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Spending Plans 102: Sticking to your spending plan

December 21, 2018

Even the best budget can unravel if the right tools are not in place. Here we talk about how to stick to your spending plan.

It’s easy to underestimate what we spend – by day, by week, by month.

It’s also common to put off budgeting until you have some money. And how easy it is to let things slide?

But when we finally get around to working out a decent, detailed spending plan the job’s not done. Now the hard work begins. Here are five tips to help you stick to your plan.

Stocktake. Spending more than you earn?

Subtract your total weekly expenses from your total weekly income. How’s it looking? Hopefully—ideally—you’ll have more coming in than going out. Over time you’ll be able to save—and build up your reserves.

First, you’ll want a buffer in case things go wrong. Financial advisers used to suggest having six month’s spare cash in the bank. When this seemed out of reach for most, they talked instead of having three months in reserve—but many people struggle to even have one.

Living month to month is stressful enough; living week to week even more so. Getting your finances into a stable and sustainable place is the goal. Properly accounting for income and outgoings is the first step.

Cut costs

You may be able to increase your income, either through taking on a second job or cranking out a genius invention. More realistically, the quickest way to improve your personal bottom line is to cut costs. Curb unnecessary spending.

Go through your expenditure. You’ll find there are fixed costs (e.g. rent or mortgage payments) you can do little about, and other areas where you could cut but it may be unwise to do so (e.g. insurance). Unfortunately, the areas where you can make greatest savings—your discretionary spending—are often the things that are most fun. Going to the movies, big Friday nights ou, or that annual Bali break with the girls.

Once more, the crucial consideration is ‘balance’. You can draft an extreme austerity plan, but you’d be unlikely to stick to it. Be realistic. Don’t introduce cuts across the board or take $20 off food without knowing what you can (and will) give up or change.

Have a goal

It’s easier to keep to a plan if you have a goal you’re working towards. It might be something humble like a pair of shoes, a cast-iron wok, or a new cricket bat. Or it could be bigger ticket items like a car, an overseas trip or your first home deposit. Or perhaps you’ve got debts you want to pay off.

Having a plan keeps you focused and makes spend-ups and blow-outs less likely.

Sort your day-to-day money management

Set up a system that makes saving automatic—and limits your ability to spend more than you’ve budgeted. It’s a good idea to consider setting up several bank accounts, with direct debits into (or out) of each.

For instance, you might have a general account where your wages are paid into. Each week, money is diverted from here into a designated ‘House’ account (for your home deposit). Don’t touch this. You might have another couple of accounts—a smaller one where you trickle money in for that trip-of-a-lifetime to New Zealand, another for a fund for big, occasional bills (vehicle maintenance etc.).

Your goal? Each month your overall financial position should be stronger than the month before.

Track your progress

Check your finances each month to see if your savings and spending plans are on track. If you’re extra organised—you may want to fill out your own Statement of Financial Position in Excel.

Don’t just look at the bottom line. Where are you over? Where are you under? What little fixes could bring things back into line?

Are your targets realistic? Remember the best spending plans are regularly reviewed and refined. They evolve over time.

How to avoid late payment fees

December 21, 2018

None of us like paying late payment fees on our credit cards. The good news is there are simple ways to avoid late or missed payments that we can share with you. Here are our tips to help you avoid missing a credit card payment and being charged a late payment fee.

Check your credit card statement

To avoid a late payment fee you need to pay your ‘Total minimum monthly payment’ by the statement ‘Due date’. Just remember, making the minimum payment by the due date is not enough to avoid paying interest.

You can find your ‘Total minimum monthly payment’ and ’Due date’ information on your monthly credit card statement.

Online credit card statements

Waiting for your statement to arrive in the mail only reduces the amount of time to pay. You can generally register to receive your credit card statements online through internet banking. Then you’ll receive a reminder when they’re ready to view. You are then usually able to access your statements anytime and from anywhere you have internet access.

Pay during your statement payment ‘window’

Find out how many days make up your payment ‘window’ – which will vary by type of credit card. To avoid a late payment fee you must pay at least the minimum monthly payment on your statement, during this period.

