If I asked you, “what is your most valuable asset?” would your answer be your house, investment portfolio, motor vehicle? Maybe. But what about your income? Assuming an increase of 3.5% per annum and continuous income, if your current annual salary is $80,000, over the next 15 years your income is worth up to $1,544,000 or over 30 years it’s worth an incredible $4,130,000.

Now what do you think is your most valuable asset? That’s right, it’s your ability to earn income!

According to TAL Life, the top 5 reasons for claims on Income Protection are, injuries and fractures, mental health, musculoskeletal and connective tissue diseases, cancer and diseases of the circulatory system (heart attack and stroke). These injuries and illnesses are nothing to be messed with and unfortunately no one knows what the future will hold.

Two of my clients never expected to be on an income protection claim, let alone for over 12 months! Both clients have received peace of mind that every month they will receive their benefit to help towards the mortgage, bills and general living expenses. By knowing that they have this regular income, they are able to focus on their rehabilitation without the stresses of money.

There are many factors to consider when taking out an income protection policy. Speak to one of our friendly advisers today to see how your policy stacks up, or if you’re looking for a new policy.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, contact us today.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has seen the Big 4 Banks come under fire for a number of things, including their ‘take it or leave it’ attitude to the Anti-Money Laundering (AML) and Counter-Terrorism Funding (CTF) Act. In 2017, the Australian Transaction Reports and Analysis Centre (AUSTRAC) brought charges against the Commonwealth Bank of Australia (CBA) for contravening the Act, and were treated to a cool $700 million penalty which barely made a dent in CBA’s fiscal 2018 cash profit of $9.9 billion.

The fallout from these charges and others alike, has resulted in an industry-wide crackdown on the enforcement of AML/CTF policies. Among other things, the Act mandates that you must identify and verify a customer’s full name, residential address and date of birth. While this seems pretty straight forward it’s causing headaches for customers who have used aliases in the past. John or Jack, Anthony or Tony, Amanda or Mandy, James or Jim and Susan or Sue are just a few examples of common aliases which have caused problems when adhering to AML/CTF obligations.

Different spelling variations of the same name have also been put under the microscope and in some cases, have required statutory declarations to confirm that the likes of Anne or Ann and Marie or Maree are one and the same person. Some financial institutions have gone as far as requiring your share holdings to be updated if your middle initial is only noted as ‘A’ on the registry, but your identification spells out your full middle name of ‘Albert’.

Locally, one of the problems we have had in the Rockhampton office is the change in suburbs as the city continues to expand. What was once Rockhampton is now broken up into several different suburbs such as Allenstown, North Rockhampton, Koongal etc. Although identification documents (Drivers Licence) might reflect the correct suburb of ‘Allenstown’ long standing bank accounts or shares acquired many moons ago may reflect the original suburb of ‘Rockhampton’. This small difference causes issues under the Act when identifying and verifying a client’s residential address.

It might be a good idea to do a bit of a tidy up of your financial affairs if you’ve had issues in the past with the spelling of your name or if you use an alias. Ensuring your address is up to date and your personal information matches your identification is another good habit to keep. A few places where we have encountered discrepancies include Wills, Power of Attorney documents, Holding Statements and Bank Statements.

Please note this article is provided as general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

That is the question. As we are in a record low interest rate environment, many home loan borrowers are considering whether or not to fix the rate on the total amount owing on their mortgage.

Whilst there are lenders offering some very attractive rates on fixed loans, the following should be considered before obtaining a new loan, or changing an existing loan to a fixed rate:

• Many fixed rate home loan products will limit the extra repayments which can be made in addition to the minimum owing. Depending on the product, this could be on an annual basis, or for the fixed rate period selected.  The additional repayments could be capped on a percentage basis, or a dollar basis for each year, or the entire fixed rate period without penalty.  If you exceed the additional repayment cap, you could be penalised.  If your objective is to accelerate the repayments on your home loan, fixing the total loan amount may not be your preferred option.
• If the lender decreases their variable rate and your fixed rate is higher, your repayments will not reduce.
• Fixed rate loans may be less flexible, and offer less features such as redraws or offset accounts.
• If your circumstances change, and you need to switch to a different product, or if you wish to repay earlier than the fixed rate term, the lender may charge you with a break cost. The break cost is typically calculated to compensate the lender for the loss in profit that has been factored into the fixed rate period.
• When the fixed rate period expires, the loan may revert to a much higher variable rate.

