Australians attitude to debt and savings - a recent survey

A recent survey conducted by RaboDirect has found the following stats:

• About 74% of respondents believe paying off their debt is the best way to save money
• One in five credit card holders worry about not paying off their bill in full each month, yet one in six are happy to make purchases knowing they cannot pay for it in the interest free-period.
• About one third of survey respondents consider their financial situation has worsened in the last year and have taken steps as a result. They have cut back on luxuries, such as dining, entertainment and holidays, and some have also considered their day-to-day shopping habits.
• The survey also found that 28% of Australians say their savings would only last two months if they lost their job
• Just over one in ten (13%) have no savings at all. This paints a worrying picture at a time of the year when the job market traditionally slows down.
• Low interest transaction accounts are the most popular home for ‘savings’ with 46% of regular savers putting money in their transaction account (representing 41% of total savings in last six months). This is despite the fact that interest paid on these accounts is negligible and often eaten away by fees

Below are some tips for better financial management:

• Set a budget and revisit it regularly and adjust as necessary to match personal/financial needs or changes to your finances. eg got married, started a family or got a new job
• Spend less than you earn!
• Pay off your most expensive, non deductible debt, first eg credit cards
• Regularly check that your financial products (such as your mortgage loan, transaction and savings account, insurance, credit cards etc.) suit your needs and offer the best value
• Have your salary paid directly into a high interest savings account rather than leaving money idle in a low-interest bearing account
• Seek help early if things get out of hand - speak to a financial advisor for more help

Savers can save $330 by switching

Savings account holders can save up to $330 by switching to a better account. According to consumer group Choice, nearly 80% of Australians had not considered switching banks in the last two years.

Choice's Better Banking campaign director Richard Lloyd said "that's what the major banks rely on, they rely on lots of Australian consumers staying where they are and that's when you get hit by high fees, poor interest rates and unfair terms." What we're saying today is `consumers don't wait for the government's reform package ... if you take simple steps now you can give yourself an early Christmas present'.''

Mr Lloyd continued by saying that smaller banking sector players were usually those offering the best deals and consumers should not be nervous about moving to smaller finance institutions as they were regulated in the same way as banks. Federal Treasurer Wayne Swan said: "I'd encourage every Australian family to check out the range of products on offer and compare them to the big banks.''

Two thirds of Australian's don't have enough money

Almost two thirds of Australians think they do not have enough money. According to an online poll published in News Limited newspapers, approximately 61% of respondents said they were not happy with their finances. Approximatley 35% of survey respondents said they were happy with their financial situation, while 4% said they are not sure.

If you would like help saving or budgeting, speak to one of the financial planners at Intellichoice on 1300 55 10 45.

How to get the best from your super

We know superannuation can seem boring, but putting good strategies in place now could make a big difference to your future. And getting your super sorted doesn't need to be time consuming or hard work. Here are some quick and easy tips to help get you on your way.

1. Find lost super
Did you know that there's more than $13 billion of lost super in Australia? That's a lot of money and there's a chance some of it's yours. It's easy to search for your money via SuperSeeker, the Australian Taxation Office's (ATO) online search tool. After all, if you lost a $100 note, you'd spend at least a few minutes looking for it, so why not spend a little time finding your lost super? Go to www.ato.gov.au and follow the links to SuperSeeker to search for your lost super.

2. Consolidate yoru super and save on fees
And once you've found any lost super, don't burden yourself with multiple fees and bundles of paperwork by having several super funds. It makes sense to roll it all into one super fund. Fewer fees and less paperwork!

3. Exercise your right to choose
So now that you have all your super in one place, make sure you choose where it's invested. Super funds nowadays have many different investment options that members can choose from. So no matter what stage of life you're at or what your investment goals are, your super fund will have an investment option that's right for you. Alternatively, speak to your financial adviser for professional help and they'll be able to assist you in deciding on an investment option that suits your needs.

4. Make the most of profesional advisers with the right expertise
After you've done all this, and if you'd still like an extra helping hand getting your super sorted, why not use the professional services of a financial adviser from Intellichioce? For a completely low fee, our team of qualified financial planners can help you grow your wealth and help you get on track to a comfortable financial future. Call 1300 55 10 45 for an obligation free financial meeting with one of our financial advisers.

5. Ensure you're insured
Life insurance is unlikely to be a big priority if you don't have a family, but what would happen if you couldn't work due to injury? You probably have insurance cover as part of your super, but you should check that it's enough. It's also worth noting that income protection premiums are generally cheaper if taken out through your super, but again, make sure that it's enough and meets your requirements.

For financial advice on superannuation or insurance, speak to a financial planner at Intellichoice today on 1300 55 10 45 or visit www.intellichoice.com.au for details on the various services offered.

Cash investments popular among investors

Self managed super fund (SMSF) investors have led the market in adopting online savings accounts and term deposits with 29% per cent of self managed super assets moving to cash between 2008 and 2009 - during the GFC.

Post GFC, cash is still maintaining its popularity among some investors. A UBank survey of customers in March 2010 revealed that a third of SMSFs have more than 50% of their funds in cash.

Some of the returns available on cash rates have been quite attractive with the Reserve Bank of Australia increasing interest rates.

Planning for retirement

Working out the best way to build your nest egg for retirement is never easy, but many agree that relying on superannuation alone is not enough.

According to the Westpac ASFA Retirement Standard, a retired Australian couple needs to earn more than $51,727 a year to live 'comfortably' or more than $28,080 a year if they want to live 'modestly'.

Investing in property is one way to help fund a comfortable retirement that allows you to pursue the interests, hobbies and activities of your choosing.

Here are 5 strategies for successfully using property investment to build wealth for retirement.

1. Think long term
Retirement strategies are all about investing money wisely over many years, building wealth through compound interest and re-investment. Think long term and have a realistic game plan that has built in buffers to ensure you remain in a comfortable position in future years.

2. Aim for capital gains
It is the capital gains that make property investing so attractive for retirement, so buy your property with capital growth in mind. This means choosing a home with resale potential that is of maximum appeal to tenants. Property experts often recommend new-built family homes because they usually have fewer maintenance costs, are attractive to the ideal tenant, and are tax effective for the investor.

3. Diversify
Property should play a big part in your investment portfolio but avoid putting all your eggs in the one basket. Diversify and spread your risk among a number of different sectors including property, shares or managed funds.

4. Consider taxation laws
Rental income may be taxed at a higher rate than superannuation unless you set up your own super fund and acquire property via your fund. Seek expert advice to best understand taxation laws and make the most of superannuation concessions.

5. Start now
It's never too soon to start planning for your future. While you are still working and have equity in your home, now is the time to use property investment as a way to optimise your financial security for the time when you plan to put your feet up!

For help on planning on retirement having an income stream during retirement, speak to one of the financial planners at Intellichoice on 1300 55 10 45 or email info@intellichoice.com.au.

Term deposits outperform shares

Cash investments have delivered far better returns to investors over the last three years than the sharemarket has. The average annual rate of return over the last three years from a one year term deposit has been 5.6%. The average annual return from ASX200 companies over the last three years has been minus 6.6%. Average dividend income for shares has been between 3.4% and 5.5%, which has been offset by some large capital losses.

Choosing a broker when you want to invest in shares

If you are thinking of trading in the shares market, you will need to use the services of a broker. There are two main types of brokers available to you, full service (advisory) and non-advisory (execution-only) brokers.

