A recent report into life insurance serves as a wake-up call to the thousands of Australians adopting the ‘it’ll never happen to me’ approach.

The Rice Warner Actuaries’ report Underinsurance in Australia showed that awareness and uptake of Income Protection and Total and Permanent Disability (TPD) insurance is extremely low.

The report found that only 22 per cent of Australians have adequate TPD insurance and 24 per cent have adequate Income Protection cover. 

It also seems life insurance is the best understood form of personal insurance with 83 per cent of eligible Australians having their average needs met, according to the report. 

While most Australians appreciate the benefits of car insurance or health insurance, when it comes to insurance that protects their personal wealth it’s a different story.

The old adage “ignorance is bliss” certainly doesn’t apply when things don’t go to plan – there’s nothing blissful about financial stress during a personal crisis. 

Instead you should be planning for how you’d cope financially if you became ill or injured.  Here is the lowdown on four basic types of insurances that protect personal wealth:

1. Death cover
   Also known as life insurance, death cover provides a lump sum payment to your beneficiary upon your death or to you if you are diagnosed with a terminal illness.Many people have this insurance within their superannuation with the common expectation of providing enough to pay out debts and meet other expenses such as childrens education.
2. TPD cover
   This cover provides a lump sum payable when a person becomes totally and permanently disabled and as a result are unable to work in an occupation for which they are reasonably suited by education, training or experience.Insurers have differing definitions of what constitutes a total and permanent disability so it is extremely important to read and understand the fine print of the contract before signing up.
3. Income protection
   Unlike TPD which pays out a lump sum, income protection provides you with regular income when you are unable to do your job due to illness or an accident.It is designed to replace up to 75 per cent of your income after a specific waiting period and it will pay monthly for a specific period of time. 
4. Trauma insurance
   Trauma insurance provides a lump sum payment on diagnosis of certain medical conditions or events after a qualifying period. The types of medical conditions it covers differs from insurer to insurer, but typically includes the “big four” conditionsof cancer, heart attack, stroke, and coronary by-pass surgeryDepending on the comprehensiveness of the contract you elect you could also be covered for other conditions such as head trauma, multiple sclerosis and paralysis. 

Some insurers will also provide ‘children’s cover’ within your policy (for an additional premium) which can help support you with the cost of caring for your child in the event they become seriously ill.

Again, specifically what is covered will be described in the contract so it pays to read this carefully before signing up.

Which one is right for me?
It can be confusing to work out which type of insurance is right for you.  When considering which insurance is best, think realistically about what will happen to your family, lifestyle and assets if you lost the ability to earn money because of illness or injury.  Begin by asking yourself some hard questions such as:

•  How long could I pay the bills and the mortgage if my income ceased?
•  Is there scope for family to help in the event that I could not work and what burden would that place on them?
• What lifestyle changes could be made immediately and how long could I sustain them if I was faced with a personal crisis today?

These are just a few of the types of questions to consider and they need to be answered realistically and honestly.  Often these questions are best discussed with a financial planner who is trained to ensure all considerations are covered and to help put the resulting answers into perspective for you. 

Even though it can be quite confronting to talk about the worst things that can happen to you and your loved ones, planning for the worst can provide peace of mind and let you get on with enjoying the best that life has to offer.

*Stephen Schill  is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Estate planning is a topic that many people would rather not talk about too often, but it’s an important part of the entire financial planning process for anyone with responsibilities, whether they are family or business responsibilities.

With one in three Australian marriages ending in divorce and people living longer, the number of blended families in Australia is increasing and family life is becoming increasingly complex. The need for comprehensive estate planning has never been more apparent. 

For many people these days, it means considering all possible scenarios and implications when mapping out how they wish to have their estate – that is, all of your assets and money – managed after they die.

It isn’t easy making difficult decisions about loved ones, and it’s even tougher for those in de facto relationships and second or subsequent marriages, where there are children from previous relationships.  The difficulty in choosing beneficiaries and amounts to be bequeathed means that many couples choose not to make a decision at all.

While estate planning laws vary in every state, wills are typically rendered invalid by marriage and may become partially invalid by divorce. So, it’s particularly important for everyone to make a new will after marrying or divorcing.  

