“Don’t sail out farther than you can row back.” This Danish saying is sound advice for anyone thinking of borrowing to buy a home, particularly now that interest rates are low and house prices are generally rising.

According to a paper [1] for the Centre of Policy Development and University of Canberra, Australians have a tendency to be over-confident in our ability to repay loans. We also underestimate the likelihood of things potentially going wrong in our lives.

Have you ever heard yourself or someone else say “I’ll be able to repay my loan, provided I keep my job, don’t get sick and I’m not hit with any large unexpected bills”? Chances are you probably have. But things can and often do go wrong.
Causes of mortgage stress

A study [2] was completed for the Royal Melbourne Institute of Technology (RMIT), which looked at the specific triggers that have resulted in Australian households being unable to meet their mortgage repayments. Survey respondents were asked the initial causes and, if they changed, what the final causes were. They were also able to identify more than one cause. The graph below shows the results.

How to reduce stress

Like most things in life, it’s difficult to make borrowing a stress-free exercise, but there are a few things you can do to reduce the angst.

1.     Review Maximum Loan Amount Offered

Most financial institutions determine the maximum loan they will provide based on a multiple of your income and other factors. But if you borrow the maximum amount, you may find you are stretched from day one unless you are very disciplined with your spending. Therefore it is important to consider if the maximum offered is suitable to your circumstances.

2.     Build up a buffer

It’s a good idea to hold (or build up) a cash reserve in a mortgage offset account to provide a buffer that can be drawn upon to meet your loan repayments if you become ill or are off work for other reasons.

3.     Take out mortgage protection insurance

Many lenders offer insurance when you take out a home loan that covers the mortgage (often up to a specified amount and for a particular period of time) if you die, become disabled or your employment ends involuntarily.

4.     Take out personal insurances

While mortgage protection insurance can provide peace of mind for a limited time frame, other types of insurances should be considered. These include:

• Income Protection Insurance which can replace up to 75% of your income if you are unable to work due to illness or injury. This can ensure you are able to continue meeting the majority of your living expenses, not just your loan repayments.
• Critical Illness Insurance which can help you service or pay off your loan and meet a range of expenses in the event you suffer a specified illness, such as cancer or a heart attack.
• Total and Permanent Disability Insurance which can help you service or pay off your loan and provide an ongoing income if you become totally and permanently disabled.
• Life Insurance which can be used to service or pay off your loan and provide your family with an ongoing income if you pass away.

5.     Fix the interest rate

Fixing the interest rate on your home loan can provide protection against rising interest rates. The downside is there are often restrictions on making additional payments into a fixed rate loan, which would limit your capacity to build up a buffer. Many people find a combination of fixed and variable rate loans works best, as additional repayments can be made into the variable rate portion of the debt.

6.     Don’t add fuel to the fire

Over 40% of the people who completed the RMIT survey responded to the initial difficulty in meeting mortgage repayments by using credit cards more often than they normally would. Using debt to service debt is very likely to compound the problem.

7.     Seek advice

At the first sign of a problem, it’s essential to seek financial advice, as there may be a range of potentially viable options to explore. Better still, you may want to seek financial advice before you decide how much to borrow.

An adviser can help you assess your spending plan and determine your affordability level. They can help you to focus on other goals you may want to achieve in the short, medium and long term and the cash flow that may be required to meet them. They can also assess your insurance needs and advise you on a range of other financial matters.

Footnotes

1.      Source: Understanding human behaviour in financial decision making: Some insights from behavioural economics. Paper to accompany presentation to No Interest Loans Scheme Conference “Dignity in a Downturn” June 2009. Ian McAuley, Centre for Policy Development and University of Canberra.

2.      Source: Mortgage default in Australia: nature, causes and social and economic Impacts. Authored by Mike Berry, Tony Dalton and Anitra Nelson for the Australian Housing and Urban Research Institute, RMIT Research Centre, March 2010.

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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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser before making decisions using this information.

1. Get your eligibility assessed

Before you can enter an aged care facility and receive Government support, your health situation must be assessed by the Aged Care Assessment Team (ACAT) (1). The assessors are generally health professionals such as doctors, nurses and social workers who specialise in aged care.

This is a free service that can be done at home or in a health centre or hospital. The purpose is to determine whether you are eligible to move into residential care, or can access a range of care services that would enable you to stay in your home longer.

More information about ACAT assessments can be found on the Australian Government’s My Aged Care website.

