Don't let overspending be your undoing

Posted on 14 September 2020
Don't let overspending be your undoing

Money and Life
(Financial Planning Association of Australia)

Do you struggle to control your spending around your friends and family? If the urge to 'keep up' with a certain lifestyle is stretching your finances, it could be time to take action.

From splitting the bill at an expensive restaurant, to having the 'right' house, car and clothes, many of us fall victim to overspending. But if you regularly suffer from buyer's remorse, or spend over and above your means, it's time for a serious reality check.

Overspending can quickly spiral into long-term debt, especially if you use credit cards to try and bridge the gap.

Young Australians are particularly at risk, taking on debt at a far earlier age and carrying it longer than ever before. Research by RateCity shows that 42 per cent of those aged under 24 have between $10,000 and $30,000 in personal debt, not including a mortgage.

Even if you're not living paycheck to paycheck, overspending will prevent you from reaching your longer term financial goals, like financial security and financial freedom.

Fortunately, spending habits are just that habits and they can be changed. Here's how to avoid the debt spiral and get your finances on track.

1. Identify your risky behaviours

Do a financial health check and work out where the majority of your overspending happens.

Is it a penchant for designer clothes? An addiction to expensive electronics? Or a love of fine dining? We all have vices that threaten to throw us off track, so look at the numbers and be honest with yourself about which behaviours are forcing your finances off course.

If those behaviors are closely associated with certain friends, family or work colleagues, it could be time to reevaluate your unhealthy relationships.

2. Associate with people who share your values

Once you know what's driving your poor spending habits, use it to take action. Distance yourself from any negative influences and find others who better fit in with your long term plans. Being surrounded by likeminded people will help restore your bank balance in no time.

3. Find alternatives

If your social life is at the center of your overspending it could be time to make some healthy swaps. Try suggesting low-cost alternatives such as bush walking, art classes or the beach. You might even meet new people who share your values.

Lead by example and encourage good financial practices among your friends and family. Be upfront about your goals and values, without being pushy. True friends will be supportive and want to spend time with you anyway.

4. Make a financial plan

Taking control of your spending starts with evaluating your priorities and setting long-term goals. By making a financial plan, you'll identify what is really important to you and the steps you need to take to get there.

You can do much of the groundwork on your own, although consulting a financial planning professional can help you to nail the details and act on your plans. You could be experiencing financial freedom sooner than you realise.

5. Stick to a budget

It's much easier to maintain your new spending habits and make a real change if you have a budget in place. Make sure to allocate funds for clothing, entertainment and 'fun', so that you still get to indulge in some of your favourite interests.

6. Create a 'want to buy' list

Every time something comes up that you want to buy, add it to your list then wait at least seven days before purchasing the item. In the meantime, find at least three prices for the same item. This reduces the risk of splurging on things you don't really need and makes it more likely that you'll get a good deal.

7. Focus on the bigger picture

The most important thing to remember is that you don't need to have everything right now. Anyone who expects that is probably not worth your time. So go easy on yourself. Take care of the pennies and the pounds will take care of themselves, so the saying goes.

It's easy to get carried away trying to keep up with a certain lifestyle and you may not even realise it's happening until you're already in debt. Good financial planning and a focus on the bigger picture will help keep your overspending in check.

Posted in: News  

Go 'hard and smart' in budget: economist

Posted on 11 September 2020
Go 'hard and smart' in budget: economist

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Leading economist Chris Richardson has warned that while Australia has dealt with the coronavirus at a sprint, the battle for jobs will be a marathon.

He is urging the federal government to go "hard and smart" in providing further support and stimulus in next month's delayed budget.

At top of the list, Mr Richardson, a partner at consultants Deloitte Access Economics, wants a permanent increase in the JobSeeker dole payment.

JobSeeker, previously known as Newstart, was doubled to around $1100 a fortnight through the coronavirus supplement at the start of the crisis.

"For a long time there's been clear evidence we needed to do more on the unemployment benefit," Mr Richardson told the National Press Club in Canberra in Wednesday.

"The arrival of the virus has strengthened the case for a stronger unemployment benefit going forward."

He said the unemployment rate was set to climb from five per cent to 10 per cent.

"If it goes back to the $40 a day, it's going to be twice as bad, because it's going to be affecting the incomes of twice as many people," he said.

The government is cutting the coronavirus supplement later this month that will reduce the JobSeeker payment to $800 per fortnight and then it is due to return to $40 per day at the end of December.

Welfare advocate group ACOSS CEO Cassandra Goldie said people were terrified of what was around the corner, having had the relief of finally being able to buy the "essentials of life".

"One million children will be affected by these cuts if the federal government does not act," Dr Goldie said.

Australian Retailers Association CEO Paul Zahra agreed that every dollar given in social security is spent.

"Every dollar spent in retail gives someone a job," he said.

"We can clearly see you can't have an economic recovery without a retail recovery."

However, there was less uniform agreement among the three speakers about personal tax cuts.

The government has flagged it may bring forward already legislated tax cuts which are due to operate from 2022. There is another stage in 2024.

