5 Valuable Financial Skills I Wish Were Taught at School

5 Financial Skills I Wish We Were Taught In School

What I Wish We Were Taught In School

Remember when you were sitting uncomfortably in your poky school desk, harsh square chair jabbing you in your shoulder-blades, your prehistoric maths teacher explaining complex algebra equations – and you scratched your head and thought – why?  

Why are they teaching me this? How will this help me get a job next year? Can this help me get rich? 

We’re taught a lot of complex functions and equations during school, but, we miss out on a lot of relevant, practical lessons that would help us get drastically ahead in life.  

Our Youth Lack Financial Skills to Thrive 

According to the OECD, our young are increasingly heading into adulthood lacking life skills and personal financial literacy – they are leaving home at a later age and heading straight into debt; credit cards, personal loans, high-cost rent and lifestyles. But, can we blame them?  

When are we teaching them the financial vitals to help them thrive in adulthood? I’m talking about the stuff that can really help you excel in life – like, managing incoming and outgoing expenses, the dangers and the benefits of interest, and relatable, relevant home economics. 

Five Financial Lessons I Wish We Were Taught At School 

There are a few important lessons I’ve learnt on my financial journey that I wish we were taught at a younger age. Lessons that could help turn $10,000 into $1.3 million over 30 years. Lessons that keep you out of financial debt and subsequent stress. Lessons that lead you to a healthier, more balanced, and enjoyable life within your means. 

So, in the spirit of making life healthier and easier for everyone, these are the five financial lessons I wish we were taught at school to fast track our path to financial security:

1. Respect for the Savings Process 

From a very basic level, we need to all learn the value of savings. More than just setting up a token Dollarmite account when children are 6 – we need to teach them the ‘Why’ behind savings. Why are you putting your $2 per week pocket money into your savings account? What is the benefit? What is the desired outcome? Are you saving for something? How much do you need to put away each week to buy your ‘something’ by X date?  

2. Budgeting and Management of Household Expenses 

Children are staying at home with mum and dad longer as they put themselves through university / TAFE. This usually means a healthy spending budget each month – without the demands of rent, electricity, internet, food, and in some cases, phone bills – some ‘children’ don’t experience the financial demands of life fully until around 25 years of age when they finally leave home.  

Teaching budgeting and management of known expenses from an early age will mitigate the risk of high credit card debts, outrageous phone bills, unnecessary personal car loans, and the subsequent poor credit rating when time comes to buy a home! 

3. Compounding interest

Compounding Interest can be your friend or foe. Foe if it applies to a loan or credit card interest. But, friend if it applies to a savings account – which is what I’m going to talk about here. 

Compounding interest is where you earn interest on your interest.  

Say you created a high interest savings account that calculated and paid interest on a monthly basis – You will earn interest on your deposited amount, as well as the interest you’ve earned each subsequent month. It’s like ordering a Sundae and getting two cherries on top. 

In comparison – a term deposit is simple interest and is calculated at the end of its term in one lump sum. Check out the MoneySmart website for a simple calculation. 

4. Investing Using Index Funds

I’m not talking about going to university and working your butt off for a fancy piece of paper that says you can work in the ASX and invest $millions of client dollars in volatile markets. #pressure

I’m referring to a very simple and effective approach to investing – Indexing. That is, putting a small, but manageable chunk of your money in an index fund when you’re in your 20s and letting it ride the market over a few decades. It *should* perform better than a high interest savings account, however, there are many factors that can affect individual results so it’s best to talk to a financial planner for personalised advice. 

5. Superannuation 

Ill touch on this briefly to say that when you’re young – it’s not really explained to you how superannuation will affect your life. You think ‘well, that doesn’t affect me now, that’s something to think about when I’m ready to retire’. Unfortunately, by that stage it’s too late. 

So, whether it’s basic management of your super fund, like, choosing one fund only and not signing up to a new fund with each new job! – or, exploring Self-Managed Super Funds once you have some money in your kitty after about a decade in the workforce. Super provides a solid investment opportunity – and the earlier you start thinking about it, the better your return come retirement. 

Why Financial Literacy Matters 

Financial literacy is an everyday life skill – it’s choosing the best mobile contract, electricity provider, and rental accommodation for your means. It’s managing your income to cover the everyday bills and expenses before you go crazy shopping the mid-season sales. It’s choosing to use cash instead of credit. 