2. Find a suitable facility

Once ACAT has determined whether you are eligible for residential aged care and the care services you may need, it’s a good idea to visit a few facilities. The My Aged Care website has a ‘Find a Service’ tool that enables you to locate and contact aged care homes in your preferred area (2).

Each facility is different, so visiting a few will help you to decide which one is the most suitable for you. Not all aged care homes will be able to meet your care needs. Also, some provide higher standards of accommodation and broader food choices, which generally come at a higher cost. These are called ‘extra services’ facilities.

3. Work out the cost

While the Australian Federal Government provides some funding for residential aged care facilities, those who can afford it are expected to contribute to the cost of their care. The four different fees you may be asked to pay include:

• an accommodation payment – for your accommodation in the aged care facility, which may be paid as either a lump sum, regular instalments or a combination of lump sum and instalments;
• a basic daily fee – which will usually be payable by all residents and is a contribution towards daily living costs, such as nursing, personal care and meals;
• a means-tested care fee – which is an additional contribution towards the cost of care that you may need to pay depending on the assessment of your income and assets; and
• an extra services fee – which may be payable if you choose a higher standard of accommodation or additional services and it varies from place to place.

4. Seek advice

Moving into residential aged care can be a financially challenging time. However, obtaining financial advice can help reduce a lot of the stress by helping you to:

• determine which fees may be payable
• implement strategies that could reduce your care costs and/or increase social security entitlements, and
• ascertain whether care at your preferred facility(s) is affordable for you.

In conjunction with your solicitor or other legal professional, a financial adviser can also help you to ensure your estate planning affairs are addressed. Issues that may need to be considered include the:

• selling, renting, retaining or transferring ownership of your family home;
• nominating a person to maintain and/or rent your home on your behalf;
• reviewing your enduring power of attorney;
• reviewing your Will (including the benefits of including provisions in your Will that establish a Testamentary Trust upon your death); and
• reviewing your superannuation death benefit nominations.

5. Apply for an aged care home

Once you’ve decided the type of care you want and can afford, and your estate planning affairs have been taken care of, it’s time to apply with an aged care home. To do this, you will need to complete an application form with the relevant aged care home of your choice.

You may find that a place in your preferred aged care facility is not available. In case that happens, it may be a good idea to lodge an application with a few places and ask to go on the ‘waitlist’. You can apply to as many places as you’d like and the facility will let you know if your application has been accepted.

If you are offered a place, you must be given a copy of the Accommodation Agreement before you move in. This agreement sets out the key terms and conditions and it should be reviewed by a legal professional. You must sign the agreement and decide how you will make the accommodation payment within 28 days of entering the facility.

The Department of Human Services (DHS) may also ask you to complete and lodge a ‘Request for Combined Assets and Income Assessment’. DHS will then use the information to determine what, if any, means-tested care fees you may need to pay.

Next steps

If you would like to find out more about moving into an aged care home, check out the My Aged Care website myagedcare.gov.au or contact us.

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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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser before making decisions using this information.

Whether you’re looking to get your affairs in order, buy a house, start a family or prepare for retirement, seeking quality advice from a qualified financial expert can help you achieve your goals sooner, and with more confidence.

What is financial advice?

Financial advice is about far more than just making money. It’s about creating new opportunities to help you achieve whatever you desire in life. A financial planner can help you work out what’s important to you. They’ll help you develop a plan that aligns your financial decisions to your lifestyle goals.

Financial planners also know your priorities can change over time, as can economic conditions, legislation and investment markets. They can help re-focus your plan, and track your progress along the way whether you’re starting out, building wealth or planning for retirement

Seeking financial advice will help you identify solutions to important questions such as:

• Will I have enough income to live comfortably in retirement?
• Is my family protected should something unexpected happen – what do I need to know about life insurance?
• How can I make sure I have enough money to fund my children’s schooling/education?
• How can I invest and structure my finances in the most tax effective way?
• How can I manage my debt and pay off my home sooner?
• How can I make my money work harder for me?
• What’s the best structure to protect my investments and assets?
• How can I maximise my entitlement to government benefits, ?
• What about estate planning?

What should I expect at my first meeting?

Your initial consultation with a financial planner will give you a chance to get to know each other.

Your financial planner will explain how their service works, and how it can work for you. You’ll have the opportunity to talk about your current financial situation and your financial goals.