Keep in mind that BPAY payments, cheque payments and transfers from different bank accounts can take several days to receive and process and your payment must be received by the payment due date.

Early payments

You can make payments before your statement period ends to help reduce your credit card balance and stay under your credit card limit. But, you’ll still need to make the minimum monthly payment shown on your statement to avoid a late payment fee.

Set up reminders and automatic payments

We recommend you either set up an email or SMS payment reminder (where this is available) or a direct debit through internet banking to avoid missing a payment, especially if you’re going on holidays.

If you’re in financial difficulty

If you’re struggling to make your credit card repayments because of financial difficulty, contact your bank to talk about your options.

If you are charged at late payment fee.

In the event that are charged a late payment fee it is worthwhile contacting your bank and try and get the fee waived particularly if you have a good history of on time payment.

Movember is here !

November 19, 2018

Let’s support a good cause!

Integrity One’s own Ben Young has been actively supporting men’s health through his participation in Movember every year since 2016.

Let’s get behind him in his 2019 quest!

Click here to visit Ben’s Movember webpage.

Please contact Integrity One if we can assist you with this or any other financial matter.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

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Spending Plans 101: Working out your income and expenditure

November 13, 2018

Working out a realistic spending plan is a great way to take control of your finances. Although it may seem like a chore, it’s the crux of sound – and sustainable – financial management. In this article we look at how to ‘do the numbers’.

A spending plan shows you how much money you’re earning, how much you’re spending, and how much you’re saving.

While it can be tempting to put it off, creating a realistic spending plan can help you hit your savings goals faster. Let’s start with the numbers.

Work out your current income

For most of us, this is a matter of checking our payslip or salary credit and seeing what we get (after tax and super). It’s trickier if you’re a contractor or self-employed, or if your income varies wildly from month to month. If your income varies week to week, you could use your last annual tax return as a starting point -and work out your average weekly net income (after business expenses, GST and PAYG). It is important to consider whether you anticipate any significant changes to this level of income going forward.

Do you have any other sources of income- for example, interest from investments, dividends from shares or rental income from an investment property? You can also factor in any income received (net of expected expenses and tax) from these sources.

Work out your spending

It can be easy to underestimate how much you spend on a day-to-day basis. But in order to create a realistic spending plan, it’s important to find out how much you’re spending, and on what.

Firstly, take a good hard look at your bank statements. Go back over the past two or three months and make a note of everything you’ve paid for. Remember there are some hefty costs which are important to factor in, which only come up once every year, like car insurance and registration.

It’s helpful if you group things into categories. Let’s start with the basics: food, clothing, housing, transport, communication and insurance.

Housing expenses

The biggest expense you’ll face is probably your rent or mortgage repayments. If you own your own place, you’ll also be hit up for home maintenance (repairs), home and contents insurance, rates, and utilities (gas, electricity, water etc.).

Food and drink

This includes your groceries, but also your takeaway lunches and evening feasts out. Don’t forget those coffees and other incidental snacks – it all adds up.

Clothing

You might want to divide this category into your work clothes and your fun clothes to sort out what’s necessary and what’s not. If shoes are your thing, you’ll need to account for these too.

Transport

The costs of running a car or using public transport can easily add up. Fuel’s just the start—there’s parking, repairs, preventative maintenance and insurance, or maybe that taxi home on a Friday night every month or so.

Communication

Consider the bills for your mobile, internet and (if you still have one) landline charges.

Insurance

If you have any sort of insurance – health, life, medical, or perhaps income protection – you’ll be paying premiums. They may be yearly or monthly, but make sure they’re factored into your final spending plan if you pay the premiums on your own, and not via superannuation.

Health and wellbeing

Although these costs might be occasional, your spending plan should take into account things like medical spending (including the dentist) and pharmaceutical costs.

In this section you can also include lifestyle costs like gym membership and sports club fees.

Life and leisure

Think about all those incidental costs that pop up over the year: magazine and TV streaming subscriptions, weekends away, movies, Christmas and birthday gifts.

Replacement costs

Every now and then, you’ll unfortunately have to replace the fridge, the washing machine, the TV, the lounge suite etc. Replacing these items can make a significant dent in your savings if you don’t have a plan in place to prepare for them ahead of time.

