Last week, we talked about failure and financial setbacks, and the importance of learning from our financial mistakes so we can come out on top.

Getting out of the hole and back on top should be priority number one, and if your financial setback has got you low on funds and high in debt, then here are 6 more actions you can take ASAP to help your situation:

1. Review your expenses

Work towards eliminating all non-essential expenses for the time being, and minimising where you can. This may mean cutting off Foxtel, reducing your food spending, reducing your entertainment money and going without some extra luxury items that you may have become accustomed to. Fingers crossed it’s only in the short term, so don’t think of this as a life sentence.

2. Reducing your private health insurance cover

If you can help it, don’t cancel your private health insurance because you avoid the additional 1% tax by keeping it. You can, however, call your health insurance company and enquire about reducing down your cover to just the basic hospital policy only. This means that you get to keep the tax advantage, retain a basic level of cover and it also means that when things improve financially, you can update the policy again without having to go through the full application process.

Work towards eliminating all non-essential expenses for the time being … Fingers crossed it’s only in the short term, so don’t think of this as a life sentence

3. Contact Centrelink

Do this as soon as possible. You need to find out what, if any payments are available to you and the time frame that you must wait. The sooner you get onto it the better. Sometimes you will need to wait up to 13 weeks before you qualify for any benefits.

4. Consider accessing your superannuation account in hard times

This is not common but is potentially an option later down the track. In order to qualify for early release of some of your super funds you need to:

  • Be receiving some form of government benefits for at least 26 weeks (hence, step 3 is important), and
  • Demonstrate that you are unable to meet any immediate family living expenses

This isn’t always the best option, because the amount you withdraw is taxed heavily, and you are only able to access a maximum of $10,000 pre tax, in a 12 month period.

5. Call your life insurance providers

Some products have the option to put your premiums on hold for up to 3 months if you are having issues financially and allow you to retain the full insurance cover. Cancelling this cover should not be one of your first options, but it’s great if you have the option to alleviate the premium payments in the short term.

6. Call the companies you owe money to

If you have debt that you do not believe you will be able to service in the short term, then contact your creditors to talk to them about options. You may need to change the repayments to interest only, or the providers may be willing to put payments on hold during this time. If you get on the front foot they are more willing to come to the table with an action plan.

Whatever your situation, there will be ways that you can dig yourself out and get back to living life. The best thing that you can do is accept where you are and take steps to change your situation.

 

Cara-Brett-Leaders-in-Heels-profile-picCara Brett

Cara Brett is the Director and Senior Financial Adviser at Bounce Financial. Having worked in the financial services industry since 2003, she saw an opportunity to work with the young professionals and the movers and shakers in Brisbane, and so Bounce was born.


Failure and financial setbacks happen. Nobody is that blessed to go through life without experiencing some form of obstacle along the way. It’s what makes us stronger, and, if we learn from the experience, then we can come out on top.

To get yourself through this time, there are certain things you should be doing to get back on track sooner rather than later. Here are 4 tips to help you bounce back from financial setbacks:

1. Accept your situation

Before you can make a comeback, you need to understand where you are, and, ultimately, how you got there. Don’t wallow and don’t ignore the problem – that isn’t going to help you.  However, understanding how you got there is the first step. Assess your situation, and what you have been doing to get you to this point. Is it something that you can physically eliminate such as a credit card, or is it an outside influence? Write it all down. Once you have assessed your situation and figured out where you went wrong, forgive yourself and don’t live in the past. Yes, you may have made some mistakes along the way, but it’s the actions you take from here on in that you can control now.

2. Revise your goals

Do you have a big debt that needs paying down? All of your old goals (like a holiday in the Maldives) must now be pushed to the side for the moment to ensure your recovery is swift and as pain free as possible. If you’re struggling with this part, hash it out with someone you trust. An outside perspective can often shine new light on a situation that you can’t see your way out of. Setting new goals and then making a plan to achieve them is what will set you on the right path.

