Each year in early May, the Treasurer delivers the Federal Budget and many people across Australia listen intently. The Budget tells us how the government intends to spend its revenue in the coming year, whether it can afford to give us tax cuts, and whether it expects to spend more (deficit) or less (surplus) than it receives.

Budgets are also important on a personal level, especially when living costs are rising and uncertainty abounds in global financial markets. So it’s worth having a look at how we’ll cope with the increasing cost of living. 

Save more or spend less?

Is it easier to save more, or to spend less?

They might sound like the same thing. After all, saving is what we do with whatever’s left over after spending, isn’t it? 

Well, not quite. You see, it’s easy for spending to get out of control, and many people actually find it easier to focus on reducing their spending than saving towards a goal. 

Take control

To begin with, work out where your money goes. Start by keeping track of everything you spend and what you spend it on. Split it into categories based on necessity. Things like mortgage repayments, utilities and essential food obviously go in the ‘must spend’ group. Some things will be ‘optional but important’, and others will fit into the ‘frivolous’ category. 

Do I really need this?

After a few weeks you’ll have an idea of where your money is going then it’s time to start asking yourself a couple of questions:

• Do I need to spend this much on this category?
• When I over-spend, what can I do to prevent it happening again?

It’s worth remembering that every year in Australia we spend billions of dollars on food we don’t eat, clothes we never wear and services we don’t use. So for many people, gaining control over spending doesn’t mean ‘doing without’, it just means being sensible about spending. There are a lot of things you can enjoy for free, and you can even turn a ‘thrift campaign’ into a hobby.

Watch debt 

Pay off credit cards within the interest-free period to avoid high interest costs. If that’s not possible, investigate consolidating high-interest debt into home loans or other lower cost loans. When borrowing, make sure you leave a ‘comfort zone’ to ensure you can meet your commitments. 

Talk to us about preparing a personal budget that doesn’t require you to do without or give up everything you love.
Call (02) 4926 2300 or email. 

To discuss your budget and how you can better manage your finances, please do not hesitate to contact the expert and friendly team at Leenane Templeton. 

The post How’s your budget – surplus or deficit? appeared first on Newcastle Financial Planners & Financial Advisors.

After Kylie completed university and had landed a well-paying job, her only plan was to enjoy her new financial freedom. She had living to do – the future was a long way off and would take care of itself … wouldn’t it? 

Kylie’s first purchases were a trendy new hatchback car and expensive clothes suitable for climbing the corporate ladder. Enjoying her exciting lifestyle, she regularly visited restaurants and bars, and took an overseas holiday each year.

According to research conducted by Impact Leaders, Kylie’s way of life is common with one third of 18–34 year olds having no savings and excessive debt. 

It’s understandable, after all, when you’re in your twenties and early thirties, thoughts of saving for a home, much less retirement, are easily put aside. But time has a nasty habit of getting away from you – just ask your parents!

A survey by Leading Edge Trends, found that the majority of 18–24 year olds won’t own their own home by retirement, fostered by a ‘buy now, pay later’ mentality. The result is that many will be excluded from home ownership, while others will struggle with late-life mortgages and financial insecurity at retirement. 

Back to Kylie. 

A few weeks after returning from a holiday around Europe, Kylie was informed that her position at work had been made redundant. With no savings behind her, she borrowed from her parents to pay her rent and other regular bills.

Shortly after, Kylie was forced to sell her car and use her credit card to manage everyday expenses.

Fortunately, within six months Kylie found a new job, again with a good salary, but during her brief period of unemployment she’d racked up considerable debt. A large portion of the new salary would go towards her debts. It would take years to recover. 

What can you do to ensure your story doesn’t end up like Kylie’s?

Savings – a savings plan doesn’t mean restricting yourself. Even small amounts deducted directly from your wage quickly add up and can become a future home deposit or a safety net for emergencies.

Budget – sounds boring, but a realistic budget can help you to live within your means without relying on credit or feeling like you’re missing out.

Income protection – an insurance policy that pays an income if you’re injured or become too ill to work – an important consideration for young people starting out on a big career!

Get advice – not just for older or well-off people, a financial adviser helps you to create your budget and savings plan so you can take advantage of enjoying life now. 

You might not be interested in buying a house just yet, but how cool would it be if the money were available when you were ready? 

You’ll probably be surprised at how inexpensive advice is. Contact one of Leenane Templeton’s licensed financial advisers to find out how your future can gain a head start.