A full service broker is able to offer you advice on buying and selling shares and other exchange traded instruments such as options and CFDs, provide market research and structured tailored investments for your long term portfolios. As a full service broker is able to offer many services you would generally expect to pay a higher brokerage fee to buy and sell financial products.

On the other hand a non-advisory broker, commonly an online provider, offers no personal advice or recommendations and only provides a trade execution service. Consequently you would generally expect to pay a lower brokerage fee to buy and sell shares, and they are a popular choice for investors who are confident in making their own trading decisions.

Whether you are an active private trader or a long term investor there are many questions that you may need to ask before deciding which broker will best suit your needs.

What type of services do you require from a broker?
Full service offering research and advice, access to investment opportunities in company floats, and financial planning or an online service accessed via phone or internet, offering low cost trading, and straight through order entry.

How much do brokers charge?
Typically brokers will charge a flat fee for transactions below $10,000 and then a percent value of the trade for higher amounts. Often discounts can be negotiated for high volume clients.

Are regular newsletters or share market information available?
Both full service and non-advisory brokers will often provide daily and weekly newsletters recommending sectors and stocks that are performing. These can be provided either by email or by access via the broker’s website.

Do Brokers conduct workshops?
Brokers will often provide workshops on how to use their execution platform, and trade in different types of financial products.

When you select a broker you should ensure that you receive a Financial Service Guide (FSG), a Product Disclosure Statement (PDS) and a Client Agreement detailing the products and services that are being offered to you, and the applicable terms and conditions of trading, by that broker before you open your trading account.

For more information about investing in shares and other investments, speak to one of the financial planners at Intellichoice today on 1300 55 10 45 or visit www.intellichoice.com.au.

Creating an investment portfolio

Before investing in shares there are many questions you have to ask yourself before you put together an investment portfolio with your financial planner.

• Are your investments going to be long term or short term?
• Are you looking for a return in the form of income and long term capital growth or a short term return in the form of a large capital growth?
• What is your tolerance to risk? Are you prepared to risk some of your investment capital for the opportunity to make higher returns?

If you are looking for income and long term capital growth then you should look at stocks that have a proven long term business model and pay good dividends. These stocks are referred to as Value Stocks and would be considered to have a lower risk profile. Their share prices gain over the long term and pay dividends every 6 months providing you with an income. Many stocks within the Infrastructure sector would be considered Value Stocks.

If you are looking for short term capital growth then you should consider stocks that are just starting their growth phase. These are usually new companies that are just starting production or expansion. These stocks are referred to as Growth Stocks and would be considered to have a higher risk. Many stocks within the Energy, Material and Health sectors would be considered Growth Stocks.

Don't put all your eggs in the one basket - investing evenly across Value and Growth Stocks can create a diversified investment portfolio with a medium risk profile. An educated investor can achieve both short and long term capital growth and create an ongoing income by receiving dividend payments.

The difference between a good and bad investment portfolio is always about education and knowledge. The educated investor will always look to buy stocks at discount prices and introduce simple hedging strategies to maintain the profitability of their investment portfolio during volatile times.

To find out whether investing in shares is right for you, speak to one of the financial planners at Intellichoice today on 1300 55 10 45 or visit www.intellichoice.com.au.

The other side of Lending – Mortgage Schemes

Investing in a mortgage scheme
“I wish to get a better rate of return on my money and don’t really mind having an indirect exposure to property as the underlying asset class.'

That's roughly how a mortgage scheme (also called mortgage funds) works, except it involves three extra features: 

1. More than one person contributes money to the scheme;
2. Investors' money is pooled together or used in a common enterprise for scheme members; and
3. Scheme members give up day to day control over how the scheme operates.

Like any investment, you face risks. Your returns will be affected by the ups and downs of property values and interest rates. You also rely on the skill and honesty of scheme managers and property valuers to find borrowers who can pay on time, with adequate security.

In the past, most mortgage funds have operated successfully. Some, regrettably, got into disastrous financial trouble; either because the managers lacked the skill to manage mortgages, especially when some of the borrowers failed to pay, or they lent too much money on optimistic valuations or risky development properties. A handful of operators defrauded investors.

Watch your margin of safety
Risk in mortgage lending lies in the gap between the value of the property and how much of that value is being lent to the borrower (described as the loan-to-valuation ratio). The closer the amount lent to the value of the property, the higher the risk that you might lose part of your investment. A $60,000 loan for a property valued at $100,000 represents a conservative 60% loan-to-valuation ratio, but a $95,000 loan on the same property represents a much riskier 95% loan-to-valuation ratio.

What type of scheme can you choose?
Mortgage schemes, or mortgage funds can be set up in different ways. You can choose:

• Pooled mortgages, where all investors share in all the mortgages. You therefore take your share in all the income and spread the risks across all the mortgages that the scheme manages. LOW / MEDIUM RISK
• Contributory mortgages, where you choose which mortgage(s) you invest in. Your mortgage(s) may pay a different income from other mortgages in the scheme. Your risk depends on the quality of the borrowers to whom you have chosen to lend. MEDIUM RISK
• Debenture or mortgage companies, where you invest in shares or debentures issued by a company that invests in mortgages. Here, you are really becoming a shareholder in, or lender to, the company, which in turn owns the mortgages. Check whether the mortgages are pooled or linked to specific properties. HIGH RISK.

What type of scheme managers can you choose?
All scheme operators must treat investors honestly. At present you will find these types of scheme managers:

• Managers of registered schemes must operate the scheme through a public company that holds an Australian Financial Services Licence and comes under ASIC regulation. (You can check this licence free of charge through the ASIC website or contact the ASIC Infoline by email infoline@asic.gov.au or ring 1300 300 630.) The scheme must have a constitution, a compliance plan and a product disclosure statement that you can inspect. It must also have proper internal procedures for handling complaints, and be a member of an authorised external dispute resolutions scheme.
• Managers of industry supervised schemes must be supervised either by the Law Society of NSW or the Law Institute of Victoria. First, get a copy of the rules set by each body, then make sure any scheme you are considering is abiding by the rules before you invest.
• Directors of mortgage debenture companies must operate through a public company. They must act honestly and diligently, but require no licences or complaints schemes. The directors are free to choose whatever operating systems they like so long as they obey general company law.
• Managers of unregistered and unlicensed schemes must restrict their scheme to 20 people or less and must not be in the business of promoting schemes. Unregistered schemes are not regulated by anybody. You are on your own. Check everything and everybody involved.

What should you choose?
Mortgage schemes may suit your needs and circumstances. Choose the scheme and the manager that suits your own knowledge and experience. If you possess no expertise in this area, you should seek appropriate financial advice.

For more information about mortgage schemes and whether they suit your needs, speak to one of the financial planners at Intellichoice today on +61 7 3624 1900 or email info@intellichoice.com.au. Alternatively, visit www.intellichoice.com.au.

Investing in mortgage funds: getting more from your money, without the heartache

We have all heard a million times that every investment has risks and there is a risk-return trade-off.
So, is there any simple, easy to understand investment for people wanting stable and reliable returns?

Among the four asset classes - Cash, Fixed Interest, Property, and Shares - cash investments are considered to carry the lowest risk, and will generally pay the lowest return. Shares, on the other end, are regarded as the highest risk investment, but have the potential to provide a much higher return.

So, if investors are looking to get their money working a bit harder for them, and getting more than the interest paid by the bank, but they don’t want to take up as much risk as with buying an investment property, they may place their money in a fixed interest investment. That’s where mortgage funds fit in.

Yes – their asset class has a lower risk profile than property investment!

