Building Wealth

Anthony Bell's Expert Tips on Pre-Tax Time Preparation

Rescu Team — Sun, 13 May 2012 23:23:05 GMT

Anthony Bell prepares us for our looming taxes on what is essential for families, singles and small business to make sure that we get the best possible refund and quickly!

Anthony Bell's Expert Tips on Changing Banks and Re-Financing Mortgages

Rescu Team — Tue, 03 Apr 2012 1:01:51 GMT

There is a lot of noise about changing banks and re-financing mortgages. Finance expert Anthony Bell tells us the exit fees involved and what his expert tips in evaluating the right financial decision for yourself.

by Anthony Bell www.bellpartners.com

Finance Expert Anthony Bell's Top Tips for Preparing and Sticking to a Household Budget

Rescu Team — Tue, 06 Mar 2012 14:14:54 GMT

As spending and splurging over the Christmas and New Year period is officially in the rear-view mirror, Anthony Bell gives us the top tips for preparing and sticking to a household budget that applies to both single and family households.

by Anthony Bell www.bellpartners.com

Pay Off or Save? Finance Expert Anthony Bell Shows Us How to Manage Our Debts

Rescu Team — Thu, 09 Feb 2012 10:10:27 GMT

Pay off or Save? If we have credit card/loan/mortgage debt, are we better off paying as much off this as we can or splitting our budget between saving and paying off? Or, should we pay the minimum and save as much as we can? Finance Expert, Anthony Bell tells us the best practices.

by Anthony Bell www.bellpartners.com

Finance Expert Anthony Bell's Top Tips on How to Find the Best Savings Accounts

Super User — Fri, 18 Nov 2011 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

When looking at savings accounts, the three things that need to be considered are:

1. Interest rate paid
2. Fees charged
3. Accessibility of the funds

Getting higher interest rates used to lock consumers in to having to take out term deposits. Over the last 10 years there’s been strong growth in the number of high interest accounts available from most financial institutions.

Most of the banks have higher interest accounts that can be linked to your day-to-day transactional accounts. There are also other institutions such as ING Direct who specialise in higher interest accounts that are linked to your normal bank account, even if it is with another institution.

To compare rates, www.cannex.com.au lists the current rates available across a broad range of institutions.

Check the fees that apply to any account you open. A high interest rate can be eaten away if the fees charged are excessive.

With any funds you are saving, consider how quickly you may need access to the funds. Some can give you instant access to the funds, whilst others can require 24 business hours before the funds are available. Some higher interest accounts will also allow your pay or other income to be deposited directly, and some will require funds to be transferred via your regular bank account.

Whether or not a high interest account is the best place for your funds is going to depend on when you will need the money, and how important the higher interest is going to be in helping you save your money. For example, if it is long term savings you are after, you may consider other investment alternatives that could generate higher returns, albeit at higher risk, such as share funds. For shorter term savings, a bank account is likely to be better as you want greater certainty without taking any risks.

If you are looking to invest for the longer term, consider seeing a financial advisor to explore the broader range of investment products that are available that might be able to better assist you reach your personal financial objectives.

More from Anthony Bell...

1. Finance Expert Anthony Bell's Top Tips on Managing Your Mortgage
2. How to Beat the Economic Crises
3. Why Your Need An Insurance Policy

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Finance Expert Anthony Bell’s Top Tips On Managing Your Mortgage

Super User — Sun, 16 Oct 2011 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Recent Federal Government legislation should now ensure that the cost of moving banks is relatively cost free and unrestrictive. The guidelines have removed the banks right to hold a borrower with unjustified and high discharge fees. You may incur some small legal and transfer fees of approximately $300 when moving banks. Gone are the days of 1.5% fee of the loan amount for an early release of security!

You should always be open and honest with the banking institution you have chosen and form a direct relationship with a local Bank Manager; this will ensure an easier path to understanding the bank procedures and processes.

Your broker should be providing you with different bank alternatives as they arise and reviewing your mortgage every six months or when your personal /family situation changes. They should also have a thorough understanding of all the different types of loans including Reverse Mortgages and Self-Managed Superannuation Loan facilities.

Be aware of your current interest rates and review them against the rates advertised in the paper or on the net, this will give you a good indication of how competitive your rate is against the market. The interest rates quoted in the media can generally be further reduced by a competent and effective broker who should be accredited with multiple banks and therefore offer you the best product fit and competitive interest rate options. Also confirm that your broker has updated his/her licensing requirements under the new National Consumer Credit Protection Act.

The decision of fixed and variable interest rates always comes down to your personal situation. A variable rate product will give you greater flexibility with off-set accounts, transferring money and making additional payments. Having said this, there is a couple of banks that offer off-set accounts on fixed rate loans! A fixed rate will offer you a guaranteed interest rate for a certain term, generally between 1-5 years in length, although you can request a 7-10 year fixed rate term at most of the majors. At present there are 3 year fixed rates that are as low as 6.4%p.a whereas most clients’ standard variable rates should be 7.1%p.a or lower. This is a good time for discussion on loan structure with your financial planner.

A few questions you should ask yourself are; ‘What would happen to my personal situation if interest rates went up to 9% p.a?’ ‘Could I afford the repayments?’ ‘Would I have to sell my property?’ A good balance of fixed and variable rates can ensure both comfort/security and flexibility for a lot of clients.

Bonus/Inheritance: Generally this should be placed in your offset account in the first instance, and then discussions should take place with your independent financial planner as to the best investment opportunity for these funds. A 100% off-set account is a facility that enables you to hold money in a savings/general account with the same institution as your loan, and reduces the amount of interest charged on your home loan/investment loan.

If you are recommended alternative investments, have a complete understanding of the risk profile associated with this investment, especially given current economic vulnerability.

When speaking with your planner, understand that the return on investment should be greater than the interest charged on your loan account to justify a move into another investment i.e. shares, managed funds. These are also riskier investments.

As always my advice is, do your homework.

More From Anthony Bell..

1. How To Beat The Economic Crisis
2. Why You Need An Insurance Policy
3. How To Start Your Own Business

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How To Beat The Economic Crisis

Super User — Tue, 20 Sep 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

The toughest part in uncertain economic times is often the constant media speculation and “bad news” stories being written and broadcast. It’s important to be aware of what is happening in the world, but always keep in mind that as individuals, we can do little to influence it, and no amount of worry or panic on our own behalf can alter that.