And, it’s knowing how to make your money work harder for you to reap extraordinary returns in the long-term over instant gratification today. 

Get in touch if you need some extra-curricular tutoring to enhance your financial literacy. I can help you get a read of your financial situation and recommend the best plan of action to gain control of your finances and build a more secure future for you and your family. 

How Not To Blow Your Budget These School Holidays

How Not To Blog Your Budget These School Holidays

Beach fun

Sometimes, life throws a spanner that stops the wheels from spinning. It doesn’t matter how hard you’ve been saving over the past few months or how much you’ve improved your spending habits (thanks super budget!). It can all fly out the window when school holidays hit.  

Everyone’s at home. Everyone’s bored. Everyone wants money.  

School holidays shouldn’t be an excuse to blow your budget and put your family straight back into debt! Sure, your children need things to do so they don’t suffer extreme boredom and cause, or get into, trouble. But, there’s no need to rob a bank. 

When Did School Holidays Become an Excuse for Spending Money? 

The more you prepare for the holidays, the more you’re able to stick to a reasonable budget. Unfortunately, waiting until you finish breakfast each morning before working out your plan for the day is a sure-fire way to budget blow-out.  

So, don’t get caught up. Don’t spend more than you have to. Don’t overwhelm yourself running your children all around town, up and down, and out – make a plan.  

Here are some strategies to help you manage the excess in ‘spare time’ without blowing your bank balance.  

How to Prepare for Budget-Friendly School Holidays

  1. Make a budget – how much money can you really spare? Set a daily or a weekly budget that everyone will stick to. This is where your Avocado and Happiness funds come into play.
    If you’ve been collecting an Avocado fund, you could access this account for some cheap family thrills.
    You could use your Happiness fund to book a last-minute stay-cation if you’re in the position to splurge.
     
  2. While you’re all together, start teaching your children how to budget for fun day events and school holidays – MoneySmart offers a free budget training resource for children in years 5-6 you can do together. Work out how much they’ll have for their daily budget? How can they spend their money? Can they save some for a big-ticket event?
     
  3. Before things get too silly, sit down as a family and prepare your schedule in advance. Make a list of the cheap or free activities you’re interested in and stick it on your fridge to refer to during the break.
     
  4. Choose 2 activities that cost a little bit more money, but still fall within your allocated budget. Like, a quick trip away! If spending time away is on the agenda – try camping. Or, if mum’s not really a camper – what about glamping or Airbnb? There are some amazing low-cost accommodation alternatives nearby which won’t hit your bank account.
     
  5. Organise for one big event / reward at the end of the holidays. Encourage your children to be on their best behaviour and offer up a day at a theme park, day on the go-carts, or a road trip down to the Big Banana for ice cream sundaes.  

You’re Not a Full-Time Entertainer – Look After Yourself, Too 

Remember – you’re not a full-time entertainer. Chances are, you have a job and you need to split your time at home with your existing work commitments. Kids can be bored. The world won’t end. But, if you run yourself down into the ground, it very well might!  

Find time to spend on yourself – use that Avocado fund and shout yourself a massage, facial, or breakfast tucked away in a quiet café. 

Do you have some holiday budgeting tips that stop you from emptying your wallet?
Share your ideas in the comments! 

Are You Financially Fit? Why You Need A Check Up

How healthy are your finances?

Having healthy finances is the key to a great budget, how healthy are yours?

Most people want to improve three things in life, their financial health, physical health, and mental health. My philosophy at Bright Future Financial is that we can’t have one without having them all.  

Which is why each year I sit with my clients and carry out an annual financial health check-up. 

Much like your PT takes you through a checklist to determine your physical health and fitness, your financial health-check can determine the health of your finances and your overall financial outlook. 

Being in strong financial health ensures you’re prepared to overcome any of life’s unexpected challenges. You are liberated from financial stress and pressures, and you live freely and confidently as you need.

The Foundations of Strong Financial Health 

Budget 

You can’t have healthy finances without first designing a budget. Your budget helps you track your expenses, what’s coming out and when – it also raises important questions about your spending habits.  

