Kick -sta rt your financia l fitne ss - ANZ Personal Banking · Set some realistic goals for paying...

Kick-start your financial fitness

Work out your money and get your finances into shape

61526_FinFitLifePg24pp 11/11/04 4:30 PM Page 1

CONTENTS

4 Top tips for financial fitness

6 Make the most of your money muscle – realistic budgeting

8 Regular financial exercise for long-term gain – creating a savings plan

9 Debt-busting exercises – reducing and controlling debt

10 The healthy credit card workout – sensible credit management

12 Increase your financial strength – building financial assetsthrough investing

16 Financially fit at any age – retirement planning

18 Health insurance for your finances – protecting your assets

19 Mastering the tax-time treadmill – preparing for tax time

20 The financial fitness information directory

22 Financial fitness talk explained – glossary of terms

Back cover Your budget planner and spending record sheet

Important notice

Australia and New Zealand Banking Group Limited ABN 11 005 357 522. This booklet provides generalinformation and is intended as a guide only. The information does not take into account your personal needsand financial circumstances and you should consider whether it is appropriate for you. It is not intended to be a substitute for professional advice and should not be relied upon as such.


Keeping financially fit is just

as important for your well-being

as physical fitness.

Just about everyone, at one

time or another, has wished

they had their finances a little

more under control.

Like getting physically fit, the

hardest part about getting your

finances into shape can often

be simply making up your mind

to do something about it.

This booklet contains practical

hints and information to help

you understand and manage

your finances. And the good

news is, just by picking up this

brochure you’ve already made

a start!

Terms appearing in bold text throughout this guide areexplained in more detail on page 22.

Financial fitness –an essential part of yourpersonal well-being


Your financial future is in your hands. Thefollowing tips will help you to kick-start yourfinancial fitness…

1. You are responsible for your money –know what you earn, know what youspend, know where you stand and knowwhere you’re heading.

2. Keep a budget, review it regularly andinclude a plan for regular savings.

3. Keep records of all your financialtransactions together in one place – from bank statements to super fundstatements. Check your statementscarefully and talk to your financialinstitution if there are any inconsistencies,or if there is anything you don’tunderstand.

4. Don’t spend more than you earn and only borrow what you can realisticallyafford to repay.

5. Map your financial future, including how you plan to fund your retirement.

6. Protect your assets with adequateinsurance.

7. Understand the basics of investments,including superannuation. Rememberthat high returns generally equal high riskand only take on a level of risk that youfeel comfortable with. Do an annual‘health check’ on your investments.

8. Be aware of what your financial productsare costing you – ask questions if youdon’t understand the fine print and shoparound to find the products that best suityour needs. Don’t sign up for anythingyou don’t fully understand.

9. Seek professional and qualified financialadvice when it counts (e.g. buying ahouse, planning for retirement,insurance, investing and tax issues) andget a second opinion if you feel unsure.

10. Be cautious of investments offering ahigh return from little or no risk. If itsounds too good to be true, it probably is!

11. Take the time to teach yourself moreabout finance (see page 21 for moredetails) and don’t be embarrassed to talk about money with people you can trust.

Top tips for financial fitness

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6

Make the most of your money muscle

Realistic budgeting

Do you ever find yourself down to your lastfew dollars two days before your next pay?

You can get back in control of your moneyand kick-start your financial fitness programby creating a budget to suit your needs.

Here are some ideas to get you started:

1. Take a look at what you earn and what youspend – write it all down during the courseof one pay period. Where does your moneyreally go?

2. Can you cut your spending and increasethe amount you set aside for savings or torepay debts? There are ways to cut yourspending without having to live frugally.For example, only go shopping when youhave the money to do so, shop around forthe best price for major items such aswhitegoods and consider buying second-hand rather than new goods.

3. Set yourself at least one financial goal.Do you want to save up for a holiday, buy ahouse or try to pay off your credit card debtonce and for all? Having clear goals willhelp you decide what’s important and giveyou an incentive to keep your financesunder control.

4. Now create your budget. Start with whatyou get paid. How much do you need toaccount for your essential living andhousehold expenses? Decide how muchyou want to set aside as savings. Howmuch do you want to reserve to pay yourdebts? Do you want to invest some money?Can you allow yourself a small amount of‘play money’? Write it all down.