Mortgage funds are less volatile than some other investments: that means that they are designed to provide reliable income payments, preserving the initial capital invested. Not all fixed interest investments can do the same. In fact, despite the name, fixed interest can fluctuate in value: for example, as interest rates go up, bonds value goes down, and so do returns of fixed interest funds invested in bonds. Mortgage funds behave exactly the opposite way: as interest rates go up, returns also go up. So, rates going up become something to look forward to, for a change!

Let’s not forget the importance of diversification: some people do want to take extra risk and invest in property or shares, but how to insure against times when markets are not doing so well? There is no such insurance policy out there, but keeping part of the portfolio invested in a mortgage fund may provide a solution to that.

For example, the graph below shows the performance of a mortgage fund (The La Trobe Australian Mortgage Fund), against the downturn periods of the Australian stock market, over a 10 year period. The mortgage fund had strong positive returns, at the same periods when the Australian stock market was experiencing negative returns.

An article in the Australian Financial Review (October 2008) headed "Cash, property shine as shares crash and burn", suggested that investments in cash or property over the last 10 years had come close to, or even potentially outperformed, the return from equities over the same period. The volatility in the share market that we have seen in recent times has eroded many of the gains made in equity investments prior to the 'global financial crisis'.

On the other side, it has also been argued that over a very long period of time – 25 or 30 years – investing in shares provides superior returns, even with market downturns like the one we have just experienced.

But what if you just don’t have another 30 years to invest? What if you are close to retirement and may need to delay it if the market goes down? Or what if you are saving, for example, for your children’s education? They can’t just “wait a couple more years” to go to school!

In that case, a more conservative option may be more suitable for you.

So, what about the recent debate about mortgage funds?

The word “mortgage”, in investments, hasn’t had very good publicity recently. But it is important to clarify a couple of things, when talking about them.

First, mortgage funds are not those mortgage-backed securities that you have been hearing about! Mortgage-backed securities are much higher risk investments, which have been linked to the GFC.

Second, not all mortgage funds have frozen redemptions in the past year. The ones that did were offering investors the option of taking money out at anytime. They effectively borrowed short and lent long. When the government issued the bank guarantee, many investors felt safer with the banks, and they all tried to get their money out of mortgage funds at the same time. However, investors’ money is used to offer finance for mortgages, sometimes lasting 30 years. As a consequence, managers had to refuse redemptions requests. The lesson learned here is that mortgage funds should match as best as possible the investment term with the mortgages term. Those that did, are still open and continue to provide stable monthly returns.

Intellichoice has a working relationship with La Trobe to offer our clients the opportunity to invest and growh their wealth in a safe manner. The La Trobe Australian Mortgage Fund Pooled Mortgages Option, for example, has never restricted redemptions, has always had only a one year term option, and is currently returning 7.50%, monthly income. That’s why it has been awarded “Best of the Best” in Money Magazine.

For more details about mortgage funds and whether it is a suitable investment tool for you, speak to one of the financial planners at Intellichoice on 1300 55 10 45 or email info@intellichoice.com.au. Alternatively, visit www.intellichoice.com.au.

Get your finances in shape

Get your finances in shape. Use this simple checklist to assess how healthy your financial management is.

• Do you know how much money is going out and coming in?Use a budget planner to easily track your finances
• Do you have a financial plan for the next year, five years? A financial plan will help you reach your short, medium and long term goals
• Do you have enough funds for a rainy day? We recommend that you have equal to about three months in savings for those emergencies
• Pay extra on your home loan so you decrease the amount of interest you pay each month and it helps you pay off your home loan sooner
• Get the best available rate on savings. Do your research and find savings accounts with high interest rates. Make compound interest work for you
• Pay off your credit cards in full each month. You could also consider getting a debt consolidation loan to pay off all your high interest credit cards

 For more tips on savings, budgeting and keeping your finances fit and healthy, speak to a financial planner today on +61 7 3624 1900 or email info@intellichoice.com.au. Visit www.intellichoice.com.au.

Do you need to update your salary sacrifice arrangement?

Salary sacrifice not only boosts your super balance, but it can also reduce your accessable income and therefore, the income tax you pay. By salary sacrificing, you may be able to reduce the total tax you pay and increase your super contributions without impacting your take home pay.

It is important each year that you reassess your salary sacrifice arrangements to ensure you are getting the best benefits available.

Differing circumstances may affect how much you can salary sacrifice. For example, if you have had a pay increase in the last 12 months, it may be beneficial to increase your salary sacrifice contribution, which in turn will minimise your payable income tax.

However, please be aware that the government has now reduced the before-tax contribution limit and if you breach the cap applicable to your age, you may be liable for excess tax.

The annual individual limit on before-tax contributions known as concessional contributions (eg. employer Super guarantee or salary sacrifice) is $25,000. However, if you turn 50 at any time between 1 July 2007 and 30 June 2012, you will be able to contribute up to $50,000 (not indexed) of before-tax money from the financial year you turn 50, until 30 June 2012. After this date, the limit will be $35,000 for everyone.

For the self-employed, this cap applies to personal contributions you make for which you claim a tax deduction.

Over the years, salary sacrifice has proven to be one of the most popular and effective wealth accumulation strategies available in Australia. Conditions do apply and we recommend you discuss this strategy with your financial planner to see if this is suitable for you.

For more information about salary sacrifice, call 1300 55 10 45 or email info@intellichoice.com.au. Alternatively, visit www.intellichoice.com.au for more details.

Tax cuts deliver savings

The third and round of tax cuts from the 2007 election begin this week, which will deliver significant savings to Australian workers. Wage earners on an income of about $59,000 will save $450 in tax this year, or $8.65 per week, compared with last year.

People earning between $55,000 and $60,000 per year will save $1,350 in total, compared with three years ago, while those earning $100,000 will save $500 or $9.62 per week.

Treasurer Wayne Swan said average workers have had their taxes cut by 20% since Labor came to power.

Investing in property

Last week, we looked at how investing in shares can impact on your cash flow.  This month, we will address the impact property has as an investment.

Research shows that the median house price in Brisbane in 2000 was $173,000, rising to $445,562 by 31st December 2009.  This equates to a rise in capital value in the last 10 years of 257.5%!

The question I hear a lot is “What about the Global Financial Crisis – hasn’t that stopped that growth?”

The simple answer is No.

Over the past 12 months, Brisbane house prices have risen by 12.1%!  Wouldn’t you want to get growth like that on your money and if you did, wouldn’t you like to get a tax advantage at the same time?

Borrowing to purchase an investment property is one way of take advantage of those tax benefits. However, when borrowing, there are three types of investment gearing you can accomplish – positive geared, neutrally geared or negative geared. 

A positively geared investment is when the income generated (rent and depreciation deductions) are greater than the outgoings (interest payments on the loan and property maintenance costs). A neutrally geared investment is when the income is equal to the outgoings and negatively geared is where the income is less than the outgoings.

There are pro’s and con’s to each option and it depends upon your long term strategy, incomes and goals as to which is your best choice. 

To give you an example of the benefits of property, one of my clients was paying about $26,950 in tax prior to the purchase of an investment property. After buying an investment property and taking into account depreciation deductions and other tax entitlements, his tax liability was reduced to $20,736 – a reduction/savings of $6,213.40.

Remember that arranging correctly structured and priced finance is a specialist job and a quality broker is worth their weight in Gold, so find someone highly recommended. If you are having trouble with this, let me know.

