There has been a lot of discussion in the media recently about volatility in global share markets, however the fact is that periods of market volatility are a fairly normal part of the investment cycle.
While it might seem a strange idea at first, risk is an essential part of investing; it’s simply the chance that what a particular investment actually earned (the return), could be less or more than expected.
A low-risk investment can provide the comfort of greater certainty of achieving its targeted return, while higher levels of uncertainty about how an investment will perform, generally means that an investment carries higher risk.
Risk and return
Generally, lower-risk investments are associated with lower returns, while higher-risk investments give the possibility of higher returns.
However, there are no guarantees when it comes to investing. While everyone would like higher returns, not everyone can handle the uncertainty that may come with a riskier investment.
How prepared you are to accept changes in your investment returns — including potential losses — will help you understand what’s known as your risk profile, or tolerance.
How much risk are you comfortable with?
Everyone’s risk tolerance is different depending on their own personal circumstances and mindset, so think about your risk tolerance before you make your investment choice. Are you the kind of person to lie awake at night worrying about a downturn in the market, or you can comfortably live with some market fluctuation?
So how can you work out your risk profile? Well many super funds provide an online risk profiler or calculator that make is super easy to work out.
These risk profilers can help you to clarify your:
- investment goals and timeframe
- experience level as an investor
- tolerance of a potential short-term fall in the value of your investments
Based on your answers to these questions, the profilers typically will also indicate your investor type.
These investor types can include:
- Cautious — typically invests over a shorter timeframe (three years or less), seeks lower-risk investments and, in exchange, is willing to accept lower returns
- Assertive — generally invests over a five years + timeframe, is prepared to accept some short-term changes in returns, or moderate risk, as seeking slightly higher returns than a cautious investor
- Aggressive — invests over longer-term (10 years or more), more comfortable with short-term fluctuations in investment performance, as aiming for higher long-term returns.
Super funds will typically match the investment options they offer to an investor type, so you can more easily see which option might better suit your personal circumstances.
Before changing your investment strategy, it’s worth considering getting advice. HESTA members can access advice — including about their investment strategy — at no extra cost.
It’s worth checking with your super fund about what advice they offer. Having a chat to a super expert at your fund can be a great way to get to know more about your investments and what type of investor you are.
Issued by H.E.S.T. Australia Ltd ABN 66 006 818 695 AFSL 235249, the Trustee of Health Employees Superannuation Trust Australia (HESTA) ABN 64 971 749 321. This information is of a general nature. It does not take into account your objectives, financial situation or specific needs so you should look at your own financial position and requirements before making a decision. You may wish to consult an adviser when doing this. For more information, call 1800 813 327 or visit hesta.com.au for a copy of a Product Disclosure Statement which should be considered when making a decision about HESTA products.
Did you know Australians are over $200 billion ahead in their home loan repayments? Over 70% of home loan payers are actually ahead in their repayments and are in fact more than two years ahead of schedule.
It is often not one reason as to why they are ahead but rather a number of little ways that people accelerate their repayments. Here’s some tips so that you too can get on the accelerated home loan wagon and pay off your home loan sooner …. after all, every little bit counts and better in your pocket than the banks!
- Shop Around. If you have an owner occupied property, now is the time to really negotiate a fabulous deal. There are plenty of lenders who are offering variable and fixed rates for under 4%. They key to this though, in order to pay your home loan quicker, when you do refinance is to keep repayments at the original level. As tempting as it may be to have more money in your wallet every month, by having the same repayment at a lower rate, there is more of your repayment actually paying of the principal and not just going towards interest.
- Pay Fortnightly. Paying fortnightly can save you 5-6 years off your home loan. That’s right, years. There are 12 months of the year but there are 26 fortnights. By paying fortnightly you are in effect paying 13 months off your home loan every year. The savings over the life of the loan is between $40,000 – $50,000!
- Pay an extra $10 / week extra off your home loan. On a $500,000 home loan and at a rate of 4.5% by paying just $10 / week extra, you can shave 12 months off your home loan and save you just over $15,000 in interest.
