Debt Burden and Debt Solutions
Australians debt levels near the highest in the world and continue to rise, presently ranking 4th in the debt stakes world wide. When broken down the debt usually is comprised of mortgages, investor, personal, student and credit card debt.
65% of Australians believe they will not have sufficient funds in retirement and sadly if we continue ranking 4th this figure will only rise. There are solutions however that simply take looking in to your finances and arranging them in a manner that works for both you and the creditors for the long term.
Advertised Debt Solutions
Many companies advertise solutions to debt, budgeting, money management etc. Whilst these companies are great in their goals, be aware that to use their services you will also be paying for that service.
Dependent on what your case is, your income and level of debt these firms will charge anywhere from $1000 to to $5000 as an establishment fee for their budgeting plan and guided assistance along with administration fees of approximately $2000 per year, and in some cases much higher.
Some firms even require extra fees for the payment plan.
These firms are intermediary, brokering deals with your creditors, however it must be noted that they will pay themselves first before your creditors.
Is there another financially viable solution?
There are other ways though that will cost nothing more than your time. National debt helpline 1800 007 007 provide a free, confidential and independent services.
National Debt Helpline Financial Councillors:
- Offer suggestions on ways to improve your financial situation
- Check if you’re eligible for government assistance
- Negotiate payment arrangement with your creditors
- Explain in detail your options and their consequences, including debt recovery procedures, bankruptcy and other alternatives
- Assist with applying for a hardship variation
- Organise your finances and do a budget
- Refer you to other services, for example, a gambling helpline, family support, personal counseling or community legal aid
Financial cousellors also assist with the following:
- Debts you are finding difficulty in paying
- Threats from debt collectors
- Debt recovery through the courts
- House eviction, disconnection of gas, electricity, phones etc
- Uninsured car accidents, taxation debts and unpaid fines
Take the time to get yourself back on track and find peace of mind. You always have options available to you.
from Strategic Finacial Advice, Suite 2, 319 Keilor Rd., Essendon VIC 3040
Some people would argue that investing in property is less risk than shares, yet all avenues of investing should be investigated thoroughly for suitability to your circumstances and goals, prior to signing on the dotted line.
Benefits of investing in property
- Property as a whole is less volatile than other investments
- Tenanted investments provide rental income
- Increases in property values provide capital gain when sold
- Property expenses can be claimed as tax deductions
- You don’t need a law degree to purchase an investment property and
- You’re investing in something tangible
Downfall of property investment
- The rental income generated may not necessarily cover all costs associated with the property, leaving you with a financial gap to cover
- Interest rate fluctuations can affect your disposable income
- Vacant investment properties means covering all financial costs for an unspecified period of time
- The property can only be sold as a complete entity and can’t be split when more income is needed
- Property market crashes can leave you with a mortgage bigger than the value of the investment and
- The costs associated with the property, such as stamp duty and agent fees can be quite expensive.
Investing solely in property increases risks, whilst diversifying into self managed superannuation funds, property and trading funds provides a broad range of investments with reduced risk.
This is not to say that property should be avoided.
On the contrary property can be very financially viable to your investment portfolio, however where and what you choose to purchase can have a great effect on your financial return.
What makes a solid property investment?
- Purchase property in areas you know well, cutting down on research as you may already know what to expect to pay for that particular area
- Research high growth areas. The Real Estate institute of Victoria (REIV) website provides free information on growth areas per quarter.
- Look into areas with potential for high rental income compared to the value of the property
- Speak with local Real Estate leasing agents in the area you’re looking to invest to discuss vacancy rates, as these can alter future sale prices
- Consult with the local councils regarding proposed future zoning and developments that could adversely affect the properties value
There will always be many properties on the market, yet you will want to look for properties that appeal to a wide range of people.
- Scope out accessibility to local transport, shops and schools
- Aim to include all segments of the market such as a home that could suit families, singles, retirees or couples
- Look for properties that require little maintenance, perhaps avoiding pools or manicured gardens
- For units, ensure that you know all the outgoing costs associated with it, such as body corporate fees
Choosing property investments as a part of your financial plan is a great way to build wealth.
As with all investments, choose wisely, research well and seek professional advice.
At Strategic Financial Advice we have over 20 years experience when it comes to investments.
You can trust that we’ll provide you with the best advice when tailoring a property investment plan with you.
How to reduce your assets risk?
With the right advice there are many ways to minimise risk associated with your assets, whilst reaping financial rewards, such as;
- Increase your lending limits when your income is stable for future draw down if necessary
- Lock in interest rates
- Ensure you have stand-alone investment loans (not secured to other investments or home)
- Invest via Trusts for tax benefits and Asset protection
- Private assets moved to the partner or spouse with the least risk and lower tax rates
- Income protection insurance – to protect your earning capacity
- Trauma and critical illness insurance – for immediate lump sums
- Wills protecting your estate and transferring assets per your specific instructions
If you have not sought the correct advice where your assets are concerned then the potential losses to you financially can run into the thousands.
Case study. Protecting assets in hard times
New clients to the firm William and Jodie, recently came into our office seeking advice on how to protect and maintain their assets whilst continuing to deal with a difficult family issue.
William works in the building industry and has done for over 25 years and Jodie worked in Real Estate. Together they juggled life with two children whilst their combined income maintained mortgage repayments.
Early last year Jodie received news that she had early stage breast cancer and required immediate treatment. Jodie stopped work to focus on her illness and William took time off to support Jodie through chemotherapy.
A little over a year later with William struggling to cope with mortgage payments on his own, they are in financial trouble.
From a financial planning perspective, insurance could have saved them this financial hardship.
If William and Jodie had personal income protection, life insurance, trauma and critical illness insurance, they would have been paid a lump sum figure that would have covered the mortgage for a period of time until Jodie could get back on her feet.
Fortunately we were able to assist by offering solutions for the present and asset protection advice moving forward.
‘Strategic Financial Advice’ offer unique and tailor made plans designed around your needs that are adaptable to market and personal changes and asset risk reduction to market movements.
Call Strategic Financial Advice today to protect your family and assets before something happens to you!
There are pros and cons to the method of negative gearing. When the market is good the returns are good, yet a low market or sudden fall in the market can have long lasting financial losses.
Here’s how you can reduce the risk;
- Ensure you have a secure income that can cover the loan repayments when the investment cannot
- Have in place a high marginal tax rate to get the most effective tax benefits
- Negative gearing involves commitment for a period of 7 to 10 years
- Be prepared to handle financial changes, such as reduction in income, loss of spouse income or increasing family commitments.
- Consider purchasing an investment with a central location, close to all major conveniences which would have a higher appeal rate to potential tenants
- Prepare for the worst. Make sure you have adequate insurance for both the investment and you personally
- Equally important is to have diversified investment. In other words, make sure all your eggs aren’t in one basket so that if one investment fails it doesn’t take down the rest.
Negative gearing should be taken very seriously before any decision is made.
Strategic Financial Advice is here to help. Step by step we’ll go through the risks, plan how to minimise the risk and forecast the unforeseen before you invest.
We find that a lot of our clients approaching the new financial year start to plan their next investment.
Give us call and arrange a time to come in and chat about the best investment options for you.
We’ve helped countless individuals to look upon their investment future with a clear and concise plan.
Interested in stepping into the investment world but don’t know how, call Strategic Financial Advice today.