Australian personal finance news, tips and advices.
by AFB
For most people, buying a home is the most significant financial investment they will make. A sizeable loan is usually required, and repayments are generally spread out over many years. Therefore, it’s important to also invest a little time into understanding your options and getting a deal that suits you. Let’s begin by learning the basics of how a home loan works.
Before discussing the different types of home loans it will help to understand what all home loans have in common. ... (read more)
by AFB
Sometimes, despite the best intentions, an accident or illness can affect you or your loved ones. Such times are distressing for the individual concerned, and can also be disruptive to any business or workplace. Every situation is different, but a time could come when you are called upon to care for a close relative or household member. Fortunately, all full and part-time employees are eligible to take paid or unpaid carer’s leave in times of emergency. ... (read more)
by AFB
Modern Australian households typically involve both parents engaged in occupations outside the home, or a single parent working full or part-time in order to make ends meet. The Australian Government provides Paid Parental Leave for parents or primary carers of newborn children. Paid Parental Leave can be provided for up to 18 weeks.
Paid Parental Leave is available for the primary carer (usually the birth mother) of a child. You will need to meet Australian residence requirements, and earn less than $150,000 during the year prior to the date of the child’s birth. If you are employed, you will need to be on leave or not working for the duration of your Paid Parental Leave. You will also need to satisfy the work test requirements. ... (read more)
by AFB
Understanding how interest affects your home loan is an important step in the loan process. Even if the interest rate remains relatively low it will still add up to a large portion of your total repayments over the duration of a 25-30 year home loan term.
Many people misunderstand how interest is calculated. For example, when investigating a $100,000 loan at 10% interest, a novice borrower might think the total amount of interest to be paid will be $10,000. ... (read more)
by AFB
Financing Options:
On the face of it, financing your car purchase through the dealership would seem to make sense. After all, it’s convenient, and you can be behind the wheel of your new car in no time. The downside is that you might be negotiating with a seasoned (or even shady) dealer who is expert at extracting every dollar from their customers. It could turn into a high pressure situation where you are persuaded to accept unnecessary add-ons such as rust-proofing and additional insurance cover. The loan repayments from a dealer are often also front-loaded, meaning interest rates will be exceedingly high at the beginning of the repayment schedule.
This is a popular option for a number of reasons. Interest rates are competitive, and there is no additional sales pitch for add-ons. Some banks even entice customers with free insurance. The interest rates are also spread evenly for the duration of the loan. The only real drawback is the time it takes to set up a face-to-face meeting with your bank loan-manager.
Institutions are understandably offering more online services, including car loans. The rates are competitive and loan approvals can be made on the internet, without additional inconvenience. However, not everyone feels comfortable with the impersonal nature of online deals, and there are always scams to beware of.
The rates are competitive, as your bank is in competition with other major financial institutions. If you have already paid off a large amount of your home loan, it could be convenient to extend the loan without eating into your savings. On the other hand, if you use too much equity and then decide to sell your home it could cause financial strain.
One of the biggest influences on your car loan repayments will be your credit rating. Lenders can access information about your credit history (including defaults) that will affect your prospects of getting a loan and the interest you will be asked to repay. If you are in the high-risk category your interest rates will be higher.
You will enjoy driving your new car more if you are not saddled with oppressive monthly repayments. Consider the duration of your loan, as a shorter loan term will incur higher monthly repayments.
A car dealership has several income generating departments. Often the finance and insurance department makes as much (if not more) profit than the sales department. A dealer often acts as a middle contact between the buyer and lender. A dealer will try to get the lowest possible interest rate, and then increase it in order to profit. If you are financing through a dealer, take your time and research available rates to make sure the mark-up is not unreasonable.
Your new car dealer will also offer a bunch of incentives such as zero-percent interest or extravagant rebates on your old car. Rebates can actually be a real saving to you and are sometimes offered when dealerships are overstocked with certain makes and models. However, don’t forget that the rebate is money for you and not leverage for the dealer to insist you pay full price for your new car. There is still plenty of room to negotiate.
Extended warranties are offered on your new car. Actually, all new cars come with a warranty that could be suitable for your needs. There are also other sources of acquiring an extended warranty such as banks and credit unions, often at better rates.
The dealer will probably also offer you rust, fabric or paint protection for additional cost. If you are purchasing a new car, rust protection and undercoating has already been applied in the car manufacturers factory. Fabric protection is the equivalent of that which you can buy in a can from any hardware store, and paint protection is a sealant car wax that you will be applying anyway when your wash your new vehicle.
Window etching and alarm systems are additional items that will safeguard your purchase. They are relatively inexpensive procedures and installations that can be done yourself or by a reputable company at a fraction of the price a car dealer will offer.
Not all car dealers are cowboys. After all, it’s in their best interest to satisfy customer requirements, and you can get a very good deal. Prior to purchasing, shop around for a loan by approaching the various lending institutions, as well as talking to your dealer. When you know exactly how much you have to spend you will be in a position to negotiate and take advantage of the best deal on offer. A little research could save you thousands of dollars on your next new vehicle purchase.