- Don’t reduce your home loan repayment when the RBA reduces the cash rate. If you maintain your repayment at the original level when your loan commenced it has two positive effects on your home loan. Firstly, you are paying off more principal on your home loan but secondly when rates actually rise again, you will not notice any repayment increase or pain. For example: If your $500,000 home loan 3 years ago was 5.5% with a repayment of $2,839 (interest component is $2,292) and if your rate is now 4.09% the interest component has reduced to $1,704. By maintaining the $2,839 repayment, you will then be paying off $1,135 / month off your home loan. If you paid an extra $1,135 / month off your home loan every month form year three for the life of the loan, you would save a whopping 12 years off your mortgage and $150,000 in interest alone!
- Use an offset account to reduce the interest you pay. Interest is calculated daily and charged monthly. For every single day that you have money sitting in your offset account you are reducing the interest you pay. This requires a little more discipline – no impulsive spending allowed here! If you have $10,000 in your offset account you could be saving yourself just over $30 / month in interest on a $500,000 home loan. $30 / month extra in repayments is a further 8 months off your home loan and $9,280 interest savings.
A combination of a few little things can certainly help you achieve greatness. See what you can do to get your home loan down!
Do you feel like you’ve got a handle on the basics of budgeting and now want to get savvy with your money. Really savvy? Like, investing in stocks and shares, savvy? Not sure quite where to start? Well, you’re not alone!
This is our Beginners Guide to stocks and shares for those of you who are ready to take that leap into this whole new world.
This video explains the basics behind investing in shares. Our ASX experts share insights into when, why and how you might use shares to form part of a diversified investment portfolio, where to find further information and what to look out for.
What are shares?
When you buy shares in a company, you are buying a part of that company. This means you share in the company’s performance in the form of profits which can be given to you as dividends and/or capital growth through the value of your shares increasing. Companies generally list on the stock exchange to raise capital for their company and to create a market in their shares. Companies you invest in benefit by using your money and that of other investors to finance their business or its expansion, without having to borrow money.
Shares are an important part of an investment strategy. Being good at investing in shares is about being informed, monitoring your share’s performance on a regular basis, keeping an eye on your goals and investment strategy and participating in ongoing education as you need it. Shares may also be referred to as stocks, securities or equities.
What are the Risks and Benefits?
Investing in shares will make you part-owner of a business. Shares can be a sound long-term investment to build wealth over time but are very risky to use in the hope of making a quick buck.
Before you invest in shares, you should understand the benefits and risks, think carefully about your options and seek financial advice before you enter the market.
The benefits of investing in shares are:
- Potential capital gains from owning an asset that can grow in value over time
- Potential income from dividends
- Lower tax rates on long-term capital gains
The risks of investing in shares are:
- Share prices for a company can fall dramatically, even to zero
- If the company goes broke, you are the last in line to be paid, so you may not get your money back
- The value of your shares will go up and down from month to month, and the dividend may vary
Can I Borrow To Invest In Shares? Margin Loans Explained
A margin loan allows you to borrow money to invest. The margin loan is secured against the investment you make with it and/or other investments you have. You’re not allowed to borrow the full amount of your investments but just a percentage called the LVR – Loan to value ratio. This is usually between 30% and 70% of the value of your investment in shares or managed funds.
Using a margin loan, or borrowing to invest, can be a very effective strategy to build your wealth, but it’s not for everyone. You need to have excess income, be a savvy investor and happy to take risks. Because you’ve more money to invest, your investment gets a ‘turbo boost’ and gains are magnified. But if your investment loses money, losses are magnified too. Not only have you made a loss but you still have to pay back the loan. Be aware of borrowing to invest in a volatile share market environment, get financial advice and have a strategy in place for meeting a margin call.
Flick through the ASX Investing in Shares Booklet. With a friend or in your GIG or online Money Makeover group, discuss shares. Use the points below as conversation sparks.
Approach – how and where to start
- How much is a minimum amount needed to start investing in shares?