I like to remind myself regularly to concentrate my thoughts and efforts on those things I can have influence over. For example, whilst I can’t influence interest rates, I can influence how well I manage my spending and saving habits, so I’ll focus on that rather than the next meeting of the Reserve Bank. Just spending five minutes writing down what worries or concerns you and then marking off what you can and can’t influence can go a long way to clearing your mind of unnecessary worry and stress.

When you do find yourself worrying about what might happen in the world economy or with interest rates, keep in mind that over time the free markets of the world have a strong record of working through problems and coming out of difficult times in a better situation. For example, the economic issues of the last 4 to 5 years are much more complex than those that led to the Great Depression in the 1930’s, yet we have all maintained a better standard of living that we would have had 80 years ago with less complex problems!

On those things you can control, how much control have you actually taken? Have you reviewed your spending? Do you have a budget you work to? What savings and investments goals do you have? Remember that it’s the habit of saving and investing that is as important as the amount you save and invest. If you have a habit of saving and investing, then you could actually be in a position in the current environment to take advantage of the uncertainty by making investments at better prices than you could have 12 months ago. Some shares that are backed by strong businesses are selling at better value now than they have for a long time. A great rule is to try and buy your investments like you would your groceries, when they are on sale and are good value, not when they are expensive.

Another advantage of uncertain economic times is the opportunity to review some of your costs. Do you have a credit card with ridiculous fees that you’ve been meaning to change over to a lower cost option? Is it a while since you had your home loan reviewed for its competitiveness? In any economic environment there are businesses looking to do great deals to keep them competitive.

Tougher economic climates also remind us of some fundamentals. We need to keep a buffer of available funds in case something unexpected comes along, without needing to rely on credit or loans. To do this we need to spend less than we earn. The fundamentals of sound personal financial management don’t change with growth or decline in the share or property markets.

With your career or business there are also opportunities. When things are going well, it’s not so hard for everyone to look good. But when things are tougher, those that deliver great value and quality stand out more when a more critical eye inevitably gets applied by either employers or customers reviewing what they are receiving in return for their more scare dollars.

Again, we can do little individually to influence the headlines. But we can do a lot personally to take advantage of the opportunities it brings, and to keep our own situation in good order.

More From Anthony Bell..

1. Why You Need An Insurance Policy
2. How To Start Your Own Business
3. How To Beat The Tax Man

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Why You Need An Insurance Policy

Super User — Tue, 16 Aug 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

All types of insurance relieves policy holders from the financial burden in the event the risk covered materialises. This is a very important advantage of holding an insurance policy. It helps one cope with hard times and secures the financial state of an individual and their families at all times. Imagine having to worry about money matters along with the emotional turmoil that comes from life’s challenges.

There are many different types of insurance an individual may be covered for. These include Life, Trauma, Disablement and Income Insurance, Home & Contents, Motor Vehicle Insurance, Landlord’s Protection Insurance and Travel Insurance. Business owners may look at taking out Business Expense Insurance, Workers Compensation and Professional Indemnity Insurance. The list does go on; generally you will be able to insure yourself for almost anything that contains some value.

Insurance exists because ultimately, risk exists. In a persons lifetime there is a possibility that they may fall ill, be unable to return to work, become a victim of fire, theft, motor vehicle accidents, other injury accidents, lawsuits and more. We are subject to the risk at any time of the day, be it travelling to work, at home, in the car or walking in the street, we face this risk anywhere and at anytime. Insurance does not remove the risk of the above occurring, it transfers all or some of the financial impact of these events taking place.

What type of insurance should I hold? This all depends on your personal and financial situation. Holding sufficient Life, Permanent Disablement, Trauma and Income Protection Insurance is extremely important not only to protect an individual in the event of injury, illness or unfortunate death, but to protect their family and future beneficiaries.

Income Protection Insurance can provide you with up to 75% of your income should you be unable to go to work due to illness or injury.

Aim to insure yourself with reputable companies who are known for their customer focus and are likely to be around in the future should you need to claim.

It is important not to use price as the only qualifier. Seek professional advice on the value you are getting from your policy to ensure what you are paying for is suitable to your needs.

In summary, having in place sufficient insurance to protect your assets, your family and income is very important. Buying insurance is common sense; it is protection against the risks that can confront you every day. Although you do not get the instant gratification in purchasing an insurance policy, the peace of mind is invaluable.

For more information about your personal insurance needs or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More From Anthony Bell..

1. How To Start Your Own Business
2. How To Beat The Tax Man
3. How To Be Successful Without Having To Compete With Your Friends

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How To Start Your Own Business

Super User — Fri, 22 Jul 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Before jumping into registering with the Australian Tax Office for an Australian Business Number ("ABN"), I'd recommend you take a step back and begin your business plan, start to consider some of the following:

- What is your business and what will it do?
- Who will its customers be and how will you reach them?
- Who is the competition and how will you be different?
- What are your budget forecasts and when will you make a profit?
- What investment will you need to make to get into the business?
- Why are you going into this business?
- What are going to be the strengths and weaknesses of the business?

The above are only a starting point, but if you can answer each of them truthfully and with a bit of detail, you will have given yourself the base of a good plan.

These responses will then help you and your advisor determine which business structure is going to best suit your business. Getting your structure right from the start can make an enormous difference to your asset protection and tax position after the business starts. Your structure might be registering a company with ASIC, or setting up a trust of some kind. It’s rare that anyone serious about a new business would operate as a sole trader or under a partnership.

With your structure confirmed and established, now you can apply for your ABN. In applying for an ABN, if it's a new structure, you will also apply for a Tax File Number. Depending on your expected levels of sales and staffing, you might also register yourself for GST (it is compulsory if your expected sales are more than $75,000 per annum) and for PAYG withholding taxes if you are going to employ any staff.

Part of your business planning needs to also consider your start up costs. Assuming your business will be brand new without any existing revenue, keeping an eye on your start up costs is critical, as every dollar you spend is coming out of the capital, you can invest in your business' development and growth. Prioritise what you spend your money on at start up. The important areas to not cut corners on are your structuring, tax registrations, business planning and insurances. If location is not overly critical, try and save as much as you can on occupancy when you start out. Your first office or warehouse doesn't need to match that of a Fortune 500 company!

Raising money for a start up is a tough ask. With no trading history, any investor is going to have to base their decision on how appealing they find your business proposal. In a start up, the investor will put particular weight on the experience of you and those who will be running the business. They will also look at the niche in which your business will be operating, and what competitive advantages it will have in the market. If you can raise money from an investor, a downside of getting investment at start up is having to give up a greater share of the business ownership to compensate the investor for taking such a risk.