Following are just some of the estate planning issues you should consider, in consultation with your solicitor and financial planner:

Keep your will up to date - If you already have a will, you should update it when your financial or relationship circumstances change. While remarriage may revoke an existing will, divorce may not.

Provide for dependants in your will – If dependants do not have specified entitlements set out in a will, they may have to make a claim for entitlement through the courts, at expense of the estate.

Nominate guardians for your children – If you have children under the age of 18, appointing a guardian for them in your will may help avoid disputes between family members by making your intentions clear. However, it is not binding as the Family Court can override your choice of guardian and appoint a different guardian where it considers this to be in the child’s best interests.

Careful planning to minimise tax - The executor of a will may decide to sell the estate assets rather than pass them directly onto the beneficiaries. In this case, capital gains tax may be incurred, reducing the money the beneficiaries receive.

Bequeathing assets not owned - People need to understand what they can and can’t bequeath.  Assets owned by joint tenants, trusts or companies can’t be included in a will.

Don’t assume superannuation will bypass the estate - Large super funds may automatically pay superannuation benefits to a deceased person’s estate. Having the funds included as part of the estate increases the risk of money falling into the wrong hands if the estate is challenged. To ensure superannuation benefits are paid directly to a beneficiary and not included as part of their estate, a person needs to provide a valid binding death benefit nomination directly to their super fund.
 

Managing family trusts – Family trusts need trustees to manage them.  If, for example, a person stipulates in their will that when they die their sister is to be the person who appoints the trustee, what happens if the sister dies a short time later?

Testamentary Trust – To provide additional protection of your assets, a Testamentary Trust might be an option. Put simply, this is a trust established by a will. 

Rather than assets being distributed upon death, some or all of the assets would remain in this trust for the benefit of a specific group of beneficiaries named in the will. There may also be tax advantages in having a testamentary trust due to the flexibility available to ensure that more income is distributed to ‘dependent’ children.

Let’s say a father leaves a sum of money to his son or daughter, who later separates from their spouse, the Family Court in a divorce settlement may rule that the spouse is entitled to a proportion of the inheritance. However, this risk could be reduced if the assets had been left to the children in a trust.

Be clear and concise – Ambiguity in a will can lead to unnecessary disputes over meaning, and the wishes of the deceased person may not be carried out as intended.

While the saying ‘you can’t rule from the grave’ carries some truth, planning for what will happen after you die will ensure your hard earned assets are protected and your wishes carried out.

Estate planning is just as important as planning financially for other stages in your life, such as marriage, starting a family or retirement. After all, why work to create wealth only to see it dissipated by not planning for its distribution after your death?

While only a qualified practitioner can legally draw up a will, a financial planner can help you navigate your way through the complexities of estate planning and provide a framework for ensuring all considerations are covered when mapping out your final wishes.

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs. No payments are received by AMPFP or a financial planner accredited by it for the general advice in this article. If you decide to purchase or vary an AMP product, your financial planner, AMPFP and companies within the AMP group will receive fees and other benefits from the product, which will be a percentage of either the premium you pay or the value of your insurance. You can ask your financial planner for more details or contact AMPFP, 33 Alfred Street, Sydney NSW 2000.

When it comes to women keeping up with men’s superannuation balances, the unfortunate truth is that the majority are still lagging behind.

According to the recent AMP Retirement Adequacy Index**, while average super balances for women have increased, the gap between female and male balances widened across all age groups. The average balance for males was $54,061 compared to just $29,692 for women – a 45% difference.   

The reasons women have less super:  

• The average income for women is lower than for men  
• Women often take time out of the workforce to start a family  
• Many women work part-time while raising children
• While women are often great at managing the household budget, they are not always financially literate about ‘big picture’ issues such as retirement planning
• Women often put the costs of raising children before their own financial needs
• Women live longer than men so their superannuation needs to last longer
• Women who divorce may lose their nest egg if, for example, their partner retains all the super when assets are divided

For all these reasons, many women reach retirement age and suddenly realise they do not have enough super to live comfortably.

Or worse still, some women do not have any superannuation at all and have to get by on the Age Pension, which may not be adequate to support their basic living and health costs.  Some may struggle to put food on the table, keep up with maintenance of the home, upgrade their vehicle or pay for a social life or travel.

The good news is, there are some simple tips to help women boost their super. 

