News Financial Planning

Risk of Withdrawing Super Early

The entire world has been affected by the global pandemic, COVID-19. Businesses have closed and many people have lost their jobs. In Australia, almost one million people have found themselves out of work as a direct result of the virus. These people face expenses including mortgages, rent, groceries, and bills to pay. Yet now with little or no income to rely on, times are harder than ever.

While the Government released both the Job Keeper and JobSeeker payments to help out, they also gave Australians early access to their Super to keep them afloat. While this seems like a great initiative, there are of course risks involved that need to be weighed up. So what is the risk of withdrawing Super early?

Accessing Your Super Early

Those who have been affected financially by the COVID-19 pandemic can now access their Super early. Eligible Australian citizens are able to access $10,000 for the 2020-21 financial year. To be eligible, you must be:

  • Unemployed
  • Eligible for JobSeeker Payment, Youth Allowance, Parenting Payment, Special Benefit, Farm Household Allowance.

Plus, on or after January 1 2020, either:

  • Made redundant.
  • Had your working hours reduced by 20% or more.
  • Were a sole trader and your business was suspended or there was a decrease in turnover of 20% or more.

Already, about 2.3 million Australians have gone down this route. This is in an effort to get the financial help they need during the pandemic. So what is the risk of withdrawing Super early?

withdraw super early

Risk Of Withdrawing Super Early

This may seem like a great idea in theory. However, there is plenty of risk that comes with withdrawing Super early. Here are just some factors to consider before making a decision about whether it is worth it to you:

The dollar amount:

$10,000 may not seem much to you right now. Especially considering how much it can help you out in your current predicament. However, when it comes to the risk of withdrawing Super early, you need to look into the future.  While it may be $10,000 now, what will it look like down the track?

According to Industry Super Australia (ISA) Chief Executive Bernie Dean, a 20-year-old who accesses the full $20,000 available under the scheme (which applied to the financial year that has just ended as well) could lose more than $120,000 from their retirement. For a 40-year-old this works out at $63,000 by retirement. This is a significant cost to factor in when making a decision. That $10,000 has the potential to grow to a much larger amount by retirement.

Life Insurance:

About two-thirds of Australians hold their life insurance through their Superannuation fund. Taking out $10,000 means those who are new to the workforce could be left with nothing in their account. This could mean they are no longer covered by insurance. For others, the amount that can be claimed drops with this withdrawal.

Unnecessary Spending:

Your Superannuation is there for a reason. It is to ensure that you can comfortably retire in the future. Many people accessing their Super early are actually using it on things that don’t need, which is an inherent risk of withdrawing Super early. Recent figures have shown that Australians who have accessed their Super spent nearly $3000 more than normal in the fortnight after receiving it, with about two-thirds of the additional purchases on non-essentials.

Knowing the risk of withdrawing Super early, what are the options?

withdrawing super early

Look At Your Entitlements

The first step is to look at what you are entitled to. As mentioned above, the Australian Government has stepped up during the pandemic to help those who have lost jobs and businesses, with a number of payments, including JobKeeper and JobSeeker. Do your research and see what you can apply for to help you out, before resorting to other measures. It may be enough to keep you on track.

Consider Debt Help

While no-one wants to have to take out a loan to cover their debt, it can be a much better option than accessing your Super early. A loan will not only give you the boost you need to get back on track but knowing you have to repay it in the near future will help prevent any of the unnecessary spending that occurs as a result. Instead, if you pay back your loan on time and meet your repayments, it will actually have a positive effect on your credit score and help you get any additional loans, such as a mortgage, down the track.

Get Debt Help Today

If you are wondering what the right option is for you, then speak to the experts at the Australian Lending Centre today. We offer the best advice for your personal situation and help you get access to the help you need in a way that is right for you.

Mortgage Financial Fitness Financial Planning

Second Mortgage: Can You Handle the Effects of Inflation Before Retirement?

How do you protect your finances from inflation especially if you have a second mortgage?

While it is impossible to avoid inflation, you don’t have to suffer the huge impact of the decline in the purchasing power of your money, although you have a second mortgage. If you are careful with your spending decisions today, you may not even have to worry so much about your finances tomorrow. But, as your income increases, bear in mind that your expenses may soar as well. Even if it doesn’t, the prices for goods and services can increase in time.