5. Set aside a modest ‘emergency’ fund topay for any unforeseen expenses such asa surprise car repair bill or your dog’sunexpected trip to the vet.

6. Once you’ve worked out your budget,give it a reality check. A realistic budgetis one you can follow without it being aconstant struggle.


Checklist for a realistic budget

Set your budget period to match yourpay period, whether it’s weekly,fortnightly or monthly. This will makeit easier to manage your pay.

Pay yourself first – your savings andretirement plans should be one of yourmain budgeting priorities. They arethe keys to achieving many of your short-term goals and long-termfinancial security.

Organise your pay so that savings anddebt repayments are automaticallydeducted.

Keep your savings out of reachby transferring them into a separatesavings account. Consider anaccount that doesn’t have ATM orelectronic access.

Create your own budget using the budgetplanner and spending record sheet at theback of this booklet.

Take action:

Avoid impulse buying. For example,take only enough money for food onyour lunch break and leave the creditcard or your ATM card back at the office.Better still, take your lunch to workwith you!

Review your budget every few months(or more), to make sure you’re stickingto the plan. Maybe you can put a littlemore into your savings, or perhaps youneed to allow a few extra dollars forhousehold bills.

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8

Creating a savings plan

Many people find that after they pay thebills, cover the basics and make the oddday-to-day purchase, there isn’t much leftfor anything else. For some, saving up formajor purchases such as a holiday, a car ora house, seems near impossible.

Successful saving checklist

If this sounds like you, it’s time to startsaving and make your financial fitnessprogram pay off! A healthy savings plancan be the key to achieving your financialgoals and making your life easier andmore enjoyable.

Regular financial exercise for long-term gain

Start today, no matter how small yourregular savings contribution might be.Thanks to compound interest, a smalleramount of money saved sooner canearn more over the long term than alarger amount of money saved later. For example, if you saved $2 everyday from the age of 18 until you turned 60, you will have accumulatedalmost $105,000 (assuming annualearnings of 5%).

Pace yourself. Make sure your savingsgoals are realistic. If you set the bar toohigh it’s easy to become disheartenedand stray from your savings plan.

Be disciplined and make savings a partof your regular budget.

Keep your savings in a separate accountso you won’t be tempted to dip in. Butremember – there are lots of differentaccounts to choose from. Shop around,ask questions and aim to select anaccount that meets your needs andprovides low or no fees.

Watch your savings grow. Seeing theresults of your efforts will make it easierto stay on track.

Open a savings account if you don’t already have one.Organisations such as the Australian Consumers’Association and InfoChoice have websites to help youcompare finance products, including savings accounts.See the directory on page 20 for more information.

Take action:


9

Reducing and controlling debt

Debt can be a necessary and beneficial partof life. Most of us take on debt for a setperiod of time in order to purchase life’s‘big ticket’ items such as a car or home.But unmanageable debt can put a seriousdent in your emotional well-being and, insome cases, cause severe financial andpersonal distress.

If your debts never seem to go away, it’s timeto take a realistic look at your situation andthe only way to tackle debt is head-on.

Debt-busting exercises

a low overall interest rate and minimalfees. As with any financial product, make sure you read the fine print.Beware of products that look like theywill be a ‘quick fix’ in the short term but actually lock you in to excessivelyhigh interest rates and ongoing feeslonger term.

If you can’t consolidate, start by payingoff smaller debts and those with highinterest rates. You’ll feel a lot better whenyou cross off that first debt and you canthen continue to set aside thatrepayment amount to go towards yourlarger debts.

Never ignore a debt that you can nolonger repay. Talk to your financialinstitution sooner rather than later – theymay be able to vary your repayment planto help make the situation moremanageable. Alternatively, talk to afinancial counsellor about otherstrategies that might help.

Assess your current debt situation andwork out a plan of attack. Get help fromyour bank, a financial planner or afinancial counsellor if you are not surewhere to start.

Set some realistic goals for paying offyour debts, even if it’s just one at a timeover an extended period – at least you’llhave something to work towards.

