Summer
2013
Welcome to the SUMMER EDITION
Summer 2013
Contact Us Hammock Financial Group Tel 07 4642 1179 Email hello@hammockfinancial.com.au Web www.hammockfinancial.com.au Address Lvl 1, 516 Ruthven St, Toowoomba Postal PO Box 1869, Toowoomba Qld 4350
Hammock Financial Group Pty Ltd (ABN 88 150 832 232) is an Authorised Representative of AMP Financial Planning Pty Limited. Any advice contained in this newsletter is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. For important information about us, our services and to read our Financial Services & Credit Guide (FSCG) please visit www.hammockfinancial.com.au.
Summer Edition 2013
In this issue... Spender or Saver? Are you the spender in the relationship where your partner always questions how the money has been spent at the end of the month? Or is it the other way around? Great Silly Season Savings Tips Christmas is fast approaching. Here are 20 great savings tips to help your dollar go further during the silly season! Control your debt before it controls you Debt can be very handy but can quickly get out of control. Here's a simple plan to take control of “bad” debt. It includes some astounding statistics that may shock you! Busting the myths about financial advice Many don't seek financial advice because they're embarrassed about their financial situation, don't have enough money to invest or think it's only relevant for retirement planning. We bust 5 myths and facts about financial advice. Resolutions for your New Year If your New Year resolution is to get a better handle on your finances, our tips might be just what you need! Super for contractors Just because you’re a contractor doesn't mean you should forget about building your retirement nest egg. If you’re a contractor, or know someone who is, here’s some food for thought to help clean up your finances! Ideas that won't break the budget Christmas Special! We've scoured the internet for clever ideas every day people are coming up with. From cheap and tasty recipes, clever uses for everyday things and DIYs that will blow your mind, we're on it and want to share it with you!
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Spender or
Saver Is your other half spending your investment funds? Are you a spender or a saver?
We are told that money is usually one of the main causes of relationship problems and breakdowns... ... or is it?
1
Many experts agree that it’s really a lack of communication and compromise about money. Money has meaning beyond the numbers on a page or notes in your wallet. It is strongly linked to our sense of security and self worth. If you and your partner argue about money you’re not alone. Most do! So how can we improve our ‘financial communication’?
Discuss your differences
Spender or saver - which one are you? Some like to spend their pay before the end of the month and hope the credit card still has room to cover possible shortfalls. Others like saving for a rainy day. Are you the spender in the relationship where your partner always questions how the money has been spent at the end of the month? Or is it the other way around? Why have we attracted someone who is completely different to us on the financial platform? The reality is that we all have different emotional and financial security needs. In many relationships one person wants to spend the money they are earning to enjoy luxuries and live life in the moment. However the other person may feel a constant need to save for a secure future. We find that spending habits, attitudes and beliefs about money tend to be noticed more significantly when you think about starting a family. It’s my parents’ fault! We learn our spending and savings patterns by watching our parents. These habits tend to stay with us throughout our adult lives. Sometimes this means we behave the same way, but surprisingly some of us often take a polar opposite approach to our parents. Communication is the key It can be very useful to share your observations and experiences with your partner in a nonjudgemental and non-confronting way. You could perhaps start by describing the financial style of your immediate family members and who you think you are most like. These can be tricky conversations, but if you can find a middle ground it can make a world of difference to your long term happiness.
2
Plan to secure a financial future together
Understanding each others’ differences and establishing open communication will help in establishing your agreed plan. Ask your partner about their own personal dreams and long term financial goals. Looking at the bigger picture helps you decide if you are both prepared to make sacrifices to your current lifestyle (however small) to achieve long term wealth. Remember you both need to be financially responsible AND financially satisfied. More often than not, common financial ground can be found.
3
Budgeting is not about going wiithout
In fact a realistic budget allows you to enjoy your own spending style with the confidence that you are also getting ahead. Ensure your budget is realistic by estimating your future expenses from past expenses and track your regular and incidental costs for a few months. Cater and plan for these expenses. Ideally your budget will allow you and your partner investment options (eg set aside an amount for an investment property) to assist in your wealth creation.
4
One pot or two?
The decision about whether to opt for a traditional combined household fund is a big one and really depends on your personal circumstances. These days many couples keep their own accounts and contribute equally to household expenses. Others do both - a joint account and their own separate accounts. This is a subject that requires an open discussion about your circumstances (eg if one person is earning a much higher income or there are children to support).