Getting bank lending for a new business can be extremely difficult, as bank lending criteria generally revolve around your ability to service a loan, which in turn is dependent on the income of the business - difficult to show at start up! If you are going to be running the business in your spare time and keeping your day job, you could look to apply for a personal loan, or an extension on your home loan if you have equity in your house.

Going into business means taking a chance. Statistics tell us that most people won’t take the risk to start their own business, and for those that do, a large percentage will either close the business within a few years of starting it, or struggle to make it viable. This shouldn’t deter you though. With some planning and organisation, you can tilt the odds more in your favour.

The members of our community who have generated the greatest wealth and self satisfaction have generally done it by going into business, and many without grabbing the public’s attention.

The best way to look at going into business is as a challenge, not something to fear. It will mean going outside of your comfort zone, but how many things do we do on a daily basis that once scared us? Be brave and take up the challenge!

More From Anthony Bell..

1. How To Beat The Tax Man
2. How To Be Successful Without Having To Compete With Your Friends
3. How To Rid Yourself Of A Bad Credit Rating

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Anthony Bell Tells Us How To Beat The Tax Man

Super User — Tue, 28 Jun 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

With the end of financial year upon us, there is limited time left to effectively minimise the amount of tax you will pay. Tax planning doesn’t have to be an onerous task, and can often involve some simple housekeeping! What you do to manage your tax will depend on whether you derive your income as an employee, through a business or as an investor. For ease of reference, these tax tips are separated according to how you might earn your income.

Individuals

Should you have any professional memberships or subscriptions related to your work, make sure they are paid up before 30 June
If you use your car for work, have you done your 12 week log book to try and maximise your claim?
Have you sold any investments for a capital gain, and are there any other investments that you have made unrealised losses on that you could sell before 30 June to reduce your capital gains? The Australian Tax Office is starting to identify people who have sold shares during the year, so you can’t hide capital gains on shares!
If you have net medical expenses (costs after health fund and Medicare rebates) exceeding $2,000, you might be entitled to an additional tax offset of 20% of every dollar over the $2,000 threshold.
Salary sacrificing into superannuation, provided you don’t need the money until you retire, can save a significant amount of tax, given superannuation is only taxed at 15%.
If you have any loans that are used to fund investments, see if you can prepay some interest before 30 June to get the tax deduction brought forward.

Businesses

If you have to make superannuation contributions for employees (including yourself), make sure they are PAID before 30 June so you can get the deduction for them this financial year.
Are there any expenses for the September 2010 quarter that you could prepay before 30 June and get the deduction this year instead of next?
If you sell to any customers on credit, and you know there are some bad debts amongst them, write them off as bad debts in your books before 30 June (why pay tax on money you won’t ever receive?)
Are you holding any slow moving stock that you should discount and sell?
Review your plant and equipment schedules. Are there any items that you haven’t fully depreciated but can no longer use and could fully write off?

The number of things you can do to manage your tax better is as extensive as you want it to be. It’s well worth taking the time to review your affairs with a professional advisor to best maximise your tax savings. Tax saved is money you can reinvest in your business or other aspects of your life for your own enjoyment.

But always remember to never enter into an arrangement or investment just to save tax. An investment is supposed to make you money first, so ensure that it will be a sound investment first, and any tax benefits are a bonus.

More From Anthony Bell..

1. How To Be Successful Without Having To Compete With Your Friends
2. How To Rid Yourself Of A Bad Credit Rating
3. Expert Tips On How To Create A Share Portfolio

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How To Be Successful Without Having To Compete With Your Friends

Super User — Tue, 21 Jun 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

A lot of people who have been successful will mention a concept that has changed their ability to focus, and not worry about everything else around them. In its simplest form, the concept is to focus on what you can control, and not worry about what you can’t. Start by listing areas that are within your influence and control such as your diet, your spending and your thoughts. Then list areas of your life that are outside your influence, including things like the economy, thoughts and actions of others and the nightly news!

Applying this concept- you can’t control what cars your friends drive, what houses they live in, or how expensive their clothing is. You can however control how you spend your own money, and the goals that you put them towards. This assumes of course that you have set yourself goals that you focus on. If not, don’t wait until New Year’s Eve to set them, set them now and work towards them. There’s some great literature around on how to set goals, so I’d recommend you make that a starting point.

Expanding on this, why compete with your friends on things like cars and houses? Without being too philosophical, shouldn’t your friendships be about more than material possessions? There is also little to be gained from constantly comparing yourself to others, most of whom will have very different circumstances or situations to you.

Once you have set yourself some long and short term goals that excite and motivate you, you will find yourself worrying less about what others do with their money. Keeping up with others is an expensive game that no-one can ever really win. Giving yourself a sound financial footing however can you give you a strong personal satisfaction and sense of self-worth that the latest new gadget will fall short on.

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1. How To Rid Yourself Of A Bad Credit Rating
2. Expert Tips On How To Create A Share Portfolio
3. The Effects Of Rising Interest Rates On Home Ownership vs Renting

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How To Rid Yourself Of A Bad Credit Rating

Super User — Sun, 15 May 2011 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Perhaps you didn't pay your mobile when you were younger, or you went abroad for three years and left your electricity bill unpaid. How do you get your credit rating back in check? Also, what does a bad credit rating mean? And how will not paying your mobile bill (and incurring a bad credit rating) affect you later on in life?

Having a good credit rating long term is dependent on you having good financial management so that defaults and late payments don’t happen. Now that the obvious statement is out of the way, here’s what to do if you don’t currently have a squeaky clean credit record:

Get a copy of your current credit record. It can be obtained at www.mycreditfile.com.au If you’re in a hurry, you can order one straight away, or if you’re prepared to wait, there’s one that can take a week or two, but is free.
Review your credit history. If there are errors, assemble any information that assists your claim, and contact the credit reporting agency (for example, Veda Advantage) and the institution who lodged the report to have it corrected. If you did forget to pay a power bill or credit card statement, and it’s still owed, contact the company you owe, make an arrangement to pay it, and request that its rectification be put on your record.
More weight is given to those assessing your credit record to newer transactions. If you were late on your phone bill a couple of times 4 years ago, but have been clean since, you should still be ok.
If you’ve only just started getting your credit back up and running, consider applying for something like a credit card and being ultra careful to be on time with your payments. This will show on your record, and being the newest entry, will be more important.