- What online trading platforms exist? How do they work? eg. CommSec, E-E*trade, nabtrade…
- What is trading? What kinds of trading is there? eg. define ‘day trading’, ‘options trading’
- What is the difference between ‘trading’ and ‘investing?’
- When is a good time to invest in shares?
- How much does it cost to start? Online fees, full service brokerage fees
- Why would you sell?
Discuss the following terms:
- International vs Australian shares
- Employee buy-in schemes
- Reinvesting dividends (pros, cons, how to’s)
- ‘Set and forget’
What does a share trading success story look like? Think about good and bad attitudes and behaviours.
Want to learn more about ethical investing? Click here for a guide.
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Learn online with a group of fun and intelligent women just like you! Click here!
RESOURCES & REFERENCES
We all know the benefits of goal setting – focus, clarity and hopefully, success.
Yet the real benefits of setting financial goals go well beyond the increased chance of achieving them.
Benefit #1: Helps to Review Your Here and Now.
The first thing that financial goal setting does is allow us to review where we are now.
Many of us feel uncomfortable, apathetic or not in control of our financial affairs. When this happens we tend to avoid opening the bank statements or reading the pay slip. When we set a financial goal around debt repayment or saving for a particular item, it gives us an added incentive to get to grips with what we earn, what we spend, what we have and what we owe. This process also tends to highlight to us what we don’t know and give us the opportunity to fill in some gaps. When it comes to finances information is power.
Benefit #2: Focusing on your Priorities
The second benefit is about focusing on our priorities. Few of us have simple wants and desires. Chances are you want to work less, earn more, have more, owe less, be carefree spending more today and have peace of mind that you’ll have everything you need tomorrow.
The act of goal setting gives us the opportunity to be realistic about we can achieve and to prioritise those wants and needs.
When you are feeling overwhelmed one of the most powerful things you can do is take a paper and pencil and write down everything you want. You write and write and write until there is no room left, until you can’t squeeze anything more from your head and onto the paper. By seeing these things written down, you have a visual representation of the hidden expectations you carry around. You can then acknowledge that it’s not realistic to have them all, or to have them all now. What you can do is pick one or two of the most important wants and work towards those. Focusing on a couple of goals instead of a lengthy list will make you more likely to achieve them and reduce the chance of getting discouraged and giving up.
Benefit #3: Managing Regret
The third benefit of goals is about managing regret. When you pursue one goal, chances are you are giving up (or delaying) the opportunity to achieve another. You’ve decided to focus on getting out of debt and that has meant you’ve said no to the weekend away with your girlfriends. Or you’ve decided to further your career prospect through further training, but that’s delayed your ability to save for your deposit. We will always get moments of regret and longing for things we wish we had done or not done. But knowing that your choices are furthering your chosen financial goals will help you deal with the downside.
Benefit #4: Learn New Skills
The fourth benefit are the invaluable skills, knowledge and habits you gain, that will percolate throughout other aspects of your life. The experience of negotiating with your bank to consolidate your credit card debt might come in handy when having to raise difficult conversations at work. Getting your superannuation sorted by understanding fees and investment options may help you be more confident and informed when going to apply for a home loan.
The act of budgeting and managing your spending may make you more mindful of social justice issues as well as the environment impacts of consumption.
The final word goes to Henry David Thoreau, an American author and philosopher of the 1800s who shared with us this wisdom:
‘What you get by achieving your goals is not as important as what you become by achieving your goals.’
About Rhiannon Robinson:
Let us Help You Transform your Finances!
Hi, My name is Veronica! I am a happy mama of three, a freelance voice and performance coach, a small business owner and now debt free and well on our way to saving for our first property.
My husband and I welcomed our lovely children in our early 20’s, and being young meant that our careers were yet to blossom, we lacked the discipline it takes to grow financially and needless to say, we hadn’t a clue how to budget! We were limited financially and ideally, my husband and I should have taken on full time jobs in order to support our family. But I had dreams of the kind of parent I wanted to be. I wanted to earn a living without compromising the time I wanted to spend raising my young ones and the same went for my husband. Simply put, we wanted to be there while our children were small and this took priority over securing our careers. We knew that in order to maintain that lifestyle, we had to work as freelance parents.
