Fremantle Financial Advisers

Financial Planning in Fremantle, Perth, Western Australia

How to Avoid a Financial Binge and Starve

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Here are our five tips for breaking bad financial habits this holiday season… and keeping your finances on track all year round.

Like the old tune says, ‘it’s the most wonderful time of year’ – but for many of us, it’s also the most expensive. Over one-third of Australians reach for their credit card around Christmas time, racking up an average debt of $1,666.1 So how can you avoid a financial hangover when the New Year rolls around? The best way to break the pattern of a financial binge and starve is to form good spending and saving habits throughout the year. So if you’re already worried about the strain on your wallet this silly season, here are five ways to get your finances in shape for 2019.

1 Plan for the year ahead
While it may seem daunting to think about your next 12 months’ worth of spending, it can help you get a clearer picture of when the most expensive periods will be. That way, you can start preparing for them in advance. You may already have a weekly or monthly budget in place to keep track of your day-to-day cash flow. But if you look at your expenses for the next year, you can start planning for one-off costs like your car registration, insurance premiums or education fees.

2 Save first, spend second
Once you have a big-picture view of your upcoming expenses, you can set up a regular savings plan. Many of us are in the habit of putting aside whatever is left from each pay cheque after we spend, which means we often end up with very little in our savings account. The trick is to reverse this mindset and put aside some savings before you start spending. The easiest way is to set up a regular direct debit from your everyday bank account, scheduled for each payday. With a fixed amount automatically transferred to your savings account, you’ll be able to grow your balance without even having to think about it.

3 Budget for major purchases
If you’ve set your sights on a big-ticket item like a car or an overseas trip, it’s important to be realistic about how much it will set you back. It’s always a good idea to overestimate the cost, so you don’t get caught short. At best, you’ll end up with a little cash left over to add to your savings. And of course, make sure you shop around before buying so you can get the best deal. By figuring out the cost well ahead of your purchase date, you can then work backwards to calculate how much you need to save until then. You could even open up a separate account for your one-off goal so you can keep track of your progress and avoid the temptation to dip into those savings.

4 Be careful with your credit card
If you don’t keep a close eye on your spending, the urge to splurge on your credit card can kick in. Before you know it, you could end up in a debt cycle where you’re repaying interest upon interest. In fact, almost one in five Aussie consumers are behind in their credit card payments, so it’s best to avoid becoming a statistic. Instead of splashing out on each purchase that takes your fancy, it makes financial sense to wait until you’ve saved enough cash to pay for it outright. If that’s not possible, you might look into alternative payment options. For instance, some retailers may let you pay in instalments or enter a rent-to-own agreement.

5 Find ways to cut back
The key to keeping your finances on track is to prioritise your spending. This is especially important during the expensive periods like Christmas – and if you’re a generous gift-giver, you’ll need to tighten your belt in other areas so you don’t blow your budget. Take a look at your regular spending and think about how you can trim it. For example, if you put your daily coffee habit on hold for the month of December, you could end up with around $100 more in your pocket to spend on presents. Or, perhaps there’s an upcoming expense that can wait until January, like the pricey haircut you’ve been planning. And remember, when it comes to getting your finances under control, your financial adviser can help you create a budget and savings plan that works for you all year round.

ONLINE TOOLS TO SIMPLIFY YOUR FINANCIAL LIFE

Technology makes our lives easier in so many ways, so why not use it to improve your financial wellbeing?

There’s no doubt that the internet has revolutionised the way we live, work and play –with many of us now also doing our shopping, banking and even our socialising online. The web is also a rich source of financial information, and plenty of sites offer clever apps and tools that can make it easier to manage your finances. Here are some of our top picks.

Retirement planning
Wondering how much money you’ll need to enjoy a comfortable retirement? ASIC’s MoneySmart website has you covered, with their online Retirement Planner and Superannuation Calculator.