Once you have assessed your situation and figured out where you went wrong, forgive yourself and don’t live in the past

3. Cut back, just for a while

Now that you know your short term goals, you need to look at your expenses, and figure out what is actually mandatory and what isn’t. Housing, food, and electricity are all necessities but maybe the daily coffee, expensive car lease and designer outfits are not. I think it’s important in your budget to have some money for the extras that you enjoy but in the short term, you may need to go without. Don’t think of it as a life sentence, just think of it as a short period while you get yourself sorted out. You may need to be brutal with yourself but it’s for a pre-defined period, so there is light at the end of the tunnel.

4. Build and use your support system

Get buy-in from close friends or family. Much like starting an exercise regime, having a support system that can call you out when you are about to make past mistakes again, is invaluable. As an added benefit, if they know what you are going through then you won’t feel as much pressure to keep up with the Joneses.

The road to recovery doesn’t have to be long, but the only way to get through itis to self-evaluate and set out a realistic plan of action. If you knuckle down in the short term, you’ll be back planning your holiday to the Maldives in no time.

 

Cara-Brett-Leaders-in-Heels-profile-picCara Brett

Cara Brett is the Director and Senior Financial Adviser at Bounce Financial. Having worked in the financial services industry since 2003, she saw an opportunity to work with the young professionals and the movers and shakers in Brisbane, and so Bounce was born.


How you manage your finances should be one of the most important things you do.  In most circumstances, failing to have a budget is the top mistake people make with their finances. If you don’t have any form of budget then you likely have absolutely no idea what shape your finances are in.

The good news is that there is no set method for budgeting. Everyone has different financial situations and priorities. There is no such thing as a one size fits all approach, so you can comfortably find the best system for you, and as long as it is realistic for your situation, then all the better.

When assessing people’s finances however, I see some common themes. Having a budget is one thing, but if you are making some other mistakes along the way, all the budgeting in the world is not going to get you where you need to go.

Here are the top 5 mistakes people make with their finances:

1. You are paying your bills late

As of March 2014, the credit rating system was changed to incorporate late bill payments. Previously if you paid a utility bill a few days late, it was no biggie, but now it could have a negative impact on your credit score. Couple that with the fact that if you pay a bill late, you usually incur late fees. If you pay your bills on time, you’ll be able to pay the lower amount and won’t have to worry about your credit rating next time you try and get a loan.

2. You underestimate your yearly expenses

When it comes to budgets, you need to include everything in there. Most people underestimate what they actually need to pay for during the year. Don’t just put aside money for ‘bills’. Work out each of your bills for the year, and make sure the money you set aside is enough to cover them all. If you don’t set aside the right amount of money, you will end up blowing your budget at some point down the track anyway, so be realistic when establishing your budget.

3. You don’t give yourself spending money

It is important, when managing your finances to give yourself some ‘play’ money. Too often I see people creating very strict budgets for themselves, and falling off the bandwagon 2 weeks in. Incorporating a set amount of spending money each week will keep your sanity in check. You can allocate an amount of money to go towards the fun stuff, like dinners, coffees, the movies etc. You don’t have to feel guilty about it, because if your budget is set up correctly, the rest of your expenses should be covered.

4. You live off your credit card

Credit cards can be a great transactional tool, if you can be trusted with them. If however you have a problem with spending too much each month, then you should consider getting rid of the credit card and getting yourself a debit card instead. This will ensure that you can’t overspend each month and will help to keep you on track.

5. You don’t have any emergency cash

Budgeting your yearly expenses is one thing, but you never know what life is going to throw at you that could completely blow the budget. In the last year alone, I have had to pay an excess on insurance for the crazy storms in Brisbane, and my George Foreman grill broke and needed replacing. How could you anticipate or plan for these expenses? You can’t, but you can set aside some emergency money specifically for these type of things. In our household we keep $2,000 aside to pay for these unexpected nasties, but depending on your personal situation, this amount could be different.

Budgeting and money management is more than just writing down your expenses on the back of an envelope. With the above tips, you will be able to take your budget from ok, to actually working for you over the long term.

Image via Pixabay under Creative Commons CC0

 

Cara-Brett-Leaders-in-Heels-profile-picCara Brett

Cara Brett is the Director and Senior Financial Adviser at Bounce Financial. Having worked in the financial services industry since 2003, she saw an opportunity to work with the young professionals and the movers and shakers in Brisbane, and so Bounce was born.