I was working and studying as a singer and musician and instantly fell in love with teaching. This worked very well for me, not only because I loved it, but also because I was able to work from home, often after bedtimes or at nap times. Over 11 years, I have since grown my home studio into a small business in Canada Bay, with four teaching staff and a small musical community of over 100 students. I now earn a passive income on top of my freelance work, which is wonderful, and the feeling of contributing to the young people around my community is priceless. However the path to get here has not been easy. Raising small children on two freelance incomes in Sydney was a week-to-week ordeal. We were using credit to live, paying things off when we could, only to use it again when a ‘big bill’ would come in the mail. This really spiralled us into a pretty dark place financially, which was not too friendly on our marriage to say the least! I do believe in hindsight that the more in debt we got into, the more nonchalant we became with our spending. Getting out of debt was not a priority however I also knew deep down that our financial worries would be temporary. Children grow, start school, and with that, I knew I would have more time available to work and when that time did come, our finances became a lot more stable.
# 1: Treat your debt with a positive mindset and with gratitude
This is a concept I learned from financial author/motivator, Suze Orman. It was not until I wrapped my head around the concept of respecting money and treating our debts with respect that our debt started to decrease. I think that for young families, money is sentimental. It means nourishment for our children, warm clothes, a trip to the zoo. I began to ‘thank’ the money that would come in, no matter how small. If I found a five cent piece on the floor, I thanked it. I changed our banking password to words of gratitude. I wrote ‘Thank you for this money’ on the underside of my wallet. I also wrote a huge ‘thank you for our debts’ manifesto and stuck it to my dresser in order to remind me that this borrowed money saved our family out of some desperate situations (and one overseas holiday, which we thoroughly, guiltfully enjoyed!). These were a constant reminder to switch my mindset from ‘Ugh, not another credit card bill, blegh!’ to ‘This money is precious, this money represents hours of work and resources, a roof over our heads, a warm blanket in winter, a memorable family event…’.
This is the single most powerful thing we did to change our financial outlook for the better, hands down. When you learn to respect money, treat it like you would a good friend, it returns the favour! When you respect that your debts are there because a little plastic card came to your rescue during a tough period in your life, it makes it easier to be humble, to stop treating debt with such negativity and to switch your mindset to one of gratitude. It is so much easier to get on with the task of getting rid of the debt when it is not such an emotional chore to do so.
# 2: Make more money
It is very difficult (impossible) to get out of debt when there isn’t enough surplus to increase your minimum payments. We worked very hard to increase our freelance income and set our careers towards a brighter trajectory. My husband worked overtime, while I worked every available moment on my business. I saw clients during school hours, after bed time hours and Saturdays, and worked on my business presence and admin late at night. I also loved making extra (tax-free!) income by selling things on eBay and having frequent garage sales. When you treat it like a game, it can be a ton of fun! There are many avenues to make extra money. I wish that fiverr.com or Airtasker were around a few years ago, as I most definitely would have used those websites to drum up extra cash!
# 3: Decrease spending
What we’ve learned is that with some preparation and organisation, decreasing spending is actually very easy.
- Food is the biggest expense for a family, so learning how to cook nice meals, stocking a freezer and eating healthily means less expensive packaged food (and is better for you too). Making menu plans and freezing food after a cook up with the kids saves hundreds of dollars a month and is a great way to spend time with young children.
- Holding BBQ’s with friends at home instead of going out.
- Shopped (and still shop) at Aldi and fresh food/fruit markets as much as we could…you really notice a difference in price!
- Negotiated our credit card interest rates down and calling them often to bargain them down even more.
- Use a pre-paid phone sim (Amaysim is the cheapest and the best!)
- Buying second hand where we can (having a love of vintage old things helps!)
- I also make my own ‘cheapskates.com’ laundry powder!
- Use very cheap and simple cleaning items such as vinegar, baking soda, lavender and dish liquid.