In the Retirement Planner, you can set a retirement age then work out what your retirement income will be from super and the Age Pension, based on your current super balance and contributions. You can even see how your retirement savings will be impacted if you decide to take a career break. Using the Superannuation Calculator, you can then estimate how much further your super could grow if you top it up through salary sacrificing or by making after-tax contributions. There are also a variety of retirement planning apps that you can download to your smartphone or tablet. One example is RetirePlan, which allows you to get a complete picture of your future retirement income. You can also compare different scenarios to see how your nest egg will be impacted if, for instance, you or your partner retire earlier or give your super an extra boost.

Budgeting and saving
If you need help drawing up a household budget, the MoneySmart website offers a handy Budget Planner. With this easy-to-use tool, you can break down your family’s expenses into different categories like utilities, groceries, entertainment and transport. You can then compare your spending against your income to see if you’re on track or if you need to make some cuts. When you’re ready, you can print out your budget summary and maybe stick it on your fridge, so you can check your progress throughout the year. To keep an eye on your spending while you’re out and about, you could try out popular apps like You Need A Budget. This app allow you to synchronise all your bank account and credit card balances with your bills and other expenses so you can see exactly where your money’s going.

MoneySmart also has two great apps – TrackMySpend and TrackMyGoals – that can help you prioritise your expenses, set spending limits and create realistic savings goals.

Property
Whether you’re looking to buy, rent or invest, searching for the perfect property has never been easier. From the convenience of your desktop, phone or tablet, you can now get real-time property market data from sites like realestate.com.au and Domain.

With industry listings and insights at your fingertips, you can find houses and apartments in your preferred suburb or region. You can even filter your search results by price, property features, the number of bedrooms and bathrooms, and nearby amenities such as schools or parks. They also have tools to help you work out how much you can borrow, calculate your upfront costs and estimate a repayment plan for your home loan.

Tax
Hate tax time? The Australian Taxation Office has introduced an app to take the headache out of EOFY. With myDeductions you can keep track of your income records and tax deductions as an employee or sole trader, as well as storing photos of all your invoices and receipts. If you’re a business owner, apps like Expensify and Squirrel Street can help you stay on top of your business expenses – from scanning and archiving receipts to generating expense reports. There are also plenty of apps like Mileage Logbook by Driversnote and Travel Logs that make it easy to log and track your work-related vehicle use and mileage.

Investing
Online share-trading platforms have been around for a while, but many of them now have their own apps. SelfWealth users can buy and sell shares directly from their smartphone or tablet, while Stocklight and Simply Wall St allow you to find, research and monitor investment opportunities in just a few clicks. Raiz is an innovative micro-investing app that automatically rounds up your credit card purchases to the nearest dollar and deposits the difference into your investment account. And with the rise of bitcoin, new apps like CoinBase and CoinJar enable crypto-investors to create a digital currency portfolio and trade bitcoin online, with added security to ensure your investment is safe from hackers.

Get the right advice
While online tools and apps are great, remember that your financial adviser is the best resource available to you. Your adviser understands your unique circumstances and can tailor your financial plan to make sure you stay on track towards achieving your lifestyle goals.

To find out more, visit moneysmart.gov.au or ato.gov.au. Other apps discussed in this article are currently available at the time of publishing through the App Store or Google Play. They do not take account of your individual objectives, financial situation or needs. You will need to review the content and relevance of these apps to ensure they are appropriate for you and your circumstances.

Q&As
Answers to some common questions we have recently been asked.

Q: I’ve read that I can’t put any more money into my super once my balance reaches $1.6 million. Does this include the part of my balance that I’ve already used to start an account based pension?

A: While you can still make pre-tax contributions (for example, salary sacrifice), you can no longer make any after tax contributions to your superannuation during a financial year if your ‘total superannuation balance’ just before the start of the financial year is $1.6 million or more.

