Are you financially literate?

On August 1st, ASIC launched its National Financial Literacy Strategy for 2014. See press release

According to the article, financial literacy is about having the knowledge, skills, attitudes and behaviours necessary to make sound financial decisions, based on personal circumstances, to improve financial wellbeing. It is considered by many as a ‘core life skill for participating in modern society.’

I personally think it is a fantastic move that, if implemented correctly, will have huge future benefits for not only the individuals that embrace the education, but for the prosperity of our nation as a whole.

‘With almost every Australian owning one or more financial products, improved financial literacy can benefit anyone, regardless of age or income, in term of having greater understanding of financial matter and the ability to meet financial goals for the future.’
ASIC’s strategy is being deployed using all the latest technology. They have a dedicated website with loads of useful tools and calculators.

Odyssey is also at the forefront of money management having recently released its Odyssey Smart Money offering using cutting edge Moneysoft software. We take a step further from ASIC’s initiative, by helping you manage your money in real-time, with automatic bank feeds and pro-active tracking processes. Managing your household finances has never been so easy – or accurate! Check it out here

I truly believe that good money management will beat any ‘get rich quick’ scheme over the long run and I look forward to seeing the results pan out in this space!

Written by Silke Poortman – Sales & Marketing Manager, Odyssey Financial Management

 

The Do’s and Don’ts of Property Investment

 

Understandably, low interest rates are giving many investors an added incentive to look at investing in property – either directly or through their SMSF.  Australians have always had a love affair with property. This affair could be about to get even steamier as historically-low interest rates reignite people’s appetite for borrowing.

Here are some of the dos and don’ts of property investing you should discuss with your financial adviser:

do'sDo – Define your goals
A ‘successful’ property investment depends on your goals. For example, are you looking for a high level of rental income? Or are you more interested in long-term capital gains? A clear strategy of what you are hoping to achieve can help you decide where to look, and what types of properties suit you best.

Do – Reassess your insurances
Increasing your level of debt is a good reason to reassess your life insurances. This particularly applies to death and total and permanent disability (TPD) cover, as one of the main goals of these insurances is to extinguish debt if you can no longer service it.

Do – Diversify        
If you already own a home, putting of all your resources into property could leave you more exposed to a downturn in the property market. Make sure you discuss your diversification strategy with your financial adviser before you invest.

Do – Talk to your financial adviser
While property can be an important part of a diversified investment portfolio, you need to be careful about how you go about it. Ongoing advice from your financial adviser is essential to ensuring your property investment meets your long-term goals.
dontsDon’t – Over-borrow
When interest rates are low it’s easy to fall into the trap of over-borrowing. But property is generally a long-term investment, and it’s likely you will experience a range of interest rate scenarios over time – something your budget needs to cater for.

Don’t – Invest for tax reasons alone
The lure of tax deductions can be a distraction when you’re investing in property. But don’t get too caught up in the tax savings to realise how much you’re actually spending on things like stamp duty, legal costs, renovations etc. It may take many years of capital growth to recover those costs.

We have invited property expert Tal Eloss to present on the Do’s and Don’ts of Property Investment. At our event, we will also look at some of the things you should look out for before you make a decision about investing in property.

Important considerations include:

  • Cashflow and impact on lifestyle
  • Market considerations, location and property type
  • Tax effective structuring of the property purchase and lending arrangements
  • Flexibility and alternative investment options

click here for the full details of the event, along with registration details!

LIFE INSURANCE – HAVE YOU GOT ENOUGH?

Do you have enough life insurance? Recent research by insurance advocacy organisation Lifewise and the National Centre for Social and Economic Modelling (NATSEM) has revealed that a significant number of Australians do not have enough life insurance to meet the needs of their dependents if they were no longer around. According to Lifewise, half of all Industry Super members are underinsured for life insurance by $100,000, with 37% considering life insurance a low priority.

Whether you are considering taking out life insurance for the first time, or reviewing an existing policy, there are a few things you should ask yourself to help you decide how much cover you need:

  • Will your family have enough to pay off any immediate expenses after your death? Burial costs and other lesser known factors such as the possibility of unpaid medical bills may need to be taken into consideration.
  • What future costs could your family have, such as educational expenses for children, which would need to be met?
  • What is your family’s level of debt? Consider mortgages, credit cards and any personal loans which could still need to be paid in the future.
  • How much will your family need to be able to maintain their lifestyle? As well as basic living expenses, don’t forget things like holidays, special occasions and gifts.

Deciding how much life insurance to take out can be a complicated process, but it is important that you take all the necessary factors into consideration to help avoid your family being left in financial hardship. Taking some time to sit down and really think about your family’s life insurance needs could save a lot of heartache in the future.

 

 

Sources: Lifewise – http://www.lifewise.org.au/see-more-statistics, The National Centre for Social and Economic Modelling (NATSEM)/Lifewise underinsurance report Feb 2011 – http://www.lifewise.org.au/downloads/file/aboutthelifewisecampaign/2010_0302_Lifewise-NATSEMReportFinal.pdf
 Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

SAVING FOR YOUR CHILDREN’S EDUCATION

If you haven’t got a plan to pay for your children’s education, it’s probably time to get started.

The first step is to work out how much you will need to fund education expenses. The table below gives you an idea of the costs of the different options for primary and high school.

Metropolitan Australia school fees in 2012

 
Government
Government (including extras)
Systemic
Systemic (including extras)
Private
Private (including extras)
Primary
$454
$2,990
$3,043
$5,954
$9,516
$12,963
Secondary
$878
$4,151
$7,973
$11,429
$16,246
$20,457
Source: Australian Scholarships Group (ASG). Please note that this is a guide only. Figures have been rounded and represent the upper ranges that parents can reasonably expect to pay. Fees vary across states, child age and individual schools, sometimes significantly. “Extras” includes extracurricular activities, uniforms, necessities (eg stationery, books and bags), travel and computer.

 

The second step is to work out how much you can afford to put aside for savings. Budget calculators are an excellent way to work this out and only take around 40 minutes to complete. They are available widely on the internet (e.g. www.moneysmart.gov.au).

To get the most out of your savings, you’ll need a strategy. The best way to find the right strategy for you is to speak with a financial planner. Below are some ideas to start your thinking:

  • Insurance or education bonds – These are great if you and your partner earn more than $37,000 per year as they are only taxed at 30% if you keep them for 10 years and contribute no more than 125% of last year’s contribution each year. Education bonds offer additional tax savings but work best for university students over 18.
  • Mortgage redraw – This involves saving for education by paying down your mortgage and then using a re-draw facility or offset account to pay education expenses. That could give you an equivalent return of over 10% per annum depending on your marginal tax rate and mortgage interest rate.
  • Managed funds, shares, term deposits – These can be particularly powerful if you have a long-term investment horizon and you or your partner is on a low marginal tax rate.

 

 

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

Discover how the inner circle can help you. Contact us today for a financial consultation.

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs.
Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.
Odyssey Financial Management is an authorised representative of Total Financial Solutions Australia Limited.