I also recommend checking the NSW Fair Trading’s Steps to buying a car page and the Moneysmart’s Buying a car page as well.
by AFB
Setting a comfortable savings target is the first step. Not only will there be money aside in case of emergency, you will also feel increased satisfaction and confidence due to your disciplined savings efforts. Whether you are single or part of a family, a better and more consistent future is guaranteed when savings are available for emergency use.
In today’s modern economy many employment sectors don’t provide traditional health and retirement savings plans. In /this environment we are forced to live from one pay-day to the next without any real guarantees. Having money in the bank will provide peace of mind and the ability to ride out any down times during your career or between jobs.
A savings account doesn’t only have to be geared toward emergencies either, although some money should be set aside for unexpected reversals in life. Your savings account can be further divided into additional priorities and future plans such as a vacation or even a home deposit.
We are all conditioned to paying bills and living expenses, so why not treat yourself as another essential expense and dedicate some of your wage toward savings. Be patient while your balance rises and you will begin to appreciate there is a lot more to working than just paying the bills.
The first step is to visit your preferred bank or financial institution and set up an account. Be clear with the bank that it’s a simple savings account you want. Features of the account to look for include minimal (or zero) monthly account keeping fees, no minimum balance, and the best possible interest rate. You can even link your savings account with other accounts you may have for convenient (or automatic) transferring of funds.
Your visit to the bank shouldn’t take up much of your time, and you will be up and running with a savings plan.
At this point it’s no use getting too far ahead of yourself. Don’t start to plan for amazing vacations or fancy cars at this point. The first and most important consideration of a savings account is to have ready cash available for emergency use. Financial experts suggest keeping at least 3 to 6 months of emergency expense savings set aside. It will take some time to build up this large chunk of cash, but once it’s done you (and your family) will be able to breathe easy knowing that unexpected financial hurdles can be overcome. Try to focus on one savings goal at a time to avoid impatience or discouragement.
If possible, have around 10 percent of your salary directly deposited into your account. It will be much easier to resist temptation this way, and you will become habituated to understanding that the 10 percent is not for immediate use. In time you won’t even think about it, and your savings account will continue to rise. In any case, whatever percentage is suitable for your individual circumstances, even 5 percent, will add up over time.
Nothing is achieved in life by being fickle or undisciplined. Why should your savings plan be any different? Keep on track with your plan and you will ultimately find yourself being encouraged by the savings. Try to see your savings account as a long-distance race rather than a sprint. You will eventually see a sizable balance in your savings account, and even have the opportunity to dedicate a little toward luxuries for yourself and your family.
For the sake of minor frugal living adjustments, such as fewer shop-bought coffees or meals per week, your growing savings will ensure you have a financial cushion, peace of mind, and the added confidence that, for better or worse, only money can buy.
by AFB
Renovating a home can be one of the most fulfilling achievements for a home owner or investor. However, when things go wrong (as they inevitably do) your renovations can turn into a financial nightmare. Taking out a home renovation loan that is tailored to your needs can be one of the most astute financial decisions you will ever make.
Understanding which home renovation loan best suits your project is the first step toward a successful outcome. The ‘plan’ in financial plan is more than just an idea; it’s an essential factor in making sure you add maximum value to your premises. Unless you have savings set aside for your home renovation, you need to understand what type of loan best suits you. ... (read more)
by AFB
There is a common conception that bullying is something that only goes on in the school yard. Unfortunately, the tactic of domination by fear, intimidation or physical abuse often carries on into adult years, and is increasingly found in the workplace. Regardless of where the blame rests, bullying in all its ugliness is unacceptable, and perpetrators are accountable for their actions. There are Australian laws in place to deter bullying and compensate victims.
In 2011, The Work Health and Safety Act raised awareness of workplace bullying. The aim of the legislation is to avoid the escalation of bullying into a compensation or discrimination claim. Although the intention is noble, the incidence of workplace bullying is still on the rise. The system has failed in many cases to protect workers and their families suffering as a result of illness or injury. Managers and team leaders are accountable, and often struggle to reign in workplace bullies. In fact, evidence shows that in many cases, those in positions of power are themselves the workplace bully.
Modern workplaces can be pressure-filled environments requiring a high level of productivity for amassing a maximum profit. It’s true that not all employees are equal and some may perform better than others, but this should not be an excuse for bullying less efficient workers under the guise of encouragement to meet productivity targets.
Psychological and physical trauma as a result of workplace bullying can have a significant and lasting affect. It can manifest in health issues, reduced work productivity, and difficulties amongst family, loved ones and the broader community. As of 2010, the Productivity Commission Report stated that workplace bullying costs the nation up to $36 billion annually.
Compensation claims for mental stress alone have risen by well over 50 percent in the past decade. Psychological claims are most commonly attributed to work pressure, with a quarter of those claims caused by a combination of harassment and bullying. Rehabilitation services are stretched in dealing with mental illness caused by workplace bullying, and the difficulties are compounded by aggression from employers as a result of claims being processed.
A survey of injured workers, including those who had been bullied, highlights a number of obstacles toward recovery. Below are some of the causes of stress in employees seeking compensation.