5
Should you have a financial controller?
Some relationships work really well with both people actively involved in the finances. However the picture we often see is that the person who has strengths in this area becomes responsible for household finances. Because it can be a thankless task for those holding the purse strings, we recommend a regular joint review of your financial situation, budget and goals. Regardless of who is managing the finances, everyone needs their own spending money. This is especially important to help reduce the power imbalance that often exists when there is only one income earner.
‘Although you may inherit your spending, saving and investing habits through influences and experiences, if it is not generating the results you desire then it is possible to change it.’
?
There is a huge financial future available for most people. The reason 80% of us hold back is that we fail to take control of our financial position and do not have a full understanding of our investment options. We don’t know what we don’t know, and at the risk of seeming uneducated we are usually too afraid to ask. We also often hear that “my partner is averse to investing”, so nothing happens. It is OUR role to help you understand what is in YOUR best interest based on a discussion of your individual circumstances.
Are you ready?
If you think you are ready to explore your options after reading this article, we encourage you to have a chat with us and explore them together in a safe, non threatening environment. Simply call the office and say “It’s time for a coffee”. We look forward to hearing from you.
Great Silly Season Savings Tips
Christmas is fast approaching Here are 20 great savings tips to help your dollar go further during the silly season!
With Christmas and New Year fast approaching, it’s more important than ever to manage your expenses and keep within your means. Here are 20 great savings tips to help your dollar go further during the silly season! Use a budget planner to help you sort out your budget and find out how much money you've got left to spend on holidays and gifts. For a free online budget planner, simply go to www.amp.com.au and click on the ‘Advice & Guidance’ tab and then click on ‘Calculators’ to locate the budget planners towards the bottom of the Calculator page.
If you don’t feel your current credit card is the best for you, do a credit card check at www.infochoice.com.au or www.canstar.com.au to find out if there are better offers. Make sure you read the fine print carefully, as there could be entry and exit costs and other charges to watch out for. Sign up to Skype (at www.skype.com) and get free phone and video calls to your loved ones.
Check out www.christmaswarehouse.com.au for great discounts on Christmas decorations and gifts.
Buy Christmas presents early to get better deals. Make your own lunch during the working week. You can save hundreds of dollars doing this, rather than buying lunch at your local take-away shop.
Check out shopping coupons and vouchers likewww.hotdockets.com.au www.clevercoupons.com.au;www.whypayfullprice.com.a u; andwww.valuvouchers.com.au
Use supermarket petrol discount coupons.
If you’re over the age of 60, where possible, ask for a seniors discount or call Senior Shopper offers on 1300 366 265, if you live in Qld, NSW, the ACT or Vic.
Instead of splurging on hotels and other holiday accommodation, why not go camping? This is one of the cheapest forms of holidaying.
Switch off your hot water and all unnecessary electrical appliances (except fridges, freezers etc.) when you go on holidays.
Replace all your conventional light bulbs with energy-saving light bulbs. This will help to reduce your electricity intake and save hundreds of dollars for years to come.
For just $1 a day, you can get a bargain one-way driving holiday at www.standbycars.com.au.
Sign up to discount airline newsletters like Jetstar’s JetMail or Virgin Blue’s V-mail to find out about the latest special offers, promotions and sale fares.
Check out booking sites like www.wotif.com.au and www.lastminute.com for great flight and hotel accommodation deals.
If you’re planning to travel overseas during the Christmas and New Year’s break, make sure you get travel insurance. The benefits and peace of mind could far outweigh the cost.
Cut-back on your alcohol intake for a month. This could save you hundreds of dollars and can also improve your health.
A great cost-effective way to entertain your family for a night is to take a drive around your suburb or another nearby suburb to see the Christmas lights. It can become a family tradition.
Shave your head throughout the year and save hundreds of dollars on haircutting costs. You can also raise much needed funds for the Leukaemia Foundation by signing up towww.worldsgreatestshave.com!
Take the time to clear out your house. Clearing out old stuff makes way for new stuff and if you sell your ''treasures'', you could make a fortune. Try selling online through www.ebay.com.au or www.gumtree.com.au.