A common strategy to reduce the impact of the above disadvantages with fixed rate loans is to ‘split’ your home loan by making it part fixed and part variable.  The fixed component of your loan will provide the ability to budget for the repayments over the fixed rate period.  The fixed portion of the loan will mitigate the risk of future interest rate increases, and ensure your repayments are set over the fixed rate period.  The remainder of the loan balance can be held at a variable rate so you can make unlimited repayments, and enjoy the benefits of access to redraws, and a linked offset account.

When obtaining a new loan or refinancing an existing loan, there are several options to consider.

Please not this article provides general advice only and has not taken your personal or financial needs into consideration. If you would like more tailored mortgage or financial advice, please contact us today for a confidential, cost and obligation free discussion.

Most funds have either an online application form or a PDF application form (this is usually found in the Product Disclosure Statement for the chosen fund) that you can complete. There are some things you need to have, or to have decided, before you submit your form:

• Your Tax File Number
• ABN for the employer
• Choice of Risk Profile, or Investment option
• Life and TPD Insurance requirements
• Income Protection Insurance needs
• Beneficiary nomination

In completing the application, whether by a PDF or online, after entering all of your basic personal details including Tax File Number, you will then need to make choices in regard to your super account.

Beneficiary Nomination

This is the person or people you wish to receive your benefit upon your death. Nominations can be binding or non-binding and most funds offer both options. A non-binding nomination means that the trustee of your super fund is not bound to pay your benefit to the person/people nominated, but will be guided by your direction, whereas a binding nomination means that the fund must pay to your nominated beneficiaries.

It is worth remembering that most beneficiary nominations lapse after 3 years, so you need to review regularly to ensure it remains current and still reflects your wishes.

Insurance

Insurance is optional, but most funds offer a default amount of life, TPD and income protection insurance. If you do not require insurance you should opt out, but make sure that you have proper advice from a qualified professional that you do not need insurance.

Most industry funds offer insurance on a unitised basis, where the sum insured will decrease as you age, while the premium remains reasonably level. There is usually also an option to take out insurance for a fixed sum.  This is likely to incur a higher premium but may be a better option to ensure you have an adequate amount of cover.

For income protection insurance of more than the default amount, you will need to provide your annual salary and details of your occupation. The occupation has a bearing on the premium you will pay if you opt for other than default income protection insurance. You can choose a preferred waiting period i.e. the period to expire before your benefit begins to be paid. A shorter waiting period will result in a higher premium.

If you seek more than the default amount of insurance, you may need to complete health questions so that the fund can calculate your premium based on any health or occupation risks.

Investment Option

Funds offer a range of investment options from an automatic premix of asset types to a more customisable mix of asset types. Unless you really know what you are doing, you may be best to stick to premixed options. The basic premixed option is available for all risk profiles, which generally fall into about 5 main categories, with a multitude of variations between funds:

• Conservative
• Moderately Conservative
• Balanced
• Growth
• High Growth

Asset allocation refers to the mix of what is called ‘growth assets’ and ‘defensive assets’.  Growth assets are assets that can grow in value, such as shares or property – they are generally higher risk but have a higher return potential.  Defensive assets are lower risk, with potentially lower returns and usually relate to assets like cash, term deposits and other fixed interest investments like bonds.

The 5 investment options shown above have a different mix of growth and defensive assets, moving from low risk (Conservative) to high risk (High Growth). A Balanced portfolio, is typically middle-of-the-road in terms of asset allocation and may consist of 60% Growth assets and 40% Defensive assets, while a High Growth portfolio may have only 5% or so in Defensive assets and 95% more or less, in Growth assets.

Asset allocation with a higher proportion of Growth assets has the potential for higher growth, but there is a greater risk of negative returns and an increased level of volatility, or value fluctuation. An asset allocation skewed towards Defensive assets reduces the risk of negative returns but also protects against extreme volatility (price fluctuation), and returns over the longer term are likely to be lower.

Choice of investment option should be based on your attitude to risk, your investment timeframe, financial circumstances and your retirement goals.  What is your attitude towards risk? Can you accept some shorter-term losses in order for higher returns over the longer term, or would you rather play safe so that the value of your account doesn’t decrease?

