Eliminating sneaky expenses
During a cost of living crisis, many of us look for obvious ways to cut expenses, like cancelling streaming services, dining out less, and skipping extras in our shopping baskets. But what about the less obvious ways? Sneaky fees and charges can increase our day-to-day living expenses without us realising it. Here are some hidden or avoidable costs that could be draining hundreds from your annual household budget. Do you check restaurant bills before paying? You might read over the items, but what about the fine print? Some restaurants and cafes include an automatic service fee. Not a card payment fee or public holiday surcharge, but an additional fee, sometimes up to 12%. When queried, it may be explained as a discretionary tip to service staff. This means you have a choice – ask to be sure – but remember the business owner is struggling to survive too. Be aware though, that if the fee is for service staff, then you tip your server on top, you could be paying way more than you should. Check all charges on your restaurant bill and question anything you don’t understand. An absolute necessity for all travellers, but if you haven’t kept up to date with your credit card’s T&Cs (and who does?) you may be doubling up. Competition among credit providers has resulted in many offering complimentary travel insurance provided you pay for your travel using their credit card. Read the fine print to ensure you meet the qualifying conditions, the policy is underwritten by a reputable company and covers what you need. Understand the claims process and make sure the company has an emergency contact line easily accessible from overseas locations. Additionally, many policies cover car-hire excess. This excess can be costly if purchased through the car hire company and unnecessary if it’s already covered in your travel insurance. Double-check your policy! Warrantees on purchases where for a small additional charge you get extra cover, can be unnecessary or over-priced. Take a close look and cancel or downsize if required. Subscriptions with free trial periods can be traps ready to spring the very second the trial ends. Ensure you: Many apps are free provided you can put up with advertisements. Try free versions first, then if ads become annoying, upgrade to the ad-free version later. Life insurance is designed to pay your debts and support your dependents if you or your spouse dies, becomes ill, or disabled. So, if you’ve paid off your home, you’re debt-free and kid-free – or at least they’ve flown the coop – should you still be paying for life insurance? Your financial adviser can help you answer this question. Google Play, Amazon Appstore, Apple App Store, are just a few app stores available. Check your devices for one or more of them. Open the app, navigate to the Payments and Subscriptions menu and open Subscriptions. You may be surprised by the things you’re paying for. It’s easy to lose track of everything we, or family members, have signed up for. Asking the right questions, checking the fine print and auditing subscriptions and apps, can add up to some serious annual savings. Similarly, your financial advisor can help you reduce costs by reviewing and consolidating insurance policies, savings and superannuation investments. It’s tough out there and everyone is seeking ways to increase revenue and reduce running costs. Your household is no different – it’s in your hands and it’s do-able.
Stop Resting on Your (High Income Earner) Laurels
Achieving a high income is a significant accomplishment. You’ve put in the hard yards, climbed the ladder, and now you’re pulling in the big bucks! But don’t be mistaken; a high income does not automatically equate to financial security. Just because the money is rolling in today doesn’t mean you’re protected from tomorrow’s uncertainties. Resting on your high-income earner laurels, assuming that a large salary guarantees long-term security without considering long-term financial planning, can be downright risky. So, before you get too comfortable, it’s time for a reality check. When “More” Becomes the Norm Earning more often leads to spending more, a phenomenon known as lifestyle inflation. As your income grows, so does your desire for bigger and better things—a nicer house, a new car, dinners at fine restaurants. This lifestyle upgrade can feel deserved, but without careful planning, it can leave you no better off financially than when you earned less. For instance, imagine a couple earning a combined $350,000 a year. On paper, that sounds like a strong financial position. But between a large mortgage, car loans, private school fees, and regular international holidays, their expenses could easily absorb most of their income. If an unexpected event like a job loss or economic downturn were to happen, they’d find themselves in a precarious situation, with little financial buffer. This is the danger of lifestyle inflation: it’s subtle and easy to justify, but it can undermine your ability to build real wealth. High Income ≠ Financial Security A high income can create the illusion of financial security. It’s easy to assume that as long as the money is coming in, you’re