FEDERAL BUDGET 2018 – How will it affect your retirement?
Whether retired or contemplating retirement, there are a few things you should know about changes made in the 2018 Federal Budget that could affect you and your financial future.
Examples of these changes, that will take effect from 1 July 2019, include:
- pensioners can now work longer and earn more;
- new retirees can contribute to their superannuation for another year;
- more older Australians can tap into the equity in their home via the pension loans scheme;
- more choice and flexibility in retirement income products, including options that provide income for life (note: these latter changes will not be in place from 1 July 2019 as it will take time for superannuation providers to develop and implement these products).
Expansion of Pension Work Bonus
The Pension Work Bonus is money earned by Australian pensioners that is exempt from the pension income test. This is over and above the income free amount per fortnight for pensioners (i.e. $168 for singles or $300 for couples).
(i) The Pension Work Bonus will increase from $250 to $300 per fortnight. Thus, the first $300 earned will be exempt from the pension income test.
(ii) Pension Work Bonus eligibility will be extended to self-employed pensioners who will be able to earn $7,800 per year self-employed with no impact on their pension.
A one-year exemption from the superannuation work test
Australians aged 65 to 74 can continue make voluntary superannuation contributions for 12 months after no longer meeting the work test (i.e. 40 hours minimum worked in any 30-day period during the financial year). Note: this applies only to those with a superannuation balance less than $300,000 at the beginning of the 12-month period.
Expansion of Pension Loans Scheme
If the bulk of your finances is tied up in your home but you don’t want to sell, you may be able to use the equity in your home via the Pension Loans Scheme to top up your pension.
(i) Eligibility of the Pension Loans Scheme has been extended to all Australians of Age pension age, even maximum rate pensioners.
(ii) Maximum allowable income stream from Pension Loan combined with Age Pension increased to 150 per cent of the Age Pension.
Expansion of retirement income options
To boost the standard of living of retirees, the government is working on a framework to provide retirees more choice and flexibility in the retirement income products they are offered and also to require providers to provide simplified standardised (easy to understand) information on their products. Furthermore, superannuation fund trustees will be required to develop a strategy to help members achieve their retirement income objectives and also to offer members the option of products that will provide income for life, no matter how long the member lives.
Even small changes can make a big difference to your future financial security so even in retirement, or especially in retirement, it is important to regularly review your finances in relation to the current financial and legislative environment. For peace of mind about your financial future, seek out sound advice from a qualified financial planner.
AGE APPROPRIATE TIPS FOR RAISING MONEY-WISE KIDS
When all it takes is the tap of a plastic card to buy just about anything you need, how do you teach your kids the value of money? A cashless society may have some benefits, but it can make it very difficult to teach our kids that money does not grow on trees, when there is no money changing hands!
With no perception that money comes from hard work, and only seeing the treat in their hand that didn’t require handing over cash, parents are starting to struggle to instil money-wise habits in their kids. If you are struggling with the concept of teaching your kids about money in an increasingly cashless society, here are our pick of the best age appropriate tips for Australian parents.
Tips for toddlers
Clearly any money-wise tips need to be very basic at this age, but there are two easy strategies you can use to get them in the mood. First, you can show them that pressing buttons at the ATM gives you cash and second, you can take this money into the store and show them that you use this money to buy groceries.
Tips for pre-schoolers
This is the time to start introducing a few small chores for payment, teaching them that they can receive cash for doing a job. It’s also a good time to talk about saving vs spending their money, and if they choose to spend it on sweets they will soon learn that they have nothing to show for their money when it’s gone!
Tips for 5 to 8-year kids
At this age your child starts to really learn about the concepts of immediate and future gratification, making this the ideal time to help them start a savings plan for their pocket money. Encouraging them to save for a special toy, new bike or skateboard, helps them to integrate money-wise habits into their lives, something that will stay with them forever.
