print?

If not, ask questions and seek independent advice. Never, ever, sign a blank form. Make the right decision the first time as the costs of switching lenders can be high.

What insurance cover do you need?

You’ll obviously insure the house and contents, but what other insurance cover do you need? With your ability to make mortgage repayments dependent on you earning an income, income protection insurance should be a high priority. Life and disability insurance should also be considered. And yes, these premiums all need to be included in your budget calculations.

Need advice?

Buying a home is one of the biggest financial steps you’ll ever take. It’s also a complex process, and seeking good financial advice at the outset can deliver rewards down the track.

When the ink is dry it’s time to crack open that bottle of bubbly and celebrate getting your foot in the door of home ownership.

[1] Figures obtained from https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/mortgage-calculator#!how-much-will-my-repayments-be

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

 

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What are you signing up for?

All / 18.12.2018

How many times have you downloaded a new app or connected to free Wi-Fi and agreed to the terms and conditions without giving them a second glance? In your rush to gain access to the must-have service you may end up agreeing to scrub public portaloos.

Of course, most companies who come up with absurd terms and conditions have no intention of enforcing them. Rather, the intent is to highlight the fact that most people don’t read the agreements they readily sign up to. In many cases that won’t have any significant consequences. Most businesses seek to be fair in their dealings with customers. However, in the case of legal and financial contracts, failure to read and understand the terms and conditions can prove costly.

What to look out for

When signing up for anything that will cost you money or expose you to other potential harm, it is important to read and understand everything you are agreeing to. Here are 10 key items to look out for:

  1. Is the contract in plain English? It should be. Too much legal jargon may be a warning that the provider is trying to hide something.
  2. What are the costs involved and when and how are payments to be made?
  3. What other charges apply, for example, late fees? Are they fair and reasonable?
  4. What is the term of the contract? Is it ongoing or a fixed length? What happens at the end of the contract? Will there be ongoing costs?
  5. When and how can you terminate the contract? What will it cost?
  6. When and why can the provider terminate the contract?
  7. Are refunds available? For example, if you cancel an insurance policy will the unused premium be returned to you?
  8. What personal information do you need to provide? Is it reasonable? How is it safeguarded? Will it be shared or sold to a third party? Is sharing your personal information necessary for the provider to deliver their service?
  9. Are liability disclaimers reasonable?
  10. Can you complain? Who to?

What protections are there?

For a contract to be binding a number of rules apply.

For example, those entering into a contract must intend for it to be binding. That should probably allow you to leave the toilet brush and rubber gloves at home. Nor can a contract be enforced if it contains an agreement to do illegal things or breach other legal requirements.

In consumer contracts there are also protections against unfair contract terms that disadvantage a consumer. Further rules apply to credit contracts.

As for the liability waivers that are common when signing up for an adventure activity, if you are injured while undertaking the activity you may still be able to sue the operator. This is an area where expert legal advice is required.

Even in plain English, terms and conditions make for pretty dull reading and they may still be difficult to understand. If you are unclear about what you are signing up to, don’t sign. Seek clarification from the contract provider. And if significant sums of money are involved or if it’s a credit contract, obtain qualified advice.

If you’re wondering why we keep referring to portaloos, this was a clever experiment www.purple.ai/blogs/purple-community-service/. Have you ever read the terms before using free WiFi?

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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How much do we need to retire?

All / 06.12.2018

How much do we need to retire?

The question of how much a person needs to have saved before confidently launching into their retirement years very much requires an individual answer. Each one of us lucky enough to reach the brink of those golden years will feel a lot better doing so with some assurance that we’ve squirrelled enough away to be comfortable in retirement.

The answer to the above question is made all the more complicated by several unknown factors, as no-one knows, for example, how long they will live or what medical necessities could surface to strain the coffers.

Some guidance is available however from Super Guru, a website run by the non-profit Association of Superannuation Funds of Australia (ASFA). Super Guru releases a “retirement standard” every quarter. This is a benchmark for the annual budget needed by Australian individuals and couples to fund either a “comfortable” or “modest” standard of living in their post-work years.

The updated quarterly figures reflect inflation and provide an objective outline of the budgets that singles and couples would need to spend to support their chosen lifestyle.

Super Guru’s release of figures up to 30 June 2018 shows that the super accumulation balances needed for a “comfortable” retirement are $545,000 for singles and $640,000 for couples. In annual pension payout terms, this equals $42,953 and $60,604 respectively. Details of what these amounts mean for spending capacity are shown in the table on the following page.

