Disclosure: This document may contain information of a general nature and does not take into account your personal circumstances. Before acting on the information you should consider your circumstances and read any relevant Product Disclosure Statement

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Also in this issue…

“Do your adult children have a

back-up plan?”

“Buying your kids a home–

Good idea or

Bad"

February 2018

There are few words that strike as much fear into some people as the term “budget”. Usually those of us most fearful of sitting down and doing a budget are the ones in

most need to start.

Why? Because we might find that our income is less than our outgoings and we would rather fall into the fluffy cushiony goodness of an approved credit card limit than recognise this disturbing fact.

If you continually spend more than you earn, at some stage something is going to have to happen…you either lower your expenses, or you earn more income.

That’s all great you say, but earning more income isn’t always easy. That leaves us back at reviewing your expenses.

Do you find yourself saying “I would have been ok but we had the two regos this month” or “we were going along fine but then the electricity bill came along”. If we are honest with ourselves, these expenses occur every year/month/week and should be absolutely no surprise when they arrive.

YOU INC.

Start thinking of yourself as your own business, YOU INC. You are the CEO and financial controller. You are given a certain amount of income and you are in charge of using that to the best of your ability and keeping YOU INC strong and viable.

Like any company, if the expenses exceed the income, eventually the company will

not survive. You are no different and these steps below are the first steps in guiding YOU INC. to financial security.

How to fight back!

The electronic age has allowed the following system to be of benefit to those of us that keep getting “surprised” by bills.

The miracle of BPay/ direct transfer and direct debit means that you can develop your own automatic system to get on top of your bills for now and evermore.

How does it work?

For this system to work, you will need a budget, a bank account set up for bills that is separate from your private account, and ability to use phone or internet banking.

Step 1 - The time consuming part!

Firstly it will require you to get an understanding of where your money is going. If you can’t bring yourself to do this part, the rest of it falls to pieces. The good thing is, you only have to do it once and review annually. So gather together all your bills ; Rates, rego, insurance, Foxtel, mobile, home phone etc. Once you have completed your budget you should now know where your money is going.

Lets assume that you have determined your expenses as being less than your income and you are ready to go to step 2.

Step 2 – Bills & expenses account

You will need to open a bank account that is dedicated for bills and regular expenses. Ideally use an interest bearing cash account that has good on-line banking facilities.

Continued on Page 2

Newsletter

The non-budgeters guide to budgeting- Brett Gilday

Step 3 – Pay your bills when YOU get paid

You should know your yearly expenses now having completed the budget. Lets assume for this exercise that

your income is sufficient to meet the expenses you have come up with.

Lets further assume that some bills will fluctuate and there will from time to time be legitimate unexpected bills or costs. So whatever the yearly figure is add 10% to allow for such variances.

As an example, if you determine your yearly expenses are $40,000, add 10% to this figure for the remainder of the exercise i.e use $44,000 as an estimation of your expenses.

The next step is to then divide that yearly amount required for bills into a regular payment that fits in with your pay period.

If you get paid weekly, divide the annual figure by 52. If you get paid fortnightly by 26, monthly by 12.

As an example, if you determine to pay all of your expenses it is $44,000 per year and you get paid weekly you should put $846 a week to your bills and expenses account.

Step 4 – The Electronic Bill Buddy

This is the fun part. If done once and done properly, most of your bills will take care of themselves from now on. Using BPAY, Electronic transfer and Direct Debit you can make a lot of your regular bills a pleasure to receive because, if you do this step correctly, you will only ever receive bills for a very minimal amount or they may be in credit.

A lot of you will already use BPay or electronic transfer to pay your bills when they come. But here's the important part. Instead of waiting until the bills come, work out the payment amount and set up a regular deposit from your bills account to go every week, fortnight or month.

For example your rates are $1,400 per annum. You get paid weekly. So send $27 every week to the rates and when you get the bill, it will be, generally, paid up and for your records only.

So set up anything that can handle BPay, direct credit or direct debit on a recurring payment system that fits in with your pay period. You may also find that companies will offer an early bill repayment offer and

you could receive a percentage off your bill.

This will take a little time but is worthwhile and only needs to be done once and checked annually. My bill provider does not accept BPay or electronic deposit?

For anything that does not accept BPay or Electronic deposit, set up a direct debit from your bills account.