# 4: Have a money date
As a couple, we changed the way we discussed about money (see #1), and now at every ‘pay day’, we pour a glass of red, sit in front of the telly, and casually chat about where our money is going that week. I vowed to make it simple and easy. Sometimes the candles even come out! It makes the chore of discussing money into something special. Having a money date is so important as it means we can keep a close eye on where funds are going but also celebrate each time we paid a chunk off our debts. As our statements became smaller and smaller, our money dates became a lot more fun and our confidence and excitement grew, but at the beginning it was not easy and if other couples are in the same predicament, expect a few bad nights (more wine!). It is not nice seeing a chunk of your hard earned money go towards debt, however, remind yourself that when in debt, there are only two choices: Pay it off now, or keep paying forever. They are two sources of pain, yes, but at least one has a happy ending! It won’t disappear on its own!
# 5: Budget to zero and use cash for general living expenses
We have a very conservative budget and take all of our general living expenses (such as groceries, petrol and fun money) out in cash. No cash, means no spending! We then allocate the remaining funds into a high interest savings account (at the moment, RAMS have a very good high interest savings account) and other bills are paid online until there is zero left. Our electricity and gas bills are paid in increments every week, so that we never have to pay a large bill. When we were in debt, what now goes into savings went to our debt, where we paid off the highest interest rate debt first, and then ‘snowballed’ to the next debt. Anytime we had a windfall (such as a tax refund or a big eBay clear out!), we would use the money towards debt. After two years, we paid off 4 credit cards, one personal loan and one car loan!
# 6: Read books and blogs about finance and/or business
Getting educated about money is inspiring, motivating and just makes sense. Unfortunately, being financially responsible is not a skill you learn at school! There are so many tips and tricks from people that I have picked up along the way. Obviously, 10thousandgirl is a blog to trawl through! Suze Orman’s ‘The courage to be rich’ was a game changer for me. We are now able to finally plan our future and are vigorously saving, which is quite easy as we’re so used to living within a small budget. Although we’re no longer as strict on our budget (we allow the odd un-budgeted spend and do it guilt free). We hope to purchase our first property within the next 12 months, expand my business even further within the next 3 years and are now able to plan for our future without a large debt to hold us back. It is worth every ounce of discipline and hard work!
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Preparing a budget can help you get on track to reach your financial goals. Knowing you’re spending within your limits can also remove a lot of stress from your life. Being in control means you can enjoy that occasional splurge without the guilt.
So, how do you get your budget in order?
- Gather your financial records for an entire year. It’s best to look at the whole year since expenses and income can vary a lot. Helpful documents can include bank statements, credit card bills, mobile bills and payroll documents.
- Find a tool to use. You can create a simple spreadsheet, or have a look at some of the budget tools on websites like Moneysmart.gov.au.
- Start with income: include all the money you’ve been paid over the past 12 months to understand your annual earnings.
- Add up all of your expenses by category: housing expenses, insurance, taxes, groceries, going out, shopping, petrol and commuting, medical, children, vacations and any other major categories. Using categories makes it easier to see the patterns.
- Estimate what you’ll earn over the next 12 months by month based on the past year, and by thinking about any changes such as raises or changes in hours.
- Project your expenses honestly for each month. Don’t assume you’ll spend less than in the past less unless you have a clear way to make that happen.
- Subtract expenses from income to look at your net inflow or outflow for each of the next 12 months. From that, set yourself a reasonable, achievable savings goal for each month. Write this down at the bottom for each month!
- Print out your budget and keep it in a safe place. At the end of each month, take a look and compare to reality. If you’ve reach your savings goal, give youself a major high-five! If it’s not working the way it should, set yourself some specific goals to change your behaviour and spending and get back on track the next month.
Budgeting is not about putting a noose around your neck, it’s about putting you in control of your finances, understanding your financial position at all times to ensure you are making informed decisions.
Modern life can be overwhelming so when it comes to making a financial plan many of us simply can’t find the time to sit down and go through it; and when we do, we’re not really sure where to even start!
