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.