DEBT GOT YOU DOWN?

Reception • August 30, 2018

As of January 2018, there were more than 16.7 million credit cards in Australia. The same records show more than 70% of us had a credit card.


In addition:


  • Australian households have the fourth highest debt levels in the world after Denmark, The Netherlands and Norway.
  • The ratio of average household debt to income has almost tripled since 1988 from 64% to 199.7% of annual disposable income.
  • Average debt levels are $4,181 per person for credit card balances and $18,409 for car loans.


So, what does this mean for the ‘average’ Australian?


If you are a prospective home buyer and have ‘average’ levels of accumulated debt it could affect your borrowing power by almost $100,000.



With the median Australian house price at $818,416 what impact might this have on your home ownership dreams?


Perhaps ask yourself these questions…


  • Is your debt growing faster than your assets?
  • Are you concerned about your debt situation?
  • Are you struggling to make your monthly repayments?
  • Does it always seem like your bills amount to more than your wages?


If you answered yes to one or more of these questions, then perhaps it’s time to look at a solution for your debt situation NOW – before it’s too late.



Why do so many of us have debt problems?


Some people fail to recognise that using credit to purchase items for use today means they are spending their future earnings before they have even received them.


In the past, lenders offered credit cards, with pre-approved limits, without thoroughly checking credit histories or capacity to repay. With debt levels on the rise, the government is currently reviewing credit card rules – there is a push for lenders to assess suitability based on a consumer’s ability to repay within a reasonable period.



How have times changed?


In the past we saved up or used the lay-by method, i.e. we used money we already had for items we wanted. Now, as an instant gratification society with an abundance of credit at our finger tips we are tempted to use it without considering future consequences. It’s little wonder many people experience high levels of debt.



What are the first signs of trouble?


  • You think it is unlikely you will be able to repay your existing debt with your foreseeable future income.
  • You have multiple credit cards.
  • You are no longer paying the full balance of your debt each month – you just pay the minimum amount.
  • You have arranged for more credit cards (or a personal loan) to help pay off other cards.
  • You have added a store card(s) because there was no room left on the credit cards.


Eventually your repayments start to approach – or even exceed – your income.



What is the solution?


We all know that good budgeting and discretionary spending discipline is the real answer, but sometimes it doesn’t matter how well you budget there’s just not enough money to make ends meet.


One solution (and this is not for everyone) may be debt consolidation.


It may be too late for budgeting because the debt level is already greater than your income. In this instance, debt consolidation may be an option for you.



What is debt consolidation?


This is when you take multiple debts (where the majority of the debt has a much higher interest rate) and consolidate the debt into one loan with a lower average interest rate. Generally most people opt for refinancing against their home (using existing equity) as it has the lowest interest rate. For example, your home loan rate may be 5.0% or even lower as opposed to a personal loan that might be 10.95% or higher (definitely lower than most credit cards).



How can we help?


  1. If your debt levels are a concern and you think you may be experiencing the first signs of trouble – CALL US NOW – before it is too late. We don’t judge. We are here to help.
  2. Ask us for our debt consolidation spreadsheet to see how much we can potentially save you each month to go towards the payment of your debt. You may be surprised.
  3. Even if you are managing your current debt, it never hurts to review your finances to see how your cashflow can be impacted favourably.
  4. If you have friends or family who you think could benefit from reading this article, please forward it to them.
  5. finder.com.au
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Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