set for life. But without the right safeguards in place, a high income can actually mask financial vulnerabilities. Take Liam, for example. Liam, a 34-year-old marketing executive in Sydney, was earning $250,000 a year and living a pretty comfortable lifestyle. He assumed his high income meant he was financially secure. But when the pandemic hit, his job was made redundant, and without an emergency fund or sufficient savings, Liam found himself in financial distress within months. Liam’s story illustrates a key point: a high income is not a substitute for financial planning. If your finances aren’t structured to handle changes, even a hefty salary won’t protect you from financial uncertainty. How to Future-Proof Your Finances So, how do you make sure you’re not resting on your laurels, assuming that your high income will take care of everything? Here are some strategies to ensure you’re future proofing your finances, no matter how much you earn. A budget is just as important for high earners as it is for those with more modest incomes. Avoid the temptation to spend simply because you can. Instead, allocate funds towards savings, investments, and building an emergency fund. Even high earners need a safety net. A good place to start is having 3-6 months of living expenses in an emergency fund. This ensures that if something unexpected happens you’ll have the financial resources to cover your expenses without going into debt. Don’t rely solely on your salary—make your money work for you by building a diversified investment portfolio. The earlier you start, the better, as even small investments can grow significantly over time thanks to compound growth. Don’t wait—time is your biggest asset when investing! Even if retirement seems far away, it’s never too early to start planning. Superannuation is a tax effective structure for building wealth and making contributions to super can be a tax effective strategy for high income earners! Insurance might not be the most exciting part of financial planning, but it’s essential. Income protection, life insurance, and health insurance are vital tools to safeguard your financial future. Take Control Before Life Happens While earning a high salary certainly opens doors to a more comfortable lifestyle, it also comes with the risk of complacency. The belief that you’re financially set simply because you’re earning more is dangerous. Lifestyle inflation, lack of an emergency plan, and failure to invest wisely can all leave you vulnerable when life throws a curveball. It’s not about depriving yourself of the things you enjoy—it’s about ensuring that your financial future is secure, so you can continue enjoying them for years to come. So, don’t rest on your laurels. Take proactive steps now to secure your financial future. You’ve worked hard for that high income. Now it’s time for that income to work for you!
When debt collectors call, know your rights
Debt is a fact of life; some might say it’s necessary. Rarely is a home or large-ticket item purchased without finance of some kind. Let’s talk about when debt collectors call you, what your rights are. Australians typically manage their financial obligations well, but rising interest rates, cost of living pressures and unexpected expenses combine to place stress on a household budget. In an increasingly cashless economy, it’s difficult to keep track of spending, and before you can say, tap-and-go, the morning latte and toastie has maxed out the credit card. Most people tighten the belt and get back on track. Unfortunately, others find themselves caught in a downward spiral that quickly gains momentum until realising they’re in over their heads. Failure to meet your financial obligations may result in you being contacted by a debt collection agency as creditors seek to recoup their losses. While this is traumatic, keep your cool and remember that you have rights. According to MoneySmart.gov.au a debt collector can only contact you: Debt collectors may: Debt collectors cannot: If you believe a debt collector, or agency they represent, has acted outside of their boundaries, you are within your rights to take action. Violent or threatening behaviour is never acceptable; immediately contact the police. Alternatively, if the collectors are intimidating or harassing you, write to them or their agency to report the behaviour and request it be stopped. If this doesn’t work, reach out to the Australian Financial Complaints Authority on 1800 931 678 for advice. Debt collectors aside, you must take action to manage your debt. No debt ever went away because it was ignored, but there are ways to dial down the pressure. Here are some steps you can take today to get started: You can also seek professional assistance from a qualified financial adviser. They’ll work with you to create a realistic strategy for managing your expenses and guide you in developing a plan to move forward and eliminate debt. Debt can be debilitating and seem overwhelming, but by understanding your rights, knowing where you stand financially and seeking professional advice and support, you can take back control of your finances and look towards a comfortable financial future.