Super boosting tips for women

Joining the front line – 20s

• Start your retirement planning early – although most young women are just starting their careers and retirement may seem like a long way off, it is never too early to begin planning for the future.
• Don’t be a financial dummy – get your statement out and familiarise yourself with your super. Look at how your money is invested, the performance of your fund and the fees you are paying. Improve your financial literacy by seeking professional advice from a financial planner or signing up for a financial workshop.

• Consider salary sacrificing – while your employer must contribute the 9 per cent Government Super Guarantee, it is a good idea to top up your superannuation by salary sacrificing. Depending on how much you can afford, try to put another 2-5 per cent of your income into your super fund. By contributing more while you are young, you will get the benefit of compound interest. Lower income earners should also make the most of the government co-contribution scheme.

Launching a sound super strategy – 30s and 40s

• Have a solid plan in place – at this stage in life women might be well established in their career, they could be busy raising a family, married or single, looking to invest or take the holiday of a lifetime. Regardless of a woman’s lifestyle in her thirties and forties, it’s important to have a sound strategy for building your superannuation assets.

• How much is enough? – working out what you will need in retirement is always a difficult task. A general figure of 65 per cent of a person’s pre-retirement income is often used as a guide when looking at how much a person might need in retirement, however expected retirement lifestyle is also an important factor.
• Consolidate multiple funds – on average Australians have 3.5 super accounts each, wasting as much as $1.1 billion a year in unnecessary fees. Websites such as http://www.findmysuper.com.au/ can help you track your missing super. Once you have found it, consider consolidating it into a single account to keep fees to a minimum.
• Consider spouse super contributions – this is a good strategy for women if they are not working or are working part-time while raising a family. Their partner can make contributions to their superannuation and receive an 18 per cent tax offset. Spouse splitting is another method in which a person can contribute up to 85 per cent of their salary sacrifice payments and employer contributions into their partner’s super fund. Over the years, this will serve to equalise a couple’s super accounts and close the wealth gap.

Building on your reserves – 50s  

• Do a budget for retirement – consider the lifestyle you want and work out exactly how much income you will need once you retire. Make sure you accurately account for all your living expenses and budget for additional costs such as buying a new car or travel.
• Plough more money into super – now is usually the time for aggressive retirement planning. As a large chunk of your home loan will hopefully be paid off by now, you may be able to salary sacrifice as much as 30-40 per cent of your wage.
• Consider ‘transition to retirement’ – if a woman is 55 or over and still working they can start radically boosting their nest egg with a transition to retirement plan. This involves moving super into an allocated pension for a more tax efficient income. By using the pension to cover living expenses, you can then start injecting your salary back into super. Keep in mind there are concessional caps limiting the amount that can be salary sacrificed into super.

While it is important for women to start building their nest egg early on, remember it is never too late to get your retirement planning on the right track. By using these simple strategies, women can work towards a stress-free and comfortable retirement.

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

**Source: The AMP Retirement Adequacy Index results, released on 1 March 2011, used data for the six months to June 2010 from more than 328,000 AMP corporate superannuation customers.

“You have cancer” are words that you never want to hear but when you do, you can be faced with questions like: Why me? What will happen to my family? How do I fight this? How much will it cost? How will my family cope financially if I can’t work or, worse yet, if I don’t survive?

According to the Cancer Council of Australia, cancer is the second leading cause of death with approximately 43,000 people estimated to have died from the disease in Australia in 2010 and about 114,000 new cases diagnosed during the year.

Being told that you have cancer is a big enough blow to your mind, body, emotions and overall spirit without having to worry about your finances. As a person living with cancer, your first priority is to get well again and spend as much time with your loved ones as possible. However, it can be hard to concentrate on these priorities when you have bills to pay, a family to feed and mounting medical costs.

Many people believe that taking out life insurance is for the aged, those who are ill, have children or are thinking about retiring. This is a myth.

An illness like cancer can strike when you least expect it and one of the most responsible actions you can take is to be financially prepared. Similar to private health insurance, taking out life insurance when you are young and healthy ensures lower premiums for the lifetime of your policy.

So what life insurance policies should you be considering?

• Trauma Cover

Trauma Cover provides a lump sum payment if you’re diagnosed with a specified trauma condition. Trauma Cover is designed to help pay for your medical costs and living expenses, providing you with some financial security during the important recovery process.