The concept of good debt verses bad debt has come up a lot lately. Most people seem confused by the idea. Isn’t all debt bad?

Debt is debt. It means you owe someone (usually a bank or alike) some money. At some stage in the future you are going to need to pay it all back, so whether the debt is considered ‘good’ or ‘bad’ doesn’t really matter when it comes to whether you owe someone or not.

So, what is the difference?

Good debt is usually considered debt that you can get a tax deduction for.

You can usually claim a tax deduction on any debt you’ve acquired for the purpose of making money. Now there are couple of things to note with this: firstly, the tax deduction that you receive is only on the interest that you pay on the loan and some of the lending expenses, not the principal. So, if you have an investment property, you are able to claim a tax deduction on the interest portion of the repayments only.

You can usually claim a tax deduction on any debt you’ve acquired for the purpose of making money

Now, remember, a tax deduction doesn’t mean you get the whole lump sum back (that is a tax offset), a deduction means that it reduces the amount of income that you earned (on paper) through the year, so when they calculate the tax you need to pay, it is based on a lower income. The benefit of that, is that you end up paying less tax to the tax man.

Examples of ‘good debt’ are business loans, investment loans, car loans that fund a car for your business, and anything that is in place for the purpose of making a profit.

Bad debt is just your regular every day debt. I am talking home loans for the house that you live in, credit cards, personal loans, and personal car loans. You cannot claim any tax deductions on these, because they are for personal use and not for the purpose of making money.

Why do you need to know the distinction?

Like I said, a debt is a debt, you are still going to need to pay it back at some stage. If however you have a good debt (tax deductable debt) and a bad debt (your home loan), then you are better off paying the ‘bad debt’ off the quickest. Whatever excess cash you have should be thrown into your home loan to pay that down quicker.

The right strategy for you will depend on your personal financial situation, but knowing the distinction between the two is a good place to start.

Featured image via Pixabay under Creative Commons CC0

 

Cara-Brett-Leaders-in-Heels-profile-picCara Brett

Cara Brett is the Director and Senior Financial Adviser at Bounce Financial. Having worked in the financial services industry since 2003, she saw an opportunity to work with the young professionals and the movers and shakers in Brisbane, and so Bounce was born.


It’s always a time of reflection and goal setting as the year comes to a close. Resolutions start popping up and the idea of a fresh start is an exciting one.

Many people start out strong, and about 2 1⁄2 weeks into it, fall off the wagon. Usually they go out guns blazing, too fast and too brutal to actually maintain changes for the long term. We’ve all been guilty of this, even the best list makers and goal achievers fail along the way.

Well, if you have decided that 2015 is the year that you finally start investing, then read on. In order to get yourself investing in the New Year, there is a bit of housekeeping you need to do. Below are the 4 main things you need to consider to ensure that you can invest in 2015.

1. Spend less than you earn

In order to invest, you need something to invest with. If you are one of those people who spend every dollar they have, then you aren’t really helping yourself. You need to review your budget and ensure that you are living below your means. Whatever excess income you have, will be what starts your investment portfolio, so make sure you take it seriously. You can start a portfolio with as little as $2,000, and a monthly contribution of $100 so making the adjustments to your spending could get you there sooner.

In order to get yourself investing in the New Year, there is a bit of housekeeping you need to do

2. Review and reduce your debts

If you have debt, then you need to review this asap. This may mean engaging a mortgage broker to review your home loan to see if they can do better, or upping your credit card payments to get rid of it sooner. Debts drag you down and inhibit your ability to throw excess cash into your investments. Depending on your situation, a credit card balance transfer might be worthwhile if you think that you can pay it down within the interest free period. This strategy could save you a heap on interest as long as you pay it off in time.

Whatever excess income you have will be what starts your investment portfolio

3. Keep your receipts

A hearty tax return is a great way to kick off your investment portfolio, but they aren’t always guaranteed. To put yourself in the best position to get a large tax refund, make sure you keep all of your potential tax deductions. A good accountant or tax agent will be able to tell you what you can and can’t claim, but if you don’t have the receipts, they won’t be able to help you much.