By way of comparison, note that the government Age Pension base rate (before payment of supplements) is $21,222 for singles and $31,995 for a couple. “The Age Pension is designed to provide a ‘safety net’ for those who do not have enough superannuation or other financial resources to provide an adequate retirement income. So the Age Pension works in conjunction with superannuation,” Super Guru says. “Most people – women in particular – will continue to be eligible for a full or part Age Pension, supplemented by whatever superannuation benefits they receive.”

ASFA notes that as people age, their spending requirements also change. It estimates the net impact of the various factors at play mean that by age 85 annual budgets would reduce by around $1,000 a year for “modest” lifestyles, and $5,000 a year for “comfortable” lifestyles.

As far as measuring what these different lifestyles entails, Super Guru has produced the following comparison table  (and includes a retiree taking the Age Pension only)

ASFA’s estimate for retirement savings

 Comfortable lifestyleModest lifestyleAge pension
Single$42,953 a year$27,425 a year$21,222 a year
Couple$60,604 a year$39,442 a year$31,995 a year
MaintenanceReplace kitchen and bathroom over 20 yearsNo budget for home
improvements. Can do repairs
but can’t replace kitchen or
bathroom
No budget to fix home
problems like a leaky roof
AppliancesBetter quality and larger
number of household items
and appliances and higher
cost hairdressing
Limited number of household
items and appliances and
budget haircuts
Less frequent hair cuts or
getting a friend to cut your
hair
Air ConditioningCan run air conditioningNeed to watch utility costsLess heating in winter
Eat OutRestaurant dining, good range & quality of foodTake out and occasional cheap restaurantsOnly club special meals or inexpensive takeaway
InternetFast internet connection, big
data allowance and large talk
and text allowance
Limited talk and text, modest
internet data allowance
Very basic phone and internet
package
ClothingGood clothesReasonable clothesBasic clothes
TravelDomestic and occasional overseas holidaysOne holiday in Australia or a few short breaksEven shorter breaks or day trips in your own city
HealthTop level private health insuranceBasic private health insurance, limited gap paymentsNo private health insurance
VehicleOwning a reasonable carOwning a cheaper more basic
car
No car or if you have a car
it will be a struggle to afford
repairs
LeisureTake part in a range of regular leisure activitiesOne leisure activity infrequently, some trips to the cinema or
the like
Only taking part in no cost or
very low cost leisure activities.
Rare trips to the cinema

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances

 

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Who made January the first month of the year

All / 06.12.2018

Who made January the first month of the year

A new year is a time to look forward and plan new ventures and goals. But why does the New Year start in January? It hasn’t always been this way. So, where did our calendar originate?

The Ancient Egyptians developed one of the earliest calendars and started the New Year in the northern hemisphere’s spring. This seemed appropriate as new life emerged from the darkness of winter.

But then in 46 BC the Roman Emperor, Julius Caesar, came along. He and his scholars tinkered with the Egyptian calendar and created the Julian year. When you rule a large part of the world, you can do what you like with someone else’s calendar and they established a 12-month year starting with January.

The first six months were named after Roman gods, goddesses and a feast. The next two were named after Roman emperors. They ran out of ideas for the last four months so they reverted to the early Roman calendar and named them after the number of the month in the that calendar.

January After Janus the god of the sun – new year and new beginnings

February A Latin feast of purification held on the fifteenth

March After Mars the god of war

April After the Greek goddess of love, Aprhrodite

May After the Greek goddess of spring, Maia

June After goddess Juno, the Queen of the gods

July After Julius Caesar (of course!)

August After Augustus, the first Roman Emperor

September The seventh month of the early Roman calendar (sept is Latin for 7)

October The eighth month (oct is Latin for 8)

November The ninth month (novem is Latin for 9)

December The tenth month (decem is Latin for 10)

In the ensuing five hundred years, various people modified the Julian calendar, and as Europe became more united there was a need for a consistent system. Pope Gregory XIII established the Gregorian calendar in 1582 and kept January as the first month. We still use his calendar today.

Of course, the Romans are not the only ones who developed a calendar. The Hindu calendar celebrates New Year or “Diwali” in October/November and the Jewish New Year or “Rosh Hashanah” is celebrated in September/October. The Chinese New Year is in January/February.