Like, do you really need that magazine subscription to Fishing World when you haven’t read it in 9 months? How many times have you been to the gym lately?  

Understanding your actual expenses and putting strategies in place to pay your bills before they’re due are the first step to solid financial health.  

Financial Goals 

Do you have a savings goal in mind?  

Are you saving for your retirement? 

Are you planning your wedding?  

Are you dreaming to buy a house in Bulimba? 

Once you have a solid budget in place, you can integrate your savings goals into your budget and confidently save in the fastest time possible (without sacrificing your everyday commitments).  

Debt 

Not all debt is bad (your mortgage being a good debt to have!). But, being weighed down by the bad debts will negatively affect your financial health. Think credit cards and car loans. The interest rates are high and it’s easy to get caught out at the end when you’ve been sticking to minimum repayments.  

Clear your bad debts and free up your cash for the stuff that matters. 

Emergency Fund 

The big kahuna that influences your financial health is your emergency fund. Have you set yours up?  

If you’re a regular follower of my blog, you’ll notice I talk about emergency funds A LOT. That’s because they are your financial health foundation.  

Your emergency fund should equate to roughly 3-6 months of expenses (plus $1,000) sitting in a high-interest (but accessible) savings account. Your emergency fund ensures that should life throw a spanner into the mix; you lose your job, you or your family fall sick or are injured, or your house falls down due to termite damage, you have a healthy emergency fund in your kit to keep your head above water. 

How healthy are your finances? 

If you’re keen to check out your financial health – download my free checklist.  

Please note this is only a guide and isn’t a substitute for financial advice. If you’re concerned about your financial health or you’re looking for guidance to improve your finances, please get in touch to arrange your free consultation. 

Download my free financial health checklist

Save Money Quickly By Treating It Like A Bill

Why You Should View Your Savings As A BillDo you find yourself struggling to save, pay to pay? Do you have your eyes on a prize but feel as though you’re not getting any closer to achieving it? 

It might be time you reframed your thinking and started looking at saving as an everyday bill. Here’s why it works. 

Automation Helps You Manage Your Money 

Automation is a “set it and forget” approach to money management – it helps you stay on top of your bills before you succumb to the distracting calls of end-of-season sales and Friday work drinks.  

Used commonly to manage bill payments, automation is a simple, and effective, strategy to boost your savings, too. If you’re struggling to make progress on what feels like a never-ending savings target, automation will ensure you meet your monthly commitment.  

Automating your bills and expenses 

If you’re in control of your bills and monthly payments, chances are you already have a solid system in place. Maybe you’ve set up direct debits. Or, perhaps you’ve linked your credit card for a simplified ‘one click’ payment process. 

The benefit in automating your bills is less risk of overdue payment fees and subsequent poor credit! Automation also ensures you don’t spend money on shoes that you need kept aside to pay for that epic electricity bill you’re expecting. 

Automating your savings 

How much more effective would you be at saving if you had a direct debit set up much the same way as your bills? You would never have to remember to put money aside into your savings account – an automated process takes care of it for you! 

Set up a transfer between your everyday and your savings bank accounts the day you’re paid and start achieving your monthly savings targets without effort or sacrifice.  

Change your mindset around saving  

If you have a big picture savings goal, like a wedding, house deposit, or retirement, start viewing your goal as a bill that needs paying off. 

So, pay your bills first. Pay your savings second.  

‘Go to town’ with whatever’s left over.  

Start small until you build some momentum and then increase the amount when you’ve settled into your new habit. 

You’ll never reach your savings goal if you keep getting distracted by short term gains like five-star dinners and designer handbags. Even if they are discounted. Your short-term emotional satisfaction is holding you back from something much greater. 

I challenge you to take your savings out of your account the moment your pay cheque hits the bank. Then, sit back and watch your golden egg grow!  

Get in touch for quality financial and budget management advice that helps you reach your financial goals, sooner. 

Should You Buy, Or Renovate? Understand What’s Right For You.

Welcome Home || Should You Renovate Or MoveTo buy or renovate? It’s a tough decision – both choices have a large impact on your life and your budget – especially when it’s the wrong one! 

Before you decide, do your homework and get a solid understanding of all likely costs. How will your choice affect your end goal? What are you trying to achieve? 

Here are some key considerations to help you figure it out. 