The ultimate healer of credit ratings is time. For example, after 7 years, a bankruptcy is removed from your record. The more time moves on, and the cleaner you keep your record over that time, the better.

Your credit record is important. It’s how any prospective lender will assess your record in meeting your financial commitments. That’s why it’s so important to know what is on it, and take action to clean it up as soon as you can.

Also beware of making too many credit applications. If a lender sees you have applied for a lot of loans in a short amount of time, they take that to mean that you have been rejected for all of those applications. Be a bit selective in your applications. For example, if you are looking at home loans, don’t apply at every bank you talk to. This is where a mortgage broker can also be a great help, as they will advise on the best loan, meaning one application rather than multiple ones.

Finally, once your record is looking healthier, keep it that way! Use some basic disciplines such as budgeting and keeping a monthly record of your bills and when they’re due so you can keep on top of your finances. If you do run into trouble, talk to your creditors. In the main, they’d rather work with you than make your life difficult.

More From Anthony Bell..

1. Expert Tips On How To Create A Share Portfolio
2. The Effects Of Rising Interest Rates On Home Ownership vs Renting
3. Before you open a joint bank account, read Anthony Bell’s money management article first!

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Expert Tips On How To Create A Share Portfolio

Super User — Sun, 27 Mar 2011 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Given what we have seen over the last few years in share markets across the world, it is understandable that the average investor may be a bit more hesitant to start a share portfolio and enter the share market.

As with any type of market (residential property or the price of bananas at the fruit shop) the share market is driven by supply and demand, meaning if you can understand the drivers of these factors you will receive on average a higher return than that of any other asset class.

For those who are contemplating investing some of their hard earned savings into shares for the first time, the best place to start is to put your reading glasses on. Information is the key. Reading publications such as the Financial Review and The Australian Investor to gain a feel for how the market operates and reacts to certain events will be of benefit to any first time investor.

When people look to buy an investment property they are often told to purchase in areas they know well. The same can be said when investing in the share market. While the smaller stocks do have the potential to increase significantly in value, there can be a higher level of risk attached to these stocks. If a first time investor is looking to gain access to the smaller stocks listed on the ASX it may be wise to utilise the services of a fund manager who deals in small stocks every day. This allows you to focus on what you do best (i.e. earning an income from your occupation) and leave the investment to the fund manager.

Alternatively, you may like to invest at the bigger end of town or what are commonly referred to as Blue Chip stocks. Blue chip stocks are not usually expected to experience the volatility (although the GFC taught us even the big companies can go broke) and are widely seen as a safe investment long term. These shares usually pay a dividend (distribution of company profits to shareholders) bi-annually of between 2%-8% p.a. providing you a steady income on your investment.

The easiest and cheapest way to get started would be an online trading account that all major banks offer. The fees involved for a trade are generally between $15-$30 per trade up to a certain limit. These accounts are fairly easy to use and will not take very long for a beginner to master. If you are however looking to jump straight in with a large sum of money or want to trade on a frequent basis or in a sector you are not familiar with, a broker could be the way to go. It is the dearer of the two options at circa $100 per trade minimum but the peace of mind that comes with speaking to a person and having them execute your trades for you is worth the cost when your dealing with a large sum of money. They will also be able to provide you with recommendations on potential buying opportunities that they may come across.

Diversification is the key to minimising risk in any portfolio. The old catchcry “don’t put all your eggs in one basket” rings true in share market investment also. As there are transaction costs in purchasing shares it may be difficult for an investor to gain access to adequate diversification. For example, if you were employing the services of a stock broker charging $100 per trade, brokerage on a $20,000 investment across ten stocks would cost you 1% of funds invested once you take into account the costs of selling. There is an emerging trend in the Australian Stock market for Exchange Traded Funds (ETFs) which are investment products that allow investors to buy or sell shares of entire portfolios of stock in a single security. The savings for investors can be quite significant in the long run as you will only hold a single Exchange Traded Fund which will provide you with exposure to a number of stocks on the Australian Stock Exchange as opposed to buying and selling multiple direct shares. This option may be something for first time investors to consider.

People invest in shares to make money, however when you do realise a gain on a stock the tax man will want his cut. Profit made from shares you sell in the financial year will be taxed at your marginal tax rate. An incentive to invest long term is that if you hold a stock for longer than 12 months you will receive a 50% discount on the tax that you would have to pay. If you realise a loss on a stock in a financial year, the losses can be offset against profits you may make on other stocks meaning you will only be taxed on your overall gain for the financial year.

In summary, if you are interested in investing in shares you need to start reading and gaining knowledge before you invest. Putting money in something you don’t know about is like handing your savings over to a black jack dealer so putting the effort will ensure you have a better chance of reaping the rewards.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More Anthony Bell blogs for RESCU:

1. The Effect Of Rising Rents
2. Learn To Deal With Debt
3. Anthony Bell Explains The Baby Bonus Basics
4. Plan For A better Future With These Superannuation Tips

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The Effects Of Rising Interest Rates On Home Ownership vs Renting

Super User — Mon, 14 Feb 2011 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Interest rates keep going up and affording the mortgage is getting harder. What should homeowners be wary of? How tight is too tight? Will interest rates keep rising? Should renters stick to their lease contracts for now?

Whether or not interest rates will rise or fall inevitably involves a bit of crystal ball gazing. My take at the moment would be that with Europe and the United States still doing it tough, and the potential slowing effect of the recent floods, interest rates this year might be a little more stable in Australia than last year. If they do rise, it won’t be in big leaps. Naturally that can change if circumstances are a bit different to what we expect.

When taking out a mortgage, you should work out how affordable it would be for you if rates went up 3-4 percentage points from where they currently are. If you can’t afford your mortgage should rates go up this amount, you might be cutting it fine.

It might still make sense to get the mortgage, but with the knowledge that you should do everything you can before any significant rises to pay down a bit more of the mortgage or increase your earning capacity to give you more buffer.

You might get lucky and rates might not rise by much or even fall. Even so, no one wants to leave their mortgage affordability to luck! And if interest rates do fall, it’s normally sound financial management to keep making the higher repayments to reduce the debt.

The buying versus renting argument has gotten tougher with rates rising. Paying a mortgage does involve higher payments than rent. Plus there are the outgoings such as council rates or strata fees that a renter doesn’t normally pay.

