Are you protecting your family? 5 myths BUSTED!

I'm not very tall.

Ok, that's an understatement, I'm pretty short.

5 foot nothing to be honest (perhaps still being a little dishonest).

Anyway, that may be the reason I have so many soapboxes (short-girl syndrome!!) and you guessed it, I'm about to share one with you right now.

For anyone who's been to one of our Family Finance presentations, you'll have heard me waxing lyrical (ok - ranting) about the fact that with everything we're taught in school, basic household financial management is not part of the curriculum.

Think about it for a moment - who was it that sat you down and taught you step by step how to manage money?  Things like:

• Budgeting
• Shopping
• Credit cards
• Getting a loan
• Compound interest
• Living out of home
• Earning income
• Investing

If you were lucky your parents trained you, but in most cases no one did.  And even if it was your parents, in many cases they were winging it themselves!

So we're given no formal training, is it any wonder then that we often find managing money complicated, challenging, frustrating?  And that it's the cause of many family arguments, not to mention tears?

And by the way, if you have young children and you think the arguments you have with your partner about money are bad, wait until you have teenagers...(BTW - affordable boarding school options is another one of my soapboxes tee hee).

Today I want to focus on protecting your family's lifestyle because it's an area that's often neglected and it's really important.

Insurance tends to have a bad rap for the wrong reasons, mostly being that we'd rather not talk about it.  Because let's face it, insurance is something that we're only ever going to get value out of if something pretty bad happens right?  The problem is that by not talking about it, or not doing anything about it, we still can't stop that bad stuff from happening - it just means you could be financially devastated if it does.

Anyway, rather than focus on all the reasons you should have insurance cover, because I think most people know them even if we don't like to talk about them, I thought I'd dispel the top 5 myths instead!

Click here for my top 5 insurance myths - BUSTED.

And if it's reading that whets your appetite for information, then click here for a copy of my article "Is it time to review our dinner time conversation" and/or click here for some VERY interesting facts on critical illnesses...

Of course, if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,
Caren

The success you can achieve when your personal & business goals are in alignment

The most successful businesses are run by people who love what they do. This is great, but of course there’s real danger that your business can become all-consuming when you love what you do.

Your personal goals (family, lifestyle, community, spiritual) need to be in harmony with your business goals. When they’re not, tensions develop, breakdowns occur, and achieving any of your long-term objectives becomes almost impossible.

And it’s a lot more involved than simply striking a “work-home” balance. It’s about ensuring your fundamental values and purpose are aligned for both yourself and your business. This involves:

   ∙  Planning

   ∙  decision making;

   ∙  careful execution;

   ∙  asset protection;

   ∙  regular review; and

   ∙  a clear picture of the “ultimate” reward you expect from

      your business.

 

I guess I understand this because Michael (Moschetti) and I live and breathe it. As partners at home as well as the office, we realised a long time ago that we could only achieve true success by reconciling our business aspirations with what we wanted from life personally.

Because it’s so important, we recently wrote an e-Paper together called “Business – it’s Personal”. In this paper, we share our story, as well as give practical tips and strategies for you to implement in your own business including:

   ∙  How to align your personal and business goals

      (a step by step guide);

   ∙  How to protect against obstacles and risks that may

      prevent you from reaching your goals; and

   ∙  The steps you must take now, to achieve the financial

      and personal rewards you’re working towards.

To read "Business - it's Personal", just click here - we’ve tried to keep it as entertaining and jargon-free as possible.

You may also like to click here to listen to a recording of my most recent “You and Your Business” segment were I talk about this topic on Radio Eastern 98.1FM.

Talk soon,

Caren

Women and Super

Last Friday was International Women’s Day, so I thought it was appropriate to reference something I read in the Herald Sun from 6 March (there was no one in the lunch room to “quiz me” so I had to actually read the paper…). According to the article, a recent Canstar research report claims that stay-at-home mums miss out on $160,000 - $290,000 in superannuation savings.

Yikes, that’s a lot of money!

I’m definitely not suggesting that women who choose to stay at home with their children should now rush back to work to improve their super balance, but it does mean that somewhere along the lines you may need to address the “hole” and make sensible financial decisions to get back on track.

But what is “on track”?

Last week I mentioned that a typical rule of thumb is that you’ll probably need about 60%-80% of the annual income you earned before retirement to maintain a similar standard of living.