6 Tips to Help Choose Between Selling or Renovating

By Kola Dev • September 2, 2024
Assessing the benefits of an extensive home renovation against selling your property is always a worthwhile exercise. Selling your home is rarely an easy decision. It will often hold family memories, and that makes it tough to leave. It’s also likely to be your most significant financial asset, and you want to be confident you can maximise its value. The process of selling isn’t cheap with commissions, legal fees and taxes. But the alternatives are to tolerate your home in its current condition or to talk to an architect or builder about giving your home a makeover. That’s not cheap, either. Costs can run into hundreds of thousands of dollars, and there’s never a guarantee the work will finish on time and budget. If you think selling is stressful, you should try a large-scale renovation! Regardless of which way you jump, it’s likely you’re going to need finance - whether that’s refinancing your current loan for a renovation or a new loan for a new property - so it’s worth talking to your mortgage broker to understand your options. Here are a few tips to help you think it through. 1. Structural issues Nothing dates a bathroom like colour. You can tell if it was built in the 70s and 80s merely by the colour scheme. Most bathrooms today are based on white, rather than old school creams or browns. If your bathroom can remember when David Cassidy was making hits, then the time to act is overdue as aging bathrooms usually also have waterproofing issues. 2. Money in the bank You can afford to decide whether you want to pour your hard-earned cash into your existing home, or climb the property ladder and find a superior property. Or if you’ve paid down a lot of your current home loan, you may be able to redraw to fund a renovation. 3. You intend to stick around If your home is well located, you may opt to stay and maximise the potential rather than move. However, if you favour a renovation, be aware that upgrades offer the best payback when you sell within a year or so of the work being completed. Your new kitchen doesn’t stay new forever although it is likely to give you a lifestyle benefit for at least a decade. 4. Big squeeze If your current home is getting too small, you’ve got the option of building an extension, but that means you’ll have to battle the planning process as well as the stress of selecting an architect and builders and perhaps paying rent while the work is being done. If the rebuild is so big that you need to move out anyway, a new home might be a more straightforward option here. 5. Living in the 70s Many owners who take the upgrade path want to modernise their homes. They’re fed up with the rabbit-warren design of small, disconnected rooms and yearn for open-plan living, plus a new kitchen and bathroom. Making such fundamental changes are expensive, and it is worth checking out the prices of more modern homes nearby before going ahead with a renovation. That will help you understand the value that you’re adding. 6. Dead space Poor design can result in some rooms being ignored, either because of their size or their position relative to the main living areas. Real estate is not cheap, so this is very wasteful. If fixing the problem is difficult, finding a new, better-designed property will pay off for you financially in the medium to long-term while also helping you take the next step on the property ladder. Give us a call on (03)8657 8664 to have a chat about the best way to fund your home improvements.

Tax Deductions for Investment Properties Explained

By Kola Dev • August 5, 2024
Owning an investment property is a little like running a business. It provides a great source of income and builds personal wealth but inevitably comes with a series of costs that hit your bottom line. The excellent news for property investors is that many of these expenses are tax-deductible. Tax advantages are not just available on new properties. While an older building may have limits on what you can claim, you do not have to buy a new house or apartment to qualify for tax benefits. There are two components of a tax claim for a rental property. These are: Capital Works Allowance covers the structure, such as walls and roof tiles; and Plant & Equipment covers the so-called removable assets such as carpets, stoves, and hot water system.  You should always obtain professional accounting and tax advice to understand exactly what can and cannot be claimed according to your own specific circumstances as the Australian Tax Office changes the rules regularly. For example, only investors of new property can make claims under plant and equipment assets. However, exclusions exist for those properties that have been renovated. Those who own older properties can continue to depreciate items that fall under the capital works component, so long as it was built after September 15, 1987. And you may benefit from depreciation even if a previous owner undertook improvements. So, working out what you can claim legitimately requires the eagle eye of a professional. In general, you will find the following items are tax-deductible: Costs associated with a property manager, which are usually 3-8% of rental income Accounting and professional financial advice Advertising if required to find new tenants, plus associated re-letting costs Strata levies Rates and land tax Insurances Loan interest and ongoing loan fees Also, work with your accountant or financial adviser to build a tax depreciation schedule for your property. This document will list all the items in your property that qualify for depreciation. It should only need to be completed once, and it can then be submitted to the ATO each year to ensure you obtain the maximum possible tax benefits from your rental property.

A Guide to Purchasing Your First Investment Property (and Beyond)

By Kola Dev • July 1, 2024
Investing in property isn’t rocket science but there are a few rules savvy investors should follow for success. Here are some things we’ll cover in the next couple of weeks to get you started. Should I invest? Investing isn’t right for every one.The first thing you need to do is make sure you’re in the right financial position to take the risk. How do I build a strategy? Before you start your journey you need to do plenty of research and build a strategy around your specific budget and financial needs. How do I choose the right loan? Once you get your finances in order, start shopping around for a great loan. Make sure you get pre-approval from your lender before you start looking for your investment property. How will I manage my investment? It’s important to remember that an investment property is a long term commitment and you need to know how you are going to manage it over the life of your loan. With the right advice and loan, property investment can be the most satisfying and profitable decision you make. If you have any questions or want to discuss whether property investment is right for you, contact us on (03)8657 8664 or email us at reception@futurefinancegroup.com.au
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