Tips for 8 to 12-year kids
At this age, you can start to discuss the family finances with your child (in simplistic terms of course), helping them to understand that every dollar spent has to be earned. Giving them a job that requires managing a budget is a great strategy for teaching them money-wise skills. For example, you could put them in charge of the budget for the family’s pizza night, giving them hands-on experience of managing a monthly budget and making it last for 4 weeks!
Tips for teenagers
Teenagers always want the latest technology, fashion and gadgets and are always pestering their parents for money. A great way to make them more money-savvy is to agree to pay half for their cherished possession if they find the best price, whether online or in-store. This will definitely motivate them, but make sure that they show you their research to prove that they have found the best price. This teaches them some very valuable shopping habits, which hopefully will help them to become financially responsible young adults.
These tips will help parents to educate their children about money in an increasingly cashless society. If you want your teenagers to learn more about budgeting and taking control of their financial future, why not give them an appointment with a financial planner for their 16th birthday or when they start their first job (whichever comes first). Call Amanda McCall on 07 3356 6929.
or book an appointment via email.
IS MONEY ENVY SENDING YOU BROKE?
With the popularity of the internet, our lives are continually inundated with social media - Facebook, Instagram and Twitter are good examples, and people are now more than ever comparing themselves to others. Envy of another’s money, position, job, relationships and even heritage are not new, but when this feeling begins to influence your life, financial ruin can be just a step away.
Negative effects of comparing yourself with others
When your neighbour paints their roof, builds a new pergola or fully renovates their home, do you rush to the bank to increase your mortgage to do the same? If your BFF buys a new outfit every week and goes on weekend trips and long overseas holidays, do you rush out and put that Bali holiday you can’t afford on your credit card?
What if your work college pulls up in the latest model fast car on the market, do you race to the showrooms and take on another loan you can’t afford, just to be one of the guys? Heaven’s above if your favourite celeb has a new hair-do, has just released a new perfume or was just seen with a wonderful designer handbag on Instagram!
Spending your hard-earned money and even borrowing money just to ‘keep up with the Joneses’ and – shock horror – to keep up with your favourite celebs, is a recipe for disaster. It doesn’t matter how much money you have, there will always be someone who has more of something than you. They will wear more expensive designer clothes, buy better houses, go on better holidays and drive more expensive cars.
Not keeping on top of your finances and getting yourself deeper in debt, simply to impress others, is not a good strategy for building yourself a sound financial future.
Positive effects of comparing yourself with others
On the other hand, if you use what you learn about others to better yourself and your circumstances, then you are on your way to success in so many different ways. If your friend on Facebook has posted pictures of her latest holiday, instead of going into debt to book your own lavish holiday, why not think about how she affords her lifestyle?
Does your friend have a high-paying job, earned through hard worked combined with a good education or does she go into debt to fund her lifestyle? What is really important to you? What makes you happy? How do you really measure success anyway?
When you compare yourself to others and find yourself lacking, one of the best actions you can take is to use that feeling of envy and inadequacy to propel yourself further towards your own goals. Some of the most successful people in the world have dug deep to identify what really makes them happy and then pulled out all the stops to achieve this happiness.
Money doesn’t always bring happiness and money envy can, in the end, negatively impact your life and your financial future. Why try to live like someone else when with a little inward reflection, you can discover what truly makes you happy?
5 AWESOME MOTHER'S DAY GIFTS WITH A FINANCIAL TWIST
Mother’s Day is the perfect opportunity to show your Mum how much you love and appreciate her, but sometimes it can be difficult to find the perfect gift - especially if you have a Mum with everything!
Chocolates, flowers, perfume and toiletries are all old hat and have been done by everyone again and again, every year. If you have run out of Mother’s Day gift ideas and are looking for something unusual in the nicest possible way, why not try one of our gift ideas with a financial twist?
Donate to your Mum’s favourite charity
This is a gift that will make your Mum feel good about themselves and will also help other people less fortunate than your family or animals that need our help (depending on the charity you select). If you aren’t sure of your Mum’s favourite charity, then simply pick one that you feel she would like to support and donate in her name. You can then pop the receipt inside your Mother’s Day Card for an extra special surprise!