Time is running out if you are planning to make investments while reducing your tax liability before June 30th. Remember, this is all about leaving the workforce one day, so implementing your structure sooner rather than later needs action now.

If you are concerned or just keen to get moving on something we are here to help. Speak to one of our certified financial planners on 1300 55 10 45 or email info@intellichoice.com.au. Visit www.intellichoicefp.com.au for more details.

What stops people from getting financial advice?

There is always the temptation to do it yourself when it comes to your finances, but the truth is that without specialist financial planning knowledge, you may not reach your financial goals.

Many people put off getting quality financial advice because of things they may have heard. In most cases, they are nothing more than myths.

Based on commission only - WRONG
Financial advice provided through Intellichoice is not based on commission and you can be assured that our qualified financial planners will always be honest and provide unbiased advice. There is no conflict of interests and any recommendations we make for growing your wealth is in your best interests.

High cost of getting financial advice - WRONG
Our unique and innovative financial solution offers everyone, regardless of age and income level, to enjoy financial freedom and pay very little or nothing for any financial advice received through Intellichoice when compared to industry standard. We are very upfront about our fees so you know exactly where you stand at all times. Find out more about our low fee financial planning service by calling 1300 55 10 45 or email info@intellichoice.com.au.

Get rich quick - too good to be true investments - WRONG
If it’s too good to be true, it often is! Financial planning is not about getting rick quickly. Through good advice and informed investment decisions, your financial planner will help build your wealth over an appropriate time frame and in a safe manner that is in your best interests.

Invest in shares only - WRONG
We listen to your needs and provide unbiased and professional advice to help grow your wealth in a safe way. Our holistic approach to creating wealth is to take into account the amount of risk you are willing to take and provide investment strategies (either through property, shares, cash, managed funds, superannuation or mortgage funds), that will help you meet your goals in a safe manner.

Glorified sales people – WRONG
Anyone can go and sell cars, mobile phones or computers, but Australian financial planners are subject to rigorous licensing, education and ongoing professional development standards. The financial planners at Intellichoice are accredited with two of the largest licensees in Australia, which regulate ethical and professional codes of conduct in the financial services industry.

To find out more about getting quality financial advice and how a financial planner from Intellichoice can assist you to grow your wealth and have a comfortable retirement, call 1300 55 10 45 or email info@intellichoice.com.au.

Make sure you pay your credit card bill in full

Did you know that the minimum monthly repayment demanded by the credit card issuers do not even cover the interest charged? Many banks lower the minimum repayment to below the interest charged so that interest gets charged on interest.

If you are late by one day in making a credit card repayment, interest could be charged back to the date of purchase, negating any interest free days. That can apply even if a partial payment is made. If you don’t pay your credit card bill in full and on time, your next interest free period may be taken away.

If you need help budgeting, managing debt or need a debt consolidation loan, speak to one of the financial planners at Intellichoice for further assistance. Call +61 7 3624 1900 for more details.

How do investments impact on you - Shares

Shares grow in value over time. Most text books will say that you will require somewhere between 10 and 15 stocks to obtain a diversified portfolio of shares so you can spread your exposure and reduce your risk.

For example, on 31st December 2001, you purchased 9 stocks - Flight Centre, Commonwealth Bank, James Hardie, John Fairfax, Billabong, Qantas, Ten Network, Telstra and Woolworths - to the value of $83,542.40 and you held those stocks until 31st January 2010.

This share portfolio would have increased in value to $111,278.60 - an increase of 33%.

This is good news, but it is not the entire story.

On top of the underlying growth of your investment and the income you receive from your shares (in the form of dividends), do you know how your investments will impact on your tax return?

A simple strategy, such as gearing can make your money work for you and help reduce your tax. Gearing relates specifically to the money you borrow to fund your investments.

Below is a simple scenario showing the difference between investing and not investing.

Based on an income of $50,000 pa with no other income or deductions, you would currently be paying about $9,600 in tax, inclusive of the Medicare levy.

However, if your investment strategy takes into account gearing, the amount of tax you would pay would be reduced to approximately $7,575 – a saving of about $2,025 in tax, while at the same time, your net income increases by $3,033.

The points to highlight are:

1.    Investments will reduce your tax liability
2.    Geared Investments will create a tax saving
        
Where to from here? Many of our clients are becoming aware that the end of financial year is looming. As shown above, it is important that you speak with a knowledgeable financial adviser on the best strategy for your circumstances to reduce your loss to the tax man.

For more information, visit www.intellichoice.com.au or speak to our financial planners on 1300 55 10 45 or email info@intellichoice.com.au.

Disclaimer: This column is provided as general advice only and does not take into account your personal objectives, financial situation and needs. You should always carefully consider these matters and discuss them with a financial planner before you act.

Seek SMSF advice

A self managed super fund (SMSF) may have many benefits, for example, it will give you more control over the fund's investment strategy, there is a lower tax payable and all self managed super funds are protected from bankruptcy and other legal claims, but many Australians don't understand the time, risks and costs involved in operating a SMSF.

A survey conducted by TNS found that more than half of Australians thought you could establish a SMSF with a balance of $50,000 or less. One quarter of respondents thought a balance of $5,000 would be enough to set up their own SMSF.

As a note, if you have less than $200,000 in super, the admin costs would probably make setting up a SMSF uneconomical. You can also expect to pay $1,000 to $1,500 a year on running your own super fund.

There has been an increase in the number of self managed super funds being set up, suggesting that Australian's want to exercise more control over their super. However, research shows that only a third of people consult a professional financial planner to decide whether a SMSF is suitable for their needs.

So if you are thinking of setting up a DIY super fund, please seek advice from a professional financial planner first to ensure that this is the best option for you. Factors such as time, money in administering a SMSF and whether you have the desire and ability to manage the fund for the long term all need to be taken into account. For more information about SMSF's, speak to one of the financial planners at Intellichoice today on 1300 55 10 45.

$50,000 needed for an adequate lifestyle in retirement

A recent survey has found that almost 50% of respondents in Australia were confident they would have enough superannuation in retirement. Respondents to the survey also said they would need about $50,000 a year to maintain an adquate lifestyle in retirement. Almost three-quarters, including retirees, said they were in favour of the government's policy of increasing compulsory super from 9% to 12%.

Getting professional financial advice

Financial advice is a process that will help you meet your goals and dreams through the property management of your finances. Whether you are looking at buying a property, manage and pay down your debts, save for your children's education, build wealth or plan for retirement, getting good, professional and quality financial advice will help you implement a financial plan in order for you to reach those goals.

There are many ways to get information about handling your money, such as newspapers, money or investing magazines, the Internet, friends and family. However, finance and building your wealth is a complex area and you should seek advice from a certified financial advisor. Just as you would go to a doctor or lawyer for their expertise in their area, you should also do the same when it comes to your financial wellbeing.

So how do you know that the financial advice you get is of high standard?

According to the Australian Financial Planning Association (FPA), getting quality and professional financial advice should be based on the following, which your financial planner should go through with you.

• Identify your life goals - short, medium and long term
• A financial planner will become acquainted with your financial background, including your income, debt levels, commitments (for example, home loan or personal loan repayments etc)
• Understands your current situation, needs and what you want to achieve now and in the future
• Prepares a financial plan based on your needs and goals and implements strategies that address your attitude to risk
• Identifies suitable investments and insurance plans for your situation
• Provides annual reviews for your financial plan to ensure it still suits your needs and financial situation

Good quality financial advice will help you in many ways including:

• Gives you greater control over your financial future
• Provides you with a long-term relationship with an expert that will help you reach your goals and is on hand to answer any concerns or issues you may have
• Good quality financial advice will give you a realistic picture of your financial future and how to reach your goals in a safe way
• Provides you with clear information on how to manage risk

 Many people may think it is better to do it themselves and not seek professional financial advice, but the truth is that without professional financial planning knowledge, you may not reach your goals or reap the full benefits.

