Every household has debt of some sort. Getting control of this debt is critical to getting ahead financially in life.
We've put together a short video clip of 8 tips and points to help you.
CLICK HERE to watch the video.
Thursday, 12 July 2012
Wednesday, 11 July 2012
5 Tips for Financial Success
Tip 1: What's right for you is not right for someone else.
The biggest tip is to ignore the hot tips and helpful hints you might hear from friends, family and even the media, and chart your own course. Your decisions need, first and foremost, to be about your time frame, age, risk appetite (read "willingness to lose your money") and your reasons for investing - the early retirement, the boat, the trip to Antarctica.
Once you have a clear picture of those things, you can set about dividing your money into appropriate portions across a range of assets along the risk continuum.
Tip 2: We all make bad decisions, and when money and emotion are together, it gets worse.
Once you have split your portfolio among the asset classes (then split it further among a big enough selection of top investments within those assets), you need to do your best to leave it there. Not necessarily in particular investments, but definitely in the assets.
You need to get a grip on your fear and greed so you are not panicked into selling at the bottom or lured into buying at the top.
Tip 3: Regular and early saving is your ticket to future wealth.
Let's say you manage to stash away $100 a month from age 30 - that's probably the equivalent of cutting out one coffee or sweet treat a day - and earn a pretty realistic 6 per cent average return on it. By 55, you'll have more than $70,000. Better still, what you have actually squirrelled away represents less than half that figure - most is earnings during that time. But wait 10 years before you start and to reach the same balance, you'll need to save $240 a month. You'll have to save $43,000 of your ultimate $70,000 yourself.
Procrastinate another decade and you'll need to find a painful $1,000 a month to total $60,000 of your $70,000.
The sooner you start, the easier building wealth is. And the less you have to rely on big returns - and the extra risks they entail - to get you across the line.
Tip 4: Debt is like quicksand.
One of the best money moves you'll make is to get rid of personal debt. That means credit cards, personal loans and mortgages - anything for which you don't earn tax deductions. This is a tax-free, risk-free effective return equal to your interest rate, which - on even the cheapest form of debt, your mortgage - will be higher than you can earn in a savings account.
If you're on the top tax rate, you would need to earn about 11 per cent on an investment for that to be a smarter strategy than simply paying down your mortgage (based on a 7 per cent variable rate).
Tip 5: You've got to be in it to win it.
There is a real danger right now that investors who have been burnt the most in the market downturn of the past five years will struggle the hardest to rebuild balances.
This will happen if they become too risk-averse and shelter too much money in low-risk, low-return investments to preserve what's left. Sure, every portfolio needs this component to anchor returns. But after inflation and tax, it can be very unrewarding indeed.
Please note that nothing in this post constitutes financial advice and you should seek the advice of a professional licensed under AFSL regulations.
The biggest tip is to ignore the hot tips and helpful hints you might hear from friends, family and even the media, and chart your own course. Your decisions need, first and foremost, to be about your time frame, age, risk appetite (read "willingness to lose your money") and your reasons for investing - the early retirement, the boat, the trip to Antarctica.
Once you have a clear picture of those things, you can set about dividing your money into appropriate portions across a range of assets along the risk continuum.
Tip 2: We all make bad decisions, and when money and emotion are together, it gets worse.
Once you have split your portfolio among the asset classes (then split it further among a big enough selection of top investments within those assets), you need to do your best to leave it there. Not necessarily in particular investments, but definitely in the assets.
You need to get a grip on your fear and greed so you are not panicked into selling at the bottom or lured into buying at the top.
Tip 3: Regular and early saving is your ticket to future wealth.
Let's say you manage to stash away $100 a month from age 30 - that's probably the equivalent of cutting out one coffee or sweet treat a day - and earn a pretty realistic 6 per cent average return on it. By 55, you'll have more than $70,000. Better still, what you have actually squirrelled away represents less than half that figure - most is earnings during that time. But wait 10 years before you start and to reach the same balance, you'll need to save $240 a month. You'll have to save $43,000 of your ultimate $70,000 yourself.
Procrastinate another decade and you'll need to find a painful $1,000 a month to total $60,000 of your $70,000.
The sooner you start, the easier building wealth is. And the less you have to rely on big returns - and the extra risks they entail - to get you across the line.
Tip 4: Debt is like quicksand.
One of the best money moves you'll make is to get rid of personal debt. That means credit cards, personal loans and mortgages - anything for which you don't earn tax deductions. This is a tax-free, risk-free effective return equal to your interest rate, which - on even the cheapest form of debt, your mortgage - will be higher than you can earn in a savings account.
If you're on the top tax rate, you would need to earn about 11 per cent on an investment for that to be a smarter strategy than simply paying down your mortgage (based on a 7 per cent variable rate).
Tip 5: You've got to be in it to win it.
There is a real danger right now that investors who have been burnt the most in the market downturn of the past five years will struggle the hardest to rebuild balances.
This will happen if they become too risk-averse and shelter too much money in low-risk, low-return investments to preserve what's left. Sure, every portfolio needs this component to anchor returns. But after inflation and tax, it can be very unrewarding indeed.
Please note that nothing in this post constitutes financial advice and you should seek the advice of a professional licensed under AFSL regulations.
Thanks to Nicole Pedersen-McKinnon and SMH for the R&D
Monday, 2 July 2012
Cash Economy - Are you in the ATO sights?
It's the start of a new financial year, and that means new attacks by the ATO.
The ATO are undertaking more checks and data-matching on those businesses which fail its benchmarking tests or which they suspect are operarting in the "cash economy" and may not be reporting all their income.
They are doing this by looking at the business income and then whether in their opinion it is sufficient to support the family of the owners. A business that makes continuing cash flow losses will also be in the enquiry line, wondering if the business is in fact a business but also if the losses are because cash income is not reported.
In terms of a business having sufficient income to support a family, the ATO have a couple of versions of a personal living expenses worksheet on their website. These are part of what is used to determine what is a sufficient level of income. There is a concise version (http://www.ato.gov.au/download.asp?file=/content/downloads/BUS00195974n72960_01_11.pdf) and a comprehensive version (http://www.ato.gov.au/download.asp?file=/content/downloads/BUS00195965n72959_01_11.pdf). If you think you may be in the ATO sights then use these to see what level of income the ATO will be looking for.
There are also cross-checks done are to see if purchases are being made which aren’t consistent with income (the old asset improvements test), and will include;
- Loan payments to banks and finance companies
- Vehicle purchases and registrations
- Boat purchases and registrations
- Property purchases
The upshot is that as a result of audits carried out, the average payable has been $40,000, a combination of income tax and GST.
If you get a call from the ATO making enquiries along these line, make sure you answer the questions or direct the call to Cliftons, as a failure to respond will lead to an audit.
It's imperative that you are fulfilling your obligations and know where you stand, particularly with;
- Bookkeeping and record-keeping requirements
- Reconciliations between till takings (z-totals) and banking
- Consequences of failure to report all income (penalties, fines, interest, additional tax, additional GST)
- Consistency of business income between prior and current years, and with reference to lifestyle
- Reference to the personal living expenses worksheets.
If you want further advice on the above points
please do not hesitate to contact Clifton Accountants
Bomaderry 02 4421 5866 Bowral 02 4861 2811
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