The flip side is that the property owner gets the growth in the value of the property. They also get the piece of mind that comes with knowing that they won’t be required to move at their landlord’s request. A smart homeowner can also increase their wealth through some smart renovations and upgrades that add value in excess of any additional costs.

Another factor to consider is that your mortgage repayments generally won’t increase as fast as rent will. Most home owners find that within 5 years of purchasing their home that their mortgage repayments are the same or less than it would cost them to rent a similar property, despite rent initially being “cheaper”.

Take this example. Ten years ago, Jane Smith purchased a $300,000 property on a 6.5% mortgage over 30 years and borrowed the full amount. Her weekly repayments were around $470 a week. If she was renting the property, she might have paid $250 to $300 a week in rent, around $200 a week less. Ten years later, her mortgage interest rate could be 7.5%, and her repayments up to $520 a week due to the higher interest rates. However, the property is now worth $500,000 (with the increase in value going to her net worth) and rent if she was renting it, she’d be up for $500 to $550 a week, and rising every year after that, whilst the value increases. Many home owners will have similar stories to this.

The lesson is that buying a home is a longer term consideration. For short term cash flow, renting will normally win. For longer term wealth creation and piece of mind, home ownership can be a big winner.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More Anthony Bell blogs:

1. What To Do Before You Open A Joint Bank Account
2. Baby Bonus Basics Explained
3. How To Make And Stick To A Budget
4. Learn To Deal With Debt

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Before you open a joint bank account, read Anthony Bell’s money management article first!

Super User — Sun, 14 Nov 2010 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Mixing your assets can be fraught with danger and uncertainty but, as RESCU’s finance expert Anthony Bell explains, this can be reduced with some upfront discussion and planning.

Keep in mind that issues over finances are a big cause of relationship issues and breakdowns, so it makes sense to deal with it early on in the relationship.

A starting point would be to discuss your attitudes to finances. If one of you is very particular about every dollar, and the other is completely carefree and loose with their money, this can cause tension. Speak about where you agree and where you are different. Managing it doesn’t mean you both have to completely change, but you put in place ways of minimising its impact on your day to day lives. Again, better to uncover these aspects early instead of it being a surprise later.

Also, cover what each of you is bringing into the relationship financially. One of you might earn significantly more, or have more in assets than the other. Equally, there might be family assets you will have a share of that you want to protect.

Strongly consider getting a cohabitation agreement or binding financial agreement. These documents set out what each partner is entitled to in the event of the relationship breaking down and provides protection for each partner. It might seem pessimistic to enter into such an arrangement when things are going well, but being sadly realistic, close to half of all longer-term relationships break down at some stage. Having such an agreement in place can reduce the angst if there is a breakdown by providing certainty at a difficult time. As a positive, undertaking such an agreement can often bring up and allow resolution for any money issues at an earlier point.

If you do undertake a financial agreement, I strongly advise having a lawyer prepare the document to ensure it is done properly.

Joint bank accounts and borrowing
Whether you start having a joint bank account or not might depend on what you learn about each others’ attitudes to money. If both of you have similar money beliefs, and there is complete trust (a prerequisite for a good relationship surely!) then it might not be a bad idea to have a joint account for joint expenses etc. Again, it is important to be clear on what the account is to be used for to avoid misunderstandings.

Joint borrowings can be a real deal breaker for some relationships. When you jointly borrow money, most loans are structured so that you are both individually responsible for 100% of the loan. It’s not a case of you just being responsible for half the loan. If your partner can’t pay, you have to make up the shortfall. If your partner loses their job and can’t pay, will you feel comfortable making their payments, and likewise if they have to make your payments for you? Before jointly borrowing any money, be clear on its purpose and your relationship. Joint credit cards also fall into this category.

If you aren’t asked to jointly borrow money, but to be a guarantor for a loan, the same rules apply. Whilst your name might not be on the loan, if the borrower defaults, as the guarantor, it becomes your problem! Where you have joint debts, look at your insurances. It’s worth reviewing and even having policies for each where the other one is the beneficiary. This means that should the worst happen and one of you passes away or is injured, the debt can be covered.

Keep watching the budget
If you do mix your assets, including your cash, make sure one of you is responsible for paying bills etc. For the other partner, they still need to involve themselves in reviewing the finances. No point asking why there’s no money if you didn’t keep involved. And as boring and repetitive as the concept might be, a budget is worth having.

In any budget, you should each give yourselves some free spending money. That is, money each week, fortnight or month that you both get and can spend however you like without having to justify it, whether it be for going out, shoes, clothes or whatever. It’s an important part of still retaining some of your own freedom and identity.

It all comes down to being upfront and honest. Money can be an awkward topic, but addressing it properly should be seen as a way of improving your relationship, not threatening it.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell's RESCU Blogs:

1. Finance expert Anthony Bell gives us advice on dealing with debt, and how to organise our finances in our 20s, 30, 40s and beyond

2. Finance expert Anthony Bell explains the baby bonus basics and other childcare benefits for Aussie parents

3. Happy New Financial Year: Anthony helps you plan a prosperous year

4. Joint finances 101: Anthony Bell shares his advice on mixing love and money

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Plan for a better future with these superannuation tips from finance expert Anthony Bell

Super User — Sun, 17 Oct 2010 13:13:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

There's a lot of talk about superannuation at the moment. So we asked Anthony Bell about how to get our super sorted. He also told us why it’s important to think about our super when we're 20, 30 or 40 years away from retiring.

The Government initiated Cooper Review on the superannuation system in Australia has been released and has again brought this important aspect of retirement planning to the front of people’s minds.

People talking about superannuation is a great thing as it is never too early to start thinking about your retirement. Superannuation is after all likely to be your second largest asset after your family home when the day comes for you to retire.

I often hear the misconception that you should only think about superannuation when you get into your 50s - but by then it is often too late. There are a number of things that you can do today to ensure you maximise your super balance and to give you the power to choose your retirement date and not to have to continue to work as dictated by a lack of retirement savings.

I hear a lot of clients say to me “Superannuation Funds have performed poorly the last few years”, whereas in actual fact it is the underlying investments within the funds or indeed investments held by people personally that generally performed poorly during the GFC. The superannuation fund environment in nearly all cases remains the most tax effective structure for investing; it’s the quality of the investments that really counts. This is why it is never too early to think about superannuation and how your minimum 9% employer contributions are invested.