What is your investment timeframe? This is the period between the present and when you retire. If you have a long time until retirement, are you willing to accept some additional risk in order for a better long-term return that will provide you with a bigger balance at retirement, or would you prefer to have a smoother ride knowing that at retirement you will have a smaller retirement sum?  If you only have a short time until you retire, do you want to risk what you have already accumulated by using a risky asset allocation in the hope that you will quickly accumulate a larger balance?

The selection of investment option is one of your most important decisions so far as your superannuation funds are concerned. Don’t take it lightly and do seek qualified professional advice to assist you to build your super balance so that you can achieve your retirement dreams.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial or superannuation advice, please contact us today. One of our advisers would be delighted to speak with you.

What I really enjoy about being an adviser is the opportunity to resolve client puzzles. Each situation is unique and the solutions are an opportunity to make a real difference to a family’s life.
Recently, I was asked by a client how to protect their child with special needs from potential future financial mistreatment. This was an opportunity for me to dust off my knowledge of trusts and more specifically, special disability trust.

The purpose of a special disability trust

A trust is a legal obligation that details how you want property or assets held for the benefit of a beneficiary administered and managed.

Special disability trusts are primarily established to assist succession planning by parents and family members, for the care and accommodation needs of a child or adult with a severe disability. The name ‘special disability trust’ relates to the social security treatment of the trust, not the actual disability.

The legal requirements for setting up a special disability trust

The first step is to make sure that the special needs person qualifies for a special disability trust. They need to meet the definition of severe disability as detailed in the Social Security Act 1991. The individual will have to go through a process where they are interviewed and assessed by social security. Centrelink has a special division that makes an assessment regarding whether they meet the criteria under section 1209M of the Social Security Act.

The Social Security Act recognises that people with special needs work and positively contribute to our society. If the special needs person is working, the act states that a condition of a disability restricts them from working more than 7 hours a week for a wage that is at or above the relevant minimum wage.

The trust deed must comply with certain conditions, and incorporate compulsory clauses as defined in the model trust deed as laid out by the Department of Social Services.

Anyone except the special needs person or the settlor can be a trustee of a special disability trust. There are two types of trustees and they both must be Australian residents (must be assessed by the Department of Social Services).

1. Independent (corporate) trustee – does not have any relationship with the special needs individual and has to be a professional person or a lawyer.
2. Individual trustee – A minimum of two trustees are required to ensure the special needs individual’s interests are protected.

The trust can either be activated while you are alive – this gives the special needs individual more independence or set up as part of a will – to protect the special needs individual.

The special disability trust can only have one beneficiary (the special needs individual) and the beneficiary can only have one trust. There are two main restrictions placed on the beneficiary, their living situation and gifting.

The Social Security Act stipulates that the beneficiary is not able to reside permanently outside of Australia – the reasonable primary care and needs for the beneficiary must be met in Australia.

There is also a gifting concession available and the contribution made must be unconditional (you can’t get it back), and without the expectation of receiving any payment or benefit in return (if gifted by you). The beneficiary is only able to give money that they received as an inheritance within 3 years of receipt into the trust. Also, a gifting concession, that does not impact any Centrelink benefits is available for the first $500,000 of gifts contributed to the trust.

The social security implications of a special disability trust

There is no limit to the dollar value of assets that can be held in a special disability trust, however, there is an asset test exemption (for Centrelink benefits) of up to $669,750 (indexed 1 July each year) available to the beneficiary. Another advantage is no income is assessed under the social security income test for the beneficiary. The special needs individual can also have their primary residence in the special disability trust, which is also exempt.

Centrelink has also added a limit of $11,750 to ‘discretionary expenses’ for beneficiaries to improve their level of health, wellbeing, recreation and independence.

Further information about special disability trusts can be found on the Department of Veteran’s Affairs site and the Department of Social Services site.

In conclusion, the aim of establishing a special disability trust is to provide protection and to ensure that those we love have a secure financial future.

Please note this article provides general advice and information only, it has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today, one of our advisers would be delighted to speak with you.

If you are looking to buy your first home, here are some things to consider to improve your chances of finding the right property, securing the funding, and realising your dreams.

Watch your spending

Due to recent pressure from Australian Prudential Regulation Authority (APRA), and the fallout from the banking royal commission, lenders are under increased pressure to tighten credit eligibility guidelines and ensure stricter adherence to responsible lending practices. The lender will need to assess that an applicant can more easily afford to service the debt by applying actual living expenses, as opposed to the Household Expenditure Measure used until recently.