Loud budgeting: amplifying your financial awareness
I’d always known that saving for my first home would require a bucket-load of discipline and sacrifice. And when I thought about the amount I needed for a deposit…well, it all seemed too hard. Whether it was a weekend away with friends, or the latest can’t-live-without gadget, I was too easily distracted and couldn’t seem to control my spending. The problem, I believed, was that long term savings goals felt so unattainable that I saw no reason to go without the things I wanted now. In short, I lacked motivation. While meeting with my financial adviser for my annual review, I expressed how frustrated I was by the seemingly unreachable sum required to buy a home, and my inability to save. That’s when Jennifer told me about loud budgeting. Loud budgeting, she explained, is a goal-oriented mindset. It starts with being willing to share your savings goals with trusted friends and family and being accountable to them. For me, it was like a light came on. It’s the opposite of how my parents managed their money; for them, discussing one’s finances was strictly taboo. But the transparency of loud budgeting is its driver, and definitely helpful when politely declining invitations to dinner or the movies, etc. So, after talking it through with Jennifer, I decided to give it a try. We discussed how much I would need for a home deposit and she guided me through these simple steps: Loud budgeting became part of my weekly routine. Each movement of my tracker pin along my chart was incredibly satisfying, and then there was a sense of empowerment with every milestone achieved. Fast forward about 16 months and my dream has become a reality. I have a deposit saved and am ready to reap the rewards of my hard work. Look, I’d be lying if I said it was easy. There was the trip to Rottnest I reluctantly opted out of, and there were setbacks like new tyres for my car and an emergency root canal. But I also learned a lot too. I learned that loud budgeting is more than just a savings concept. It’s even more than being accountable. It was about sharing my dreams with loved ones. It was about celebrating each milestone with them. And it’s about helping my sister set up her own loud budgeting plan. So while loud budgeting may not work for everyone, it definitely worked for me. And now, I’m off to meet with a mortgage broker Jennifer recommended, and I can’t wait!
Is FORO ruining your retirement?
FORO – the fear of running out. I’d never heard the expression until I met Mark and Susan. Of course I’d heard of FOMO, the fear of missing out, but never FORO. As the newly-retired couple sat across from me, explaining how they were so afraid of running out of savings that they were not enjoying the retirement they’d worked so diligently for, I grasped the meaning of FORO immediately. They rarely went out for dinner, bought anything new or – heaven forbid – took a holiday. After a lifetime of saving hard, paying off a mortgage and raising a family, Mark and Susan were naturally frugal, but FORO had left them feeling vulnerable and afraid of the future. After two decades as a financial planner, I’d come across this situation before, although, it is unfortunately becoming more common. Mark and Susan had never sought financial advice before and weren’t sure what I could do to help, but came to see me because they didn’t know where else to turn. When I assured them that there was plenty I could do to help, they visibly relaxed. I explained that the key to overcoming FORO was having a well-structured financial plan. After I outlined my 5-step strategy, they were eager to proceed. The steps we took were as follows: By thoroughly assessing their current financial position (superannuation, savings, investment and social security entitlement), I formulated a picture of where they were at, and their future cash flow projections. Working together, we identified essential living expenses and discretionary expenses, then allocated funding that balanced financial security with lifestyle goals. Next, we determined a retirement investment portfolio with a sensible withdrawal rate to support their retirement plans. In my experience, the what if factor is a major concern for retirees. What if…I become ill? What if…the fridge breaks down? What if…the car dies? These questions, and more, play on peoples’ minds to the point where they fall back into a FORO mind set. To ease their anxiety, I recommended they include a contingency fund in their portfolio to ensure that unplanned expenses were covered. That way, if something unexpected pops up, their retirement lifestyle strategy remains on track. FORO had been holding Mark and Susan back for too long. I explained that hobbies, travel and social activities are crucial to mental well-being. So once we had established a responsible financial plan, I showed them how they could afford to spend, sensibly, and enjoy themselves. I especially encouraged them to make the most of their early retirement years, while they were fit and energetic. The final step in the process was my ongoing commitment to Mark and Susan. Retirement planning is not a set-and-forget strategy; it’s a journey through every stage of life – physical retirement being one of those stages. By regularly reviewing their financial position, I helped Mark and Susan monitor their spending and investment performance, and made portfolio adjustments that kept them in control of their retirement plan. Last week I bumped into the couple on the street. They were glowing with excitement and told me they’d just booked a Pacific cruise. Of course, I was thrilled for them – it was a big tick off the bucket list! But when Susan said they’d turned FORO into FOMO and were living their best lives, well, I’ll just say it was one of those moments when I absolutely love my job!