Finding the time to sit down and do a budget is vital to ensuring peace of mind around your future.
The budgeting process is valuable as it will allow you to separate your income into various areas. Many years ago our Grandparents allocated their weekly earnings into various jars or envelopes and only spent the remainder on food and little luxury items, this ensured all bills were paid on time.
Any good budget and planning starts with having a crystal clear understanding of your income and expenses. This is vital because you know then the amount of surplus you have to work with to direct towards future planning. The process of understanding incoming and outgoing money is that you can see, clear as day, the areas that need your attention and reviewing.
Warning Signs you Need to Start Budgeting
If you use credit cards and are not able to clear the balance every month than this is a clear indication that you are spending more than what you are earning, you should cut up your credit card to eliminate temptation.
Do you have debts/loans are you able to make extra repayments, clearing the debt in a shorter time frame and saving yourself thousands of dollars, or are you overdue in repayments?
These are clear warning signs that you are not managing your finances well.
Budget Set-Up and Monitoring
Budgets are best managed in excel spreadsheets to easily enable changes. There are also many online tools and apps available; Google ‘Free Personal Budgets’ and choose one you are comfortable using.
Here’s an example of a double income household and their budget. No matter your circumstances, the same concepts apply.
The Jones’ receive a combined Net Income of $3,500 fortnightly
Step 1: Allocate your income into various accounts. All commitments need to be allocated and funded prior to any discretionary spending.
- Mortgage $1,200
- Credit card debt $150
- Bills account $600
- Christmas club account $50
- Super $400
- School fees $190
- Weekly expenses $650
- + Savings $260.
Step 2: Use different accounts/direct debits and pay bills
Separate money into various accounts will make budgeting easier, set up direct debits and periodical payments and pay all bills automatically. If you structure your cash flow correctly you will only need to worry about your weekly expense amount, this account funds food, petrol, birthdays and clothes.
Any item that you can do without or reduce, you will find you will make more conscious decisions regarding purchases. Saying no to a few more smaller items will ensure you have savings for emergencies, holidays and luxury items.
Step 3: Consider Your Future
Budgeting will give you a good indication of what you need in your retirement so that you can enjoy a similar standard of living as today. The government site, Money Smart, has a retirement planning calculator to help you work this out.
Step 4: Is your Super really Super?
Planning for your future means keeping a close eye on your Superannuation account. Ask yourself these questions to ensure that it is on track and working hard for you:
- Do you know what your current super balance is?
- How often do you check it to find out how much your balance is growing?
- How are your funds invested?
- Is this in line with the amount of volatility you feel comfortable with?
- How has your superfund performed?
- Have you considered whether the type of fund you have is the right one for you?
- Do you have the ability to choose a super fund of your own choice or did you go with the default fund as it was too hard at the time?
- Do you have more than one super fund?
It is important to keep track of how your fund is performing so that you know whether you are on track to achieve your financial goals.
If you are not managing your finances well and are not aware of how your super is performing or what your options are than alarm bells should be ringing!
Step 5: Get Help if you Need it!
If you are not a financial whiz than it is a good idea to seek the advice and guidance of a Trusted Financial Adviser, who has a wealth of information and experience. They can help you with managing your cash flow and implement a financial strategy to help you achieve your financial goals and then ensure that it is managed and reviewed regularly.
It’s never too late to start getting financially healthy, your future self will thank you for it.
Find out more about Christine, here.
Unless you talk money with your friends or colleagues, it can be really hard to benchmark yourself against others to see how you’re faring:
- How much should I have saved?
- Is $5,000 in credit card debt that bad?
- Should I know where my superannuation is?
All of these are very legitimate questions but I’m guessing you don’t want to ask your parents about your credit card debt (which took you on a pub tour of Europe last summer!).
You may be a student with a part time job or about to set off on your full time career so there’s no better time to get your head around what to do with your money from now on.
Although you may not be earning a six figure salary and feel like you’re struggling, this is the time to really save and save hard, especially if you’re living at home or paying cheap rent.