Control your debt before it controls you Debt can be very handy but can quickly get out of control, leaving you stressed and anxious. Here's a simple plan to take control of “bad” debt, giving the you a better understanding of the advantages of “good” debt. It includes some astounding statistics that may shock you!
Debt can be a wonderful slave but an unforgiving master. Australia, in common with many western countries, has an extraordinarily high level of consumer debt. The number of new credit card accounts opened in the 12 months prior to December 2012 increased by 210,000. But the scariest figure is the accruing interest on credit cards – at the time of writing is in excess of $6,300,000,000 per annum (that’s over six billion dollars) and growing by the second! You can see why banks LOVE credit cards! Please don’t misunderstand; properly managed debt can be a great tool. Most people need it to help them purchase their first house and other necessities in life. It is also very important in investment planning, enabling you to purchase income-producing growth assets, such as shares or property, to boost your long-term wealth. In this case the interest may also be a tax deduction. The problem arises when debt is used for basic living costs or purchasing depreciating assets. This is further aggravated when the interest rate applied is too high and there is no planned debt reduction program in place. When interest rates increase most people focus on their mortgage rate and forget that the interest on their credit cards sneaks up too. Most major cards are charging around 15 to 20% with many customers paying only the minimum amount and sinking further into debt. If you are not paying off your credit cards in full every month, have other high interest loans, or your current level of debt is keeping you awake at night, you need to seriously consider your financial direction.
Take control of your debt today! Follow this simple plan and take control of your debt before it takes control of you... 1. Restructure your debt by consolidating what you owe at the lowest available interest rate. Keep ONE credit card and cut up the rest! 2. Seek professional help from a financial adviser to plan your financial goals and how to achieve them. 3. Prepare and keep to a budget to ensure your cost of living is within your means and put a debt reduction program in place. 4. Beware of “interest free” offers and make sure you can afford to pay off the entire balance by the end of the contract. A lot can happen in 50 months so don’t get behind on your payments. 5. Ensure new loans are only for a productive purpose, such as investing, and can be justified by potential future profit. 6. Avoid the mental attitude of “keeping up with the Joneses” – the laugh will be on them when the debt collector turns up at their door! All of the above steps will make for a much easier life in future years ... not to mention sleeping better every night!
Sources: www.rba.gov.au Credit and charge card statistics current as at December 2012. https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock http://www.canstar.com.au/credit-cards/compare-everyday-spender/
G N I T S U B THE MYTHS
ABOUT FINANCIAL
ADVICE Five myths and facts about financial advice
We all look for professional advice when it comes to building a home or diagnosing an illness. But according to research, between 60 and 80 per cent of Australians have never used a financial planner.* Many people don't seek financial advice because they're embarrassed about their financial situation, they don't have enough money to invest or they think it's only relevant for retirement planning. Everyone can benefit from visiting a financial planner whether they're young or old, high or low income, single or married. Financial advice can help people save money, protect their loved ones and build wealth for the future.
Five myths and facts about financial advice: Myth: I don't have enough money to invest Fact: You don't need a large lump sum to invest or a high disposable income Everyone, regardless of their income or how much savings they have, can benefit from visiting a financial planner. You don't need to be a high net worth individual to reap the rewards of advice. Financial planners can help with everything from budgeting and debt management, through to superannuation and retirement planning.
Myth: It's only for people who are close to retirement Fact: It's never too early to seek advice Many people don't think it's necessary to visit a financial planner until they're approaching retirement. While it's never too late to seek advice, it's also never too early. Young people who are just starting their working life can benefit greatly from financial advice. People who establish good money habits early on are less likely to develop financial problems later in life. Also, the earlier a person starts building wealth, the better. For instance, salary sacrificing into super from a young age can dramatically boost a person's nest egg due to the effects of compound interest. Myth: I don't need it and I don't have the time Fact: It's one of the most important things you can do Money issues are often delegated to the 'too hard basket', but there can be devastating consequences if people bury their heads in the sand. Most Aussies don't have adequate insurance to protect their loved ones in the event of loss of income. The big four are life insurance, income protection, total and permanent disability insurance (TPD) and trauma insurance. It's also vital to have a will to ensure the right funds end up in the right hands at the right time and an enduring power of attorney to enable someone to look after your affairs if you’re incapable. People with kids also need to consider guardianship. *Australian Securities and Investment Commission, Report 224, Access to financial advice in Australia, December 2010
Myth: Planner fees are too costly Fact: You can't afford not to have financial advice Many people avoid visiting a financial planner because they are worried about the cost, but when you consider all the benefits of advice, it is good value for money. Planners sometimes offer a free initial consultation or a discounted first fee so people don't have to engage in the complete financial planning process straight away. People who want to spread out the cost can opt for scaled advice, which addresses single financial issues at a time, such as budgeting, insurance or superannuation. Myth: I won't get independent advice Fact: It's all about choosing the right planner It's important for people to take the time to find someone they trust. Look for a licensed planner who does not receive up front commissions on super, managed funds or retirement products. Look for a planner who charges a fair fee for the advice process and a modest fee for implementation. Ask for recommendations from friends, colleagues and family, or contact the Financial Planning Association for a referral. Finances are very personal, so people need to look for someone who understands them and their situation.