Debts drag you down and inhibit your ability to throw excess cash into your investments

4. Start an emergency fund

There is nothing like an unexpected nasty popping up to derail your perfectly laid investing plans. We can’t budget for everything as we never know what is around the corner, but having a ‘budget buffer’ will soften the blow. An emergency fund of $2,000 is a good starting point to ensure that life’s little gremlins don’t sap funds from your investing goals.

By making the above 4 changes to your finances, 2015 could be the year you start your investment portfolio. You can start small and build over time as the power of compound interest will be on your side. It’s about changing your mindset and realising that it is achievable. Committing to the right habits now will help to get you there quicker.

Featured Photo Credit: 401(K) 2013 via Compfight cc

Cara-Brett-Leaders-in-Heels-profile-picCara Brett is the Director and Senior Financial Adviser at Bounce Financial. Having worked in the financial services industry since 2003, she saw an opportunity to work with the young professionals and the movers and shakers in Brisbane, and so Bounce was born.


With winter now officially behind us, it is only natural to break out of hibernation, go out more and spend more of our hard earned dollars.

While it is very easy to spend money – especially during the warmer months – you may be interested to know that there are also some easy ways to build your wealth while still doing the things you enjoy.

Indeed, there are a few simple techniques you can implement now to help you make your money work harder for you – so you can have your cake and eat it too!

1. Review your bank

Re-evaluating the relationship you have with your lender is a great way to find out whether or not there is another lending institution that is better suited to our needs. Australia’s lenders are hungry for business at the moment, so many are offering cash and other incentives for new-to-bank customers. The trick is to do your research and find out whether or not there is another lender who offers a better product/s (such as a high interest savings account). You may find that by simply switching lenders you are able to save more money.

2. Salary sacrifice

Making salary sacrificed super contributions offers a simple way to save on tax and build wealth. It involves having part of your before-tax salary paid into your super rather than taking the money as cash in hand. These contributions are taxed at 15 per cent, which is likely to be below your marginal tax rate (which could be as high as 46.5 per cent), so more of your money goes towards growing your super rather than paying the tax man. Up to $25,000 annually can be added to super through pre-tax contributions ($35,000 if aged 60-plus).

3. Maximise your tax return

If you receive a substantial tax refund, it pays to invest this money wisely. Using the refund to reduce your debt can help you considerably with your future endeavours – including home ownership. The reality is having too much debt can make a difference when it comes time to apply for a home loan. Alternatively, you can transfer your tax refund into a high interest savings account. Whether you are saving up for a new car or a deposit to buy your first house, this lump sum injection will help speed up the process. Once the cash is in your savings account, leave the money untouched and watch the interest add up.

4. Cancel your credit card

According to Mortgage Choice’s 2014 Money Survey, 35 per cent of Australians with a credit card currently owe $5,000 or more. Not only are the interest rates on credit cards notoriously high, but many people get stuck using a credit card because they can’t break the cycle as interest continues to accrue. If you have a credit card, work on paying it off in full. Once done, cancel the card. Debit cards are an ideal alternative, providing a similar level of protection for online and over the phone purchases, without the significant interest rates.

5. Compare to find a better deal

You may be paying more than is necessary on your home loan, insurances, utility bills, etc. By doing your due diligence and comparing to see if there is a better deal out there for you and your needs, you may find you are able to save hundreds of dollars.

By following these simple steps and making your money work harder for you, you will be able to go out and enjoy the lovely summer months while still saving money.

Do you have any other tips to save and make your money grow? Tell us in the comments below!

Jessica Darnbrough is the Head of Corporate Affairs at Mortgage Choice. With eight years experience as a journalist Jessica has written for an array of trade and consumer publications. Her current role as Mortgage Choice’s head of corporate affairs and company spokesperson sees her as a key communicator of Mortgage Choice’s services and specialties, with a particular focus on Mortgage Choice Financial Planning.

Photo credit: Tax Credits via Flickr