The types of conditions that Trauma Cover may cover you for include: heart attack, multiple sclerosis, motor neurone disease, major organ transplant, severe burns, cancers, dementia and stroke or paralysis.

• Income Protection

Income Protection, also known as salary continuance, usually pays a monthly benefit of up to 75 per cent of your regular income if you’re too sick or injured to work.

This type of insurance is designed to help you continue to pay the mortgage, children’s school fees, utility bills and buy food, clothes and other day-to-day expenses.

• Total and Permanent Disablement (TPD)

TPD cover provides a lump sum payment if you’re totally and permanently disabled. This cover will usually help you pay for medical expenses, repay major debts and ensure that you are looked after in the future.

• Death Cover

Death cover works by making a lump sum payment to your family if you were to die, or, under some policies, are diagnosed with a terminal illness. It offers you the security that if the unexpected were to happen, your family would have financial protection.

For anyone who has large debts such as a mortgage, it is important to take out death cover, irrespective of your age.

Making sure you have the right cover will help give you peace of mind now and financial support in the unfortunate incident that you experience disability, illness or death.

If you would like professional advice about which life insurance option is most suitable for you and your family, you could consider consulting with an accredited financial planner. Your financial planner will investigate how much cover you currently have and how much you should have by taking into consideration your personal circumstances and needs. 

*Stephen Schill  is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

There’s nothing better than seeing our loved one’s faces light up on Christmas morning when they open their presents. And while giving gifts is a great way to show we care, it’s very easy to spend like crazy.  

In the lead up to Christmas, many peoples’ budgets and savings can be ruined by spending sprees of yuletide proportions. However, with a little bit of thought and planning, it is possible have a jolly Christmas without putting a strain on your budget.

Twelve budget tips for the twelve days of Christmas:      

• Do a budget – write out a list of the people you’d like to buy for and put a price limit next to each name. If it adds up to too much, review the limits you’ve set.  

• Organise a ‘Secret Santa – instead of buying a gift for everyone, consider a ‘Kris Kringle’ arrangement where each member in your family draws a name out of a hat and only buys a present for that person. Don’t forget to set a price limit so that no one goes overboard.

• Shop in mid season sales and use catalogues – get organised and start your shopping early at the mid-season sales. Most of the big department stores are still in sales mode, offering discounts of up to 40 per cent.

• Don’t forget layby – it may be a bit old fashioned, but many shops offer no deposit laybys right up until Christmas.

• Shop online – more often than not you can find the item you want for a lot less online. Books make a great Christmas gift and can often be ordered on the internet at heavily discounted prices.

• Get baking – the most appreciated gifts are often the ones that are made with love. Home-made fruit cakes, rocky road, shortbread, jam and relishes are festive favourites which never fail to impress.

• Stockpile Christmas groceries – pop a few extra items in your shopping trolley each week and store them away in the pantry, so your Christmas grocery shopping bill won’t be so scary. Stock up on items when they’re on sale or look out for ‘two for one’ deals which make for really economical Christmas shopping.

• Buy clean skin wine – most bottle shops offer a wide range of clean skin wines which are fantastic quality. You can bring the price down even more if you buy by the half dozen.

• Be credit card wise – while credit cards are convenient, they are also addictive over the Christmas period and can quickly undo a well-planned budget. Avoid buying gifts with credit, unless you are going to be able to pay off your card before interest is charged. You don’t want to be still paying off Christmas well into the New Year.

•  Ask family for vouchers this Christmas – then take them to the after Christmas clearance sales. You’ll get more bang for your buck and you can choose what you want. Post Christmas sales are a chance to pick up some real bargains, especially on big ticket items. But go prepared and be armed with a list of the items you actually need to avoid unnecessary purchases.

•  Start paying off your holiday now – if you’re going away over the Christmas break, try to pay off your accommodation costs in instalments before you leave. Make sure you holiday within your budget and avoid paying for expensive overseas travel on your credit card if you won’t be able to pay it off quickly. To cover extra holiday expenses, such as ice-creams and movie outings, why not start saving your loose change in a jar. It’s surprising how quickly the money can add up.

