Tag: finances

Kochie’s 16 signs of financial maturity

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How many times are we told to “act like an adult”, “grow-up” or “get a bit of maturity”… whatever that means.

Whether it’s behaviour, humour, manners or lifestyle there’s a level of expectation which governs the opinions of others. To make grown-up decisions.

It’s the same with money. Financial adulthood means taking ownership of your money rather than just letting it happen. Using your money to match your values and to finance your dreams.

Just like adulthood, there’s no really strict definition of financial maturity to benchmark ourselves against. So here’s our checklist to what we think you need to tick off  to reach monetary adulthood.

1. Have a credit and a debit card. Be able to pay your monthly credit card balance on time and in full… without going into overdraft on your transaction account.

2. Know your credit score and check your credit report at least annually. It’s pretty easy by going to www.getcreditscore.com.au. Knowing your score gives you power to negotiate better deals and checking it ensures there are no costly mistakes.

3. Consolidate your superannuation into one fund, which you understand and check regularly. Ideally, you’d be making extra annual contributions up to your age limit. Remember superannuation is the second biggest asset of most Australians. It accounts for 26 per cent of our net worth.

4. Have an emergency fund. As a general rule, the ideal is to have 6 months worth of salary in a separate savings account to use in case of a financial or medical emergency.

5. You have adequate insurance protection. For you (life, income protection), health, car and household insurance. The amount of cover depends on your age, commitments and circumstances. Often it’s best to get expert advice and recommendations.

6. Have some form of a financial budget… in writing. There are so many budget templates out there and a huge number of good smartphone apps. There is absolutely no excuse not to have one but also make sure it’s constantly updated.

Kochie explains how to ask for a pay rise… and get it!

7. Know your take-home pay every month…after tax. We know this can sound a bit simple, but you’d be amazed at how many people don’t know the amount they earn. Add in any regular overtime or part-time jobs. This is the cornerstone of your budget.

8. Know your net worth. It is simply the value of your assets (house, investments, superannuation balance, car etc) less the debts you owe (home loan, credit card balance, personal loans etc). Do this calculation annually as it provides a concise barometer on whether your personal wealth is improving or not.

9. Spend less than you earn. Living within your means is the absolute foundation of financial maturity. It’s not complicated. Don’t spend what you don’t have.

10. Have a system for remembering and paying your bills on time. Whether that’s setting up a direct debit for regular costs or a calendar alert in your smartphone, you shouldn’t be forgetting about bills, or leaving them unpaid. If you automate payments, regularly check the statements are correct.

11. Know when you’re going to be debt-free. Credit card debt (and to a lesser extent personal loans) has extremely high interest rates. A rule of thumb is that if you have consumer debt you should have no savings… it should be used to pay off debt.

12. Know your financial goals and how you’ll achieve them. Looking after your money better can be pretty boring if there are no goals you want to achieve. Could be buying a house, going on a big holiday, paying off the car, putting the kids through school… the goals are endless. Having a goal provides an automatic map of how your finances will be used to make your life better and more enjoyable. It also gives you an incentive to stick to your plan.

13. Plan your tax better. Everyone has to pay tax to do our bit for keeping Australian society and services the way they should be. The aim is to pay the right amount of tax and not more than necessary. Start by improving your record keeping, use good tax software or meet with an accountant or tax agent.

14. Organise your important documents. We have what we quaintly call our “death file”. One spot where all the important documents are kept in case one of us (or both) die. The deeds to the house, wills, bank details, investment records etc. In other words, records of your financial life should be kept in the death file. Many people digitally scan the documents into a folder and email them to their loved ones for safekeeping.

15. Be able to confidently negotiate a better deal or challenge a payment. But be polite while doing it. If you don’t speak up for your money, no one will. For example, never automatically pay an insurance premium without asking for a better deal or question an unknown expense on your credit card statement.

16. Be able to say no to expenses you can’t afford or don’t want. On the other hand, know when it’s most important for you to be able to say yes, and figure out how to afford the things that mean the most to you. Being a savvy spender is crucial to financial security. Determining which is an important expense and which is frivolous can save you a fortune.