And a little more trivia to end on – did you know that a common year (not a leap year) is 365 days 5 hours 48 minutes and 46 seconds long – or 365.242199 days?

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Ethical Investing – putting your super where your heart is

All / 29.11.2018

Ethical Investing – putting your super where your heart is

Millennials – take a bow.

Not only are you concerned about how your super is invested, you are more likely than other age group to act on your beliefs when choosing a super fund.

Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that 75% of Millennials prefer to invest in a responsible super fund than one that only considers maximising financial returns. Well ahead of Gen X on 66% and Baby Boomers on 68%.

Across all demographics, the proportion of people who would rather invest in a super fund that “considers the environmental, social and governance (ESG) issues of the companies it invests in and maximises financial returns”, as opposed to a fund that focuses solely on maximising returns, has risen by 27% since 2013.

That’s a pretty strong trend which sends a clear message not only to superannuation and investment fund managers, but also to the wider corporate community – people care about more than just profits. They also want their investments to contribute to the greater good.

What makes an investment ethical?

Ethical investment funds may use positive screens to select companies that are doing ‘good’ things, or negative screens to exclude companies doing ‘bad things’. Or they may do a bit of both.
There are, of course, different views as to what is ‘ethical’. Someone with strong religious convictions may be interested in a very different range of investments than someone with deep environmental concerns. Typically, though, ethical funds tend to avoid investing in companies involved in weapons manufacture, alcohol, tobacco, gambling or fossil fuels while favouring renewable energy companies, sustainable technologies or healthcare.

Even then it can be difficult to decide if a particular company is ‘good’ or ‘bad’. Many people avoid investing in companies that mine uranium, but those same companies may also extract the materials needed to build wind turbine towers. Or a bank that finances coal mines may also lend to solar farms and energy efficiency projects.
Given the wide range of ethical considerations, you may need to do some in-depth research to find the fund or funds that best match your values.

Is your fund doing the right thing?

While you may have an ‘out of sight, out of mind’ attitude to your super, it’s important to remember it’s your money and you get to choose where and how it’s invested. Start with your fund’s website or disclosure documents and look for the environment, social and governance section.
Most large super funds offer a range of investment options, only some of which may match your idea of ‘ethical’. However, there may be a direct share option, allowing you to construct your own portfolio of shares in companies that are compatible with your values. Or you may look to the increasing number of investment managers that apply ethical filters across their entire range of funds.

Advice moves with the times

Fortunately, it’s becoming easier to track down the investment funds that suit you with advisers more switched on than ever to the needs of the ethical investor. Talk to yours about the issues that are important to you so they can help you invest your super where your heart is.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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How to protect yourself from being scammed

All / 22.11.2018

How to protect yourself from being scammed

Since the earliest days of commerce there have always been people prepared to commit fraud against others. With easy access to millions of people via the internet, modern fraud has increased the opportunities for the bad guys and heightened the risk for the innocent.

We are all interested in making a better return on our investments but who can we really trust?

The Australian Competition & Consumer Commission (ACCC), the government body with a charter to protect consumers, has a most helpful website at www.scamwatch.gov.au with tips to assist Australian small businesses and consumers, and lists of scams they have uncovered.

The federal government has an online service called “Stay Smart Online” at www.staysmartonline.gov.au. You can sign up for the email alerts that provide details of the latest scams doing the rounds and what to do if you are targeted, either online, by phone or via the post.

The Australian Securities & Investment Commission (ASIC) warns that financial scams tend to look realistic and are presented professionally. Scammers often go to a lot of trouble to:

  • print attractive documents and set up a professional looking website;
  • choose names that sound similar to reputable companies or organisations;
  • convince you with a persuasive story using the names of professional brokers or investment managers.

Some of the clues to look out for include offers with a much higher return than genuine investments. Some offer 20% a year, others may go to 200% or even more. Many scams state that financial success is easy and risk isn’t a problem.

Then again it could be a “secret offer”, “inside information” or “new techniques”. There is always some feature to make you feel like you will have an edge over other people. Scams get dressed up as an opportunity and scammers will create a sense of urgency with “don’t miss out”, “act quickly” or, “hurry, before it’s too late”.

Start your research by first checking if the person or company making the offer is domiciled in Australia and operating under a licence issued by ASIC.