For someone who is in their 20s or 30s, there are three main areas I focus on when it comes to superannuation:

1. Consolidation – by the time someone is 25, it is not unusual for them to have upwards of 5 different superannuation funds as they move from job to job. By consolidating your superannuation, you will pay one set of fees and achieve better control over where your retirement savings are invested.

2. Fees – do your homework on the fees you are paying within your superannuation fund and research what other funds charge to ensure you are getting a good deal. These fees can have a significant impact on your balance in 40 years time so it does pay to invest a little bit of time to understand what you’re paying.

3. Asset allocation – remember you are 30-40 years away from retirement. The underlying investments within your superannuation fund should reflect this investment timeframe and you need to be willing to accept the inevitable short term volatility for long term capital growth. You can guarantee that there will be around 3 to 4 major market corrections/shocks over this timeframe, but you will have time on your side to ride these out and benefit from long term growth.

It is when our clients get into their 40s that we look at “supercharging” their superannuation fund. By this time they have bought their family home and have been working for over 20 years, so there is usually a reasonable balance within superannuation.

For people in their 40s and 50s, I usually suggest the following:

1. Asset allocation (again) – now you are a bit older, it may be time to pull back the aggressiveness of the underlying investments and look at a slightly more defensive approach to protect the wealth you have accumulated between ages 20 and 40. There is still scope for capital growth, but it is now important to protect the money you have worked hard for over the last 20 or so years.

2. Salary Sacrifice – Making pre-tax contributions to superannuation not only enhances your retirement benefits, it also creates tax savings as contributions made pre-tax direct from your salary are only liable to 15% tax rather than up to a maximum of 46.5% tax in your hands. You can contribute up to a maximum of $25,000 pa (including the 9% compulsory super) into superannuation. This maximum increases to $50,000 pa up until 30 June 2012 if you’re over 50 and thereafter only if you are over 50 and have a total superannuation balance below $500,000.

After tax contributions from your personal cash can also be made up to a maximum of $150,000 pa or $450,000 once every three years.

3. Using a Self Managed Superannuation Fund (SMSF) – this can be a great way to achieve a higher level of flexibility and control over your superannuation investments. Due to the annual costs in running a SMSF, it is normally only economically feasible for balances around $200,000 or more - but it is definitely something to consider even if you have a little less than this, depending on your circumstances.

4. Insurance – I would also recommend having a close look at your level of insurance cover for Life and Total and Permanent Disablement, Income Protection and Trauma. It can be beneficial to hold insurance cover through superannuation as premiums are paid by the fund and don’t impact your personal cash flow.

At the end of the day, the superannuation environment is the most tax effective investment vehicle you have to maximise your future wealth as the most tax you will pay is 15%.

The most important thing is to have a financial plan for the future that is tailored to your circumstances by a licensed financial planner and then to review that plan from time to time, or when your circumstances change. You can guarantee that superannuation will be a key part of that plan.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell's RESCU Blogs:

Get Expert Advice to RESCU your life: Fashion; Beauty; Finance; Health; Dating; Lifestyle and great competitions.

Finance expert Anthony Bell gives us advice on dealing with debt, and how to organise our finances in our 20s, 30, 40s and beyond

Super User — Sat, 04 Sep 2010 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

Many of us struggle to cope with the temptation of credit cards. Fortunately, Anthony Bell is here to give us his professional advice...

Debt Detox
Debt can be a like a nice wine, easy to get into, hard to say no to! Having an understanding of debt and how to make it work for you can have an enormous impact on your overall financial well being.

Often our first experience with debt is when we get our first credit card or borrow to buy our first car. Buying something with “someone else’s” money can be an easy habit to take up. From there the temptation to keep consuming and not saving often takes over and leaves us with a big headache that seems out of control.

Know Your Debt
There is “good” debt and “bad” debt. Good debt is money you borrow for assets that will increase in value over time, such as a property. I would also include in this money you borrow for assets that will add to your income earning ability, such as a car that you will use mostly for work and allows you to do your job (this means something practical and affordable, not necessarily the most expensive car you can find!).

Bad debt is money borrowed for consumption like a holiday, a night out, or a car that you don’t really need and will lose its value.

Starting Point
Work out where you stand financially right now. You need to know your starting point and work your way from there. If you have a lot of credit card or personal debt, face up to it. It won’t go away, and acknowledging it and working on it will be a lot less painful than putting it off for another year.

Draw up a list of what you own of value (leave off personal items that lose all their value when you walk out of the store) and all the money you owe. Don’t worry about how good or bad it looks, just do it!

From here, work on a budget and paying any personal debts (see my previous articles for hints and tips on how to do this), and look at ways going forward on how to make your money work for, and not against, you. Your money priorities will change as you go along, so below I have listed a few things you should focus on at different stages in your life:

Your 20s – Laying the Foundation
This is the decade where you start out having not long left school, studying or starting your first job, and probably not earning as much as you’d like!

Often it’s this lack of money that make easy credit very tempting (think the interest free deals at department stores), as it offers a means of having more of the good life than you otherwise get to enjoy. The trap here is not so much what is borrowed, but the habits that you are forming.

Despite the temptations to do otherwise, push yourself to get into a savings habit, and avoid personal debt as much as possible. Even if your earnings are minimal, get into the habit of putting aside at least 10% of whatever you earn into a separate savings account that you don’t touch. Again, it’s not the amounts that are important, but the habit you are setting in place for the rest of your life. Use these savings to build up a bit of a buffer so you have emergency funds if you need them (and no, this doesn’t include paying off the credit card because you overspent). Try to have at least 3 months worth of living expenses saved up and set aside in cash. Having some sort of buffer will give you piece of mind knowing that you won’t be caught short if something unexpected happens.

With any excess savings over this buffer amount, start the next habit of investing. This might include putting a sum of money into a managed share fund every month, or putting together a deposit for a property. Having a chat to a financial planner can also help, as they can show you the range of things you can invest in, and tailor them to your personal preferences and comfort level. Again, what’s important here is the habit of saving and investing that you are getting in to.

If you start these habits as early as possible in your 20s, you’d be surprised how well you are going by the back end that decade, by which time you might just be earning closer to the sort of money you first envisaged when you left school!

Your 30s – Leveraging yourself
By the time you reach your 30s, you might have started and finished a career, and be on to the next one, or even have a family or being looking to start one.