Caring for your elderly parents financially

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It is a sad story which touches so many Australian families. Caring for elderly parents who are finding it difficult, or incapable, of looking after themselves financially. Responsibility invariably falls to the children, which can often cause friction within the family.

We were recently approached by a Sunrise viewer in this predicament who was desperate for some guidance. Gwen’s 80 year old widowed father had entered a nursing home. The house had just been sold for $400,000 and she had no idea what to do with the money or how to organise her father’s finances.

She is one of 3 daughters and the problem was starting to cause dissent within the family at a very emotional time. Each child had a view on what should be done, but their suggestions were all very different as they took their own individual counsel from spouses and friends. As people continue to live longer, caring for elderly parents is becoming an even bigger commitment for every child.

Making it work in your family

We know it can be an uncomfortable situation, but the key to caring for elderly parents is to find out as much about their financial affairs before a crisis occurs. That terrible middle of the night phone call carrying news of a catastrophe can be a nightmare if preparations have not been made.

For example;

. do your parents have legal documents and do you know where they are located?

. where are the bank accounts and who do your parents rely on for advice?

. what are their other investments and are they held jointly or separately?

The first step is to discuss the issue with your parents as early as possible. It can be an uncomfortable situation as no parent wants to face the problems of old age and no parent wants to feel as though their children are putting them out to pasture.

Try to relate the argument to other families which have been split because of the lack of preparation for a sudden crisis with a parent. Everyone can recall a story of a friend or relative where the dominant financial partner dies, leaving the surviving spouse with no idea of their financial situation. Emphasise to your parents that your enquiries are not being made by a gold digging child but by a family concerned about caring for their parents in the best possible way.

Watch Kochie’s estate planning tips, thanks to moneysaverHQ

Ask to meet your parent’s bank manager. Make sure your parents organise the meeting and make the introductions. At the same time, sign an authorisation which allows the banker to talk to you about their accounts. This means the bank will be comfortable in keeping you up-to-date with your parent’s accounts and can provide an early warning system if irregularities start to appear.

If you live far away from your parents, find someone who can help locally. Convince your parents to maybe settle in to a retirement village sooner rather than later because the longer they leave it, the harder it will be to settle in. Your parent’s church minister may also be able to recommend a trustworthy helper if your parents are more independent.

The importance of a power of attorney

Some parents can be reluctant to share financial information with grown children because they are fearful of giving up their independence. But if something happens to them unexpectedly, they may not be able to give you legal authority to act on their behalf.

So it is critical a power of attorney is arranged to enable you, a friend, relative or solicitor to take control of your parent’s finances when needed. It is not a pleasant thought but one which must not be neglected. This is the most important document of all, it’s the one that will let you help your parents if help is needed.

A power of attorney allows one person to give another specific authority to handle financial affairs. Even if you never need to fully implement it, it will allow you to take smaller steps such as clearing up credit card problems.

A power of attorney can be limited to a designated piece of real estate or it can cover all financial transactions. Your parents don’t have to be incapacitated to need a power of attorney either, they may just need someone to look after their affairs if they go away for an extended period.

A power of attorney empowers one person or party to act on their behalf, taking into account any wishes conveyed to them. However, an important point is that the capacity of a person must be taken into account at the time they execute the power of attorney. Many people only think of a power of attorney at the first sign of mental deterioration. This is really too late.

8 simple and effective money decisions you can make TODAY

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It’s the little things that make a difference when it comes to building sustained wealth.

The mistake a lot of people make is that they get overwhelmed by big financial decisions. They focus on the big complex issues rather than breaking their finances down into a series of little decisions which can be achieved quickly and easily.

Elite athletes will always say they break the big goals down and focus on the little steps needed to get there.

Here are eight simple financial decisions you can make today which, together, will make a huge difference to you achieving your goals.

1. Salary sacrifice into superannuation

Currently all working Australians have 9.5 per cent of their salary compulsorily contributed to their superannuation plan. Unfortunately it’s not enough and you need to contribute atleast an extra 2.5 per cent to ensure a comfortable retirement.

Start bridging the gap now by salary sacrificing extra contributions in before tax dollars… it makes sense financially and tax wise.