The stress involved with rehabilitation often leads to an escalation of the problems. Compensation should always be undertaken with the guidance of a highly qualified legal team, such as Firths Compensation Lawyers, who empathise with victims of bullying and provide positive steps on the pathway toward better health.
At present in Australia, there are loosely connected mechanisms that assist in compensating bullying victims. Improved anti discrimination laws would go a long way toward clarifying the situation, but in the meantime, Firths Compensation Lawyers can give the best advice moving forward with your claim. Present avenues include:
by AFB
Value investing is one of the simplest stock investment strategies, and also one of the most effective. You don’t even need to be a finance whiz or undergo a course in chart analysis. Value investing strategy means locating quality stocks that are presently undervalued. In other words, if you know the value of something and purchase it at a discounted price, you will get a bargain – and then make a profit.
There are just a few easy fundamentals to master in understanding value investing.
A dollar saved is a dollar earned is a common expression every discerning shopper understands. By educating yourself regarding the intrinsic value of goods you can save a lot of money over time. Buying company stocks is no different. According to demand, the value of a product will fluctuate, although the product itself is unchanged. It makes no sense to pay the full price when you know that a product will be on sale sooner or later.
Company stocks are subject to the same variables. Discounts will arise, but not at predictable times as in the retail market. Educating yourself regarding the intrinsic value of a company is the first step in value investing. Then, when the sale price comes, you will be poised to purchase stocks at bargain prices that other investers are unaware of.
A lot of factors are taken into consideration when constructing an efficient-market hypothesis (EMH). However, markets factor in a bewildering host of indicators that often do more to confuse rather than clarify investment strategies. Some investors who think they have mastered the hypothesis, actually believe that stocks cannot be incorrectly valued due to the abundance of company data available.
Progressive companies such as Clime Value Investing think otherwise. Data is mostly gathered from past performance indicators and doesn’t always reflect present circumstancs – nor can it fully predict investor response to emerging trends. For example, an underpriced stock could be the result of an economic downturn caused by unexpected events or national (or global) recession. Alternatively, an overpriced stock may be the result of excited investors jumping onto an unproven technology bandwagon.
A key principle of value investing is to keep a margin of safety. A value investment strategy means your chances of earning a profit on stocks is greater. Also, in the event of a stock not performing to expectations you are less likely to lose money. It’s important to distinguish ‘junk’ or speculative stocks from those with solid foundations where value is expected to rise.
A good rule of thumb for a margin of safety is to buy stocks that are performing at around two-thirds of their actual value, thereby maximising returns while minimising risk on a genuinely deteriorating stock.
Value investment isn’t a get rich quick scheme providing instant rewards. Long-term capital gains incur a lower tax than short-term gains, so there is no reason to become impatient. In fact, it could be several years before your stock returns to expected highs. Nor is value investment a guaranteed win on every occasion. Savvy investors understand there will be losses, but it’s the bottom line that counts. Gains that outweigh losses equals profit, and value investment supported by Clime Value Investing professionals is a strategy designed to tip the balance in your favour. Waiting until the time is right to invest is a significant feature of value investing strategy.
Avoiding the herd mentality ensures you don’t jump in and buy overpriced stocks. There is no such thing as a permanently flat line on a stock market chart, and value investors are educated regarding company financials and the expectation of a bounce-back for a company with sound business fundamentals.
by AFB
Although there are variations in property law for different Australian states, the terms of contract usually transfer insurance risks from seller to buyer as soon as the contract is signed. The time between signing the contract and final settlement is most commonly between four to six weeks, with many people unsure of their need for insurance during this period. A legally binding contract also includes fine print, and every word should be fully understood before entering into what, for most people, is their greatest financial investment.
The seller has an obligation to take care of the property between the sale and settlement dates, ensuring there is no property deterioration during this time. Even if the property becomes the buyer’s risk prior to settlement, it’s a good idea to remain insured until settlement. The property would otherwise be uninsured if the buyer doesn’t insure for the sale/settlement period.
The buyer should take out an insurance cover note as soon as the contract is signed. In some cases the buyer may not immediately be notified at the time the seller counter-signs, meaning the investment could sit uninsured for a period of time. Some insurance companies offer free insurance for the duration between signing the contract and settlement date, so it can pay dividends to investigate various insurance company policies.
If the land is vacant at the time of purchase, a buyer can use public liability insurance during the construction phase. As soon as building finishes, it’s time to invest in a comprehensive insurance policy covering both the land and building, including improvements such as carpets, fixtures and furniture.
The body corporate insurance responsibility is for common property, including common walls and other building or property assets. The buyer should insure for unit contents and public liability.
In the case where the buyer is uncertain, an insurance premium covering the building and contents will safeguard against any unforeseen events. Once it’s determined that the body corporate has appropriate building insurance, the buyer can cancel any unneccessary building insurance.
Buyers should understand the difference between being an owner-occupier and being a landlord. If your property is going to be rented out following settlement you will require a policy suited to your needs. A standard building and contents insurance policy will not cover every scenario. Risks include:
In every case, it’s in the buyers best interest to investigate all insurance options, carefully study the insurance policy, and take out appropriate insurance to cover any situation that could affect you as the home or property owner.