Irrespective of your path, your 30s are when you can really leverage off what you learnt over the previous 10 or so years. If you got into a good savings habit, by now you should have a good amount tucked away in some investments that are starting to add value without you having to do much to them at all. You might even be in a position to consider borrowing some more “good” debt for some investments to accelerate things if you’re comfortable with some extra risk.

You will also have plenty of skills in work and life that are of a lot of use to you and others. Just because you’ve now got experience doesn’t mean you stop learning and growing. Whether it be a university degree, a TAFE course or a short course at your local community college, you will find that the extra education will really multiply your effectiveness at whatever you do.

Keep having goals to work towards. And if you have fallen off the wagon a bit financially, starting over is better than not starting at all!

Your 40s – Maximising your returns!
In your 40s, you will often find the habits you got into in your 20s and 30s are the major factor in where you are in life (both good and bad!). What you want to do is tackle any lingering bad habits you have, and take full advantage of the good ones.

If you’ve been on a good financial path to date, keep it going! Take full advantage of your career and life experiences to maximise your value to your family and your employer or business. Add to your savings and investments and check that the goals you have are still relevant and motivating.

Being organised is important at every life stage, and very much so by your 40s. Think things like wills, insurances and how you hold your assets (for example, how well protected are you if you were involved in legal action?).

Again, don’t beat yourself up if you haven’t got your financial house in perfect order (or any order). If you feel like you are going off track, go back to basics. Take stock of where you are right now, face up to any debts that need tackling, and set some habits and goals that will move you forward.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell’s RESCU Blogs:

1. Finance expert Anthony Bell explains the baby bonus basics and other childcare benefits for Aussie parents
2. Happy New Financial Year: Anthony helps you plan a prosperous year
3. Joint finances 101: Anthony Bell shares his advice on mixing love and money
4. Anthony reveals how to recover from your Superannuation Loss

You can read more of Anthony’s blogs at www.rescu.com.au/_blog/Anthony-Bell-Finance-Insurance-Budget-Tax-Advice

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Finance expert Anthony Bell explains the baby bonus basics and other childcare benefits for Aussie parents

Super User — Sun, 08 Aug 2010 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

There’s been a lot of talk lately about childcare benefits, the baby bonus and other tax and government breaks relating to caring for your children. We asked Anthony Bell to take us through the minefield of what’s available and who’s eligible.

There are many benefits and tax breaks available when considering the birth and raising of a child in your care. Below is a list of items to consider:

Baby Bonus
There are many aspects which will impact your eligibility for the Baby Bonus, one of these aspects is based on your income.

To meet the income test criteria you and your partner must have a taxable family income of $75,000 or less for the 6 month period following the birth of your baby.

The maximum entitlements are effective from 1 July 2010.

You can be paid $5,294 per eligible child in 13 fortnightly instalments or
If your baby has died or was stillborn, you may ask for your Baby Bonus to be paid in a lump sum instead of fortnightly instalments.

Child Care Benefit
Qualification of a Child Care benefit payment is based on;

your use of approved or registered child care, and
your child is immunised (or on an immunisation catch up schedule), or is exempt from the immunisation requirements, and
you are responsible for paying the child care fees for your child.

From 1 July 2010, an income test has also been incorporated to assess eligibility.

The maximum rate is payable for actual annual family income under $37,960 or families on income support. However nothing is payable should that family income go over the following thresholds;
Number of children Income limits
1 $134,443
2 $139,333
3 or more $157,329 plus $29,721 for each child after the 3rd

Just remember, registered care also includes care provided by the guardian, grandparents or other relatives, friends or nannies who are registered as carers with the Australian Government’s Family Assistance Office. However, you can only make this claim if you are working, studying or training at some time during the week when the care is provided.

Family Tax Benefit Part A
You may be eligible for Family Tax Benefit Part A if you have:

a dependent child aged under 16, or
a dependent child aged 16–20 years who: has completed a Year 12 or equivalent qualification, is undertaking full-time education or training leading to a Year 12 or equivalent qualification, has been granted an exemption from this requirement,
or a dependent full-time student aged 21–24, or
have care 35% of the time, and
your family income is $45,114 or less

If so, your payment will not be affected by the income test.

If your family income is more than $45,114, it does not mean you are ineligible for the payment, it simply reduces and ceases to be paid if your family income goes over the following thresholds;

No. of children 0–17 years No. of children 18–24 years
Nil 1 2 3
0 $100,290 $110,060 $120,791
1 $98,769 $108,539 $119,270 $130,001
2 $107,018 $117,749 $128,480 $139,211
3 $116,229 $126,960 $137,691 $148,422

These figures do not include the supplement.

Family Tax Benefit Part B
You may also be eligible for Family Tax Benefit Part B if you satisfy certain conditions. One condition is the income test, which requires the primary earner having an adjusted taxable income of $150,000 per year or less.

The maximum rate of Family Tax Benefit Part B payment is;

Age of youngest child Each fortnight Each year
Under 5 years $136.36 $3,909.15
5–15 years (or 16–18 years if a full-time student) $95.06 $2,832.40

Medical Expenses Tax offset
Net medical expenses are the medical expenses you have paid after refunds you have received from Medicare or a private health insurer. You will be able to claim back 20 cents in the dollar of your net medical expenses over $1,500.

As you can see there are a significant number of benefits available. Other benefits that you may be eligible for include;

the parenting payment
the carer allowance
a health care card

Should you require more information, it is best to speak to your accountant or visit Centrelink and the Family Assistance Office.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell’s RESCU Blogs:

1. Happy New Financial Year: Anthony helps you plan a prosperous year
2. Joint finances 101: Anthony Bell shares his advice on mixing love and money
3. Anthony Bell’s insurance decoder
4. Anthony reveals how to recover from your Superannuation Loss

You can read more of Anthony’s blogs at www.rescu.com.au/_blog/Anthony-Bell-Finance-Insurance-Budget-Tax-Advice

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Happy New Financial Year: finance expert Anthony Bell helps you plan a prosperous year

Super User — Sun, 11 Jul 2010 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

With the start of the financial year, there is no better time than now to set financial year resolutions for 2011. So get a pen and start goal setting for the next financial year, with help from our finance expert, Anthony Bell.

One of the most important things is to get your finances in order, and what better way to start than to get your 2010 tax return lodged and out of the way.

So while it is still fresh in your mind, collate all of your income sources and deduction items and get them to your accountant ASAP. What is even better is if you are eligible for a refund, get it into your savings account and earning interest rather than keeping it in the ATO’s!