Shield your finances from the detrimental impact of inflation:

Build Your Home Equity

If you want to get approved for a higher amount of loan in the future, make sure that you build your equity today. You can apply for a second mortgage on top of a first mortgage to save on interests and fees or to make improvements that will increase its future value. While equity usually pertains to the actual value of your home that you own or the amount you paid for. It can also refer to its future value.

It may take a couple of hundred dollars or thousands of dollars to increase the value of your home. But, if you follow the tips below, you can increase your home’s value with just a few extra bucks a month:

  1. Apply for a short-term low-interest loan (payable on installment basis) to pay for necessary repairs. Look into plumbing and heating problems, roof leaks, and the possibility of installing lightbulbs with slightly higher wattage to add to the value of your home on a budget. Clean the yard (if you have one), mend the fences, and paint your walls with fresh colors to make online casino it more appealing
  2. Make your house appealing to the realtor by doing a basic cleaning, eliminating unnecessary items and junks to make it more spacious and eliminating house smells
  3. Install energy saving devices and make environment friendly improvements that future buyers may look for in a home

The comparable selling price in your neighborhood can limit the value of your property. While you may not get a higher value for a home in a neighborhood with huge incidents of foreclosures, making small improvements can help you increase its value before you apply for a second mortgage, or before you retire.

Invest your money wisely

Choose the right investments. It can be in the form of UITF, stocks, bonds, or savings accounts with good interest rates. Some people invest in real estate in industrial areas, or in bustling cities for better returns in the future. Put in money into your retirement savings accounts, pay off loans you took from it and update your payments regularly. If you don’t have a good health plan, perhaps it is time to get one—as you are nearing your retirement age.

Evaluate your budget

Have you been spending excessively in the past year? Or was the expense due to existing debts? Perhaps it is time to earmark certain areas in your budget. Collect the receipts, bills and every proof of purchase you can get, create a spreadsheet of possible adjustments you can make and work towards minimum deviations to make your budget work.

Make lifestyle changes

What is the kind of lifestyle that you really want? As you inch towards your retirement age, it is important to decide how you like to spend it. If you want a life of luxuries, make sure that you have enough money to cover it. Otherwise, it is advisable to minimise luxury spending and to adopt a new lifestyle that matches your current and future income.

Augment your income to avoid the effects of inflation

It is never too late to seek for new opportunities to generate income. Explore fresh opportunities using your profession or business. Anyone can begin a company with a business loan. A company PR manager can start a consulting business on external communications, while a company accountant can also launch his own book keeping service. In the same way entrepreneurs who feel that they can no longer manage their business right after retirement, can take on private consulting jobs for startups.

Anything that would add value to your financial portfolio is worth the effort-as long as it will not put you into the same level of stress when you were still in active service. Interest rates on second mortgage, personal loans, consumer loans and basic commodities keep getting pricier over the years. What our grandparents spent for a carton of milk in the past may just be enough to buy a candy today. Change in price happens because of inflation.

The value of money reduces in time and allows us only to buy a smaller percentage of the commodity or item than its previous value. For example, if the inflation stands at 5% per annum, a $20 burger could get pricier by a dollar the next year. So, if you have a second mortgage, it is advisable to build your equity over time. And, if you don’t have one, you may look into the benefits of getting a second mortgage to have extra money not only to pay your existing debts but to pursue lucrative endeavours that would increase your income.

Refinance and Refinancing

4 Important Considerations Before you Refinance Your Home

Are you planning to refinance your mortgage? If so, here are some important considerations to take into account before you refinance your home.

What is your purpose for refinancing?

Refinancing is a type of debt you will get. So, it is important to determine the whys and wherefores before securing it.

People often decide to refinance their mortgages because of the following reasons:

Lower the current interest rate.

Lowering your mortgage by two percentage points can make a noticeable difference in your portfolio. So, if the original mortgage rate is higher than your refinancing option and the monthly payment will be lower, then you might consider refinancing.

Pay for the closing costs of the original loan.