• Budget for New Year expenses – when doing your Christmas budget, don’t forget to factor in for some of the big expenses you’ll be facing in the New Year. If you’ve got children, be mindful that all those back to school costs are just around the corner. You’ll also have a new round of bills starting to roll in, such as rates, electricity and phone bills.

Like most things, if people don’t carefully plan their festive season expenses, they will end up with a major headache when the fun of Christmas is over and the summer holiday is a distant memory.

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Making tough decisions

Funding the trip is the biggest consideration. Much will depend on how long you want to be on the road and where you want to go. Some people sell their homes and hit the road indefinitely. Others dip into savings or super funds to go for a set time. Before making any big decisions, give me/us a call. I/We can also help if you receive a Centrelink pension.
Do you need to upgrade your vehicle? The following questions will help you reach a decision:

• Will you be camping or towing a caravan?
• Are you planning to travel to remote areas?
• What sort of terrain will you cover?
• Do you need a four-wheel drive system?

It might be worth contacting caravan or motorhome clubs to get some advice. The Australian Recreational Vehicles (RV) Network (www.rv.com.au) has links to clubs in each state.

Choosing when and where to go

Have you got your heart set on seeing the spectacular wildflower displays in Western Australia? Would you like to attend music festivals? Have you considered working part-time fruit picking? Take into consideration the weather and seasonal highlights when planning your itinerary. Most people travel north in winter and south in summer. Also, keep your travel plans flexible so you can stay longer in places you love or take recommendations from other travellers. Across Australia there are many free campsites and it’s worth using them during school holidays when caravan parks charge extra. For more information, visit tourism websites for each individual state.

Be prepared

What will you do about your house while away? There are a few options including renting or house-sitting. If you decide to rent, consider appointing a property manager to look after your affairs. Getting a house-sitter is an attractive alternative, as they will also collect mail, water plants and look after pets. For more information, visit: Happy House Sitters and Aussie House Sitters.
Additional tips:

• Contact your insurance company regarding home and vehicle insurance. Leaving your home vacant may attract a higher premium. Also, some insurance providers offer discounts to over-55s. 
• Check expiry dates on credit cards, licences and vehicle registrations.
• Register for internet banking.
• Organise direct debits for bills.
• Consider hiring a gardener to mow your lawns.
• Re-direct your mail.
• Consult your doctor, dentist and any other medical practitioner you visit regularly, for advice about life on the road.
• Consider doing a basic first aid course.
• Have your vehicle serviced and think about doing a car maintenance course.

Staying in touch

These days wireless internet connections, mobile phones and global positioning systems have made it easier to stay in contact with loved ones. If you are travelling in remote areas consider investing in a satellite phone or high frequency radio, which will also allow you to contact the Royal Flying Doctor Service.
Keep in mind the following tips:

• Seniors Card will give you access to many discounts, as will internet access.
• Make copies of travel documents – one for you, one to leave with a trusted friend or relative.
• Carry copies of your health records.
• Pack enough medication or remember to fill prescriptions in larger towns.

Being well prepared not only gives you peace of mind, but also sets you up for the adventure of a lifetime, so start your planning early.

Need more information?

Visit the following websites or call us to discuss the best way to finance your next adventure!
Planning: www.thegreynomads.com.au
Nationwide discounts: www.aboutseniors.com.au

What you need to know
This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. Although the information in this article was obtained from sources considered to be reliable, the information is not guaranteed to be accurate or complete. The information in this article is current as at September 2010 and may change over time.

There’s a saying ‘money can’t buy happiness’, but is this statement really true? According to the latest AMP.NATSEM report, The pursuit of happiness, there is a link between wealth and happiness. Overall higher income, personal wealth and consumption are associated with higher levels of happiness – but only slightly.

While money is linked to a greater satisfaction with life, a person’s income would need to increase by hundreds of thousands of dollars to improve their happiness by a single point on a scale of 0 to 10.

Even people who receive a windfall of money, such as by winning the lottery, are not significantly happier than non-winners. And an improvement in health or marriage would have a much greater impact on a person’s happiness than an extra $20,000 of income each year.

However, how much a person earns in relation to their friends can have a big impact on their level of happiness. The report shows the rank of a person’s income in comparison to their peers, has a significant bearing on happiness. Happier people tend to have higher incomes relative to their peer group, and the most dissatisfied people have lower incomes than their peer group. A person, for example, who earns $50,000 compared to his or her friends who earn $30,000 could be happier than a person who earns $60,000 with friends earning $80,000.