HOW N R LEA AKE TO M
AWES OME + SMA FINAN RT CIA L DESCI ONS
Phone 07 4642 1179 www.hammockfinancial.com.au
ERY V E U TH R LIFE F O GE STA
2014
RESOLUTIONS
for your NEW YEAR 2014
If your New Year resolution is to get a better handle on your finances, our tips might be just what you need!
Getting fit, starting healthy eating habits and getting your personal finances on track are among the New Year resolutions for many Australians. But, often, as the months pass by these resolutions are forgotten. However, if you plan to make a a resolution to improve your finances in the new year, our simple and practical tips may be just what you need.
1. Start with a budget Get into the habit of maintaining a household budget. Spending more than you earn can quickly land you on the rollercoaster of debt, so make a promise to start living within your means. There is a budget planner calculator at amp.com.au/calculators which can help or we can provide a more personalised service for you.
2. Separate your 'wants' from your 'needs' Do you really need the $100 per month pay TV package? Or the latest model car? Knowing what suits your needs is key to managing your money better. Remember, it’s a trade-off between what you have today and your long-term wealth.
3. Use credit cards wisely Interest rates on credit cards are sometimes as high as 20% or more, so it's important to pay off credit card debt quickly and within the interest-free period. To do this you will need to make more than the minimum repayments each month. Also consider rolling different credit card debts into one low-interest bearing loan facility.
4. Have an emergency fund As a contingency for life's unexpected expenses, it's vital to have an emergency fund or access to cash through a mortgage redraw facility or offset account. Try to have at least three months’ salary in savings.
5. Get savvy with your super AMP has introduced a simple service to consolidate your super online for free at amp.com.au/consolidate or you can also call 133 888. And consider topping up your superannuation through salary sacrifice. The benefit is in the compound interest. Lower income earners may also be eligible for the Government Co-contribution scheme.
6. Review your mortgage An effective way to save interest on your home loan is to make extra repayments each month. The monthly repayment on a $300,000 mortgage over a 25-year term at 7.25 per cent is around $2,168. But you could pay off the loan 10 years earlier and save $158,277 in interest if you increased your monthly repayments by $575. You may also want to consider making fortnightly repayments as opposed to monthly repayments, as this may also save you interest in the long term.
7. Have a debt strategy Pay off 'bad' debt like credit cards first, as they usually have the highest interest rates. As the interest rates on home loans are much lower than other loans, this type of debt should more aggressively reduced after your credit card and other high interest loans are under control.
8. Protect your family Consider taking out life insurance and income protection through your superannuation. With changes in regulation, it’s now possible to obtain income protection insurance from some super funds until age 65, if cash flow is a problem.
To truly ensure that you get the best strategy to improve your financial position, call us today. We are qualified to provide you with the best advice to help you get your New Year off to a flying start, and ensure that it stays that way year in and year out.
superannuation for
contractors Just because you’re a contractor doesn’t mean you should forget about building your retirement nest egg.
What you should know about building up your super
There’s a lot of upside to being a contractor, but it’s important to keep in mind the benefits you may not be getting to make sure you’re not short changed in retirement. If you’re a contractor, or know someone who is, here’s some food for thought to help clean up your finances! Q: Are you a contractor or an employee?
Q: What’s the upside to contracting?
You’re contracted for a set task or project. You submit invoices for the hours you work. If this sounds like you, you may be one of Australia’s 980,000 independent contractors[1]. About 8.5 per cent of Australian workers are employed on this basis[2].