Homeowners who do not have the funds to bring to the closing table can transfer the closing costs of the initial loan to the new loan.

Invest into retirement.

Homeowners who are nearing g retirement can take advantage of short-term refinance mortgages. They can use the proceeds of the loan to invest in a diversified portfolio. While it is not advisable for those who largely depend on the market for retirement income, retirees with a steady flow of income and large pension don’t have to worry. After all, increasing the number of your finances can help you generate growth even after retirement.

Other viable reasons include managing your credit to improve your credit scores, changing loan type, shortening loan term, and getting cash for home improvement. You can also access the equity in your home to cover important personal expenses and deal with life-changing events such as a wedding, divorce, sickness and financial losses. Refinancing is also a good option for those who plan to consolidate their debts and use cash-out refinance to pay for credit card debts with high interest.

In short, refinancing is a good option for people who need instant cash, and those who want to get out of debt fast, reduce their loan payments, strengthen their portfolio and invest into the future.

How long will you stay in your house?

If you don’t see yourself staying in your property for the next 15-years, or so, when your loan term is longer, then refinancing may be a costly choice for you. Aside from the fact that you cannot move anytime soon, the closing costs would outweigh the savings you accumulated from refinancing your mortgage.

What is the value of your home?

The cash you can get and the interest rate depends on your home’s value. Talk to a licensed appraiser to determine the value of your home, so you can decide whether or not you can make some improvements to increase its value and the chance of getting refinanced.

What are your options?

While traditional financial institutions offer refinancing products, an experienced and highly reliable alternative lender like Australian Lending Centre can help you find the most suitable loan products, based on your needs.

You can talk to our refinance specialists to get the best interest rates, regardless of your credit history and financial standing.

Contact us today and we will do our best to help you refinance your home loan.

Debt Management Financial Planning

Pay Off Debts and Save for Retirement

Saving up for retirement is one of the things that everyone should pay attention to and take into consideration. Sooner or later, you’ll realise it’s time to stop working and retire. It would be nice to retire if you have sufficient money and don’t have any debts to pay and worry about. Retirement is a stage in life where you can relax, travel and enjoy life. But it is impossible to do any of these if you are in debt. Before you reach this point in life, you should have at least paid all your debts so you can enjoy your retirement.

Planning Your Retirement

Are you in your 40’s or closer to your retirement age? What are your financial goals? Do you want to set up a retirement fund but are having difficulty because you simply cannot get out of debt? Do you want to invest in the future? It is best to determine your goals in life.

It is ideal to put up an emergency fund; it may not be like what financial experts suggest but saving up even smaller amounts is better than nothing. Why emergency fund? You don’t know what’s going to happen in the future or in the next few days. Without it, you are going to rely again to your credit cards or private financing. But if you have an emergency fund, you are preventing yourself from borrowing money with high interest rates.

Before you reach your retirement age, it would be ideal to have paid off your debts. Again, you can practice the stack method. This method requires you to list down all your debts. Loans with highest interest rates should come first, down to the lowest. Prioritise the first one, you should immediately settle loans with high interest rates. Cross it out when you are done, then proceed to the next until you reached the bottom of your list. Easier said than done.

How can you make this possible? Avoid making new loans or using your credit cards; pay in cash and make use of what you have in hand. Once you are done with the list, you can save up for retirement. If you aim for a more secured future, it’s time to start saving up and avoid unnecessary expenses.

Cutting down your credit card usage and extra expenses that you can live without can save you hundreds or even thousands of dollars annually which you can allocate for a retirement fund. Having a retirement fund is essential and it is best to plan for it ahead of time.

Debt Management

Dealing with Retirement Debt

To many of us, retirement is the time when we would just have to sit back, relax, and enjoy the fruits of our hard labour. It is ideal that when retirement age comes, you should just be living comfortably in your retirement house, not thinking of any stress. It is worth thinking about managing debt before going into retirement.

But things could be complicated along the way. Before you know it, you could already have accumulated too much debt in your pre-retirement years. By the time you retire, you could still be servicing some or most of those debts. So how should you deal with debt when you get to your retirement age? Here are some ideas.