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Debt-Free New Year

All I want for Christmas is a debt-free new year

 

By AMP Financial Planner Dianne Case

 While Christmas is one of happiest times of the year, it can also be one of the most stressful when it comes to money.

With so many additional expenses to account for such as the cost of presents, Christmas food shopping and holiday outings, careful budgeting is essential.

There's no need to be a scrooge, but there are many simple tips to follow to ensure you enjoy the festive season without risking a financial hangover in the New Year.

Tips for controlling silly season spending:      

1. Get everyone to bring a plate – hosting Christmas lunch is expensive but you can spread the cost by asking everyone to bring a dish. Your family and friends won't mind being asked to bring a salad or dessert.

2. Be a savvy shopper – set a budget for presents and stick to it. Instead of buying for everyone why not organise a 'Secret Santa'. Also use catalogues and shop online to find the best deals. Vouchers are a great gift idea because you can use them in the post-Christmas sales and get more bang for your buck. Don't forget many toy shops offer no deposit lay-bys right up until Christmas.  

3. Go easy on the credit – while credit cards are convenient, they can be addictive over the Christmas period and 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.

4. 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.

5. Bake it or make it – if you have a talent for craft or baking you can create inexpensive presents such as home-made fruit cakes, rocky road, jams and relishes. If you can sew, knit or have some other skill, a personalised gift will be even more special.

6. Budget for New Year expenses – when doing your Christmas budget, don’t forget to factor in 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.

So with a little thought and planning now, it is possible to have a jolly festive season without blowing a hole in the budget.

Once the fun of Christmas is over and the summer holidays a distant memory, you can then look forward to getting off to a flying financial start in 2013.

 Dianne Case 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.

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Assets Building Years

Making the most of your asset building years

Harness your peak earning years to achieve important financial goals, with the right mix of asset building strategies.

During their 20s and 30s, most people focus on the basics of financial security: families, first home deposits, super contributions and personal investments.

By the time you reach your mid-forties, things have usually changed. You’ve progressed in your career and you’ll typically see your salary and net worth rising, along with your living expenses. More importantly, you are just about to enter your peak earning years. In terms of building assets, these can be your golden years so it’s important you plan to use them effectively.

Sorting out the options

This is a period of many options, and a few risks. Should you concentrate on paying off your mortgage? Reducing your tax? Building your personal investment portfolio? Making a career change? Investing for a more comfortable retirement? Or a combination of these strategies?

Finding the right answers means some serious thought about what your life and investment priorities are, and sitting down to talk with your financial planner may help. The answers are different for each of us, and getting them right is the key to maximising the financial possibilities that these peak  earning years present.^[

Sylvia and Gerry’s story

Sylvia, who’s in her mid-forties, runs her own catering company, while Gerry, also in his mid forties, is a structural engineer. The older of their two sons will be completing school next year.

Gerry was recently promoted and the boost to his salary means they expect to have at least $13,000 to save, invest or spend in the coming year. Gerry intends to continue salary sacrificing to build up his super which now stands at $267,000, while Sylvia has accumulated $22,000 in her fund. She plans to boost her super when she sells her catering business sometime after she reaches 55, or the boys have left home.

They believe their insurance cover is adequate; however, they ran down their modest cash reserves to support Sylvia’s new business, and want to add at least $15,000.

They are happy to continue paying off their variable rate mortgage which is $280,000, though they are not sure if they should be more aggressive in reducing that.

When Sylvia and Gerry met their financial planner, they brought along their list of questions, though Sylvia was more interested in super while Gerry’s focus was on building their investments.

Over several meetings, their planner presented them with a number of scenarios. Sylvia and Gerry were able to weigh up paying down their mortgage with their surplus funds over time, compared with salary sacrificing that same money into super. The planner also indicated to them the possible impact of fluctuating market conditions on their super.

They also determined the lump sum amount required if Sylvia and Gerry wanted to retire when Gerry reached age 65.

This information gave some focus to their discussions. They decided to pay down their mortgage with some of their surplus funds each year, and contribute the remainder of the surplus funds to their managed investment portfolio. This allowed them to build their wealth inside and outside of super to bolster their retirement goals.

Putting your plans together

As this story suggests, there are many situations and options that people have in their asset-building years. An important first step is to take stock and develop your own ‘shopping list’.

The decisions and the changes start with you, and we’re here to help. So, please call us today at:

 In Reverse Pty Ltd on 0412 074 454 or email at inreverse@ampfp.com.au.

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[1] Financial fitness for the over 40s. (2011). steadyfinance.com.au/financial-fitness-for-the-over-40s.html

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. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from us, or AMP Financial Planning Pty Limited on telephone 1300 157 173.

Happy Easter

Happy Easter to all In Reverse Clients.

We trust you stay safe during this busy period.

For those clients we have been able to help have good protection in place of assets and the ability to earn an income we are confident that you will prosper no matter what.

For those we are yet to help, we are on the way.