Unfortunately, for some people, the option to pay later means a continual cycle of debt - and a lot of money wasted on paying interest.

If this sounds like you, you may want to seriously think about whether you should own a credit card. Or, think about it this way: that desired object may have seemed a bargain when you picked it up, but if you put it on your credit card and don't pay it off when you receive your next bill, imagine the interest you're paying. A bargain can quickly become a ridiculous expense.

The secret to owning a credit card is:

• charge items you know you can pay off
• decrease your limit if it's more than you need - or can afford
• limit the amount of television watched each day -including video/computer games
• avoid cash advances - these prove costly if the interest is incurred from the moment you take the advance to the time you pay it off.

And, if you do have a problem with your credit card(s), contact your bank or financial institution. You may be able to work out an individual repayment plan with them. The sooner you recognise a problem, the sooner it'll be a problem no longer.

 

Young savers

When it comes to kids and money, you're never too young to learn.

The first lesson is understanding the value of money, which can be as simple as giving your child a money box and encouraging them to put money in it. So begins the discussion of the value of each coin. And, then, when the money box is full, you can put it into a bank account for them.

Setting up a bank account for your kids can start at a very early age. Later, when they're ready, you can encourage them to contribute to the savings account, letting them withdraw small amounts to make their own considered purchases.

You won't always be in agreement with what they want to buy. The best thing to do is let them know what you think, but let them buy it anyway - within reason of course. That way, they learn through experience, rather than through what you tell them to do.

Also, encourage them to put a percentage of their pocket money into their savings account - and if they want to buy something 'big', encourage them to find simple jobs to earn the extra cash.

If your child shows particular aptitude for saving, start teaching them about investments. You may learn a thing or two yourself. After all, you ultimately teach your children your own money management skills.

As a positive measure, it may be a good idea to review your money management skills before you start to teach your children about money.

 

 

In your Interests

Interest rate rises have been a hot topic this year, leaving many borrowers somewhat hot under the collar, too. However, according to online website eChoice, there are things you can do to stay ahead of rising rates and reduce mortgage stress.

The first thing to do is create a budget. Then, adjust your mortgage payments to account for a 2% interest rise above what you are presently paying. The idea is to see where you can cut other expense areas to account for the rise. You can then save the extra for when the rise does happen.

You may consider switching from a standard to a basic or 'no-thrills' home loan, which can cut your rate by around 0.4%. On the downside, such a home loan may not offer the flexibility to make extra repayments.

Start paying extra off your home loan as soon as you can. Paying extra can cut years off the term of the loan, and save you thousands in interest. And when rates rise, you won't feel the squeeze as much. A helpful way of paying extra is to start making fortnightly repayments instead of monthly repayments.

Finally, consider consolidating your debt, so your credit card or car loan doesn't attract exorbitant interest rates, but rather the much lower home loan rate.

Sources: www.echoice.com.au

 

Taking care of business

It's not the easiest topic of conversation, and certainly not one you bring up casually around the dinner table. Yet every family should discuss it and put one in place: an estate plan.

Things to consider include:

• The Will: Make sure all potential beneficiaries are included - that means anyone who may be able to claim on your estate, such as an ex-husband or ex-wife. Then decide who gets what. It's important to understand what assets you own and how you own them, but also consider the financial situation of your beneficiaries, as you don't want the value of their inheritance to be reduced by tax. Review your Will periodically to account for changing circumstances.
• Enduring Power of Attorney: This is someone you appoint who can make decisions on your behalf in the event you become mentally incapacitated and unable to make decisions.
• Superannuation: If the rules of your super fund permit it, you may be able to arrange for a Binding Death Nomination (BDN). This means your super can only be paid in accordance with your BDN at the time of your death - as long as the BDN is valid.
• Insurance: You may be able to choose to structure life insurance and total and permanent disablement (TPD) insurance either as a stand-alone policy or through your super fund, where premiums may be cheaper and more tax effective. Find out the most tax-effective way to approach it for your situation.
• Testamentary Trusts: Complex family or business situations may call for a testamentary, discretionary trust, where the beneficiaries' inheritance is held in trust for their benefit instead of being paid to them directly.
• Designing your estate plan: To ensure an effective plan, it's best to work with a financial planner, lawyer and accountant - each can help you to develop a comprehensive solution for your needs.

MBF Life offers a range of simple and affordable lifestyle protection options. Call 132 623 or visit www.mbf.com.au/LifeInsurance.

Nothing in this article should be viewed as legal or taxation advice. Any advice in this material is general advice only and does not take into account your individual objectives, financial situation or needs. Before acting on it you should consider the appropriateness of it, taking into account your personal circumstances. Before making a decision about an MBF Life insurance product, issued by MBF Life Limited, consider the relevant Product Disclosure Statement available from MBF Life.

 

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