Your total superannuation balance is measured every 30 June and is the combined value of all of your superannuation accounts, including superannuation accounts in growth / accumulation phase and superannuation income streams (pensions or annuities).

The 30 June account balance of any account based income stream is included in your total superannuation balance (this will be different from the amount used to start your account based income stream).

The amounts of other types of superannuation income streams that do not have an account balance (e.g. annuities and defined benefits), that are included in your total superannuation balance, are determined in different ways. Your financial adviser can assist you in calculating your total superannuation balance.

Note: Additional rules must be met to make contributions to super. To make most voluntary contributions to super you must also be:

  • under age 65, or
  • aged 65 to 74 and meet a work test.

In addition, spouse contributions can no longer be made on your behalf once you reach age 70, regardless of your work status.

Q: I am 45 years old and have a super balance of $150,000. I’ve recently left work to care for my ill mother, and while I’ll receive some income from Centrelink, I’m concerned about missing out on super contributions during this time. I’ve read about a recent change allowing me to catch up on contributions when I return to work – can you explain this new rule?

A: A ‘concessional contributions cap’ of $25,000 applies each financial year to pre-tax contributions (which include an employer’s compulsory Super Guarantee, salary sacrifice, or personal tax-deductible contributions).

Recognising that people in situations like yours effectively miss out on a number of years’ worth of concessional contributions, the Government recently changed the rules to allow eligible people to carry forward unused concessional contributions cap amounts and use them in a future financial year. Access to these unused cap amounts can apply from 1 July 2019 and will be limited to those individuals with a total superannuation balance of less than $500,000 and to unused amounts from the previous five financial years (starting from 1 July 2018).

For you, this change means that when you return to work in the future, you may be able to then make use of any unused cap amounts accrued from 1 July 2018. By making pre-tax contributions that exceed the $25,000 cap by the amount of your unused cap amounts, in one or more years after you have returned to work, you can boost your retirement savings. For example, if you had no superannuation contributions between 1 July 2018 and 30 June 2019, you could make an additional $25,000 of concessional contributions (on top of your usual limits) any time from 1 July 2019 to 30 June 2024.

 

IMPORTANT INFORMATION
This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non‑guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Wisdom advisers are authorised representatives of Financial Wisdom. Information in this document is based on current regulatory requirements and laws, as at 11 October 2018, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. The Q&As in this publication are hypothetical scenarios and for illustrative purposes only. Taxation considerations are general and based on present taxation laws, rulings and their interpretation and may be subject to change. Financial Wisdom is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your authorised representative may not be a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent. Should you wish to opt out of receiving direct marketing material from your adviser, please notify your adviser by email, phone or in writing. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non‑guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Mark Giles of Complete Financial Solutions (WA) – Financial Planning (ABN26 050 157 938) is an authorised representative of Financial Wisdom Limited (ABN) 70 006 646 108 AFSL 231138). Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws and their interpretation and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Help Your Kids Avoid the Debt Spiral

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If you’re a parent concerned about the spending habits of your son or daughter, you’re not alone. Here are some simple suggestions to help your loved ones take back control and stay out of debt.

When you’re young and living life to the full, it can be tempting to see your credit card as a bottomless well of money. And faced with higher living costs than previous generations – not to mention the lure of online shopping – many young people find themselves spending beyond their means on a regular basis.

This can leave them spiralling into debt before they even hit the age of 30. And once they’re caught in this trap, they might get stuck paying interest upon interest without even chipping away at the original debt.

But with some simple changes in their spending and saving habits, young people can move closer towards a debt-free future. Here are some top tips for the millennials in your life so they can avoid the debt spiral.

Tip 1. Spend wisely
It may sound obvious, but the easiest way to stay out of debt is to avoid spending beyond your means in the first place. For many people, the biggest threat is the impulse purchases they make on their credit cards.

Getting this habit under control can take some discipline. Your child might learn to avoid temptation if they leave their credit cards at home and only spend the cash they have on them when they go out.

