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Money motto

There’s an old saying my footie coach loved to use that could be really handy for home loan borrowers. It’s especially so in these challenging times as banks slug us with rate increases outside the Reserve Bank’s torturous hits.

It goes like this: “When the going gets tough, the tough get going.” But I would like to twist this old sporting war cry to something more appropriate for the combative world of money: “When the going gets tough, the smart get going.”

But where do you go to?
It’s all about you
Let’s rely on an old song, which ran with the line: “I’ve been to paradise but I have never been to me.”

‘Me’ – or more accurately – you is the right place to put your focus on if you are finding the world of rising interest rates, rents and petrol prices increasingly more testing.

In times when “money is too tight to mention” – to quote Simply Red – this is when you need to get realistic about you and your money plan.

A fair price
What? You don’t have a money plan? Well, it’s time that changed.

I have said this before and I will say it again, if you can’t do a financial plan for yourself, your precious time should be spent finding an adviser you can trust who will do the work for you.

Sure, I know many financial advisers charge too much, but you can take control by simply being proactive and asking questions.

I recently came across a lady who thought $3000 plus GST was too expensive for a financial plan and she remained with her old adviser. She was given a shock when the new rules for planners that insist the true cost of plan be revealed showed she had been paying $24,000 annually for years.

To construct a decent plan, somewhere between 12-15 hours could go into a plan. If an adviser charges you $250 an hour – and this is a low figure! – this would mean a fee of $3000 to $4000 is pretty fair.

More complicated financial lives would mean more work, more hours and fees between $5000 to $10,000 would be believable.
Going it alone
If you don’t want to pay this kind of money then you have to do the work yourself. It is doable, but it is time consuming.
The starting point is to outline what your goals are and then find out if you are on track to achieve these goals.

Typical goals are to pay off your home loan as quickly as possible to save interest and then a decision to ramp up your super payments through salary sacrifice can be a great idea.

However, it does not suit everyone.

For example, if you will need to access the money for school fees, then you might have to hold off your salary sacrifice until your kids leave school.

You have to list down all of your goals and then see if you are on track to achieve them.
What are my options?

At times like these I would be going to websites such as Infochoice and Cannex to see if better home loan rates of interest were available to me. I would be visiting mortgage brokers to see if they can get me a better loan.

I would be going to the Australian Securities and Investments Commission (ASIC) website to try the calculators to see if I my super is going to give me what I want in retirement. And I would be looking at money websites such as Yahoo’s to see what I can learn about my financial options.

Desperate times not only call for desperate actions such as doing a budget and trying to cut back on spending. You could even think about a second job to pump up the income.

When NAB increased it interest rates on home loans by 0.12 per cent the first thing I did was go to the rate-checking websites to see if better deals were available.

The standard variable home loan was some 8.68 per cent from the big four banks, but Wizard had a 7.77 per cent product and there were even lower ones from online lenders. There was even a two-year fixed rate loan at 7.77 per cent!

Money talks

I reckon knowledge is the key to success and wealth. I had a client who sold the rights of his book to a filmmaker and pocketed a lovely amount of money.

If the guy had simply banked his money he would have paid a lot of tax. However, by asking for expert help, we hooked him up with a superb tax expert who asked the right questions and came up with the expert answers, which lowered the amount of tax this guy paid substantially.

It was entirely legal but it was the best advice from a top tax brain and the affair reminded me of another old line: “You get what you pay for!”

Published on: Thursday, January 10, 2008

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