It might not be the full extra 2.5 per cent, depending on your age and other financial commitments, but start the habit now of contributing extra and change it upwards in the future.

2. Start an emergency fund

Would you believe the average Australian household has less than a month’s worth of income in liquid savings. That’s a scary position to be in if financial disaster strikes.

Yes you could go into debt or draw down on your credit card balance, but that is a very expensive exercise. A better idea is to set up a regular transfer from your transaction account into a “rainy day” online account with the aim of building up to about 3-6 months worth of salary.

3. Get your tax under control

Do it right now. That long standing commitment to set up a filing system to store work related receipts and other relevant documents will make tax time so much simpler.

Get some direction from your tax agent, then go to Officeworks or look for a savvy website or app organiser and just do it.

4. Set up overdraft alerts

We hate accidental transaction account or credit card spends. Those little unnoticed expenses which tip your account into the red and immediately slug you a fee.

It’s a budget killer. It may be only $20-30 but it adds up, along with any interest. And why do you need to add more to bank profits?

Go into your online banking and set up alerts on your accounts when balances drop below a certain level. It will be your cue to take care and stop spending. The same goes for regular bill payments.

5. Download your free credit score

Knowing your credit score is bargaining power. A good credit score means you can legitimately negotiate a better deal with financial institutions on a whole range of products.

Banks don’t want to lose good customers and will work hard to keep them. You need to know whether you’re one of the team, so go to www.getcreditscore.com.au now and find out.

6. Always question late payment fees

It’s annoying, you know you’ve done the wrong thing but that doesn’t mean you have to accept it. If one of those unexpected payments has caught you by surprise, pushed you into the red and earned a late payment fee, do something about it.

Ring or email your banker, explain it was unintentional and ask for the fee to be reversed. For good customers they’ll do it… you just have to ask.

7. Identify your no-fee ATMs

Would you believe Australian spend a couple of hundred million dollars in fees each year from simply using another bank’s ATM. You know that $2-3 fee that comes up when withdrawing cash.

Those little fees all add up and can be easily avoidable. Use your smartphone, press your bank’s app and look up where the closest no-fee ATM is and walk the extra few paces to save money.

8. Change the way you shop

For most people shopping is seen as a reward for hard work, something you deserve and are entitled to. Studies show it creates a psychological buzz or high that makes people feel better about themselves.

Unfortunately the real life low afterwards from realising that reward is a waste of money can be a painful financial hangover.

Get into the habit of finding an alternative to shopping to provide that high. It could be exercise or meditation or listening to music. Whatever it takes to break the impulse shopping habit.

Want more free money tips from Kochie? Subscribe to our newsletter!

7 smart strategies to revolutionise your family budget

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A solid budget is crucial to keep your financial life on track, especially if you have a family to look after.

We know you’re busy and keeping your budget up to date can get tough to manage, but that’s never an excuse to neglect it.

Something we’ve always done, and highly recommend to others, is to set aside time every month to work through our budget as a couple and make sure our money is under control.

It doesn’t have to take very long. Fifteen minutes is about right for us… although you can always add a bottle of wine if you want to make things interesting.

The beauty is, once you’ve done the heavy lifting, a good budget will practically run itself. You’ll be on track to achieve your financial goals, and you can focus on enjoying life.

Here are seven ways to revolutionise your budget at your next family finance meeting.

 

Want more tips on how to take control of your money?

Join the next Money Makeover today. 

 

1. Negotiate everything

Whether it’s your bank accounts, insurance policies or even whitegoods, it pays to ask for a better deal.

Most retailers will have a good amount of wiggle room when it comes to pricing, so speak up before you get to the register. You never know if you never ask.

2. Cut your energy bills

Sometimes it’s the little things that can lead to the biggest savings, so get your family to start forming good habits when it comes to your household energy.

Make sure lights and heaters are switched off when you leave the house, cut down on using the dryer and opt for warmer clothes instead of running the heater could massively
cut your power bills this winter.

3. Don’t automatically renew your insurance

It’s so easy to set these things to autopilot and get on with your life, but you could be saving yourself a small fortune if you play it smart.

Use online comparison tools to make sure you’re getting the very best deal for your circumstances.