These days, websites are like phone numbers – anyone can have one. Don’t get caught by the unscrupulous. Check with ASIC or a licensed financial adviser before doing anything – or better still, just ignore the “magic offer”.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Money and love: how to make it work

All / 15.11.2018

Are you and your partner financially compatible? A marriage between a saver and a spender comes with its problems, but nothing true love can’t overcome – right?

According to the Australian Institute of Family Studies (AIFS), household finances are among the main reasons couples argue.

When Anna met Tony they planned a life together. They rented an apartment and Anna cashed in her $35,000 investment portfolio to fund their wedding and honeymoon.

Savings-focused Anna was now keen to save for a house. Conversely, Tony loved spending and was content to continue renting.

Despite their differences, they opened a joint savings account, and using MoneySmart’s compound interest calculator, Anna worked out the following:

Initial deposit $1,000
Fortnightly contribution $500
Interest rate 2.65%
Total after 5 years $70,563

 

They decided that Anna would pay the utilities bills and Tony would pay the rent. Anna engaged a financial adviser who created a budget to keep them on track. Additionally, the adviser suggested couples’ health insurance and combined car insurance policies to save extra dollars.

Anna stuck to their budget, saving each fortnight while meeting her obligations. Tony, prioritising differently, continued his spending lifestyle.

Five years later, they had only Anna’s savings and an eviction notice for unpaid rent. They were arguing constantly but when Tony suggested they should have used Anna’s original investment as a deposit instead of paying for the wedding, it was all over.

Anna was shocked to discover the money she’d saved was jointly Tony’s and that she was partly responsible for the outstanding rent as the lease was in both names.

It’s a frequent scenario causing Binding Financial Agreements (pre-nups) to become common in Australia. The Family Court of Australia reports that pre-nups can be made at any time providing both parties are signatories.

Would a pre-nup have helped Anna?

As soon as the marital cracks appeared, Anna could have initiated a pre-nup to protect herself, as long as Tony agreed.

To avoid financial disagreements, MoneySmart suggests that couples discuss four important points.

  1. Current situation: Review each other’s income/expenses and assets/liabilities.
  2. Goals: Will you buy a house, start a family? Agree in advance then discuss budgeting strategies to pay off existing debt and begin saving.
  3. Spending/saving: Understanding one-another’s financial attitude makes it easier to find common ground. Be prepared to compromise.
  4. Financial control: Will one handle the household finances or will you do it jointly? Both must be happy with the decision and keep communication open.

After the divorce, Anna worked with her adviser to start afresh. She took out income protection insurance in case she was unable to work, made a Will, and instructed her super fund to set up a binding nomination, naming her niece as her beneficiary.

Marriage incompatibility is not limited to young couples. The ‘silver-splitter’ phenomenon of older divorces is increasing and Australia Bureau of Statistics figures demonstrate that in 2016 the average divorce age was 44.2 years, slightly up from 2015.

You’re never too young, or too old, to protect yourself. And these days, as we’re all living longer, a little forward-planning can only be a good thing. It might not sound romantic, but involving your financial adviser early in a relationship, could save a lot of heartache later on.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Generational Risk Management

All / 15.11.2018

Personal risk management is a critical foundation stone of any financial plan. The key personal insurances are:

  • Life insurance. This pays a lump sum benefit when you die.
  • Total and permanent disability insurance (TPD). A lump sum is paid if you meet the policy definition of being totally and permanently disabled.
  • Income protection (IP) insurance. If, after the selected waiting period, you are unable to work due to injury or illness, depending on your policy you will receive a regular income either until you can return to work or the end of your selected benefit period.
  • Trauma insurance. Also called recovery insurance, trauma insurance pays out a lump sum if you suffer from one of the medical conditions specified in your policy.

Each of these insurances plays an important but different role in protecting you and your family from the financial consequences of death or disability, and the appropriate mix of cover depends to a large extent on where you are on your journey through life.

Carefree 20s

Good job, no kids or other dependants? Why do you need insurance? Well, even in your 20s illness or injury can strike, and any prolonged periods off work can have a huge impact on your current lifestyle and financial future.

Income protection is the key insurance in the ‘carefree’ 20s. Trauma and TPD could useful add-ons. But as soon as you have children, or significant debt, life insurance should also be considered.

Indebted 30s

Typically this is the decade of buying a home and starting a family. Life and income protection insurance remain the top priorities. However, trauma and TPD insurance should now be seriously considered, particularly for full-time homemakers who are not eligible for income protection cover.