Call (02) 4926 2300 or email us. 

The post Take advantage of the NOW! appeared first on Newcastle Financial Planners & Financial Advisors.

Achieving any goal in life usually involves starting with a plan. Investing is no different. One of the most important things to understand before you embark on an investment plan is the relationship between risk and return.

Some investors focus only on maximising returns without considering the risk taken to achieve those returns. Others are so concerned about losing money that they seek to avoid risk altogether. Yet the single, most important lesson investors can learn is that risk and return cannot be separated.

Common risk profiles

There are many investments available with different levels of risk to cater for investors of different risk profiles. As the investment timeframe is naturally linked to life stage, risk profiles can be generalised across age groups (that is, the younger you are, the longer investment timeframe you have and the more aggressive you can be). There is no ‘one size fits all' approach to risk profiling among age groups.

There are a number of risk profiles, but for the sake of this article, we have outlined the three main profiles:

Conservative

Conservative investors are generally prepared to accept lower returns with lower levels of risk in order to preserve capital. Conservative portfolios tend to be allocated predominantly to defensive assets, such as cash and fixed interest, with the remainder in growth assets.

For this reason, people in retirement (in the wealth protection phase of their investment journey) may adopt a more conservative attitude to risk. They have less time to ride out the ups and downs of the share market and tend to have less of their portfolios allocated to shares and other high risk asset classes.

Balanced

Balanced investors generally have more of an equal mix of growth and defensive assets, and are comfortable with taking calculated risks to achieve good returns.

Growth

Growth investors are more comfortable with a higher level of risk in order to achieve potentially higher returns. Their prime objective is to accumulate assets over the medium to long-term and capital security is secondary to potential wealth accumulation.

Investors in this category can therefore expect to have around 85 per cent of their portfolio allocated to growth assets, although still diversified across shares, property and alternative assets.

Whichever risk profile you may fit into, the most important consideration when it comes to investing is that your investment plan needs to be tailored to your individual needs and goals.

Source: Macquarie

To learn more about how your risk profile will impact future savings, talk to your financial planner.
Call (02) 4926 2300 or email us. 

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You’ve saved hard to build your retirement nest egg. You should be able to spend the money on a well-earned relaxing lifestyle. But all this could be put at risk if your adult children don’t have their own financial affairs well managed, particularly adequate insurance protection. 

It’s human nature to assume that bad things only happen to others. Unfortunately this approach means that many people are unprepared financially for their future if sickness, accident or injury strikes. This often results in other family members having to bear the costs of supporting them.

For those close to or in retirement who are placed in this position, the financial impact can be devastating. 

Could this happen to you?

Let’s consider the example of Gary and Roslyn, both 61, who have one child, a 30-year-old daughter Janet. Gary and Roslyn are retired with an investment portfolio valued at $700,000, paying them an annual income of around $48,000. They also own their home, valued at $650,000.

Gary and Roslyn were enjoying trips away and spending time with their extended family members overseas until their lives dramatically changed when Janet was badly injured in a car accident. Janet was in hospital for almost three months, requiring another nine months of rehabilitation before she was able to return to work. 

Janet’s sick leave ran out after the first fortnight, and as she had no insurance cover in place, she had no income to pay the mortgage on her apartment ($2,500 a month) or other essential costs, including her mounting medical expenses.

As they didn’t want Janet to have to sell her apartment, Gary and Roslyn needed to draw on investment capital from their portfolio to pay Janet’s mortgage and meet her expenses for the year she was off work. This ultimately reduced Gary and Roslyn’s investment portfolio by almost $70,000 (or 10%). 

While Janet fortunately made a full recovery, the cost to Gary and Roslyn of supporting their daughter in her time of need meant a dramatic change in their long-term retirement prospects; ultimately their income was reduced by $7,000 per year for the rest of their lives (a 15% reduction), plus their travel plans were significantly affected. 

What can you do?

Believing that unfortunate events only happen to other people isn’t a responsible solution and is a terrible way to jeopardise your retirement. As part of looking after your own financial future, make sure that others who could affect your plans, such as family members, have also taken the right steps for their own lives. 

Talk openly to your adult children about their insurance cover and if they are putting themselves or you at risk, recommend they talk to a licensed adviser.

Call (02) 4926 2300 or email us to spreak with one of our specialist risk management advisors about protecting your entire family 

The post Protecting your entire family appeared first on Newcastle Financial Planners & Financial Advisors.