If you pay your premium annually (which is always cheaper) that’s only one review a year for each policy you hold. Time well spent if you ask us.

Of course… a disclaimer. If you do find a cheaper deal, make sure it still provides adequate cover for you and family, because if it doesn’t, it could leave you worse off in the long run.

4.Weigh up the car

If you own a car, tally up the costs and consider whether you really need it. If you have more than one, could you get by on less?

Most cars spent the majority of their lives parked in a driveway somewhere, and if you can get rid of it you will save thousands on registration and insurance premiums each year.

5. Salary sacrifice

Take advantage of salary sacrificing and pay less tax. You can sacrifice for superannuation contributions, your car or even your phone.

Paying less tax while still paying for the things you need – or boosting those retirement savings – is a great way to save money.

6. Bring in more money

A second source of income is probably the most effective way to get ahead when it comes to your budget.

Everyone has a skill. If you’re a keen writer, can do odd jobs or even have a good voice for voiceovers, tapping into the freelance marketplace can earn you some extra cash in your spare time. Even 2 or 3 hours of extra work a week can make a big difference.

7. Automate everything

We all make mistakes from time to time. It’s part of being human. So when it comes to the process-driven side of your finances, let a robot worry about them.

Set up automated withdrawals for things like savings or bills that you know won’t change. While you should check regularly to make sure everything is as it should, it’s much quicker than paying the bill manually.

The next Money Makeover starts on the 8th of August. Want to get an idea of what it’s all about? Join our newsletter for your free lesson on how to supercharge your savings!

5 money matters that could save your marriage

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When two people decide to walk down the aisle together, they’re probably not basing their decision on how financially compatible they are. At least we hope that’s not the case.

But once the dregs of the wedding cake have been thrown away and the honeymoon snaps are safely in their frames, how you deal with money as a couple becomes an important consideration.

Financial pressures can put a huge strain on any relationship and have led to the end of many a marriage. So here are five money matters that you need to learn to deal with together.

1. Be open about money

If you don’t form good habits early on in a relationship then the bad ones will stick with you. This means you’ve got to start out being open and honest about your financial situation as soon as things get serious.

You’ve already made the decision to spend the rest of your life together, so there should be enough trust to share things like your salary and any dirty debts you’ve picked up along the way.

Otherwise, that hidden income or concealed credit card will cause problems when it’s inevitably discovered.

2. Understand each other’s values and goals

It’s important for each person to understand what the other wants to achieve financially, both in the relationship and for themselves.

Don’t expect to be 100 per cent aligned on everything; there’s no right or wrong answer, and words like security, lifestyle and comfort mean different things to different people.

But once you’re on the same page it makes managing money so much easier, from everyday issues like choosing a restaurant to tough decisions like how much to spend on a house or where to send the kids to school.

3. Line up spending habits

If one person is squirrelling away every spare dollar while the other is consistently blowing their pay cheque on the latest ‘must haves’, sooner or later things will come to conflict.

This can be avoided by making sure your spending habits are compatible. A budget will help here, as will understanding each other’s goals.

We’ve met so many couples who, through being disciplined with their money and working towards the same goals, have ended up with more wealth than those who earn three or four times as much but spend the lot.

4. The joint account

While it’s certainly not essential to have a joint account, they can make the process of managing money simpler, more transparent and fair… Think splitting bills, buying groceries and paying the rent or mortgage.

And if you spend less time arguing about money, then you can spend more time enjoying your relationship.

To make a joint account work, a good option is to set up three accounts: yours, theirs and the joint account, with wages deposited into your individual accounts.

Then look at what you both earn and set up an automatic transfer for a certain percentage (to keep things fair) of each wage into the joint account each month.

If only one partner earns, you’ll need to work backward. Deposit the entire wage into the joint account first, then transfer money into each individual account.

5. Don’t be financially ignorant

For two people to jointly manage their finances, each partner must have a basic understanding of money.

Start by opening your eyes and ears to financial news… Daily newspapers, television, radio and books on money can all provide enormous help. For more complex matters, it can be extremely helpful to see a financial planner together.

By squaring up your financial relationship, you can avoid conflict later and build a brighter future together.