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In a recent speech made by the Reserve Bank of Australia (RBA) Deputy Governor, in June 2010, Ric Battellino raised the question “are Australian households over geared”? Following this question he states that household debt has risen significantly faster than household income since the early 1990’s.
RBA figures indicate the average personal credit card debt is approximately $3,300. With credit card interest rates heading towards 20% or more, people with a large balance are facing very high repayment amounts. If only paying the minimum payment, this could take six or more years to pay off.
If you are struggling with paying off your debt then take control of the situation today. Even if you feel completely hopeless, you do have options. Once you start taking simple baby steps you’ll feel more in control of your finances.
Try some of these helpful tips below;
Take time to analyse your income & expenses. Do a budget by visiting FIDO’s budget planner. It is so important to track your spending so you get an understanding where your money is going.
Distinguish between what you ‘want’ and what you ‘need’. Cut down or cut out altogether on what you ‘want’. Making sure you spend less than you earn should provide more money to repay your debts.
Make short term and long term goals. Short term goals will keep you motivated and help you achieve your long term goals.
You may consider selling some household items you no longer need. Have a garage sale or use Ebay to sell those unwanted items. If necessary sell down some investments to pay off high interest debt. There is no point having money in the bank earning little interest and a debt carrying a higher interest.
Research credit card deals. You can compare credit card features and interest rates visiting www.ratecity.com.au. By switching over to the right deal may lower your interest rate and therefore pay off your credit card debt faster.
Consolidate all your credit cards if you have more than one card. Try to switch to a credit card that provides balance transfers and discounted or nil interest rates for the first six months.
If you cannot consolidate debt then start paying off the card that has the highest interest rate first. Tackle one debt at a time. Once a credit card is paid off, consider closing the account.
Don’t fall into the trap of continuing to use a card with high interest rates just because it carries a reward program. Often the extra interest you pay negates any benefit from receiving the rewards.
Learn how to pay “cash” for your purchases and not the credit card. Alternatively set up a debit visa card, that way you need to have cash in the account before you are able to purchase.
To get further information contact Tiffany Cosh via email or ph (08) 8333 2488.
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I (Scott Keeley) spend much of my day speaking with the families of people who are preparing to enter Aged Care Facilities. This is a particularly traumatic time for most family, and this trauma is only compounded by the complex nature of the various fee structures. In my contact with clients, often the same questions come up. There is the opinion that the cost of Aged Care is far too expensive, and unaffordable for those who own their own home, but have little in the way of other assets.
I thought I'd provide here a list of the most common myths that I hear that relate to the cost of Aged Care.
My ongoing fees will only be 85% of my pension!
While the Basic Daily Care Fee is linked to 85% of the full Age Pension, additional fees can also be charged. These include Daily Income Tested Fees, Accommodation Charges (for high level care) and potential Extra Services Fees. As a result, the total ongoing fee may be a lot higher than 85% of the pension.
I will have to sell my home to pay for the Accommodation Bond!
Maybe, but not necessarily. While this may be the most commonly explored option, renting the home and organising to pay the Accommodation Bond via periodic payments may also achieve an affordable outcome.
Only the rich who can afford to pay a large Accommodation Bond can get into a low level care facility!
The Government does in many cases subsidise the costs associated with providing Aged Care for those residents who are unable to afford large Accommodation Bonds. Furthermore, Aged Care Facilities are required to set aside a certain percentage of beds for "concessional" or "assisted" residents, ensuring everyone has equal access to care.
The Accommodation Bond is dead money!
A large proportion of money paid as an Accommodation Bond is refunded to the resident when they leave the Aged Care Facility, or to their estate when they pass away.
I'd be better off giving everything away so I can avoid or lower the fees!
As with most things in life, money buys choice. Having assets at your disposal should ensure you can choose an Aged Care Facility that is close to family, can provide the required care, and that you are happy with. Giving away assets may not improve your position. It can have significant implications from a Centrelink and an Aged Care Fee perspective. Seek specialist advice before considering this!
If we set up a family trust, we can avoid or lower the fees!
While this may be sometimes true, again specialist advice is required before considering this. The utilisation of family trusts may have some impact in reducing Daily Income Tested Fees, however I'm yet to be convinced of the merit. The Daily Income Tested Fee is only reduced because the resident's income is reduced! Sure, you pay less fees, but only because you receive less income! Robbing Peter to pay Paul?
Summary
Too much emphasiscan beplaced on keeping the full rate of Age Pension, or paying the lowest possible ongoing fees for Aged Care. In my mind, this focus is misplaced. Overall cashflow is far more important (regardless of the source). Let us help you find the best outcome. Crunching the numbers, and being aware of all of your options, should ensure that the financial aspects of entering Aged Care are far less intimidating.