Tip 2. Make a repayment plan
The more credit cards your kids have, the more they could end up paying in fees and interest. Instead, they might be better off consolidating their debts onto a single low-interest card so it’s easier to focus on paying it off.

The quickest way for credit card debt to get out of hand is by missing the repayments. That’s why it’s worth encouraging your kids to pay off their balance every month – or at the very least, to make sure they meet the minimum payment amount.

Tip 3. Draw up a budget
Young people (or anyone, really) can also avoid a debt spiral if they look closely at their regular income and expenses then make a realistic budget they can stick to. By adding up their outgoing costs, including things like rent, bills and student fees, they’ll know exactly how much they have left over each week or month to spend on themselves.

Writing down expenses is also a useful way to work out where the money is going – and finding ways to make small cutbacks. For example, buying a $4 takeaway coffee each day might not seem like much of a luxury, but it quickly adds up to more than a $1400-a-year habit.

Tip 4. Put money aside
For some people, the slide into debt can begin when unexpected costs crop up – like car repairs or medical expenses. Even if your child is managing their finances okay on a day-to-day basis, they should also try to have enough money set aside to cope with an emergency.

It’s never too early for your loved ones to put together a regular savings plan, so they’ll have extra funds they can tap into – just in case.

Tip 5. Talk about money issues
It can be tough to get your kids to open up about their financial situation, but it’s even harder watching them slide further into debt. Remember, money matters are often highly personal, so it’s important to approach the debt topic with sensitivity. If your child is having trouble managing their money, the best thing you can do is help them find a solution.

As a parent, your first instinct might be to step in and offer financial support – but this may not always be in your child’s best interests. Instead, you can always ask your financial adviser which course of action to take and their advice on helping your kids pay off their debts, including sticking to a budget and start saving for the future.

 

IMPORTANT INFORMATION
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a Financial Adviser before making a financial decision. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Wisdom advisers are authorised representatives of Financial Wisdom. Information in this document is based on current regulatory requirements and laws, as at 8 February 2017which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. Financial Wisdom is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your authorised representative may not be a Registered Tax Agent, consequently tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Mark Giles of Complete Financial Solutions (WA) – Financial Planning (ABN26 050 157 938) is an authorised representative of Financial Wisdom Limited (ABN) 70 006 646 108 AFSL 231138). Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws and their interpretation and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Healthy and Wealthy New Year

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As the holiday season approaches, it’s easy to be distracted from your financial goals. But this is actually the perfect time to put a few simple plans in place for a positive start to the New Year.

New Year’s resolutions have a bad reputation, and for good reason. So let’s agree up front that we won’t think of financial preparations for the New Year as “resolutions”. Instead this is a great opportunity to set things in order, re-group and look back to ensure things are on track, and of course to re-balance and plan for the year ahead.

Best practice around reviewing your finances for the New Year begins with a calculation of your net worth. Save this somewhere so it’s easily accessible next year, and you’ll have a simple and effective way to measure your progress against a set goal. Include all of your assets (property, cash etc.) and liabilities to calculate a final figure.

Next, pick a couple of items from your financial portfolio, whether they be credit card or mortgage, superannuation accounts or insurance policies etc, and do some research to find out whether you’re getting the best possible deal. Interest rates, fees and risk profiles should be checked at least every few years for each of your accounts. Just as compound interest can be enormously effective over time, so too higher fees and costs can result in far less wealth at the end of your investment period.

Spend some time getting to know your investments. How much is in your super? How is it invested? Are you on target to achieve your final goal? What difference could you make by re-balancing certain investments? Ask questions and seek clear and relevant answers as if you’re looking after the world’s most important retirement nest egg … because you are!