Many Australian retired couples currently live on less than $20,000 per annum, so make sure you have enough enough for a comfortable retirement. Speak to a qualified financial planner today on 1300 55 10 45 for an obligation free appointment at no cost to you, normally worth $500.

Money saving tips

The RBA may have held interest rates for now, but many analysts say we are set for another 2 rate rises by the end of the year and even more in 2011.

Rising petrol and food costs and the threat of sky rocketing inflation means we need to find ways to make the dollar go further.

If you need help with budgeting, savings or managing your debt, speak to one of the financial advisors at Intellichoice today on 1300 55 10 45.

Australians not planning for retirement

Millions of Australians are relying on as little as $322 a week on aged pension when they retire. This is because they have not planned their future properly.

The typical Australian aged 55 - 64 years will have $51,000 at retirement, but they do not realise they will need about $500,000 to fund an income of $38,000 a year for a modest lifestyle.

Make sure you speak to a financial planner about having a comfortable retirement. Don't leave it too late - call 1300 55 10 45 and seek professional advice from a financial planner about having a retirement income stream.

SMSFs spur property investment

Australians are increasingly using self managed super funds (SMSF) to invest in property rather than shares.

According to accountancy firm Chan & Naylor, 'increasing awareness of the potential of SMSFs to borrow and invest is creating new demand for residential property. It seems Australians feel comfortable with property as an investment class,' said CEO Sal Carrero.

Since the GFC, many Australians are questioning whether they could invest their own money better than what their super fund was doing, and this is one of the reasons why SMSFs are growing in popularity.

Furthermore, SMSFs are no longer just reserved for the wealthy, with a minimum of $150,000 super savings enough to set up your own self managed super fund.

If you are interested in setting up your own self managed super fund, need assistance with a SMSF investment strategy or would like more information, speak to one of our experienced financial planners first on 1300 55 10 45 or email info@intellichoice.com.au. Intellichoice also has experienced mortgage brokers to assist with a SMSF home loan if you are looking at buying property through your diy super fund.

What is a self managed super fund (SMSF)?

A self managed super fund (SMSF) is a specialised superannuation trust that can be established for up to four people, for the sole purpose of providing retirement benefits to its members. A SMSF if you own superannuation fund, where you have control of what investments your super fund invests in.

A SMSF needs to have:

• A trust deed: This establishes what the super fund can or cannot do. The trust deed needs to be reviewed regularly to make sure that it is up-to-date.
• A trustee: All members of the fund have to be trustees. You can act as individual trustees, or appoint a company as a trustee, in which case all members need to be directors. Speak to a financial advisor about which is suitable for you.
• An investment strategy: An SMSF investment strategy sets out what the SMSF will invest in and addresses risk, return, diversification, liquidity, cash flow and asset allocation. Seek professional financial advice from a trusted financial advisor first for details on setting out our investment strategy for your super fund.

There are currently over 400,000 SMSFs in Australia and in March 2009, there was nearly $300 billion invested in self managed super funds. This represents about 32% of the whole superannuation industry's investments.

But before you set up a SMSF, you need to take the following into consideration:

• If you have decided to appoint a company as trustee, you will need to register the company to be the trustee and obtain an SMSF trust deed. This can cost you from $800 to $1,500.
• You need to apply for a Tax File Number, an Australian Business Number and establish a bank account in the super fund’s name
• Once this has all been completed, you might like to think about rolling over your existing super accounts into your SMSF. You can also change your payroll details, so that your employer can contribute into the SMSF.
• Appoint an accountant and auditor to prepare your SMSF accounts, tax return and audit every year.
• Once your SMSF has been established, you need to manage it and its investments and keep proper records of all transactions. This will be essential if your SMSF is ever audited by the Tax Office.
• At least in the beginning, you should consider getting advice from a professional financial advisor.

Before you set up a self managed super fund, we recommend that you speak to a qualified financial advisor first to ensure this is the best option for you. Our financial planners are available to answer any queries you may have and help set up your SMSF and investment strategy. Call 1300 55 10 45 or visit www.intellichoice.com.au for more details.

Lower income households likely to miss payments

A new study by credit reporting agency Dun & Bradstreet has found that one in four Australian households indicated they would most likely miss mortgage payments if they found themselves short on cash. The study also found one in three said they will pay bills late in the coming year.

The Consumer Payment Priorities Study, released by credit reporting agency Dun & Bradstreet, revealed many Australians are unaware of the consequences of paying late bills.

More than half of survey respondents said they would be more likely to pay their accounts on time if they knew late payments would be listed on their credit report.

Many people do not realise that a payment can currently be listed on an individual’s credit record if it is 60 days overdue. However, new credit reporting laws which have already been accepted by the Federal Government will allow payments to be listed on an individual record if they are just one day late.

The study also reveals that younger Australians and those in lower income households are more likely to pay their bills late in the year ahead. One in five (21%) older Australians (aged 50-64 years) indicated they will pay at least one bill late – this compares to one in three for the two younger groups (18-34 and 35-49 years).

Approximately 30% of people in high income households ($80,000+) said they expect to pay late in the year ahead, as compared to 37% for households earning les than $80,000.

If you are having problems managing debt, need help with budgeting or have problems with your mortgage, speak to one of the finance advisors at Intellichoice today. Our mortgage brokers can help with a home loan review to ensure your home loan is still the best deal for you. Intellichoice also has professional financial planners to assist with debt consolidation, budgeting and a savings plan.

Reduce your tax

It's almost the end of financial year in Australia and we have put together some tips for you to consider to minimise your tax.

http://www.intellichoicefp.com.au/financial-advisor/72-financial-planning-resources/353-reduce-tax-tips-and-tricks.html

You can also speak to a financial planner for more tips on reducing your tax but building wealth at the same time.

Should I have my own self managed super fund?

There are essentially 2 benefits to having your own self managed super fund (SMSF):

1. Cost
Self managed super funds (SMSF) can be very cost effective. A SMSF will cost you anywhere in the range of $1,500 to $2,500 each year to maintain. In addition, there are a number of fixed costs that don't increase regardless of the size of your super fund. For example, the cost of auditing your SMSF and preparing the fund's tax return will still cost the same regardless whether you have $250,000 or $2 million in the super fund.

2. Control over your SMSF
You can control what your SMSF invests in and when you invest, subject to the fund's investment strategy and the technical rules about SMSF investments.

Please remember that a SMSF is not for everyone and we recommend that you seek professional advice from a financial planner first before setting up your own SMSF. A financial planner will be able to advise whether a SMSF suits your needs or whether using an industry superannuation fund or a retail super fund may still provide you with sufficient flexibility and cost-effectiveness.

Benefits of SMSF borrowing

Below are some key benefits of using your self managed super fund (SMSF) to acquire shares, managed funds or property.