And if you like your statistics, the Association of Super Funds Australia (ASFA) release national figures each quarter benchmarking what most Australians need to spend to achieve a modest or a comfortable retirement.

According to the latest the ASFA Retirement Standard figures, a couple looking to achieve a comfortable retirement needs to spend $56,339 a year, while those seeking a ‘modest’ retirement lifestyle need to spend $32,555 a year. The figures for a single person are $22,585 and $41,186 respectively.

Of course, everyone’s different, but these figures can be a helpful guideline when you’re working out whether you’re likely to have a “super hole” (yep, double entendre deliberate) to fill in retirement - male or female!

Click here if you’d like to read a copy of the Herald Sun article, and click here for full details of the ASFA Retirement Standard including assumptions and their definitions of modest and comfortable.

Talk soon,

C

Should you loan money to friends or family?

A number of years ago one of my clients came to me to ask my advice about loaning a significant amount of money to her daughter. The first question I asked was whether there was any chance that her daughter might not pay her back, to which she replied “oh there is every chance she won’t pay me back.”

I knew her financial position and knew that she couldn’t afford that risk, so told her to explain to her daughter that she wasn’t in a position to help out.

But there are cases where we are in a position to help, and at the end of the day, the only person who can decide if you want to loan a friend or family member money is you, but I do have some tips.

Questions to ask yourself:

1. Will you suffer financially, if the loan isn’t repaid. If the answer is yes, then my recommendation is to walk  away. You don’t want to put yourself into financial hardship because of somebody else’s money problems.

2. Will your relationship be damaged beyond repair if the loan isn’t repaid. If the answer is yes, then again, I recommend walking away. You don’t want to lose your relationship AND your money.

In the very few times I’ve loaned money, I have gone into the arrangement with the attitude that if I never saw the money again, I would live with it. If I can’t feel that way, then I just don’t do it.

3. How formal do you want the arrangement to be? If someone asks to borrow money from you, particularly if it’s what you consider to be a sizeable amount, then you have the right to expect a formalised written agreement. The written agreement should state the amount borrowed, any interest that may apply, payment terms (how much and how often), and the date the loan should be finalised.

I’d recommend having the agreement drawn up by a solicitor, and I personally believe that the person borrowing money should foot the cost of any fees.

4. Will you charge interest? And if so, at what rate?

Often loans between friends or family members are no interest, or low interest, and this is of course up to you. You may wish to apply a market rate of interest, particularly if you believe there’s a reasonable chance that you might not get your money back. Perhaps it’s unlikely that person will be able to get a loan from a bank or other lending institution, and would be more than happy to pay the market rate to obtain the capital

You do need to be aware that legally you have to declare all interest to the ATO, even if it’s a loan between friends or family.

5. If it’s not a formal written agreement, what are your terms? Even if you decide not to formalise the agreement, I do think you need to be clear on the terms. You terms might include a structured amount to be credited to your account each month, or a lump sum to be paid at the end of a certain period.

6. And once you’ve decided the terms, what happens if the terms aren’t met? At what point are you going
to start jumping up and down, or at least giving a little nudge? That’s probably something you should also agree upon from the start. And if the loan is never repaid – what are you going to do? If an agreement is in place, are you going to take legal action?

Probably the best advice I can offer is to be totally up-front right from the start. You may feel a little awkward, but if someone has had the courage to ask you for a loan, then setting the terms should definitely be your prerogative and should be expected. Some ideas for approaching this might include:

“This is a lot of money to me, and while I’m happy to loan it to you, I will need it to be repaid in monthly installments by July. Is that going to work for you?”

“I won’t need the money for the next twelve months, but after that I really do have plans for it. Will you be able to pay me back by September next year? And will you do that as a lump sum, or regular payments.”

“I’m happy to loan you some money, but I have to be honest I’ve seen some relationships turn really sour when money is involved, and I would hate that to happen to us. Would you be agreeable to formalising the arrangement so that we don’t have to worry about any of that?”

“If you happen to miss a payment, do you want me to give you a reminder straight away, or give you a few days in case it’s just slipped your mind?”

At the end of the day it comes down to personal circumstances and your relationship with the person needing a loan. Just make sure you consider the risks involved and what you need from the arrangement.

Talk soon,

C