Tradies, architects, builders, and supplies 

While we all wish we had a Macca, Dave, and Trev tradie network on speed dial – chances are you’ll have to outsource a lot of your reno work to builders and tradies.  

Factor in costs you’ll need for electricians, plumbers, architects, designers, builders, and council approvals for any building raises or extensions. Do the legwork – talk to at least 3 builders for quotes and confirm some of their prices with local tradies to get a solid understanding of your required budget. Do the same with suppliers. 

Don’t forget to explore cheaper options like, painting the wall tiles and cupboards instead of replacing them, to keep costs low. 

Budget blow outs 

The WOW factor in most homes is the kitchen, bathroom, and outdoor spaces. Anywhere there’s plumbing, you’re looking at higher expenses. 

It’s not just what you can see you’re replacing that costs money – it’s the stuff that’s hiding underneath tiles, or behind wall sheeting and bathroom cabinets, that will cause the most damage to your budget. 

Leaking pipes, rotting walls and cabinetry, termite damage, damp foundations – once you lift the lid you can’t go back from that. So, always have money reserved for damage control. Aim for 10-15 per cent extra cash to cover you for these nasty surprises. 

I also recommend arranging a building and pest inspection of your property for a comprehensive report on the condition of your house before you begin. 

Over-capitalising 

It’s simply not true that the more you pump into a renovation the higher your return when it comes to selling. Owning the flashiest house in a dodgy street isn’t going to give you the same return as having a renovated home in a desirable location like, Ascot, for example.  

You must research your suburb performance and investment potential or risk throwing your dollars into a sink hole. 

Buying New  

Buying somewhere new comes with its own expenses that aren’t to be sneezed at. 

Like, agent’s fees and stamp duty deducted from your sale price. Plus, you’ll need at least $10,000 + on hand to manage purchase costs like building and pest, lender’s fees and LMI, titles and conveyancer fees, moving costs, storage (if your dates don’t line up).  

Add your personal time, stress, and running around required for inspections and negotiating with agents! 

Calculate how much cash you’ll have left from your sale to put towards your deposit. Aim for a 20% deposit to avoid LMI on your new loan or, be prepared to have an extra $10,000+ thrown onto your loan to cover the bank. 

Understand Your Goals and Expectations 

Brisbane home-owners reportedly spent $206.6 million on renovations last year. But, it’s not for everyone. It can make or break a family when you don’t understand your overall goals and objectives.  

What are you trying to achieve? Increased capital? More comfortable living environment? Safer, more convenient area to raise your family? Long term property portfolio? 

Buying and renovating are life-changing decisions. Make sure you pick the right option for your family’s lifestyle needs. 

Get in touch if you’re looking to buy or renovate. I’ll help you gain a savings kick to move you there, faster.  

 

Your Guide To The First Home Super Saver Scheme

Your Guide To The First Home Super Saver Scheme To SaveAre you a first home buyer trying to get your foot in the door of Australia’s near unobtainable property market? Whether you’re trying to invest or buy your forever home, today’s property prices are holding us back. 

But, it’s not all doom and gloom and missed opportunity. If the Australian Government has its way, they’ll soon introduce a First Home Super Saver Scheme to help desperate first home buyers get a leg up.

Here’s what you need to know. 

What is the FHSSS? 

The government market it as a scheme to fast-track savings for your house deposit. Essentially, you contribute extra money to a dedicated superannuation account, and with the benefit of lower tax / tax deductions for the money you contribute – meet your savings goal sooner.

It still needs to be officially passed – consultations closed on 4 August so we should hear an announcement soon.

How does it work? 

From 1 July 2017, you can start making voluntary contributions to your superannuation account, up to $15,000 each year. Then, from 1 July 2018, you’ll be able to apply to withdraw your voluntary contributions for your first home deposit. Users of the scheme can only save up to $30,000 total as part of the scheme. 

Now, this isn’t the compulsory amount your employer makes! This is money you either salary sacrifice (pre-tax earnings) or that you personally contribute to your super (after tax).  

What You Can Do 

Should the scheme be passed by parliament, the ATO will administer it. You’ll need to opt in and determine your eligibility to use the scheme (and make sure you can withdraw your money when you want it!). 