Many young people in the X and Y Generations are earning excellent incomes but have little savings, excessive debt and consider the future too distant to be of concern. This article uses a case study to explain how you can plan your future without sacrificing your current lifestyles.

Case Study

After Kylie completed university and had landed a well-paying job, her only plan was to enjoy her new financial freedom. She had living to do – the future was a long way off and would take care of itself … wouldn’t it?

Kylie’s first purchases were a trendy new hatchback car and expensive clothes suitable for climbing the corporate ladder. Enjoying her exciting lifestyle, she regularly visited restaurants and bars, and took an overseas holiday each year.

According to research conducted by Impact Leaders, Kylie’s way of life is common with one third of 18–34 year olds having no savings and excessive debt.

It’s understandable, after all, when you’re in your twenties and early thirties, thoughts of saving for a home, much less retirement, are easily put aside. But time has a nasty habit of getting away from you – just ask your parents!

A survey by Leading Edge Trends, found that the majority of 18–24 year olds won’t own their own home by retirement, fostered by a ‘buy now, pay later’ mentality. The result is that many will be excluded from home ownership, while others will struggle with late-life mortgages and financial insecurity at retirement.

Back to Kylie.

A few weeks after returning from an African safari, Kylie was informed that her position at work had been made redundant. With no savings behind her, she borrowed from her parents to pay her rent and other regular bills.

Shortly after, Kylie was forced to sell her car and use her credit card to manage everyday expenses.

Fortunately, within six months Kylie found a new job, again with a good salary, but during her brief period of unemployment she’d racked up considerable debt. A large portion of the new salary would go towards her debts. It would take years to recover.

What can you do to ensure your story doesn’t end up like Kylie’s?

Savings – a savings plan doesn’t mean restricting yourself. Even small amounts deducted directly from your wage quickly add up and can become a future home deposit or a safety net for emergencies.

Budget – sounds boring, but a realistic budget can help you to live within your means without relying on credit or feeling like you’re missing out.
Income protection – an insurance policy that pays an income if you’re injured or become too ill to work – perfect for young people starting out on a big career!

Get advice – not just for older or well-off people, a financial adviser helps you to create your budget and savings plan so you can take advantage of enjoying life now.

You might not be interested in buying a house just yet, but how cool would it be if the money were available when you were ready?

Source:
www.abc.net.au Gen Y has little understanding of financial planning, struggles with debt: study (Lucy Carter 20 Nov 2013)
www.moneysoft.com.au Bridging the Generation Y Gap (Elias 24 Apr 2013)

You’ll probably be surprised at how inexpensive advice is. Contact a licensed financial adviser to find out how you can plan your future and gain a head start.
Call (02) 4926 2300 or email us.

Disclaimer

To speak to a financial planner about how you can plan your future and save call Leenane Templeton today!

The post Plan your future – Take advantage of the NOW! appeared first on Newcastle Financial Planners & Financial Advisors.

One of the principles of successful investing and building wealth is to make regular contributions – in this way, you buy when asset prices are low and you also buy when they are high. You don’t have to agonise over when to invest and, on average, your buying price will be lower over the long term.

This is called “dollar cost averaging” and many investors unknowingly benefit from it.

But before you can invest you first need to have saved some money to invest! It’s easy to get started.

Step 1

Many of us fall into the trap of paying everyone else first and then we get what’s left over. This not only diminishes our self-worth, but more often than not, there’s not much left over when everything else has been paid which can also be depressing.

Step one in establishing a regular savings plan is to pay you first. Even if it’s only 10% of what you receive… it’s yours (and you’re the one who’s worked hard for it!). Then you can focus on paying everyone else.

Step 2

Open a separate bank account to place that 10%. Online savings accounts offer better interest rates, low or no fees and they are easy to set up and maintain. Establish a regular automatic transfer from your everyday account so you don’t miss the money. And leave it there to build.

Step 3

While you are saving, start looking for opportunities to invest your money to earn a higher return. One option when starting out is to invest in a managed fund. Managed funds pool your savings with thousands of other investors, giving “small” investors access to a wide range of quality investments, managed on your behalf. These funds allow you to start investing with as little as $1000 which is built upon with monthly instalments that can be automatically transferred from your savings account.

This is where we come to the “science” of dollar cost averaging. By investing the same amount every month your contributions are purchasing units on a regular basis, irrespective of the current market price. Over time, the power of regular purchasing has shown that investments are bought at lower average prices, giving you more units for the same outlay, which again compound as you reinvest the returns.