Donate to your Mum’s holiday fund
If you know that your Mum has been trying to save for a specific trip, why not add to her pot of money with a few additional dollars or a gift card (whichever is appropriate). The best way to make this look like a gift rather than money slipped into an envelope is to put together a ‘mood’ board with pictures of her much-anticipated destination, local recipes and images of the local cuisine and even ideas for tourist trips in the area. You can then tack your gift card or dollar donation to the board, so she sees it when it is unwrapped.
Start your Mum’s very own investment portfolio
This is the gift that can lead your Mum down the path of managing her own investment portfolio, which would be a huge plus for the family! If you are unsure of how to buy shares in your Mum’s favourite company or store, the easy way is to buy a gift card for the shares! Who knew that in this day and age, you can actually buy a gift card for shares, but you can and it’s as simple as 1-2-3. All you need to do is Google ‘gift cards for shares’, select a website and follow their easy steps. A quick Google search found stake.com.au, but there are plenty of other online sites that sell this type of gift card.
Pay a few of your Mum’s bills
Depending on both your own and your Mum’s financial circumstances, you might find that paying one or more of her bills this month is the perfection solution to your gift dilemma. Freeing up your Mum’s money from having to pay a big bill and worrying about how she is going to pay it, might mean a lot more to her than receiving a box of chocolates!
Treat your Mum to a financial planner!
Why not set up an appointment with a financial planner for your Mum as a gift for Mother’s Day this year? Of course, this depends on your Mum’s financial needs, but even if she has trouble paying the bills and is nowhere near needing an investment portfolio, a financial advisor can help her manage her budget and get ahead.
ARE YOU ASSET POOR AND DROWNING IN DEBT?
There was a time when Australians bought a family home and used the capital gains to set themselves up for their retirement. People didn’t borrow to fund their lifestyle, instead they lived within their means and looked forward to a nice nest egg later in life. Even better, they made sure to leave their kids a little inheritance to help them get ahead later in life.
Now however, due to escalating property prices, young people have problems getting a foot on the property ladder. They can’t even look forward to an inheritance because their parents are jaunting off around the world and spending all their money!
Young people are drowning in debt
Saving a deposit for a home can be a monumental task for many young people, who often must rely on their parents to help out. The problems don’t stop there however, because with the rising costs of property across Australia and low interest rates, young people are taking on massive mortgages with monumental repayments each month.
When interest rates increase, as they will over time, the younger generation are going to find themselves in serious financial strife and unable to pay their mortgages. Even more problematical is when they dip into their equity to fund new cars, boats and holidays, increasing a debt that is already putting them in financial trouble.
The bigger the debt, the less likely it will be paid off by the time they retire and the more likely they will default as the interest rates rise. Of course, we know that many young people can’t afford to climb the property ladder, which means that they won’t be able to benefit from capital gains in their retirement. Faced with far bigger mortgages than their parents and with wages not keeping track with these increases, home ownership seems a long-lost dream for many young Australians.
The writing is on the wall - many of the younger generation will find that renting becomes a lifelong commitment, something that they will have to continue right into their retirement. All of this means that the wealth gap between retirees and our younger generations continues to grow with even the baby boomers finding that their long-awaited inheritance is now a distant dream.
Closing the wealth gap and empowering young Australians
One of the solutions for young people to secure a better financial future for themselves is to talk to an expert in financial planning. Unfortunately, many young people don’t even think about their retirement at their age, let alone start planning for it!
Financial planning isn’t all about securing your retirement however, it can also help you to manage your budget, save for a deposit on a home and help you to manage your expenses effectively so that you don’t get deeper in debt. If you have a string of credit card debts or personal loans, a financial planner can help you to clear these debts and start saving for your own home or another financial goal. You might be surprised at how little time it can take to organise your finances, once you have the right advice.