Your accountant or financial planner should be able to give you more information on the scheme and the benefits (and limitations) for your individual earnings and financial position. Like every government initiative, there are pros and cons depending on individual circumstances. So, it’s best practice to get qualified advice before you begin. 

While we wait for an outcome – I  can explore other strategies with you to enhance your financial position with a budget and savings plan that gets you to your goal, sooner. 

If you have a self-managed super fund – please get in touch and I’ll help you understand how you can use your fund to boost your house deposit savings.

How Much Money Should You Save Before Buying A House?

How Much Money Should You Save Before Buying A House?I’m keeping with the home buying theme again this week. A question I get asked often is – How much money do I need to save before I can buy a home? My answer is usually – how long is a piece of string?  

Kidding. But, with so much inconsistency between lenders’ criteria – it can be difficult to find the answer to what you think is such a simple question. 

The Great Australian Dream 

It’s the great Australian dream to own your own home. Even now, in this day where the average property price in Sydney is $1 million. Maybe it’s human nature to want what we can’t have? 

Before the GFC in 2005 – it was common for some home buyers to apply for (and receive) 100% LVR (loan to value ratio). Essentially, you could borrow the entire amount of your property’s value.  

That’s not the case these days. After the crash, governments and lenders tightened loan conditions and now require borrowers to put up a deposit to secure their loan – or risk paying that pesky Lender’s Mortgage Insurance (LMI).  

LMI is a one-off payment the lender charges you as insurance against you defaulting on your loan. It’s wasted money – so it’s best to avoid it if you can. 

How Much Money Can You Really Borrow 

When it comes to how much money you can borrow – Each lender is different. Some ask for 10% of the property value, others need 20% before they’ll lend you any money. You’ll find some of the Big 4 banks may even lend up to 95% – pending a solid and secure employment history and documented savings activity.  

But – you will need to take on LMI at this point (it’s added onto your loan amount). We’re talking thousands of extra dollars here, folks. 

Unless you’re willing to pay LMI – I’m afraid you are looking at a 20% deposit saving (and then some). 

Let’s look at the numbers. 

The median house price in Brisbane is now $655,000. Steep.  

If you’re keen to avoid LMI – you’re looking at a 20% deposit = $131,000.  

But, you also need to factor in purchasing costs; conveyancer fees, loan application fees, stamp duty, property transfer, moving costs, building and pest – and having a little bit left over as your safety net once you’re settled.  

How to Save Faster 

If you checked my blog last week, I brought you up to speed with the Australian Government’s latest first home buyer savings booster scheme in the case it gets passed. It’s yet to be finalised – but it’s a start, at least. 

However, there is one fool-proof way for you to save faster. 

Cut back on your expenses.  

Easy, now – Don’t break the messenger’s knees.  

When you commit to an aggressive (but, short-term) budget plan, you can move mountains. Start, by tracking where your money is currently being spent. 

I’m a financial planner, so I have spreadsheets and apps tracking where my money is going and feeding it back to me in a graph. Because, there’s nothing more telling of a budget blow-out than a graph. 

Check out Smart Money’s Track My Spend to get a read of your finances. Then, once you know where your money is going, you can set yourself up for savings success with a realistic and reliable budget 

Be Reasonable 

Many young first home buyers are desperate to step onto the property ladder, but end up taking on too much debt for their circumstances. There’s no point buying a home if you can’t afford to sustain it. It’s not worth the financial and emotional stress (life’s too short). 

Save hard for as long as you can until you’re in a strong position to purchase.  

If you’re ready, reach out – I’ll help you design the most effective budget for your savings goal. 

 

 

 

 

Is Your Tax Return Splurge Getting In The Way Of Your Wealth?

Build Your WealthIf you’re lucky enough to be getting a positive tax return this year, you’ve probably already worked out how you’ll spend the money. Tax returns can feel like you’re winning the lotto, can’t they?

It’s like bonus money. So, after a year of being frugal, this sudden windfall can tempt you to be a little wild and loose.

I know if I won $2,000 in the lotto, I’d want to spend it on a family holiday, new pair of ‘fancy’ running shoes, or even a 65” Ultra HD TV for my soon-to-be Netflix bingeing.

But, I need to break something to you.