Income items could relate to:

salary and wages
interest income
dividend income
rental income

Some deductions to consider are:

motor vehicle-related
study and further education costs related to your income generation
bank fees
interest on deductible loans
running costs for your investment property
income protection insurance

Click here for Anthony Bell’s previous article; Three key strategies to maximise your tax return.

2. Set a budget

The next thing that you can do as part of your new year’s resolution is to set a budget. Establish how much money is coming in, how much money you need to save and finally how much money you need to spend on necessary items. Once you have done this, commit yourself to stick to your budget!

When setting a budget many people say to themselves, “Whatever is left over I will save.” 9 times out of 10 there is no money left over to save.

Treat your savings like an expense just like your rent or mortgage payments, this way you will save some money every month rather than spending every dollar you have. What is even better is to put it into another high interest bearing account, making it harder to access and reducing the temptation to spend it on unnecessary things.

Click here for Anthony Bell’s previous article, How To Stick To A Pain-Free Budget.

3. Get your will in order

A final new year’s resolution that you should stick to is to review your will. If you don’t have one, it is now time to get one in order. Nowadays, there is no excuse not to have a will.

If you can afford to get your lawyer to draft one up for you then get that arranged immediately. Otherwise you could consider going to Australia Post and getting a will kit. The best course of action depends on your personal circumstances, so a conversation with your lawyer might need to be considered.

By getting the above items in order, 2011 will be the best year yet and will also set up some great habits to take you through to future years.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell’s RESCU Blogs:

1. Joint finances 101: Anthony Bell shares his advice on mixing love and money

2. Anthony Bell’s insurance decoder

3. Anthony reveals how to recover from your Superannuation Loss

4. Spring clean your finances

Get Expert Advice to RESCU your life: Style; Beauty; Wealth; Health; Love; Culture and great competitions.

Joint finances 101: Finance Expert Anthony Bell shares his advice on mixing love and money

Super User — Sun, 18 Apr 2010 14:14:00 GMT

By Anthony Bell, Finance Expert
www.bellpartners.com

There’s no doubt that finances and relationships can be a volatile mix. We asked Finance Expert Anthony Bell what happens to your money if your relationship breaks down. He also explains pre-nuptial agreements and the tax and wealth creation benefits that a relationship can bring.

It may not sound romantic, but with a significant proportion of relationship breakdowns caused by monetary issues, it seems that the best way forward for people in a long-term relationship is to be open and direct with each other on their finances. Of course, there really is no right or wrong answer as to how to deal with money issues as every relationship is different.

There are steps you can take to create greater financial certainty in the event that the relationship ultimately fails. For some people, this can be positive thing as this certainty can in itself take away a pressure point, but for others it can work the other way and create doubt about how one partner truly feels about the other.

First, a few facts if things don’t work out…
The rights for individuals are pretty much the same for people who are in a relationship and cohabitating as compared to those who are married. Defacto couples are usually entitled to the same rights as married couples if they have been in their defacto relationship for two years. This period can be lower in certain circumstances, particularly if there are children involved.

Financial settlements are handled through the Family Court for both married and defacto couples. In most cases, agreements are reached between the couples on the terms of the financial settlement (called a Binding Financial Agreement) and are then approved by the court.

Where an agreement can’t be reached, the matter can end up in court. This should always be a last resort as the costs, time and emotional damage it can cause are often just not worth it.

Even if you do agree on the terms of a financial settlement, both parties should still obtain independent legal advice before signing off on the agreement.

So what are your options if you want to get greater certainty up front in the event that the relationship fails?

Pre nuptial agreements
The safest and surest way for all couples (whether married or living together) to protect their assets is to enter into a binding financial agreement or pre nuptial agreement before the marriage takes place or before the defacto relationship becomes long term.

Agreements like these were once the domain of mostly very high net worth individuals, such as movie stars and business tycoons, who wanted to protect their hard earned assets, but these days they are much more common place in the general community.

This agreement will document what each party is entitled to financially if the relationship fails. Whilst it does not have to be completed in consultation with a lawyer, the agreement will have to be put in an approved court format by a lawyer for approval. By entering into a binding financial agreement, it gives both parties some peace of mind about how assets will be treated if there is a breakup.

Are agreements like these right for everyone? Not necessarily. Each couple must make their own decision, but there is no doubt that such an agreement can avoid a huge amount of heartache down the track as unfortunately it is a well known fact that around half of first-time marriages will fail.

3 money tips to increase harmony in the home:
If couples prefer to be less formal about their finances, here are some tips you can use to help maintain harmony:

1) Each party to the relationship should have their own independent spending money. That is money that is only for them and does not need justifying to the other partner when spent.

2) Create a common pool for both people to contribute into to pay for household bills/food, or the rent or mortgage etc.

3) This account can also be used to allocate funds for holidays and other major purchases.

What about investments and wealth creation?
When it comes to investments and wealth creation plans, the strategies are a little more complex as they are driven more by tax and long term prosperity than relationship harmony.

It has to be accepted that when embarking on wealth creation strategies that any relationship breakdown will bring the strategy to an end and the assets will be split according to any agreement reached.

Tax benefits
There are significant tax benefits that are available to relationship wealth creation plans. Some of the strategies that can be employed include: investing in the name of the person who is the lowest income earner. This will ensure that any interest etc will be taxed at a lower marginal tax rate. Potential capital gains tax will also be minimised as you are taking advantage of this person’s lower tax rate.

Superannuation
When there is an age difference in the relationship, couples should consider superannuation contribution splitting to direct more funds to the older person. This essentially means funds can be access out of superannuation sooner. Under current rules, a person can direct up to 85% of their employer and salary sacrifice contributions to a working spouse who is under age 65.

With all of the above being said, you should not let money issues alone control where a relationship is headed. Love, honesty, trust, transparency and faith are the corner stone of lasting relationships and will overcome any monitory problems that come your way.

As always, if you would like more guidance on an appropriate strategy regarding your finances, you should seek professional advice that takes into account your specific circumstances.

For more information about your finances or to make an appointment with a specialist from Bell Partners, go to www.bellpartners.com

More of Anthony Bell’s RESCU Blogs:

1. Anthony helps you make and stick to a pain-free budget

2. Anthony reveals how to recover from your Superannuation Loss

3. Spring clean your finances

4. Anthony gives expert pointers on investment options

For more advice on investment, read Dale Gillham’s golden rules for investment and financial independence.