1. Maximises the wealth effect in the SMSF in times when assets of the fund are rising. 
2. The borrowing can be for a short time period or for a period of up to 20+ years (if related party financing is used) allowing it to be structured to the underlying circumstances of the fund members. 
3. SMSF members and related businesses can act as lenders as long as all lending is at arm’s length
4. It increases the flow of non-contribution style funds into the SMSF particularly where the members of the super fund have used up their contributions capacity. Care must be taken to ensure that there is a genuine borrowing and not a contribution arrangement, otherwise the Commissioner may deem the borrowing to be a non-concessional contribution.
5. Future income and capital gains on underlying assets are taxed concessionally in a SMSF and may even be tax free where the assets are held for pension purposes.

If you are thinking about setting up a self managed super fund or would like to speak to a qualified financial planner about a SMSF investment strategy, speak to Intellichoice today on 1300 55 10 45. Intellichoice has experienced mortgage brokers who can assist with SMSF loans.

More Australians are struggling with debt

According to a study by Veda Advantage, one in five Australians are struggling to repay their debt. The biannual Australian Debt Study also found that more than 80% of Australians are worried about their ability to make debt repayments over the next 12 months.

The survey also found that one in seven Australians have missed a minimum bill repayment in the past three months – up from 12% in September 2009. Of those who had missed a repayment, one in ten Australians are looking to take on more debt in the next six months.

A Veda Advantage spokesperson said “this is the highest level of debt stress in the past two and a half years of this study.”

If you are struggling with debt and need help with managing debt, budgeting or debt consolidation, speak to a qualified financial planner at Intellichoice today on +61 7 3624 1900.

Gov’t changes good for SMSF borrowers

Budget changes to self managed super funds (SMSFs) will create greater certainty around borrowing to invest in shares and property.

Accountancy firm Chan & Naylor, has backed government measures that will bring greater clarity on borrowing requirements.

“SMSFs are highly effective investment vehicles which should be encouraged and promoted by the government as a means of bolstering national retirement savings and reducing the dependency on government for retirement income,” said chief executive Sal Carrero.

Mr Carrero added that taxpayers with non-complaint SMSFs risk being stung by penalty fees, audits and tax office scrutiny.

If you would like more information about a SMSF and investments, speak to one of the experienced financial planners at Intellichoice on +61 7 3624 1900. The financial planners at Intellichoice will work out with you whether a SMSF is the best option for you based on your needs. Intellichoice can also assist with SMSF loans to purchase investment properties.

Strategies to reduce your tax

The two certainties in life are death and taxes.

We do not have a crystal ball to allow us to see when we are going to die, however we do know when our tax is due. The end of the financial year is 30 June 2010. Unlike death when sometimes you are not prepared, you can prepare yourself for the tax man.

In the 2006–07 income year, individuals had $18.8 billion refunded or otherwise paid out after they lodged their income tax return, and $13.5 billion was required to be paid by other individuals to meet their annual tax liabilities.

Were you one of those individuals who contributed $13.5 billion to the federal government because you were not prepared? Or were you someone who felt you should have received a better or bigger tax refund?

What can you do?

1. Determine now, your anticipated earnings for this financial year – wages, commission, bonus, sale of goods or services.
2. Complete an estimate of your tax liability – understand how much you are going to pay.
3. Assess your long term goals and determine if you are happy to continue contributing to the Australian Taxation Office or would you be better off contributing to your own long term investments. In other words have the tax man pay off your debts.
4. Contact a financial advisor to assist in developing a long term strategy to reduce your tax liability and more importantly to help you create wealth.

Examples of some products that can help you reduce tax and at the same time build wealth include:

• Property investment – tax deductible items include interest on borrowings, council rates, body corporate fees, maintenance, management expenses and depreciation.
• Shares – tax deductible items include interest on borrowings and franking credits
• Managed Funds – tax deductible items include interest on borrowings, deferred income and franking credits.
• Superannuation – salary sacrifice, salary packaging and tax deductions available for self-employed individuals.

For more information about ways to reduce your tax payable, or to book an obligation free appointment with one of our qualified financial planners, call +61 7 3624 1900.

Pay down bad debt and focus on the good debt

Many Australians are struggling to repay their debts. According to The Australian, many more are dealing with rising interest rates easily because they have made provisions for the higher repayments, or never lowered their repayments when interest rates were falling.

Experts recommend that bad debt (incurred when a person buys things that depreciate in value, such as a car, shopping or a holiday) needs to be repaid as fast as possible. This type of debt does not help you to increase your wealth. Furthermore, interest rates on credit cards or personal loans can attract between 9 - 20% in interest charges. Good debt on the other hand, such as a mortgage to buy a house, or a loan to make an investment can increase wealth because the assets may rise in value.

If you need help consolidating debt, budgeting, debt management or would like more information about building wealth, speak to one of the financial advisors at Intellichoice today on +61 7 3624 1900.

Aussies are still wary of credit

Despite increasing confidence about the economy, many Australians are still reluctant to increase their credit card debts.

"People are still more inclined to use their own money to make purchases rather than put it on credit," Commsec chief economist Craig James said.

Datamonitor senior analyst Harry Senlitonga said use of Visa and Mastercard debit cards was up 30% in the past 12 months, compared to 6.69% for credit cards. "Debit scheme cards give consumers the best of both worlds - accessibility of a credit card and they allow the consumer to use their own money," said Mr Senlitonga.

New tax break for savers

The federal government is considering a new savings scheme that will encourage more people to put money away for years into high interest rate bank accounts. The idea is believed to come from the Henry Tax Review, which is yet to be released by the government.

The new savings scheme could offer significant tax breaks for savers - similar to a superannuation’s tax break which gives super investors a low tax rate of just 15%. Some taxpayers now pay 50% tax on the interest earned on their savings.

Intellichoice Financial Planning ties up with one of Australia's leading investment management groups

Intellichoice Financial Planning is proud to announce an alliance with one of Australia’s leading mortgage investment management group, La Trobe and offer clients the opportunity to invest in Australia’s best Mortgage Fund, as voted by Money Magazine.

A mortgage fund essentially takes investors’ money and uses it to make loans secured by mortgages or buy existing ones. You as an investor receive the net interest payments on those mortgages. These loans can be secured by mortgages over retail, commercial, industrial or residential properties.

Darin Hindmarsh, Managing Director of Intellichoice says ‘investing in a mortgage fund can consistently earn you between 7% and 15% depending on the degree of risk.’

‘This rate of return compares very favourably when compared with other forms of investments. For example, the average return on government bonds is 1.6% and 3.4% based on 1 year and 5 years respectively.’

Intellichoice has formed a relationship with La Trobe because of the strength and stability of their mortgage fund options. Their Pooled Mortgages Option has been recognised as Australian Best Mortgage Fund by Money Magazine, winning the 2010 Best of the Best Award.

A unique feature of the La Trobe Fund is their ‘Select Investments’ which means before you invest, you and your Intellichoice financial planner can review the details of the borrower and the proposed loan, including investment term, interest rate and payment terms together before you make the decision to invest or not.

‘A great feature of investing in a mortgage fund through our alliance partner is that you only need a minimum investment of $1,000, so you have all the advantages of being “the bank”, without having to fund the entire mortgage’ says Hindmarsh.

To find out more about mortgage funds and whether this is the best investment option for you, speak to one of the financial planners at Intellichoice today on +61 7 3624 1900.

Deposit rates still at record highs

Savers can still benefit from historically high term deposit and savings account rates.

Term deposit rates in Australia are now over 7% at some banks and credit unions.

A bumpy ride for 2010?

That is what it may feel for some of us over the next twelve months according to sources at UBS. With the amount of deleveraging (big word for not being able to refinance debt) in the markets overseas, it will obviously cause a lot of jitters globally. What it means to you and I is the markets are more volatile over the coming year.