Your Tax Return Isn’t The Lotto

It’s not the tax man being all nice and warm-of-heart deciding to cut you some slack this year and give you a performance incentive. Far from it.

You’re just being refunded money you’ve overpaid in tax. Yep. It’s your money, folks. Money you worked hard to earn – money you didn’t ever see, but now you have in your cool, little hands.

If that was a regular pay check, would you cash it in and head straight down to JB Hi Fi to purchase your new tele? Or, would you be more strategic with it? Put a little bit into your savings, pay off your credit card, contribute a little extra to your mortgage?

Think About Your Long-Term Goals

Now, I’m not saying you should deny yourself any reward! That’s not how I roll. But, I do encourage you to think more wisely about the opportunities missed by throwing your wad of money away on something superficial and fleeting.

Try thinking more strategically about how this extra money could enhance your financial well-being in a more meaningful way. If you’re saving to buy a house, or a much-needed, much-desired European getaway, or you’re trying to turn a hobby into a business – then really consider how any short-term gratification will hold you back from achieving something far greater.

Reframe Your Thinking

It’s the difference between want and need (it’s a big difference!). Not buying something you need will always result in a negative outcome (like, no food = starving). However, if you only want that luxury Prada handbag – well, you’ll still have food on the table tonight (maybe more of it!).

Separating your wants from needs is simple home economics.

I believe in having a healthy mind, healthy body, and healthy finances. I believe we need to reward ourselves occasionally to boost our spirit and keep our head in the game – and you should.

But – that doesn’t mean you need to spend it all on trinkets and luxury items that don’t provide any value or benefit to your life other than to show your friends ‘you have this’. Why do we place unwarranted emotional attachment to ‘things’?

You can do so much more.

A healthy tax return is your opportunity to enhance your financial position and move your wealth forward, and isn’t that worth more to you?

If you need help putting a simple savings strategy together so you can reach your goals sooner, get in touch.

 

‘Do something today that your future self will thank you for’ – unknown

Ride to work each day

Depositphotos_2036779_s

 

 

 

 

 

 

 

The battle between cyclist and motorist has been going on since the invention of the motor vehicle, and will continue into our future. However, as a money saving and health gaining exercise, cycling has many positives:

  • you get fit while you commute;
  • you get to work quicker each day and don’t stuck in traffic – (your boss will be happy and you may even get that job promotion);
  • you get to enjoy the outdoors and everything Australia has to offer;
  • you will stay trim, taut and terrific – just think how good your suit or dress will look like on you now;
  • you will be helping the environment and leaving less of a carbon footprint; and
  • you will save money – more money to go towards something special, could be a beach holiday or a new dress? Better than spending it on your car.

With all of these benefits, why wouldn’t you start today? Ask your employer if you have facilities at your work to support your cycling (such as bike racks, showers etc), or visit your local city council to find out if you have a local cycling center that offers showers and security for your bike. Put together a cycling group with your work colleges.

 

How To Get A Pay Rise Without Asking Your Boss?

 

anger-management

 

 

 

 

 

 

 

 

 

How To Get A Pay Rise Without Asking Your Boss?

Sounds great, but that’s not possible you say. Well did you realize that over $4billion dollars every year is paid to banks, brokers, insurance agents and financial planners?

But how does this get me a pay rise? Well most financial products in Australia have either a commission or a fee that is being paid into the pockets of somebody other than you. Even worse in most cases you may have never even meet the person who receives those commissions. It’s like taking money each week out of your pay packet and giving it to a stranger on the street.

Sounds crazy? Why would you do this? More than likely before today you didn’t even know that these fees existed. This is the reason I started Bright Future Financial, as I have seen people struggle each week to pay bills, and even put food on the table for there family. I wanted to help Australians understand what hidden fees they are paying, and help get this money back into their own pockets.

But I’m in an industry fund, so I don’t pay commissions. Well this is correct but fees are also being paid on your life insurance, your income protection, your car insurance, your house insurance and even your home loan, and the list goes on.

This is the pay rise you deserve – stop funding other people’s lifestyle. I want this money to be yours, to help you pay your bills, or even take your family on that holiday you have always wished. Bright Future Financial has an administration service does this for you a minimum cost, without fuss and paid into your bank monthly. Call us on 1800 457 647 or visit our website www.brightfuturefinancial.com.au.