Dr Goldie firmly opposes these tax cuts, which will come at a cost of $12 billion and will see people on six-digit salaries get $50 per week but those on low or modest incomes get just $5.

"This proposal would give dollars to people most likely to save the extra dollars, and giving to people who probably need it the least," she said.

Mr Richardson also has a minor hesitation in supporting the tax cuts simply because some of the money is less likely to be spent.

But Mr Zahra said he was keen to see the tax cut brought forward.

"I think we'd all welcome a tax cut," he said, although he did concede the timing was probably not great.

The budget on October 6 was delayed from its traditional May release because of the pandemic.

Posted in: News  

Budget to have 'singular focus' on jobs

Posted on 10 September 2020
Budget to have 'singular focus' on jobs

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Incentives for businesses to invest and create jobs will be at the heart of the federal budget, a Morrison government minister says.

Assistant Treasurer Michael Sukkar said the budget delayed from May to be delivered on October 6 will have a "singular focus" on jobs.

"This budget will be about trying to encourage as many Australians, as many businesses, to invest to create jobs," Mr Sukkar told Sky News on Tuesday.

Bringing forward infrastructure projects would also be part of the plan, he said.

His upbeat comments came as a leading economist warned Australia's rebound from recession is likely to be drawn out affair, resulting in an even higher jobless rate.

National Australia Bank chief economist Alan Oster believes the sheer magnitude of the fall in economic activity in the June quarter, and the subsequent lockdowns in Victoria, means the recovery will likely be protracted.

"Policymakers have provided unprecedented support but we think there will need to be more," he said.

"This would help businesses and the economy recover more quickly and the focus can again return to growth."

NAB's business survey for August pointed to a weakening employment outlook.

Its business conditions index fell six points to minus six points in August, unwinding most of the previous month's gain.

Mr Oster said the decline was led by a drop in the survey's employment index, suggesting while the Australian economy is generally starting to open up, the labour market is still in decline.

He said the deterioration in conditions was broad-based across the states, with sharp declines in Queensland, Tasmania and South Australia, but only a modest decline in Victoria.

"The fact that the other states have seen a pull-back suggests that the virus continues to pose a risk everywhere, not just states with significant containment measures in place," Mr Oster said.

The business confidence index made only a modest six-point improvement to an index of minus eight points after falling sharply in July, indicating sentiment still remains fragile.

The Australian Bureau of Statistics weekly payrolls report revealed the number of jobs across Australia fell by 0.4 per cent over the month to August 22.

But this was the result of payrolls in Victoria falling two per cent in that period while the rest of the nation saw a modest 0.1 per cent rise in jobs.

"While payroll jobs continued to fall in Victoria into the third week of August, it was at a slower rate than earlier in the month," ABS head of labour statistics at Bjorn Jarvis said.

RBC Capital Markets head of strategy Su-Lin Ong said there are signs of resilience and encouraging trends despite Victoria's challenges.

"But (this) may well suffer some setback with Premier Andrews' recently announced drawn out and cautious exit plan from the current set of restrictions," she said.

Commonwealth Bank senior economist Belinda Allen said consumer spending was unlikely to rebound meaningfully in Victoria until November.

Still, Australians appear to have taken confirmation of the country's first recession since the early 1990s in their stride.

The weekly ANZ-Roy Morgan consumer confidence index rose one per cent, with respondents optimistic about future economic conditions, which jumped 4.1 per cent.

But ANZ head of Australian economics David Plank is quick to point out the survey was carried out before the Victorian government announced it was extending its harsh coronavirus lockdown.

"Even taking this into account, the uptick in confidence comes as a positive surprise," Mr Plank said.

He felt the jump in "future economic conditions" may indicate that a number of people think the economic situation is close to the bottom.

Posted in: News  

Plan for working from home award changes

Posted on 7 September 2020
Plan for working from home award changes

Matt Coughlan
(Australian Associated Press)

Employees and bosses will be able to agree on flexible working from home arrangements during the coronavirus pandemic under a proposal from the industrial umpire.

Fair Work Commission president Iain Ross has released a draft plan to change awards, likely to be most relevant to small businesses without enterprise agreements.

The model includes a provision allowing agreement on working from home arrangements that balance personal and work responsibilities against the business needs of the employer.

Employees would be able to compress their week so usual hours are worked over fewer days.

Starting and finishing times could be staggered and employees directed to work at home or other locations.

Workers could take double the annual leave at half pay and also buy extra time off if bosses agree.

With the agreement of three quarters of a workforce, a cut to hours could be shared if an employer can't usefully employ everyone.

Justice Ross said working from home had been one of the most significant shifts since the start of the pandemic.

"It is likely the direct economic and social impacts of the pandemic will be felt for some time to come," he said.

"There will (likely) be a continuing need for flexible work arrangements to assist employers and employees in adapting to the changed conditions and to support the recovery."

The draft proposal could be potentially be included in modern awards, most of which don't expressly deal with working from home.

The commission president said that could constrain working from home arrangements if business was forced to pay penalty rates or overtime, despite employees seeking flexibility.