Saving 20% of your income would be an ideal proportion to put away, especially if you want to own a property in a major city in your 30s, which currently requires a $113,000* deposit i.e. 20 per cent of the average capital city property price.
This is also a great time to create good habits like setting up an automated savings payment into a separate account so it’s ‘out of sight, out of mind’ but doing nice things for you like earning interest, on the side.
If you have credit card debt, try and get rid of it ASAP, that means, put any extra money towards it, even if that means forgoing savings. You’re being charged, on average, 17.58% on your balance and that’s getting bigger and bigger with each bill if you’re only paying the minimum amount.
If you’re surviving with a debit card, keep it up! A Debit card still let’s you shop online, book airline tickets, etc. so there’s really no need to use credit, especially if you don’t have any!
TIP: There are some great fee free debit cards out there and some even give you cash back on spending or free ATM access.
If you have a loan, it’s likely a personal loan for a car or holiday and that’s okay but paying it down needs to be prioritised. Set up a Direct Debit payment so you never miss a payment. The ramifications of late or missed loan payments not only cost you in ‘late fees’ now, but can have a big impact on your credit history down the track.
You may not realise this but you start paying superannuation as soon as you start working. Your employer automatically takes it from your pay and from that point, you’re building your retirement nest egg. With every job can come a different super fund so to save yourself money and the headache, choose one provider and stick with it, by choosing it with every new job. This means you’re only paying one set of fees and it’s much easier to keep track of.
Tip: To track down any lost super, use the Government’s FindMySuper website.
*CoreLogic RP Data Property Value Index. $565,000 is the average dwelling cost across all capital cities (1 July, 2015).
By Kirsty Lamont
“Mozo is all about you saving money. We help more than 300,000 Australians find a better banking or insurance deal each month.”
The idea of “spring cleaning” usually makes us think of a freshly aired, spruced-up home. But spring is also a great time to take a fresh look at your budget and do some cleaning out. There’s no better time to get out of the winter funk and take on some new budget-friendly habits. Here are a few of our springy favourites:
- Plant a garden. You’ll be amazed what you can grow in just a couple of pots on the balcony: chillis, green onions, and loads of herbs. Invest in a few dollars worth of seeds at a garden centre and you’ll be set for the whole season.
- Feast on seasonal produce. Learn what’s in season and make the most of it. Lots of fruits and veg will soon be very good value. Watch the catalogues from your local store and stock up as we’re treated to fresh avocados, asparagus, and zucchini and plenty of others.
- Give a helpful gift. Instead of buying a gift, give a gift voucher for garden help, spring cleaning help, or taking the kids to the park. Friends will appreciate the kindness and you’ll get the benefit of fresh air and exercise.
- Cut the gym expense. When spring arrives, there’s no excuse for not exercising! Make the most of your local parks and walking tracks. Many have fitness stations that can ensure a very complete (and free) workout as you go.
- Enjoy the garage sales. Many neighbourhoods will coordinate sale days. What better way to go for a healthy spring wander and look for bargains?
- Drink water, just plain water. Forego all the expensive bottled beverages and make water your go-to drink. If you don’t love the taste, invest in a simple water pitcher with a filter which will pay for itself within weeks.
- Walk to work. If you’re within a few kilometres, pick a day or two per week when you’ll walk to and from work. Commuting can cost more than we realise and is a great place to look for savings.
- Free events in town. Check out your local paper or council website and find the local markets, concerts and kids events. Make dates with friends to attend and fill your calendar with free, fun local social outings.
- Volunteer! If you’re still looking for budget-friendly ways to get out, look for volunteer opportunities. Help out at a local roadrace, join a clean-up effort at a park or volunteer at a local festival. It’s a great way to get free admission and give back at the same time.
Want to get truly financially empowered? Check out our Money Make-Over Events, here.
Spring is a time when lots of people decide to jump into the property market. The first step is often browsing the listings and checking out a few open houses in the target neighbourhoods. While that’s interesting and exciting, it’s actually not the place to start. What should you do before you head out on a Saturday morning?