What are you doing to counter this? Well it seems over four hundred thousand Australians have decided the managing their own future through self managed super funds (SMSF) is the way to go. This may in part come from the belief that if anyone is going to lose your money it may as well be you! Not an entirely unfair statement considering that SMSF’s outperformed the major funds by 3% last year.

It may be worth recalling exactly what the different super funds are available and quite simply you have three options:

1.    Retail Funds/Master Trusts
These types of superannuation funds are owned by Banks and major fund managers. They have more investment options with less exposure to alternative assets. Alternative assets are direct property, infrastructure etc. The benefit of more choice is that the individual can tailor an investment strategy aimed at achieving their long term goals.  Colonial First Choice as an example, has a choice of 106 options.

2.    Industry Funds
These super funds are generally not for profit funds established for the benefit of the members. They have limited investment options. For example, AustSafe has 9 choices. 

3.    Self Managed Super Funds (SMSF)
As the title states these are super funds where the individual makes the investment decisions in line with government legislation. Generally the individual feels they have control and can achieve a better outcome than the so called professional.

What is best for me?
There are enough options to make Super and preparing for the future a confusing situation. However, more and more people are paying attention to this particularly due to the ups and downs we have experienced over the past eighteen months and the likelihood of more volatility to come.

The super fund that best suits you will depend on issues such as age, your acceptance or understanding of volatility, your investment strategy and also time to retirement. As with many things in life there is not a one size fits all option. We strongly suggest you review your current arrangements sooner rather than later as Super will affect many aspects of your financial future.

If you need help with superannuation or if you are thinking of setting up your own self managed super fund, speak to one of the financial planners at Intellichoice today on +61 7 3624 1900.

Bank fees cost $50/week

Bank fees are costing the average Australian about $50 per week. Even low income earners, (on $50,000 and below) are paying about $30 per week in bank fees and charges.

According to new research from the Australia Institute, in 2009, the Commonwealth Bank, Westpac, National Australia Bank and ANZ racked up $35 billion in profit. Bank charges were being passed on by businesses in their prices to customers and could be costing households more than $50 a week.

In the year to September 2009, banks earned fees and commissions worth $19.829 billion. The Australian Bankers Association disputed much of the report and said bank profits were largely derived from superannuation, insurance, institutional transactions, and offshore activity.

Gen Y not coping with debt

Generation Y, (people born between 1980 and 1994), have developed a reputation for not being responsible with money says social researcher Mark McCrindle.

McCrindle says that there has been a big rise in the number of 19 year olds declaring bankruptcy. Many Gen Y’s make good income but waste their money on cars, clothes and leisure/entertainment and are not concerned with investing for their future.

For help with debt management, debt consolidation or budgeting, speak to a financial advisor at Intellichoice today on +61 7 3624 1900.

10 things I hate about you (things you don't want to hear from your financial planner)

1. You will have to work longer
2. You need to save more
3. You have to live on less
4. You need to take more risk
5. Your family won't be covered in case something happens to you
6. It's not financially viable for me to help you at this stage (I'm not earning enough commission out of you)
7. You have to get another part-time job
8. Invest in shares only
9. Property is not a good invetsment
10. Do as I say, not as I do (my portfolio took a dive)

 All this can be avoided by speaking to a financial planner at Intellichoice who will help you find the right mix of financial strategies. Have peace of mind if the market declines, but you can also reap the rewards when the market is moving higher.

Visit www.intellichoice.com.au to view our range of financial planning services or make an obligation free appointment normally worth $500 with our financial planner. Call 1300 55 10 45 to find out how we can help you achieve your financial goals.

Benefits of a self managed super fund

A self managed super fund (SMSF) is one of the most popular and effective forms of investment and wealth creation available to Australians. There are many benefits to a self managed super fund, including control over the investments you choose to invest in, flexibility and the taxation benefits offered by the government. The benefits of a SMSF has led to an increase in the number of Australians who choose to manage and control their own super fund. Reports suggest that there are currently more than 350,000 self managed super funds with an overall 700,000 members.

The other benefit of a self managed super fund is that it helps offer an optional retirement saving mechanism thus giving the investor greater flexibility and control over the investments. The funds also enable you the ability to choose from the wide range of investment and strategies that are currently available in Australia. For example, through your self managed super fund, you could invest in cash, shares, bonds or property.

Self managed super funds offers the investor the chance to take advantage of tax benefits. DIY super also accept rollovers from other existing superannuation funds. In addition, they allow one to decide the amount of funds that one can contribute to the self managed super fund. The super fund also enjoys concessional tax rates which apply to the realized capital gains so long as the SMSF has held the assets for at least 12 months. The concessional tax rate of 15 % is applied to the deductible contributions and income held by the self managed super fund.

Self managed super funds allows an investor to change an administrator without the need for paying penalties or exit fees. Also, upon the death of the investor, the dependants of the fund member are in a position to receive the whole balance of the account tax free. The premium payable for total incapacitation insurance and death is tax deductible so long as it is paid through the DIY super fund. The cheques from the funds can only be signed by a member of the funds making self managed super a safe investment haven for most Australians. The funds also offer an inexpensive and simple structure especially for investors who wish to invest as couples.

The other benefit of self managed super funds is that they are cheaper to establish and run compared to other normal super funds. They are also a more flexible investment option compared to commercial and retail funds as they allow you to invest in property, cash, bonds, mortgage investments, shares, private equity and fixed interests. The self managed super fund allows an investor to invest in a wide variety of financial instruments that would not be available through traditional super funds.

To find out more about self managed super funds, speak to our financial planner today on +61 7 3624 1900. Through Intellichoice Financial Services, our mortgage brokers can also help you buy property through your self managed super fund with a SMSF home loan.

Pros and cons of a debt consolidation loan

If you have multiple credit card debts, car loans and personal loans and making minimum repayments each month is causing you stress, then you should consider a debt consolidation loan. Before you take out a debt consolidation loan, we recommend that you first speak with a financial advisor to ensure this is the best option for you.

Below are a list of pros and cons for debt consolidation loans:

Advantages of a debt consolidation loan

• One payment to make: Making a single repayment each month is so much easier and less stressful for you. It makes it easier to manage your finances
• Reduced interest rate: The interest rate on a debt consolidation loan will be much lower than the interest rate on your credit cards
• Lower monthly repayments to make: As the interest rate on your debt consolidation loan is lower, the amount you pay each month will also be lower
• Only 1 creditor: You only have to deal with one creditor instead of multiple creditors. 

Disadvantages of a debt consolidation loan

• It may be easy to get into debt again: As all your debt has been consolidated into the one loan, it might be tempting to start using your credit cards again or continue bad spending habits that got you into debt in the first place
• Longer time to pay off your debt
• You may end up paying more over the long term: As the debt consolidation loan term is longer, you may end up paying more interest to clear your debt

Before you get a debt consolidation loan, you should realistically look at the pros and cons to determine if this is right for you. Speak to one of the financial planners at Intellichoice for more information about debt consolidation loan and how we can help you with budgeting and managing debt.

Credit card traps

Differences in the way interest on credit card balances is calculated can cost consumers big dollars. Consumer group Choice found that two consumers with exactly the same transaction history and exactly the same outstanding balance of $2,000 could be paying either $10 in interest or $45, depending on the credit card they are using.