How a person manages their money also has a significant impact on their happiness.  People who spend their money wisely, save regularly and avoid credit card debt report higher satisfaction with their life overall.

Why careful money managers are happier:

• Debt has an effect on happiness – ‘bad’ debt is associated with lower levels of happiness, while ‘good’ debt is not. Credit card debt and overdue bills are strongly related to low satisfaction levels, while mortgage debt, on the other hand, is associated with higher levels of happiness. Bad debt typically refers to debts used to buy things that depreciate quickly and do not provide income, while good debt usually refers to debts used to purchase things that appreciate in value, such as a home.   
• Regular savers are happier – good old-fashioned money in the bank had a positive relationship with happiness.
• Planning for retirement leads to a happy future – superannuation balances correlated with higher levels of happiness. However owning an investment property, debt-free or otherwise, did not significantly boost happiness levels.
• Consumer spending on meals eaten out, a new car or a new TV does not significantly boost happiness levels.
• Spending wisely, on the other hand, is linked to greater happiness – people who spend money on their home, home renovation or holidays were more likely to be satisfied with their lives.
   

So overall, it does seem that being better off financially is associated with greater happiness. But what a person does with their financial situation also makes a big difference. Careful financial planning and a responsible approach to money can pave the way for a much happier life.

People who need help to save for their first home, build a nest egg for retirement or create more wealth would be wise to see a financial planner to ensure they are setting themselves up for a happy future. 

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Life goes through so many changes – often in the blink of an eye.

Investing, planning and setting goals can seem ridiculously ambitious when you are young – as does planning for retirement when you are just starting a family. But laying these foundation stones early can make all the difference and pave the way to financial stability and increased prosperity.

What should people be thinking about financially at what age depends on many factors, but there are some major turning points in life when most people need to reconsider their circumstances.

Age 20 – Young adult just starting out

Long term planning for a 20-year-old usually revolves around what is happening next weekend. However, it is not too early to start thinking about financial planning issues at this tender age.

In previous generations our grandparents would advise their grandchildren that when they got their first real job they should put away 10 per cent of their income for the long term and start saving now for a block of land. While the times might have changed, those guiding principals have not. Learning to be a disciplined saver is very important – regardless of a person’s goals.

Identifying goals and saving towards them is an important part of ensuring financial fitness. Don’t endlessly ride the financial rollercoaster throughout life – take our grandparent’s advice and start saving by opening a bank account and saving 10 per cent of the weekly wage. If you put away just $500 a year or $42 a month in a high interest bank account it could grow to $7,000 in ten years.

Age 25 – Single and career in full swing

With a solid career path and an attractive salary, now is not the time to just blow it. While it is nice to have a flash car, travel overseas and party, letting another decade pass with nothing financially to show for it could have significant financial ramifications in later years.

Sure, young people should have fun and reward themselves for their hard work, but in moderation. This is the time to build a solid foundation by being careful about debt and controlling the credit cards. By now people should not only be thinking about how to buy their first home but they should also be starting to be financially savvy and have a disciplined savings approach to the medium and long term – even if they don’t know exactly where life’s ferris wheel will take them.

Age 30 – Couple thinking about getting married

We know from statistics that one in three marriages in Australia fail and that 60 per cent of those failures can be traced back to financial issues.

Before walking down the aisle couples should make sure they are financially compatible by:
- Understanding how each person lets money flow through their hands. Is one a spend thrift and the other a scrooge? Opposites don’t always attract when it comes to money.
- Being clear about what assets and liabilities, each person is bringing into the marriage.
- Identifying each person’s goals and aspirations and by prioritising them.
- Preparing a budget individually and then as a couple to find the common ground.
- Having honest and open communication when it comes to money matters.

Young couples should also not fall in to the trap of wanting all the consumer toys of today and paying for it with tomorrow’s money – this is the fast way to the big dipper of debt which can take a very long time to be rid of.

Age 35 – A couple with babies

This is a ride that could make your bank account scream but financial planning and family planning actually go hand in hand. The importance of re-doing the budget at this time can’t be overstated – there is a lot more to consider than a new little mouth to feed.