Investing doesn’t diminish the importance of regular saving – after all you can’t invest money if you don’t save it first! Stop procrastinating and start building your wealth today.

Our team of award winning financial planners are available to discuss how saving and building wealth will open up many opportunities for you and help secure your future.
Call (02) 4926 2300 or email us.

Disclaimer

If saving, building wealth and investing are areas in which you would like more information, please do not hesitate to call the expert team at Leenane Templeton.

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Compounding can be the road to riches and anyone can do it. All you need is perseverance to stay on the savings path and the intelligence to understand what is happening. Basically, compounding is earning interest on your interest. The more money you accumulate the larger the return each year.

Sadly there are two catches. First, it involves sacrifice – you can’t spend it and still save it. And second, it sounds boring – at least it is until the money starts pouring in and then it becomes downright fascinating!

Let’s look at an example.

David started a savings program at age 17 and starting with a $100 deposit. He puts away $1,500 each year for 13 years into a fund that earned 7% a year. From age 30 he didn’t add any more to his savings fund. By that time the balance of his fund was $30,450.

David’s twin sister Jenny was having too much fun at 17 spending every dollar she earned so she delayed her savings program until she reached age 30 – just when David stopped. Starting with $100 Jenny deposited $1,500 per year and maintained that amount every year until she reached age 65. Her fund also averaged 7% p.a. At age 65 Jenny ended up with $208,423. Amazingly through the power of compounding, David, who hadn’t added anything to his fund for the last 35 years has $325,123 in his account that's over $116,000 more! The 13 years that David saved were worth more than all of the 35 years that Jenny saved.

You’re probably asking, “Where would someone under 20 find $1,500?” We have a suggestion. If your adult child is working – even for a few dollars a week – they will probably qualify for the federal government’s co-contribution scheme. As well as teaching your children about compounding, you could gift them a $1,000 superannuation contribution and the government would add another $500 to their account. You could invest $1,000 over 13 years and your child could end up with more than $325,000 at age 65 (based on an average return of 7% per annum).

This suggestion applies to superannuation which they won’t be able to access until later in life, however, the principle is the same if the money is invested outside super.

There are some aggressive investment strategies available for young people who are not as risk conscious. Contact our licensed financial advisors if you are interested in finding out more.

Sources: Australian Tax Office website www.ato.gov.au Super co-contributions. Compund interest calculator – MoneySmart website www.moneysmart.gov.au

Disclaimer

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The new financial year is a perfect time to make some resolutions to improve your financial health. If you create simple and easy-to-follow resolutions you will be more likely to succeed. To start, you can ask yourself the following questions:
• What do I really want to change?
• What are the benefits of making changes?
• What steps do I need to take to make changes?
• What will stop me from making positive changes?
• Are my changes realistic and long term?

This article lists some simple, easy-to implement resolutions you could take on for the new financial year.

Keep your receipts

The most common reason people don’t take advantage of tax deductions when they file their tax return is simply because they don’t keep receipts. While keeping receipts for big ticket items is necessary, you don’t always need a receipt for the smaller items such as stationery and books.

Create a budget

Achieving your financial goals doesn’t have to be daunting; a good way to start is with a budget. Try to keep a diary of your expenses and your spending. This will enable you to track where your money is going and how much spare cash you can use to either attack your debt or build investments.

Cut your spending

Look at cutting unnecessary expenses. This could be as easy as making your lunch or coffee at home, cutting out optional extras such as lottery tickets or taking public transport instead of driving.

Pay extra

Try paying more than the minimum off your debts. Whether it’s personal loans or credit cards, paying the minimum will hardly make a dent as you will only be paying off the interest.

Increase your savings

Set aside a little bit of extra money each day, week or month. If you can save just $10 a day, you will have an extra $3,650 at the end of the year. You can talk to your employer about getting it automatically deducted from your pay – if you don’t see it you are less likely to miss it.

Contribute to your super

Think of the long term and your lifestyle when you retire. One way to increase your retirement savings is through salary sacrificing some of your pre-tax salary.
This will not only help to increase your super savings but could also reduce the amount of tax you pay.

Seek professional advice

Your financial adviser will help you keep to your resolutions and make sure your financial strategy is appropriate for the year ahead.

Contact the Team at Leenane Templeton to discuss your financial position and goals. Please call (02) 4926 2300. Like us on facebook and keep an eye out for blogs, events and workplace culture.

Source: IOOF, May 2013

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