Scott Keeley - enquiries@wakefieldpartners.com.au
(08) 8333 2488
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It is never too soon to begin the Estate Planning process. It is much more than simply making a Will. Estate Planning is all about ensuring your assets are distributed to your chosen beneficiaries, distributed according to your wishes in the most financially efficient and tax effective way.
Inadequate Estate Planning comes at a cost. The worst case might see the “wrong” people inheriting your estate. Or the cost might be expensive legal or trustee company fees or perhaps heartache for your family and friends.
Surprisingly, 60% of Australians do not have a Will.
For those who don’t, the law determines who inherits their belongings. Their spouse and children may not automatically be the main beneficiaries. That is why it is so important to regularly review an Estate Plan, particularly if personal circumstances change. If you re-marry, become divorced, commence living in a de-facto relationship, have a blended family (consisting your own children and step children), or have new members in the family..... you should review your Estate Plan.
A well constructed Estate Plan can help to avoid unexpected taxes and protect assets from claims and challenges. Our advice is to consider choosing someone to be your Power of Attorney, name someone in your Will to become your children’s legal guardian, list your beneficiaries in your insurance policies and nominate binding beneficiaries in your super fund.
Make your Estate Plan easy to administer for your executors. Talk to us to arrange for an Estate Planning Information Kit to identify and organise your estate planning needs.
To contactTiffany phone(08) 8333 2488 oremail any queries or comments to her.
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In September 2007, John Howard’s parting gift was a significant increase to the Asset Test limits for Age Pension. To provide some context, pre-September 2007, if a couple who owned their home had more than $531,000 in other assets (real estate other than the home, financial investments, motor vehicles etc) they would have no entitlement to Age Pension.
As at 20th March 2010, that same couple can have $957,500 in assets other than their home and potentially still be eligible for an Age Pension.
Let me say that again! A couple who own their home can have pretty much $1 million in other assets, and potentially qualify for an Age Pension!
These changes were widely publicised at the time, in fact the Government estimated that an additional 100,000 Australians would become eligible for Age Pension as a result.
While many older Australians applied for, and became, Age Pensioners, I am still surprised to see a few people a month come through our doors that are now eligible that aren’t aware.
So why aremany older Australians who are entitled to Age Pension not receiving their entitlement?
The answer perhaps lies with the date of the change - September 2007. In September 2007, the Australian Sharemarket was setting record highs (the ASX All Ordinaries passed through 6,500 points), and the words “sub” and “prime” were rarely mentioned in the same sentence, let alone joined to make one word! People’s financial assets were perhaps quite substantial and well in excess of even the new significantly improved Asset Test limits.
Almost 3 years later, the Global Financial Crisis now has arecognisable acronym, the ASX All Ordinariessit at 4,400 and some people’s financial assets havereduced in value.
Why not take some time to revisit your situation and explore your entitlements. With over 12 years working at Centrelink, Scott Keeley can review your assets and assist you to determine whether or not you may be eligible for any forms of assistance from Centrelink. And don't be afraid of the paperwork, he can help you with that too.....
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It is sad to say, but most of us have had a loved one, close friend or work colleague die of cancer. Cancer is not confined to the elderly, many Cancer victims are young, in the prime of their life with families and careers. Like many others, I am shocked and saddened to see so many people, particularly young people taken by Cancer, with little or no warning.
Cancer is the leading cause of death in Australia. According to the 2006 figures reported by the Cancer Institute of NSW, 1 in 2 men and 1 in 3 women will be diagnosed with cancer in their lifetime.
More people are being diagnosed with Cancer, up by 10% in males and 7% in females between 1997 and 2006. More than 40% of cancer patients do not survive more than five years after diagnosis. However, the good news is that due to medical breakthroughs the survival rate has increased by 30% in the past 20 years.
Breast cancer remains the leading cancer for females from age 30 to 64 yrs followed by melanoma of the skin and bowel cancer. Even high profile women like Kylie Minogue have not escaped breast cancer.
For the men, melanoma of the skin (predominately aged 30– 49 yrs) and prostate cancer (aged 50 and over) are the main concerns.
It is estimated that 43,000 people will die from cancer in 2010 while many others will recover but struggle to resume a normal life. Financially, the diagnosis of cancer can be devastating, irrespective of whether the victim makes a full recovery.
Wakefield Partners financial planner Tiffany Cosh urges clients, particularly those with young families, to consider taking out adequate Crisis or Trauma insurance cover. This can provide a much needed cash lump sum should a critical illness strike. Trauma insurance can make a significant contribution towards the financial survival of families and businesses in a real time of need.
Talk to Tiffany on 08 8333 2488 oremail any queries or comments to her.
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