Then, depending on your stage of life:

Up to 40 years old

  • Consider maximising the effects of compound interest and perhaps even saving a little tax by salary sacrificing a small amount – perhaps $20 to $50 a week – into your super. A little now adds up to a lot later. Be wary not to exceed contributions caps though.
  • Check that your investments are allocated correctly to match your risk profile and the fact that you have several decades to ride out any market turbulence.
  • Analyse your insurance needs and check you have the correct levels of cover. You possibly have people that rely on you to provide for them. Make sure you, and they, are suitably protected.

From 40 to 60 years old

  • It’s time to start knocking down that bad debt, so make that a priority for the next few years and track your success using your net worth document.
  • Insurance is vital at this stage of life as you’ll likely have dependants and major responsibilities, such as a mortgage. Check you are insured to the right level.
  • Consider what you can do at work, or outside of work, in order to improve your earning potential.
  • Analyse your superannuation and figure out whether you need to begin maximising contributions, but don’t exceed contributions caps as additional tax will then apply.
  • Depending on your comfort with risk and your time left in the market, your portfolio’s risk/growth exposure should be periodically fine-tuned.

Pre-retirees and retirees

  • How long will your retirement wealth last? How are your investments performing? This is perhaps the most important period of life to ensure your portfolio and retirement income stream are suited to your lifestyle.
  • Is your estate protected? Organise a will and enduring power of attorney if you haven’t already done so.
  • Put some money aside to enjoy yourself whether it be for travel, a hobby, a course or simply a night out to dinner every so often. You have earned it.

Planning for the best
To revisit your financial plan and ensure you’re on track to achieving your goals, or to put new plans in place for the year ahead, speak to your financial adviser.

 

IMPORTANT INFORMATION
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a Financial Adviser before making a financial decision. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Wisdom Advisers are authorised representatives of Financial Wisdom. Information in this document is based on current regulatory requirements and laws, as at 20 November 2017, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Mark Giles of Complete Financial Solutions (WA) – Financial Planning (ABN26 050 157 938) is an authorised representative of Financial Wisdom Limited (ABN) 70 006 646 108 AFSL 231138). Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws and their interpretation and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

How to be Financially Prepared this Christmas

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With Christmas just around the corner, here are 5 tips to help plan ahead and avoid a financial hangover on New Year’s Day.

Think back to last Christmas and consider where the extra expenses came from. Was it petrol for the drive to the holiday destination? Gifts for new children in the extended family? Wine for the constant gatherings? And don’t forget the taxi fares for the journeys home from nights out.

However you look at it, Christmas is a pricey time of year. If the expense causes stress then the holiday period is ruined. Here are some tips to prepare for, and enjoy Christmas.

1. Figure out a budget
What exactly are you going to spend on gifts, food, drink, accommodation, airfares, fuel, cabs etc.? Be realistic and even pessimistic. If you over-prepare then you’ll end up with a surplus, which is a great result.

2. Christmas saver
Consider opening a new account which you can put a weekly amount into over the next few months in order to cover most, if not all, of your Christmas expenses. Even better, if you have a mortgage account, consider putting the extra money into the redraw section – that way you could save some mortgage interest during the final quarter of the year.

3. Gifts
Figure out what you are happy to spend on each person and ensure you stick to it. Give yourself time to think about gifts, working out exactly what each person will receive, to keep your shopping trips short and avoid extra purchases. And negotiate with family members to stick below a certain amount, or to do Secret Santa, in order to keep costs down.

4. Credit card spending
From now until Christmas, make additional weekly payments onto your credit card so you’re not caught out, as many people are, with an unmanageable credit card debt once you roll into January.

5. New year goal
Figure out what you wish for in the New Year and start taking steps towards that goal right now. Whether it is a fitness goal, a new skill, a bucket list item or something as simple as a reunion with an old friend, make sure at least a small part of the Christmas period is about you by planning for and achieving something special.