The lender will scrutinise your usual living expenses, check your spending habits and financial discipline by obtaining your transaction account(s) and credit card statements.

You could be jeopardising your chances of getting approval for a home loan if you are overspending on discretionary items such as entertainment or holidays. There have been recent headlines in the Australian Financial Review about lenders reviewing spending patterns on Netflix, Afterpay and Uber Eats. Set a budget and minimise your discretionary spending. Most importantly, make sure you have the discipline to stick to it!

Check your credit rating

A key part of your success in obtaining a home loan will be your credit score. A lender will lodge an enquiry on your credit file to check your credit history, and to confirm if you have had any history of late payments or defaults with other providers.

Credit reporting agencies such as Experian, Equifax and Illion (previously known as Dunn & Bradstreet) obtain information from banks, credit providers and utility companies to calculate a credit score. Your credit rating is based on the amount of credit you have borrowed, the number of applications you have previously made, if you have any overdue or unpaid debts, and if you have any history of bankruptcy or insolvency agreements.

Lenders use your credit rating to determine if you are suitable for a loan. Understanding what makes up and affects your credit rating is important for any homebuyer. You can obtain your own credit rating – including any defaults listed against your name by registering online. There can be mistakes on your report – if you pick up on them you can request they get altered. This could be the difference between a loan application being approved or declined!

The Australian Securities and Investments Commission (ASIC) MoneySmart website provides links to the credit reporting agencies which offer an online credit score check.

Reduce your credit and store card limits and minimise other debt

If you have larger credit card limits or other debt, you may not be able to borrow as much, or be eligible for a home loan approval. Reduce your credit card limits and decrease/pay off any existing debts you may have before you apply for a home loan, especially high-interest debts such as credit cards and store cards.

Due to credit policy changes in line with the tightening of responsible lending guidelines, lenders have increased the assessment rate on the servicing of existing credit card limits when reviewing a loan application. This may affect your eligibility for approval on a home loan at the required amount. Reducing debt or lowering your existing card limits will increase the likelihood of your loan being approved.

Higher deposit, better outcome

If you’ve saved less than 20% of the purchase price, there are a limited number of lenders who can offer a loan. Deposits of less than 20% may require Lenders Mortgage Insurance (LMI) to qualify for the loan, and the rate offered and fees may be higher to offset the increased risk to the credit provider.

While some lenders offer lower deposit loans, if you have saved a deposit of 20% or more, you may be eligible for a loan with a wider range of lenders with reduced rates/fees, and you will save the cost of an LMI premium.

Be aware of purchase costs and your eligibility for first home buyer grants and/or stamp duty concessions in your state

Buying a home incurs costs in addition to the purchase price. Allow for property inspection fees, loan application costs, mortgage registration fees and stamp duty. Loan establishment costs, mortgage registration and stamp duty can be covered via the lender if you qualify for the amount required. You may be eligible for the First Home Owners Grant (FHOG) or stamp duty exemptions/concessions. If you’re eligible, you’ll save thousands of dollars. Check online with your state revenue office to see if you qualify.

Check the features and options available with the lender

The interest rate is not the only thing to consider with a home loan. Make sure you understand the fees payable, product features/options available and how they work to suit your needs.
Some loan products include redraw facilities, offsets via linked transaction accounts, the ability to split the loan into several accounts on a fixed or variable rate, and greater repayment flexibility.

Be wary of discounted first home buyer specials

Lenders may offer a special discounted introductory rate for first home buyers. Check the terms and conditions carefully as the initial rate may default to a much higher rate at the expiry of the introductory period. These products may also incur higher establishment costs and ongoing fees.

Know the market in your target area

Thoroughly research the property market where you want to buy. Get an understanding of the average prices, supply/demand, local facilities, market activity/trends and recent auction results. This will ensure that your market knowledge will increase, and that your target area has what you need in terms of both lifestyle now and future growth opportunity.
Often the difference between getting value or paying a premium price is the buyer’s level of market knowledge.

Get pre-approval

Obtain a pre-approval from your lender. This will ensure that you know your borrowing capacity in advance, and you can negotiate your purchase price.
Typically, there’s no cooling-off period at auctions, once you’ve made an accepted bid that’s it. Bidders without finance approval can find themselves in deep water if they sign a sale contract. You cannot make the contract subject to any conditions such as obtaining finance unless the seller agrees to the provision.

Get advice

You can get advice with any stage of the home buying process.