- Step one should always be budgeting. It’s important to think about the budget in two ways. How much can you realistically have ready for a deposit? And how much can you truly afford on a monthly basis? In both cases, you’ll need to have a real sense of current income and expenses, and how much cash you want to retain as a rainy day fund.
- Understanding upfront costs is a very important second step. Educate yourself about stamp duty in your area, likely inspection fees and general costs to establish a mortgage. Make sure you allow for these costs when you calculate your potential deposit. If you need help with this step, it might be a good time for an initial conversation with a mortgage broker.
- Figure out how much you can borrow. Most of the banks and mortgage providers have calculators on their websites. By inputting your downpayment and monthly budget, they’ll show you the options and total price you can afford.
- Research any additional sources of funding. From time to time, there are additional sources like first time home buyers grants. Council and state websites often have information about these.
- Then it’s time to choose a bank and a home loan option. Working through a mortgage broker, or directly, have a look at the offers on the various websites, or use a comparison site like Mozo and decide which banks are your top choices. Remember to look at all of the costs including interest rates, establishment fees and any ongoing fees.
- Make contact with the bank, either directly or through your broker and begin the process to obtain a pre-approval letter. This is a formal document issued by the bank that you’ll take with you to auctions to show you can cover the price of the home.
- Identify a lawyer you’ll use for the process. Often your friends and family have recommendations or a broker might be able to help.
Then, you’re really fully prepared. You’ll have a sense of your price range, and you’ll have a support network in place to act once you see that dream property. With that, it’s really time to get out there and have a look!
Want to get truly in control of your finances and reach your BIGGEST life goals? Check out our Money Make-Over events, here.
Amy took a 10thousandgirl make-over course in Sydney. She was in credit card debt but managed to turn herself around, eventually paying off all her credit card debt and buying her own apartment! Pretty good huh?
Here’s how Amy did it.
Here are her four biggest lessons from her experience:
- Try to work out a way that you can earn more, either by working towards a promotion at work, a second job, commissions and bonus’, renting out a spare room, downgrading your current home etc.
- Try to live within your means:paying of credit card debt for things you bought ages ago is no fun.
- Being organised is such an important part of being financially fit, I do my tax return on time, keep my receipts in order, do my healthcare claims and work expenses as I go along, so that it doesn’t all pile up and become a bigger job than I can, or want(!) to handle.
- Surround yourself with smart, likeminded people that inspire you and can also lend a helping hand as you venture into new financial projects.
It seems like everyone is talking about the sharing economy as a way to supplement their income and make the most of their resources. It can be tempting to turn that spare room into a source of cash. But should you start chasing income as an AirBnB host? Or is it better to go the old-fashioned route and get a roommate?
AirBnB is great for some situations. For example, if you’re going overseas for a couple of months and will only need a tenant for a short time. But it’s also a serious commitment.
Some things to consider before you sign up as an AirBnB host.
- Make sure you understand the rules of your building and area. Check your lease to see if short-term sublets or tenants are allowed. There may also be council restrictions, so do your homework first.
- Then check into your insurance. While AirBnB provides some coverage, you’ll need personal liability and possibly coverage for any valuables in your home.
- Make sure your property and listing is up to the standard required. If you’re charging only a small amount for couchspace, and pricing it the same as the local backpackers, you can get away with very little. But if you’re charging rates comparable to a B&B or small hotel, you’ll need quality linens, amenities like wifi and coffee, and very responsive communications with prospective customers. This can mean near-constant monitoring of inquiries and lots of back-and-forth to answer questions.
Be realistic about the financial potential.
- Have a look at similar listings in your area. Assume you might only have occupancy for a portion of the time. You can see how other hosts are doing with future bookings to get a sense of this. Factor in all of the costs including the 3% that AirBnB charges and any incremental costs for cleaning, utilities or supplies.
- When you add it all up, calculate the true bottom-line monthly benefit. Compare to the weekly rent you’d have to get from a roommate to achieve that same result. If that starts to look like the easier, less stressful option, perhaps better to keep things simple and find a reliable roommate instead.