Some questions to consider before your first meeting:

• Reflect on what you want in life. Start with the next few years. Are there any changes you’d like to make, or things you’d like to do? What about 5, 10 or 25 years from now? Where do you want to live? What do you want to be doing?
• Consider your attitude to money. Are you a spender or a saver? A risk taker or someone who prefers more certainty? When it comes to spending and managing money, what do you enjoy and what keeps you awake at night?
• Think about the financial issues you find most challenging. Where do you think you could be making better decisions? What do you think you need to better understand?

Talk to your spouse or partner about these issues too. When you visit a financial planner, you’ll want to discuss what it is you want to achieve together as well as your individual dreams.

What to bring along

To help your financial planner gain a clearer understanding of your current finances and the services that could be right for you, a little preparation can go a long way. If possible, try to gather the following information before your first consultation:

• Your income. If it’s easier, feel free to bring in tax documents, especially if you have income from multiple sources or you’re self-employed.
• Your assets. Including property, superannuation, savings and investments.
• Your spending plan. Or an estimate of where your money goes each month, including your mortgage or rent, personal or business loans and credit card debt.
• Insurance covers. Especially life, disability and income protection policies, if you have them.
• Questions. In addition to a list of your short and long-term financial objectives, bring any questions or concerns you may have.

Your first meeting is informal so don’t worry about gathering all the details. The important thing is to get started thinking about your financial future.

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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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser before making decisions using this information.

There are many benefits to being a small business owner such as being your own boss, leading a team and the ability to give back to your community. A well-funded retirement account, though, is not one of these many benefits. Most of us believe that, when the time is right, we will sell our business and easily transition into retirement on the earnings generated from the sale. It’s certainly an appealing scenario. To pull it off, however, takes years of preparation and careful planning. This succession planning can be broken down into three categories – people, systems and finances.

People
Identifying and training the right person, or team, to take over the business requires the most time and effort. The smoothest and most obvious options will be family members or long-time, current employees. Start having these conversations at least five years prior to your anticipated transition date. If you need to look outside your current organisation, it’s crucial to start looking early for several reasons. First, it may take quite a long time to find the right fit. You’re not just looking for someone capable of executing the work. You’re looking for someone to take over relationships with clients and employees that you’ve built over decades. You’re looking for someone to run an operation that most in your community will still associate with you. Once you have selected a successor, the two of you should spend several years essentially tag teaming the job together. Make it clear to both your team and your clients that this person not only has your full trust and confidence, but you’re also transferring all of your knowledge through a clearly set out and transparent transition process.

Systems

Much of this transition process will be facilitated through systems. The more your business operates based on system, as opposed to based on you, the stronger position you’ll be in to hand it over to someone else. This can prove to be tremendously difficult in small businesses founded and run by one person over several decades. When it comes time to step away, we quickly discover that processes are not documented. It’s easy to take for granted the fact that you know how to operate so much of your business without consulting guides, checklists or procedures. You built it, you ran it, you know how it works. And indeed, this may have worked for many years. However, now that someone other than you is preparing to run the business, getting those processes out of your head and onto paper is a critical task. Again, the time to do this is years before the transition. Ideally, documenting and implementing systems that explain your function in the enterprise should be done from day one. Even if you are not thinking of succession anytime soon, growing your business can prove frustratingly difficult if you’re constantly pulled back into operations because your systems are weak.

Finances

The final piece of the succession planning puzzle is financing, which will require a significant amount of outside expertise. Defining your equity, untangling your personal finances from the finances of the business, setting a price and determining a purchase structure can be daunting tasks. That’s where we come in. We understand the complexity and nuances of succession planning. We will work with you to create a customised approach, unique to your business and your goals for retirement.

While succession may be far in the future for you, the time to start building the systems to facilitate a successful handover is right now. We’d love to sit down with you to have a conversation about this process in more detail.

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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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser before making decisions using this information.

From 2 July 2018 the federal government will introduce a New Child Care Package. The new Package consists of a Child Care Subsidy, which replaces the current Child Care Benefit and Child Care Rebate.

Parents using the existing package must register for the new package before 2 July otherwise they will lose access to their payments.

Income brackets used to calculate subsidies have been increased to reflect CPI changes. Eligibility criteria has also been modified.

Parents are strongly encouraged to visit www.education.gov.au/childcare for more detailed information regarding the changes and to register for the new packages as soon as possible.

Please contact Integrity One if we can assist you with any of your financial needs.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrity@iplan.com.au

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser before making decisions using this information.