Buyers’ agents can assist in locating, evaluating and negotiating the purchase on behalf of the buyer.

A conveyancer will ensure that the buyer is meeting their legal obligations during the purchase and make certain that the title transfers smoothly.

A mortgage broker can review the thousands of products available to source the most appropriate loan solution for your needs, and assist with the finance process from application right through to settlement.

Please note this article provides general advice only and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice please contact us today, or refer your family and friends, for a confidential, cost and obligation free discussion about your lending needs.

No doubt you are aware of the Labor Party policy that if elected at the next federal election they will no longer permit unused franking credits to be refunded to taxpayers and self-managed super funds (SMSF’s) in pension phase.  You may also be aware an exemption has been provided to Age Pension recipients.

The planning for retirement for many SMSF’s was done so on the premise that excess franking credits would be received to supplement investment earnings the fund’s assets generated.  This effectively would result in the return on equities paying fully franked dividends to be increased by 30% or the amount of company tax that was paid on that profit the company has decided to distribute to you.

Many of our client’s portfolios hold shares in CBA (Commonwealth Bank) which has a current yield of 5.95%.  The dividends CBA pays are 100% franked which means the true yield to a taxpayer entitled to receive a refund of those franking credit becomes 8.5% (5.95% / 70% * 100%).  A rather compelling reason to hold CBA in this low-interest rate environment some might argue…but that’s for another time…

Let’s assume you have a 2 member SMSF that is in full pension phase and you are not eligible for the Age Pension.  Let’s also assume the SMSF’s portfolio receives $30,000 of fully franked dividend income which once grossed up for franking results in a total dollar return of $42,857.  An additional amount of $12,857 or 30% of the total return has been received due to the refunding of the franking credits.  Under Labor’s policy, the $12,857 will be lost!!

One interesting change in the SMSF landscape happens on 1 July 2019.  From that date, the membership rules of an SMSF change in that the number of members permitted will increase from 4 to 6.  What does this have to do with my SMSF losing my franking credits I hear you say? Well, a lot!!

A strategy worth considering is increasing the number of members in your fund to include those in accumulation phase because the earnings attributable to their member accounts will be taxed at the rate of 15%.  The advantage of this strategy is; rather than lose an entitlement to receive those franking credits altogether, they can be offset against the tax raised against the income attributable to the members in accumulation phase.

A further advantage of adding members in accumulation mode into the SMSF is their taxable contributions are not pro-rated.  This means the contributions tax of 15% levied on those concessional/taxable contributions can be also be soaked up by franking credits to mitigate the net tax position.As you can see for the hypothetical example above, by including members into the SMSF who are in accumulation mode, part of the franking credits can be used to reduce any potential tax liability to nil.  Whilst this is not as advantageous as receiving a full refund of those excess franking credits there is a minor advantage gained in reducing the amount of tax the SMSF pays overall.

As the great Kerry Packer said at the House of Representatives Select Committee on Print Media way back in November 1991:

“I pay whatever tax I am required to pay under the law, not a penny more, not a penny less…if anybody in this country doesn’t minimise their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.”

Please note this article only provides general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

“$16m Goldsky fund ‘Ponzi Scheme’ ensnares high-profile sports stars” – this was the headline of the weekend Courier Mail.

What it is about us that makes us risk our hard-earned cash when someone sells us a good story?

There have been any number of so-called Ponzi schemes uncovered over the years and we haven’t seen the last of them.  A Ponzi scheme is a type of fraud that pays profits to its investors from funds invested by newer investors. The ‘success’ of a Ponzi scheme relies on a continued flow of funds into the scheme and little in the way of withdrawal requests. There is often no underlying investment made in spite of the reporting that is provided to investors.

These schemes are usually operated by people who excel at sales, people with the gift of the gab and a great personality, who are able to convince people to invest with them and then convince the investors that the investment is performing outstandingly well – until it crashes. Someone eventually twigs that things aren’t as they should be, with the result that a lot of people lose a lot of money.

Why would anyone invest in one of these things, or at least invest in something that could be less than what it purports to be?

We are suckers for the ‘get rich quick’ type of line that these operators will use and that level of greed will make us – for greed is what it is, will make us take the risk.

A simple portfolio of good quality ASX-listed shares that will appreciate over time and produce a sustainable income just doesn’t cut it when compared to the promises made by our dodgy operators.