 

IMPORTANT INFORMATION
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a Financial Adviser before making a financial decision. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Wisdom Advisers are authorised representatives of Financial Wisdom. Information in this document is based on current regulatory requirements and laws, as at 23October 2017, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Mark Giles of Complete Financial Solutions (WA) – Financial Planning (ABN26 050 157 938) is an authorised representative of Financial Wisdom Limited (ABN) 70 006 646 108 AFSL 231138). Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws and their interpretation and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Making The Aged Care Journey Smoother

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When you’re exploring aged care options for a loved one, the process can seem overwhelming. Here’s how to make it a bit easier.

Choosing when to place an elderly relative into a retirement home may be one of the toughest decisions you have to make. And while you want your loved one to be as comfortable as possible in their final years, it’s also important to be financially prepared.

With so many choices available and so many decisions to make, it helps to break down the process into a series of steps. And remember, when the time comes to begin your own aged care journey, you’ll want to be ready – so the sooner you start planning, the better.

Step 1. Finding the right place

The first step is to have your loved one’s needs assessed to determine the right level of care – from semi-independent living to round-the-clock nursing. Free assessments are conducted by community- or hospital-based Aged Care Assessment Teams. You should also consider any additional services your
relative might need in the future, so they won’t have to move again if their health declines.

If you can, visit different retirement facilities together to find an environment your loved one feels comfortable in. Be sure to investigate the social activities and meal options on offer, to ensure they’ll enjoy a happy and enriched life there.

Step 2. Calculating the costs

Although the federal government subsidises aged care costs, there are still various expenses that need be covered. For residential aged care, these include:

Accommodation fees. Prices are set by the facility but may also depend on your relative’s income and assets. Fees can be paid either as a lump sum or in regular instalments.

Basic daily care fee. This covers daily living costs and is fixed at 85% of the maximum single Age Pension – currently $50.66 per day.

Means-tested fee. This may be charged on top of your relative’s daily care fees, and is based on their assets and income. It’s currently capped at $27,232.33 a year.

Extra service fees. Additional fees may be charged for a more comfortable standard of accommodation, or special services like hairdressing or pay TV.

A financial adviser can help you calculate all these costs so you know exactly what to expect.

Step 3. Managing the paperwork

Because the fee amounts vary, you’ll need to lodge a Request for a combined assets and income assessment form with the Department of Human Services. This helps determine how much of a government subsidy your relative will receive towards the aged care costs.

Next, you can start applying directly to aged care facilities to find a suitable placement for your relative. A facility will contact you as soon as a slot becomes available, and they may also require you to enter into a Resident Agreement and Accommodation Agreement.

Step 4. What to do with the family home

Moving into aged care accommodation isn’t cheap, and many people who go into care need to sell their family home to cover the costs. This process can take many months, so you might also have to sort out a loan to manage the initial expenses while the property is on the market.

An alternative may be to rent out the property and use the rental income to help cover your aged care fees.

Your relative’s choice of whether to sell, or keep and rent out their former family home can have significant consequences for the aged care fees they pay, as well as any social security entitlements they receive, so speak to a financial adviser about the best option before taking any action.

Step 5. Making the move

Packing up an entire house or flat and moving into a single room of a retirement home requires a lot of work. As space will be limited, you’ll need to prioritise the most important or valuable items (including those with sentimental value) for your relative to take with them, and then sell or give away the rest.

There will also be other practicalities to deal with, such as changing their postal address and advising Centrelink about the move. Finally, make sure you include your loved one in as much of the decision-making as possible, to help make the transition as painless for them as you can.

 

IMPORTANT INFORMATION
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a Financial Adviser before making a financial decision. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Wisdom Advisers are authorised representatives of Financial Wisdom. Information in this document is based on current regulatory requirements and laws, as at 20 September 2018, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted. by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Mark Giles of Complete Financial Solutions (WA) – Financial Planning (ABN26 050 157 938) is an authorised representative of Financial Wisdom Limited (ABN) 70 006 646 108 AFSL 231138). Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws and their interpretation and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

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