Failing that, your bills account should have enough in it when the bills arrive for the very limited few bills that don’t accept BPay, direct deposit or direct debit to be paid. Step 5 – Review

Lets face it, bills change. They don’t often change dramatically however. Like anything, this will need review. Once a year should be sufficient so once a year pull out your bills and just check they have not changed dramatically. The ones that have, adjust your BPays, add up the collective changes and review the

deposit to your bills account also.

Can I use this system for other things?

Short answer yes!

Lets be honest, if you look at your income and consider all the major bills, haircuts, groceries, holidays, Christmas presents etc you will likely find that most of your income is/can be accounted for.

Taken to the “nth” degree, having done the exercise above, it might be that you decide to take it to the extent of allocating all your monies to your bills account and instead, diverting an “allowance” to your individual personal account for “fun money” or “incidentals and entertainment” that you can unashamedly spend knowing that all your bills are accounted for.

This discipline can also be used on your mortgage account whereby the mortgage becomes the “bills” account, you give yourself your spending allowance, all major bills come from the mortgage and the

majority of your income goes into the mortgage. Speak to your broker or financial adviser if this appeals.

Cont- The non budgeters guide to budgeting- Brett Gilday

Disclosure: This document may contain information of a general nature and does not take into account your personal circumstances. Before acting on the information you should consider your circumstances and read any relevant Product Disclosure Statement

Picture this. You’ve recently retired, and you’re reasonably confident you’ll have enough savings to fund the comfortable lifestyle you’d always hoped for.

Then you receive a phone call with some bad news – your daughter has been badly injured in a car accident while travelling overseas. The doctors are saying she’s unlikely to walk again.

With the bills piling up, and your daughter set to be out of the workforce for an indefinite period, you invite her to move back into the family home. You ask whether she has life insurance to help finance her ongoing living needs, only to find out she’d never gotten around to it.

It’s a natural instinct for a parent to do whatever it takes to help their children when they need you. And luckily for the baby boomer generation, and your children, many of you have the financial resources to help out.

But what if ‘helping out’ meant you had to stay in the workforce longer, or cut back on your retirement lifestyle to help fund your child’s mortgage, medical expenses or living costs?

Or what if you had to provide for your grandchildren? What would that mean for your own financial situation

– both now and in the future? These scenarios may sound extreme, but consider the following statistics:

One in five families will be impacted by the death of a parent, a serious accident or illness that renders a parent unable to work#.

Two thirds of families with kids at home couldn’t meet their expenses beyond 12 months of the main

breadwinner having passed away†.

95% of families do not have adequate levels of insurance#.

Do your children have it covered?

Generations X and Y are comfortable with the idea of using debt to achieve their goals. And to get into the housing market, they often have to take on considerable mortgages, which can take a decent bite out of their

income.

Of course, all of this is sustainable when they’re working full-time. But if your children don’t have adequate protection for their income, their debts, and their dependants, they could be vulnerable to serious illness or injury. Their own families (if they have one) can also be considerably exposed if they die.

When you consider the maximum disability support pension available from Centrelink is only $670.90 per fortnight ($17,443.40 p.a.)^, an extended period out of the workforce could leave a big hole in their budget. That’s if they’re eligible for any government assistance at all. Qualification is based on the extent of their physical condition and is means-tested.

Talking to your children about life insurance

Many adult children will discuss their major financial decisions with their parents. Major events like getting married, buying a house, or even changing jobs are good opportunities to talk to your children about life

insurance.

One of the good things about taking out life insurance from a younger age is that premiums are often very affordable.

For example, a 30 year-old male clerical worker can take out $500,000 life insurance (with Total and Permanent Disability cover), plus $4,000 a month income protection, for around $3.00 a day (Source: OnePath Life Limited, ABN 33 009 657 176, AFSL 238341).

This cover will provide some financial relief in the event of serious sickness or injury. It will also make available a lump sum on death that may be used to pay off debts, medical bills or help the family meet ongoing living costs.

The best way to help your children get the right level of protection for themselves (and you!) is to encourage them to discuss their life insurance circumstances with Moneywise.

This information does not take into account your personal needs and financial circumstances. You should consider the appropriateness of the information

having regard to your objectives, financial situation and needs.

Do your adult children have a back-up plan (other than you)?