Debts

This includes personal loans, credit cards, store cards and other loans, and the interest that comes with them.

Miscellaneous

This is where you’ll budget for everything else that doesn’t fit within the categories you’ve laid out. These might include pet costs, uni or office fees, childcare, beauty costs etc.

To help you get started, visit the government’s MoneySmart website which has a comprehensive section on budgeting that’s worth a look.

Integrity One – Stories – Nic Berry

November 8, 2018

Welcome to the next in a series of videos featuring Integrity One staff members sharing stories of day to day experiences which may be of interest to you.

Today we hear from Nic Berry – Financial Planner & Mortgage Broker – who has a good news story involving a young couple he was was able to help secure a loan for their first home

Click to watch Nic’s story.

To speak to Nic or another Integrity One staff member regard this or any other financial financial planning or accounting matter please call on –

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

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Offset accounts: A better way to manage your mortgage

November 1, 2018

Offset_accounts_better_way_to_manage_mortgage

If you want to repay your mortgage quickly and still have easy access to your additional repayments, an offset account may be worth using.

Benefits over regular savings accounts

If you hold your surplus cash in an offset account you can save interest at home loan rates, and no tax is payable on the interest savings. This is effectively like ‘earning’ the home loan interest rate tax-free.

Alternatively, you could hold your surplus cash in a regular savings account but the interest rate you earn is usually much lower than what you pay on your home loan. Plus, every dollar in interest you earn is taxable at your marginal rate, which could be up to 47%1.

Benefits over direct loan repayments

When you make additional repayments directly into the loan you can achieve similar benefits to having an offset account. However, limits often apply to the frequency and amount of withdrawals you can make and withdrawal fees are usually charged. With offset accounts, you typically have ready access to the money via an ATM, cheque book and internet, and withdrawal fees are generally not charged.

The best of both worlds

You may even want to have your salary paid directly into an offset account and withdraw money as needed to meet your living expenses. This can enable you to make the interest savings available with direct loan repayments and have easy access to your money.

	What interest rate is earned/saved?	Would interest earned/saved be taxable?	Would you have ready access to the money?
Cash account	Deposit rates	Yes	Yes
Direct loan repayment	Home loan rates	No	No
Offset account	Home loan rates	No	Yes

Other things to consider

If you’d prefer not to have easy access to your additional loan repayments, you may want to make repayments directly into the loan where you are less likely to spend the money impulsively.
If you would like to credit your salary into an offset account, you should check that your payroll provider is able to do this.
Some lenders allow you to establish multiple offset accounts to help you better manage your cash flow.
Some lenders pay an interest rate on the balance of the offset account that is less than the home loan rate. These are known as ‘partial’ offset accounts and are not as effective in saving you interest as an offset account which offsets 100% of the home loan interest rate.
Offset accounts can usually only be linked to loans with variable interest rates, not fixed rate loans.
To maximise your interest savings you may want to pay for the majority of your living expenses on a credit card and repay the card in-full before the end of the interest-free period. This enables you to use the credit card provider’s money to fund your living expenses, while applying your own funds to reduce your average daily loan balance.
If you want to invest some of the money held in an offset account, you should consider paying the money directly into your home loan and establishing a separate loan to fund the investments. By taking out a new loan for investment purposes, the interest would usually be tax deductible.

Please contact Integrity One if we can assist you with this or any other financial matter.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Integrity One Facebook

Stocktake. Spending more than you earn?

Cut costs

Have a goal

Sort your day-to-day money management

Track your progress

We’re here to help

Check your credit card statement

Online credit card statements

Pay during your statement payment ‘window’

Early payments

Set up reminders and automatic payments

If you’re in financial difficulty

If you are charged at late payment fee.

We’re here to help

Let’s support a good cause!

Work out your current income

Work out your spending

Housing expenses

Food and drink

Clothing

Transport

Communication

Insurance

Health and wellbeing

Life and leisure

Replacement costs

Debts

Miscellaneous

We’re here to help

Benefits over regular savings accounts

Benefits over direct loan repayments

The best of both worlds

Other things to consider

Services

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