A budget is the cornerstone of good financial planning and it can relieve some of the monetary stress around this life-changing event. There are so many things people should consider such as the loss of an income (maternity/paternity leave) and the addition of health, life and disability insurances to protect their loved ones.

Saving for these additional expenses, and buffering against the income drop, should happen at least a year out from even thinking about starting a family.

Once the baby arrives it also pays to start thinking about their future education. They might still be in nappies but if parents are contemplating a private school education they may not only have to enrol them now but start a disciplined savings regime as well.

Age 40 – A couple with school aged children

If people didn’t know it then, they will know it by now – children cost money.

It’s not just the school fees but all the extra curricular activities and social happenings on the weekend – sports clubs, birthday parties and not to mention what it costs in petrol to be the full-time weekend taxi driver.

People should be accounting for all of the above and more. Usually this is the time when people have the biggest mortgage, the kids are the most financially dependent and there’s also considerable outgoings. Insurance is paramount to protect you against loss of income or – worse still – the total loss of the income earner.

The worst financial mistake people can make during this phase is trying to “keep up with the Jones’”. Having the biggest people mover, the biggest house, the X-Box 360 and the biggest plasma TV can put people under senseless financial pressure.

If people can keep focussed, this is the time to accelerate their wealth creation strategies towards retirement. The tax concessions on superannuation make it one of the most attractive methods of funding retirement. Also consider making extra repayments on your mortgage. Paying an extra $100 a month could save you about $42,000 in interest payments and around three years off the term of the loan.*

Age 45 – Going through divorce

Nobody stands at the alter and plans for divorce but the facts are that not all marriages are going to go the distance.

The cost of divorce can cripple either party with often the custodial parent having to struggle to raise the children and the non-custodial parent having to budget for child support. This can be complicated with subsequent relationships, blended families and estate planning issues.

Financially speaking, when going through divorce people should consider:
- Super is now treated as a matrimonial asset not a future resource – which means it can now be split or even be flagged to be split at a future date.
- Ownership of illiquid assets, such as property, need to be considered.
- Ownership of insurance policies can cause a headache when they are cross owned. Self-ownership of insurance policies may prevent this.

Sometimes a hard ask, but often a better financial outcome during divorce results from trying to stay on civil terms with an ex-spouse using methods such as mediation. An ugly fight-to-the-death in court could financially put both parties at ground zero.

Age 50 to 60 – Empty nesters/ pre-retirees

The kids have flown the coup and now is the time for aggressive retirement planning. Not only is this a time when people consider superannuation more seriously, estate planning should hit overdrive as people think about making sure the right money is in the right hands at the right time after they’re gone.

People should ask themselves, “Do I really need to rattle around in a big four-bedroom house?” What landlord would want to have three empty bedrooms every night of the week collecting no rent? Now is the time to think about downsizing to a more manageable property that could also free up investable capital or pay off any residual mortgage.

This may also be a time to scale back on insurance due to the kids leaving home and a time to clear the debt. Any funds freed up can be ploughed back into super and other retirement strategies.

Age 60 – Retired

By the time a person retires they should have cleared their debt.

In this phase of life people should be enjoying the fruits of their labour. However, it is also a time to be well informed and aware of any possible entitlements from Centrelink, Veterans Affairs and the range of concession cards from the Department of Family and Community Affairs.

People may also need to take a more conservative view on their investments to reduce risk, as there’s no winding back the clock 30 years to build up wealth all over again.

Quality financial planning can help people sail through the sea of complex superannuation and pension issues.

Retirees should think about:
- Careful budgeting – to avoid outliving capital.
- The big trip – spend carefully. People should be realistic about how long they can afford to travel for.
- Lifestyle and health issues – plan ahead when considering retirement villages, hostels and nursing homes.
- Estate Planning – this should be well and truly in place to protect loved ones.

Remember to enjoy your retirement – not everything has to be preserved for the kids!

But to ensure you are in a position where you can make the choice between the kids and the caravan, make sure you seek out quality financial planning advice along the way. It can make all the difference – from buffering you from life’s unexpected but inevitable dips and turns to living the life you want for longer.

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS License No. 232706.

