02
Nov 2016

Four Places to Stash your Cash

Four Places to Stash your Cash

If there is a good chance you will receive a tax refund this year or by being thrifty you have accumulated some extra cash in your everyday account, try to contain the temptation to splurge or celebrate; instead make it work harder for you.

Here are some places you can stash extra cash that will pay off in the long run.

  1. Reduce your debts. As boring as it might sound, this is the best way to earn more on your extra cash. Focus on any high-interest loans such as credit cards and personal loans you have. While you’re at it, set up additional monthly payments towards these debts – even a few extra dollars each month will put more back in your pocket.
  2. Special savings. Do you have a special goal like an overseas holiday or wedding? Use your extra cash to open a separate online bank account that earns higher interest and set up a monthly automatic transfer from your everyday account. Allow it to quietly grow behind the scenes and be ready for you when you need it.
  3. Invest it. Use your lump sum to set up a managed investment then make regular contributions to take advantage of dollar-cost averaging. If you’re yet to retire and haven’t already taken control of your superannuation, this might be an even better option for you as it is far more tax-effective. Talk to us for further guidance.
  4. Share it around. You don’t have to be wealthy to be a philanthropist. What is your favourite charity? Or share it between a few needy organisations of your choice. It will not only make you feel good, but you can claim your gift as a tax deduction. You can find more information about planned and tax-effective giving at www.philanthropy.org.au.

Each of these ideas will give you back far more than spending your extra cash on a whim. 

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18
Oct 2016

Are holidays on plastic really just “plastic holidays”?

Are holidays on plastic really just “plastic holidays”?

For the past few weeks my partner and I have been enjoying the planning of our annual holiday. We both work long hours but always make sure we get away for at least two straight weeks to a place where there is no mobile phone or email access. Those destinations are becoming scarcer but we don’t feel like it’s a holiday if we’re still contactable.

Another golden rule we always follow is we have to be able to pay for the entire holiday upfront. The only aspects that go on plastic are daily expenses while we’re away. But we’ve budgeted for these as well and put an appropriate amount onto our credit cards before we leave. That way we know everything is paid for and we don’t return to a debt that will ruin all the happy memories of our time away.

Obviously not everyone is as disciplined and a lot of people spend up big using their credit cards to pay for holidays. If that applies to you, here are some tips to help you save for your next big break without relying on debt.

Start with a plan. Create a simple budget. Automatically allocate some money from each pay to a separate account and don’t touch it. It will quietly build while you plan for your holiday.

Hide it before you spend it. If you already have credit card debt, schedule an automatic deduction from your cash account direct to your credit card from every pay. In both of these tips, if the money isn’t there, you can’t spend it.

Sell something. Do you have unused gym equipment, a bicycle you never ride, or even clothes you’ve hardly worn? Have a big clean out and stage a garage sale, or sell it online. Reduce your card balance or top up your holiday account with the proceeds.

Use windfalls. Are you due a bonus or tax refund? See yourself on the holiday of a lifetime. You know where it’s going!

Spend less. Careful spending doesn’t need to impact on your lifestyle. Try these ideas:

  • Entertain at home rather than at restaurants or pubs.
  • Lay-by birthday and Christmas gifts during the store sales throughout the year.
  • Check out upmarket clothes recycling stores; they often have designer clothes at bargain prices. No-one will ever know!

Ask for help. Sometimes it’s difficult to get back on top of debt by yourself. I have plenty of other great suggestions that can help, or if you would like to share your experiences and ideas for our readers, we’d love to hear from you. Just add your suggestions below and we can all help each other.

I can’t tell you how great it feels to be on holiday knowing that I won’t return to debt. The freedom this gives us makes the holiday even more enjoyable. 

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18
Oct 2016

9 ways to manage investment risk

9 ways to manage investment risk

There is hardly anything in life that doesn’t involve taking some risk – even getting out of bed in the morning! Many people are fearful of investing because all they focus on is the risk of losing their hard-earned money. Others look for great returns and forget about the risk entirely. As with anything, there has to be a balance. 

In the majority of investment structures, risk and return are related. The more risk you take, the more return you can potentially make (and vice versa). But there are ways in which this “risk” can be managed without defaulting to low-return products. 

Here is a handy checklist to keep you focused on maintaining a balance. 

1. Risk and return

To get ahead, your investment return needs to take account of tax and also stay ahead of inflation. Many low-risk investments such as bank savings accounts often do not achieve that goal. To make any gains, you must take calculated risks. 

2. Learn more and be aware

Many investment disappointments come from lack of knowledge. You must ask questions until you understand the investment. If you do not understand it, do not invest in it. 

3. Rely on experience

Software and mathematical models can increase understanding but in the end it is people who make the difference. Smart investors seek the help of experts. 

4. Never assume

It is easy to make assumptions and accept the information you are given. You must test the assumptions through questioning.

5. Understand the risks

It can be tempting to pretend that a risk is small if something sounds really good. You must accept that risk always exists. Discuss it openly with your adviser so it can be managed. 

6. Mix up your investments

Diversifying means you take on more ‘uncorrelated’ risk. The larger number of small and different investment risks you take can provide a higher probability of more consistent returns. 

7. Stay focused

Be consistent. A rigorous and systematic approach will beat a constantly changing strategy every time. 

8. Use common sense

Investing requires you to make judgements rather than following a script. It is better to be approximately right than to be precisely wrong. 

9. It’s not just about returns

It is all about risk and return. Accepting and managing the risk may help you realise the return you desire. 

Just like achieving other goals in life, you need to decide how much risk you are prepared to take in chasing higher rewards. Talk to us about what best suits your situation.

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