"It is intended that the model schedule be used as a starting point for discussion between parties," Justice Ross said.

"Not all of the clauses proposed in the schedule will be suitable for all awards and some clauses will require tailoring to meet the needs of a particular industry or occupation."

Australian Industry Group chief executive Innes Willox said the draft was an important initiative which would deliver flexibility.

"A very large number of employees are currently working from home, and it is evident that workplaces will never be the same again," he said on Tuesday.

Posted in: News  

Why you need a Will

Posted on 3 September 2020
Why you need a Will

Money and Life
(Financial Planning Association of Australia)

In 2020 COVID-19 has introduced significant health risks and changes to family life. It's now more important to have an estate plan so you can make sure your family and loved ones are looked after should you become ill or die.

It's no wonder people tend to avoid making a Will. We can find it hard to face the fact that death is part of our future and that there may be a time when we won't be able to manage our own finances due to poor health. However, the COVID-19 pandemic has made us all more aware of how life can change when we least expect it and our health is something we shouldn't take for granted. So there really is no better time than now to get your estate plan in order.

What is an estate plan?

Your estate plan is a set of arrangements that sets out what will happen to your assets when you die and/or if you become unable to manage your own affairs. Your Will is just one part of your estate plan. It can also include a Power of Attorney arrangement giving someone else legal authority to manage your assets and finances if you become incapable of doing this yourself.

How do I make a Will?

You can take a DIY approach to making a Will with a Will kit. But not all your assets are covered in your Will. You super, for example is not an estate asset and you will need to make a separate arrangement usually a binding nomination to make sure your super death benefit is passed on according to your wishes.

Wills and estate plans can be fairly simple, but it depends on your particular family and financial situation. Owning a business, being married more than once or having children are just some circumstances that can demand a more complex estate plan. While it may take a lot more detail and structure to ensure all your assets are properly distributed, it's worth doing to take care of everything that matters to you.

One of the best ways to make sure your estate plan covers everything it should, is to seek advice from a financial planning professional and a solicitor who specialises in estate planning. A financial planner can offer you guidance on growing and protecting your assets during your lifetime. They can also talk to you about what to consider as you decide how you want your assets to be distributed among your family and loved ones, both before and after you die. This includes the tax consequences of transferring assets to your beneficiaries.

However, a financial planner cannot offer legal advice on your estate plan and they cannot draw up the legal documents you need to make sure your Will and estate plan are legal and binding. You'll need to work with your solicitor or an organisation that specialises in estate planning.

COVID-19 and your estate plan

Each State and Territory has their own legislation that lays out how estate planning documents must be signed and witnessed. Your solicitor will be able to guide you through this process so that your Will can be considered valid in a court of law.

With social distancing and other restrictions in place due to COVID-19, it can be more difficult to make these arrangements for signing and witnessing your Will and other estate planning documents. In Queensland, New South Wales and Victoria, new legislation has been introduced to allow certain legal documents to be signed and witnessed via video conference.  Your solicitor can get you up to speed on  the details of this process and let you know what software and devices you'll need to complete remote signing and witnessing to meet these legislative requirements.

This legislation does not allow you to have a binding nomination for your super death benefit witnessed via video conference.  To make arrangements for this part of your estate plan, you'll need to get in touch with your super fund and check their requirements for making a valid binding nomination.

Do I need a Power of Attorney?

Under the new legislation for New South Wales, Queensland and Victoria, Power of Attorney arrangements can also be witnessed remotely via video conference. There are different types of Powers of Attorney you can nominate, but the two main ones are a Medical Power of Attorney (also known as a guardianship) and an Enduring Power of Attorney. As you might expect, a Medical Power of Attorney gives another person authority to make decisions about your medical treatment if you're not physically or mentally able to choose for yourself. An Enduring Power of Attorney (PoA), on the other hand, gives someone the legal authority to manage your financial affairs when you're unable to do so.

As you grow older, having a PoA organised is important in case you lose capacity to make decisions about your finances. If this were to happen and you don't have someone legally appointed to act on your behalf, your financial affairs and your personal wellbeing could both be affected. If you don't have PoA arrangements in place with a trusted friend or family member, it can make it difficult for things to be done on your behalf such as paying your bills or looking after your home.

In choosing the people or persons to nominate as your PoA, it should be someone you can trust to act in your best interests. And it also helps if they have some experience with finances and good knowledge of your assets so they can fully understand the consequences and results of any decisions or actions they take. In many cases, attorneys are family members parents, siblings, children or grandchildren as they are often the ones who know best how we ourselves would think or act.

With the current restrictions in place for interstate travel, having a friend or relative in a different state as an Attorney may no longer be a practical option. So if you are choosing someone as a PoA or making changes to to your PoA arrangements, it's worth thinking about having someone nearby to act on your behalf if you should become ill or lose capacity to manage your own affairs. 

What happens if I don't have a Will?

If you die without a Will, your assets will be distributed according to the intestacy legislation for your State or Territory. Assets will be shared among family members according to these legal requirements. This is why it's important to have a Will to make sure that your estate is passed on according to your wishes.

Posted in: News  

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