*Figures based on $250,000 loan of 25 yrs at variable rate of 7%

Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Just as the Government recently handed down the Federal Budget – its financial plan for the nation – now is a good time for people to take stock of their personal finances and establish a plan of their own.

With rising interest rates leading to higher home loan repayments, many Australians may be feeling the pinch. By taking time to reassess their spending and making sure their money is working as hard as possible, people can make a real different to their financial fitness.

Whether it’s the Government or families, small businesses or individuals, setting a budget and sticking to it is the cornerstone of good financial management. Without a budget there is no real way of knowing how much is left at the end of the week to save, invest or go towards reducing debt.

Budgeting requires people to look ahead and consider their future goals. By establishing a budget, people can set financial goals and more easily monitor their expenses. After all, unless people take control of their finances, it could soon take control of them.

Let’s look at a few things people need to consider when tackling a budget:

- Always overestimate your expenditure for the next 12 months. It allows a buffer for price rises and increasing loan repayments.

- Ensure you either have an emergency fund or access to cash through a mortgage redraw facility as a contingency for life’s unexpected expenses.

- With rising property values, don’t just get a line of credit and use your house like a personal ATM machine. The life expectancy of a loan should reflect the life expectancy of the asset.

- Use a separate working account. It’s okay to use credit cards if you’re disciplined, but set aside money into the working account to cover fixed expenses like phone bills, rates and body corporate expenses. And don’t touch the working account – it’s not really your money.

- Save for the long-term goals first. People could consider saving 20 per cent for the long term for things like retirement funding and kids education and then save for the medium-term goals such as a deposit on a first home. Saving for the short term for things like end of year holidays and Christmas presents should come last.

- Differentiate “wants” and “needs”. Don’t be too hard on yourself, but do you really need the $100 per month cable TV package? You probably don’t watch half the programs. Cars are big traps too. It’s nice to drive the latest and greatest, but don’t live for your car. Be sensible.

- Always reconcile your bank statements and credit card statements. Human error can cost you. It’s also a good way of tracking your spending habits.

Once a person has successfully prepared a budget, the biggest and most important step is to be disciplined with their spending and stick to it.

It is also very important for people to strategically use any excess funds in their budget to their best advantage. Depending on a person’s personal circumstances, and with the help of a financial planner, people may choose to reduce debt, create wealth through strategies such as managed funds and gearing, or salary sacrifice into super to boost their retirement nest egg.

Having a budget puts people in control of their financial future and will enable them to own tomorrow.

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Distribution of costs and changes in price

Raw material, processing costs and tax make up most of the price. The rest is distribution costs and retail profit. Short-term changes in prices are caused by local competition between retailers whilst longer-term trends are driven mostly by raw material costs.

Daily fluctuations in price are caused by retailers discounting to attract customers. They actually don’t make much money from selling petrol – milk, papers, cigarettes and so on are what keep petrol stations going.

Supply and demand

Australia buys about its crude oil requirements in US dollars through the Singapore wholesale market. Changes in the A$-US$ exchange rate will impact fuel prices as will worldwide changes in supply and demand.

Tax

Our petrol taxes are relatively low compared to the rest of the world – only USA, Canada and Mexico are lower. Many governments have used taxes to raise revenue and force improvements in fuel efficiency.

Savings to be had

There are things you can do to reduce your spending on petrol. Take advantage of the fuel discounting cycles and buy midweek. Special deals like those offered by Woolworths and Coles Myer can also help. To find the best prices in your area look up www.fuelwatch.com.au.

Looking after you car and thinking about how you drive makes a difference. Correctly inflated tyres will improve your fuel efficiency. Air conditioners can add up to 20% to fuel consumption. Steady driving uses less fuel than racing and braking.

For more information on fuel pricing, check the Australian Institute of Petroleum website at www.aip.com.au.

When prices fall, it’s easy to get complacent. Good habits and a bit of planning can save you money regardless of the price of petrol.

What you need to know

The advice in this article is general advice only and does not take into account your objectives, financial situation or needs. Therefore, before acting on the advice, you should consider its appropriateness to your personal circumstances. Although the information in this article was obtained from sources considered to be reliable, the information is not guaranteed to be accurate or complete. This publication was prepared by AMP Financial Planning Pty Limited ABN 89 051208327. The information in this article is current as at June 2009 and may change over time.