Remember the old fable about the tortoise and the hare? This is equally true of investing. Here at The Investment Collective, we subscribe to the theory that a properly constructed portfolio of shares, fixed interest and International managed funds will achieve your objectives over time – safely. This type of portfolio will also give you transparency so that you know what you own, you know what you are invested in and you know the type of income that it will generate for you.

Why would anyone think that the ‘get rich quick brigade’ have a better idea?

Call The Investment Collective if you would like further information on how to invest safely and transparently.

Please note this article provides general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today.

What if I run out of money?

“I read in the paper on the weekend that more and more retirees are actually running out of money. I am really worried that this will happen to me.”

There are many factors involved in answering the implied question. We know that:

• Life expectancy for our population is rising every year – we are living longer.
• Centrelink thresholds have changed and therefore excluded many retirees from receiving a benefit payment.
• Interest rates are at all-time lows.

We know the stockmarket is volatile and we are only 10 years on from the Global Financial Crisis (GFC) that had a major impact on wealth. We are still nervous about putting our money into this environment because of the risk of losing it.

So instead of that, we are putting our money into the bank.  Did you know that the average term deposit rate since 2004 (all terms, all institutions: source RBA) is 3.45%?

Looking at an average Balanced portfolio of investments, the annual compounded return since inception in 2004 has been 6.62%.  This period includes the GFC-affected years.

This means that if you had invested $50,000 into a Balanced portfolio of investments, reinvested dividends and other earnings, and did not take anything out of it apart from portfolio management fees, you would now be sitting on about $126,000.

If you had taken the same amount and invested it in a Term Deposit at the same time, drawing nothing and not paying any management fees on it, you would now have just under $81,000.

Tell me which of those clients is going to run out of money first if they began drawing a payment from it?

We forget that one of the greatest risks we can take is that our money is simply not earning enough to allow it to support the lifestyle we desire. They have replaced what they see as investment risk with risk of another kind – the risk of running out of money.

There is no question in my mind that we should be properly investing our money in a portfolio that best suits our risk tolerance, rather than sitting it in a term deposit, if we wish to mitigate the risk of running out of money.

Please note that this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Christmas is fast approaching. It will not be long until Santa is saddling up his reindeer and heading to town.

The festive season gives us all a chance to reflect on the year that was, spend valuable time with our loved ones and allow us to re-charge the batteries before doing it all again!  It is also a time that is associated with spending money and a lot of it!

Here are five quick and easy steps to help you put in place your Christmas budget and make this year a debt free Christmas.

1.   Make a list of everyone to whom you would like to give a gift to

This will provide you with focus.

2.   Figure out how much you can afford to spend

This calculation is relatively simple. How much money can you save between now and December 25^th? How much of this are you willing to dedicate towards gifts? This figure must be an amount you save in cold hard cash and not the dreaded credit card.

If the number is low, that is okay. Remember, Christmas is not about financially crippling yourself just so you can feel good about giving someone an expensive gift.

3.   Prioritise

Refer back to your list you made in Step 1.

Now you are going to make it a shorter list. Life is about prioritisation.

Separate your list into three groups – paid gift, made gift and no gift.

Since you now know how much you can afford (Step 2), this will give you a better idea of how many people can be on the paid gift list. Knowing your time available, you can limit your made gift list. The others – no gift.

4.   Allocate accordingly and complete

Paid gift – next to each name on your paid gift list subscribes a monetary amount. Be sure that total does not exceed that number you came up with in Step 2. If you had planned to spend $100 on your partner, stick to it. Do not decide at the last minute that you would really like to get them that iPad they wanted, or those new diamond earrings. Stick to the plan!

Made gift – if you are arty and creative make something. Customized cards or Christmas tree decorations are simple yet effective ideas. If you are good in the kitchen, why not bake something? Christmas puddings, gingerbread and other treats are a good idea for close friends, neighbours and work colleagues.

No gift – sometimes the simple things in life mean the most to some. A personalised handwritten card, email or simply just picking up the phone and having a conversation with a family member or friend are great ways or sharing the festive spirit as well as being cost-effective.

5.   Make it work

Do not spend more than you budgeted. You have a plan now stick to it! Discipline is key. Remember you can have a giving spirit without having a negative bank balance.

Don’t forget the reason for the season.

The above is provided as general advice only. It does not take into your personal circumstances or financial goals. If you would like to discuss further the opportunities involved with budgeting and having a financial plan, call to book an appointment with one of our talented financial advisers today!