Contracting can be a great experience, particularly if you’re after more control over how much you work, or what you’re working on. By forgoing some of the benefits of permanent employees, you can also earn more money.
Not all contractors are the same and everyone’s situation is different. If you’re not sure about your exact employment status, you can use the Australian Taxation Office’s Employee/contractor decision tool. Then you can use the Superannuation guarantee eligibility decision tool to work out if you’re entitled to super. Both tools can be accessed at ato.gov.au. Your classification has important implications for your tax and superannuation. Determining whether an individual contractor is an employee for Superannuation Guarantee purposes is a tax issue for the individual or the entity contracting the individual. It’s a complex area and it’s a good idea to consult a tax adviser.
Similarly, if you’re coming back from a career break or joining the workforce for the first time, securing a contract role can often be easier, and sometimes lead to permanent employment. Q: That’s great. But what’s the downside? If you’re sick, you will not get paid sick leave. And when it comes to super you may not have any super contributions made for you. Employees have superannuation contributions paid into a nominated superannuation fund by their employer. But as an independent contractor you might be on your own. You’re responsible for funding your own super, just as you’re responsible for paying your own tax.
980,000 – number of independent contractors in Australia 8.5% – percentage of Australians employed as contractors
Q: So, why does super matter so much? When you’re starting to make your way in the workforce, the lack of super may not seem like a big deal. After all, retirement is a fair way off. And you’ve got more money in your back pocket for Friday night. And when you’re younger, it’s easy to think of super as ‘lost money’. You can’t access it now, so it’s out of sight and out of mind. But as you establish yourself in the workforce and build up a bigger retirement nest egg, your perception of super is likely to change. If you’re contracting later in your career—for example, after returning from parental leave— or know someone who’s winding back their hours leading up to retirement, like one of your parents, you’ll know all about the importance of super. Super can be the difference between achieving the lifestyle you want in retirement and needing to rely on the aged pension. Spend too many years as a contractor and you could be playing catch-up if you don’t start making regular super contributions.
Q: How can you build up your super? You need to think about the best long-term strategies to build your retirement nest egg. • Make regular contributions from your pre-tax income into your super. • Take account of government incentives, like co-contributions and spouse contributions. • Review your investment mix of growth and defensive assets to make sure it reflects your life stage and risk tolerance. Now is the time to spring into life, take control of your retirement savings, and really own your tomorrow. For more information, call us today.
[1] Australia Bureau of Statistics. (19 April 2013). Media release: Decline in independent contractors. [2] Independent Contractors Australia. Independent Contractors: How many (Australia). independentcontractors.net.au
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IDEAS THAT WON'T BREAK THE BUDGET Christmas Special
We've scoured the internet for clever ideas every day people are coming up with. From cheap and tasty recipes, clever uses for everyday things and DIYs that will blow your mind, we're on it and want to share it with you! Got a clever idea or tasty recipe? Email us at hello@hammockfinancial.com.au and you could see your idea in our next newsletter!
DIY Chalkboard Mugs For many of us, the thought of buying enough gifts for our families and friends has us in a financial panic. Instead of spending all you have (and eating 2 minute noodles all January), why not save some $$ while still giving everyone a gift with this fun holiday craft? This tutorial makes four amazing chalkboard mugs, which is four less gifts you need to buy! Link: http://ow.ly/rhCtV (We found this at www.sheknows.com)
Homemade Kids Christmas Ornaments Okay, hands up which parents are already counting down the days till school returns? Keep your kids occupied this silly season with some fun Christmas crafts like these Christmas tree ornaments. Time will fly for both kids and mum and dad! Link: http://ow.ly/rhDCj (Found at blog.hellolittleone.com)
5 Minute Frozen Peach Yogurt With all the parties and festivities comes a lot of overindulgence so we thought this healthy summer dessert would go down a treat. Not only does it take advantage of the delicious stone fruit available this time of year, it also only takes a mere 5 minutes to whip it up! Link: http://ow.ly/rhCUP (We found this at www.justataste.com)
Sweetheart Pops These adorable Christmas candies are something the kids can get involved in and help make. Would make great gifts for teachers or neighbours. Just substitute 'white candy coating' with melted white chocolate and viola! Link: http://ow.ly/rhD7D (Found at www.recipesweet.net)