If you one day late or pay less than the minimum required repayment, most credit cards will charge you a full rate of interest on the full balance going back to the date of the original transactions, with no interest free days applying. If you fail to pay your bill on time, most cards will not give you any interest free days on new purchases either.

Superannuation investors turn to property

Superannuation investors are more likely to put any extra money they have into property rather than superannuation, a new study conducted by the Australian Institute of Superannuation Trustees has found.

According to the survey, approximately 43.6% of superannuation investors would buy an investment property, while only 22.4% would put more money into their super fund.

The survey also found that women were more likely to go for property, while men were much more likely to invest directly in the sharemarket. Only one-third of the consumers surveyed said they were satisfied with their super fund’s investment performance.

If you are thinking of setting up a self managed super fund (SMSF), speak to one of the financial planners at Intellichoice on +61 7 3624 1900 for more information and to find out whether a SMSF is right for you. Intellichoice can also help you buy property through your self managed super fund with a SMSF home loan.

What happens to your super if you die?

Superannuation is an excellent way to invest for your retirement. The Australian government has provided some great tax concessions, which make super one of the best long term investment vehicles. Your savings grow because money is paid in regularly, which your super fund invests at low rates of tax. But what happens to your super if you die?

Dependants
If you die while still a super fund member, the super company must normally pay your death benefit to one or more of your dependants or your estate.

'Dependants' could include your spouse, children, people with whom you had an 'interdependent' relationship or those who depend on you financially. We recommend that you ask your super fund for more details. If the super is paid to people who are not your dependants, it may be taxed.

Nominations
Most super funds let you nominate who you want your death benefit paid to, either as a 'non-binding' or 'binding' nomination.

A 'non-binding nomination' just guides the trustee, who still has the final say, especially if you have dependants, but you nominate someone who does not depend on you. The trustee is not required to follow the instructions in your will.

A 'binding nomination' will bind the trustee, and lets you name:

• a dependant, or
• your 'legal personal representative', who must distribute your benefit according to your will or according to law if you have no will.

Make sure that you keep these nominations up to date, for example, if you marry, re-marry or have children.

For more information about superannuation, speak to one of our financial planners at Intellichoice on + 61 7 3624 1900.

Planning an affordable family holiday

During the school holidays, we find that many families plan short getaways – either to spend quality time together or just to keep the children occupied. Below are some tips on keeping your travel expenses low, yet still ensuring a great time for everyone!

Search for deals
Do not miss out on the many online opportunities to find great bargains. You can use online travel sites to search for the lowest airfare, hotel rates and car rental rates, as well as great entertainment deals. It is also a good idea to check specific airline sites too, as they may be advertising specials that are not included on the other sites.

Pick the package
Before booking any part of your trip, check out travel packages available from the airlines or hotel chains. It is often possible to find low-priced packages that include both hotel and airfare, and admission to local attractions as well. However, remember that these packages may not always be the cheapest deals. Compare and check all the details and make sure that what you are getting is worth what you are paying.

Be flexible
Uncertain exactly where you would like to go? Then plan your trip around the best deals available. Sites that specialize in low-cost travel usually advertise specials to certain locations - as do many airlines. If the location sounds like somewhere you would enjoy exploring, you could save a great deal on your trip. It's also a great way to explore new places you may never have thought or know about.

Choose a destination location
Want to save money  on gasoline and admission costs for various attractions during your holiday? Pick a hotel that has a pool, playground, nearby hiking or other on-site activities. In addition, many hotels offer suites with their own kitchens. While these may cost more than regular rooms, the savings on take-aways and dining out may more than offset the higher price.

Explore the great outdoors
Camping is not only a fun family activity, it is also a cheaper way to travel. There are campgrounds and cabins at national parks all around Australia and they offer an inexpensive way to explore these locations. Outdoor holidays are a great departure from the usual routine and make it possible for your children to get away from the television and computers and enjoy nature. In many cases, they are much less rustic than you might imagine. There are also many activities available and great sights at the national parks.

For more information about budgeting, or for other ideas on saving money, speak with one of the financial planners at Intellichoice today on +61 7 3624 1900.

Flood insurance

Major floods across Australia in the past couple of years have raised strong community concerns about the extent and availability of cover for flood damage in house and contents insurance policies. The effects of flood can be devastating and may result in the loss of homes or in extensive water damage to buildings and contents. It is therefore vital that consumers understand exactly what their insurance policies do and do not cover.


Most home and contents insurance policies exclude cover for flood damage - this exclusion must be made clear in the policy documents. However, your home insurance policy will probably cover you for stormwater and possibly rainwater damage. Insurance companies generally define these events differently. It is imperative that you check with your insurance company if you are unsure whether your existing policy covers damage caused by storm and/or flood. Ask them to clearly explain that part of your insurance policy where flood cover, or flood exclusion, is contained. This will allow you to work out whether to change your insurance policy if you need insurance for flood damage.

It has become common for some insurers to provide cover against ' flash flooding', that is, when the damage to your property occurs within 24 hours of the rain that caused the flood. This cover may be optional (you have to pay more, and it may only cover you for a smaller amount eg 20% of the sum insured).

If you would like to find out more about home and contents insurance that includes flood, speak to one of our financial advisors on 1300 55 10 45 for more details.

Aussies in debt again

Australian households are returning to their debt fueled lifestyles after a year of austerity and paying down their debts. According to the Reserve Bank of Australia, personal loans and card debts have been rising for the last four months.

Approximately 25% of Australians expect to increase their debt within the next three months according to a survey by Dun & Bradstreet. Economist Shane Oliver from AMP Capital says people are less worried about their jobs and therefore more prepared to take on debt.

Aussies value their weekends more than being rich

More than half of Australians value their weekends more than being a millionaire.

According to an online poll published in News Ltd newspapers, 55% of Australians would not give up their weekends and work 7 days a week, even if it meant they would be millionaires within ten years. Approximately 44% of respondents said they would give up their weekends for financial gain.

Save money while you travel

While you are travelling overseas, it is even more important to make your money go as far as possible. You do not want to face a huge credit card bill when you return from your overseas adventure, but you also do not want to miss out on once-in-a-lifetime opportunities while you are away. We have provided some tips on how to make your dollar go further while abroad.

Staying in touch
Use email to keep in contact with family and friends. Internet cafés (including laundries and libraries) can be found everywhere. Using "global roaming" on your mobile phone can be expensive. Alternatively use International Calling cards so you can control how much you spend

Get plugged in
If you are taking your mobile phone, laptop, razor or hairdryer, you will need an adaptor – buy one before you leave home as they will be cheaper here and will save you the time of finding a shop that supplies one when you reach your destination.

Banking from far away
ATMs are plentiful overseas but be wary of the transaction costs the overseas banks will charge. Use Internet banking if you need to check your account and move money about.

Online bookings
Finding well-priced accommodation is also quite easy in many major foreign cities using discounted travel websites.

Check local bargains
Often there are significant price differences between home and overseas. For instance, a camera may be cheaper in Italy but a haircut is a lot more expensive.

Take the bus/tram/train/subway
Do not try to drive and park in major cities. If you think driving into Australian cities is difficult and expensive, you should try Europe. The best plan is to drive to the outskirts of the city, park and catch public transport. It will also be an experience for you to try public transport when overseas and you will be able to take in the sights without the stress of having to navigate around a strange city.

Eat where the locals do
Many prominent eateries are tourist traps. Take a stroll up the back streets and you can often find excellent food at a fraction of the price.

You never know - if you save money as you go, you could afford to extend your holiday for another few days, or even weeks!