It’s also worth exploring if young children can be added to a parent’s policy to provide serious illness cover. This can help if a parent has to give up work to care for a child (income protection insurance doesn’t cover this), and also assist with meeting out-of-pocket medical expenses.

Consolidating 40s

With years to go before the mortgage is paid off, and young children turning into expensive teenagers, the same risk management priorities apply as to the Indebted 30s. A homemaker returning to employment should spark an insurance review.

Fabulous 50s

The mortgage is under control, the kids are becoming independent (hopefully) and you’re starting to build a serious investment portfolio. However, with this decade often being the peak earning period it remains important to protect your biggest asset – your ability to earn an income. And until you reach the point of true financial independence, life, TPD and trauma insurance should all be part of the mix. It’s important to keep in mind that as you get older the likelihood of claiming against your insurance increases significantly.

Another important issue to consider: do your now independent adult children have adequate personal insurance cover? If not, should they become ill or disabled, you may end up having to help them out financially, thereby impacting on your future plans. If they are unable to pay for adequate cover themselves, a better option might be to assist by paying their insurance premiums.

Triumphant 60s 

You’ve made it! While we are working later into life the 60s remains the popular decade for retirement. It delivers financial independence to many, and it may seem that there is little justification for maintaining personal insurance cover. However, many policies are renewable until age 65 or 70, and with the growing risk of death or serious illness, maintaining some level of cover may provide additional peace of mind. With premiums often ramping up rapidly later in life, it’s a matter of finding the right balance between the cost and the potential benefit.

While age has some bearing on personal insurance priorities, individual circumstances must be taken into account. Your financial adviser is ideally placed to help you design the risk management plan that’s right for you.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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An important conversation

All / 01.11.2018

None of us likes to consider our own mortality. For our older loved ones, it’s an even more confronting topic and difficult to discuss.

When Lindsay became ill, his family’s priority was to support him through his treatment, and keep him positive and as comfortable as possible.

Typical of his generation, Lindsay had always been very private, never sharing personal information – not even with his nearest and dearest. After he passed away, it dawned on the family that nobody knew whether Lindsay would have preferred cremation or burial. At such an emotionally charged time, the question caused quite a dispute.

As parents, we aim to have open dialogue with our children over issues like drugs, sex, etc. But as our parents age, difficult discussions around medical arrangements, Wills, money, etc, are usually put off until something occurs to trigger the talk. Often, by then it’s toolate, which is why it’s so important to communicate while you still can.

Once Lindsay’s funeral was over, the family faced more complex questions: did Lindsay have a Will? Was there any insurance? What investments and assets did he have? Trying to locate Lindsay’s paperwork and make sense of his finances became a nightmare.

If only someone had asked him.

What should you talk to your parents about?

If you think about all those things you’d rather not discuss you’re off to a good start.

Before the conversation, consider:

  • Finances, assets, investments, accounts, insurance policies, etc
  • Will:
    • Is it current?
    • Where is it kept?
    • Who is the executor?
  • Medical:
    • Medications
    • Power of attorney
  • Funeral preferences
  • Aged care arrangements, family home, care facilities
  • Location of important documents
  • Usernames and passwords for online accounts
  • Contact details for doctor, financial adviser, trustees, power of attorney, solicitor, executor, etc.

Before opening any dialogue, consider your approach. These are sensitive topics; introduce them gently and tactfully. It may be helpful to involve their executor, financial adviser or accountant.

During the conversation:

  • Extend an invitation

Invite your loved one to express their feelings and articulate their wants. Present the discussion as a means to making their life more manageable. Stress that you’re not taking over, but that you care and that they are in control.

  • Present an example

Use examples of challenges faced by others, explaining that you hope to avoid the same situation. Tell them you’d like to help them organise their paperwork to provide peace of mind and a plan for their future.

  • Support independence

Point out that you’re not reducing their independence but ensuring they maintain their independence as long as possible.

  • Don’t judge

As your loved one opens up, listen respectfully and without judgement. Encourage discussion around their choices so you can understand and help implement them.

Afterwards, follow up and fulfil any promises you made.

Finally, just when you think your job is done, have the same discussion with your children, only in reverse. Be clear about what you want and why you’re talking to them.

Children don’t want to think about your mortality any more than you do. They’ll think you’re overreacting and probably won’t thank you for the information – not right now anyway. But that’s the nature of kids.

The main thing is that when your time comes, they’ll realise you’ve saved them a lot of heartache.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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