Make debts a priority in your budget,after your essential living expenses.

Think about consolidating your debtsto make them more manageable. Forexample, if you have more than oneloan from the same bank, you may beable to roll some or all of these loansinto a single loan and potentiallyreduce the interest and administrationfees that you pay.

If you do choose to consolidate yourdebts, shop around for an option thatwill best meet your needs and aim for

The debt-busting checklist

Ensure you make at least the minimumpayment due on your loans and put anyextra payments towards those loanscharging the highest rate of interest.

Take action:


10

Sensible credit management

There’s no doubt that credit can beconvenient, but never forget that whatgoes on your credit card is another debtthat you will eventually have to pay, oftenwith interest on purchases and cashtransactions added.

The key to making credit work for you is touse it wisely and know your financial limits.

Checklist to successfully managing credit

The healthy credit card workout

If you make a transaction that takesyou over your credit limit, you mustpay the excess amount immediately. If you don’t, your bank may charge anoverlimit fee or close your card.

Avoid cash advances and cashequivalent transactions (e.g. using yourcredit card to get cash from a branch orATM, or to pay another credit cardaccount). They are a costly way ofgetting access to cash, incurringinterest from the date you make thetransaction until the date thetransaction is paid off in full.

Try and pay off your credit card everymonth. If it’s not realistic to pay off yourcredit card each month, pay more thanthe minimum repayment. The more youpay, the faster you can reduce yourcredit card debt.

Talk to your bank or financial institutionif you get into trouble paying off yourcredit card and see whether you canorganise a payment schedule thatworks for you.

If you don’t think you can managerepayments on a credit card, don’tget one.

Choose a credit card that is right foryou. Shop around, ask questions andread the fine print. Interest rates,annual fees, interest-free periods andfeatures such as reward points varyfrom card to card.

Only charge items to your card that youknow you can afford to pay off within arealistic time frame and be aware thatmost credit cards charge additional feesfor late payments.

Limit the number of credit cards youhave to one or two. Fewer cards meanfewer annual fees and fewer interestrates to keep track of.

Consider carefully any offers to increaseyour credit card limit. Do you need morecredit? Will you be able to manage it?Think about decreasing the limit, ifyou have more credit than you need or can afford.

For more information on how to use andmanage credit, visit A Guide to Credit atwww.howcreditworks.com.au.

Take action:



Building financial assets through investing

Think you have to be rich to invest? Notnecessarily; some of the most successfulinvestors start small and watch their moneygrow over time.

Investing can be a great way to strengthenyour finances in the mid to long term, so you can enjoy a financially fit andcomfortable future. It’s easy to get started,but it’s also important to understand thebasics of investing first. This will help youto make wise choices and avoid getting intofinancial difficulty.

Know how much risk you can take on

All investments involve some level of risk,though some more than others. Generallyspeaking, if the expected return from aninvestment is above-average, then the riskassociated with the investment is usuallyabove-average. The lower the likely returns,the lower the level of risk. This is called the‘risk/return trade-off’.

There are ways of managing your investmentsto reduce the amount of risk you are exposedto, including:

• diversification, that is, spreading yourmoney around and investing in differenttypes of investments or with differentfund managers

• taking a long-term view and investing yourmoney for longer periods of time to reducethe impact of short-term ups and downs(volatility) on your investments.

What types of investments are there?

There are four main types of investments(called ‘asset classes’):

• shares – ‘direct’ investments in companieslisted on the Australian Stock Exchange oron international share markets, or ‘indirect’investments in unit trusts which holdshares in a selection of companies

• property – a ‘direct’ investment in propertyassets (such as houses, offices orfactories), or an ‘indirect’ investment in a property trust, which holds assets in aselection of properties. Property trustsare usually listed on a stock exchange

• fixed interest (bonds) – investment in fixedinterest securities such as bonds issued bycompanies or governments

• cash – investments in short-term, interest-bearing products such as bank bills orcommercial bills, or in term deposits.

These can be accessed by investing directlyin the assets themselves (e.g. buying someshares, or buying a property), or by investing‘indirectly’ through products such asmanaged funds. When investing in amanaged fund, your money is pooledtogether with that of other investors andis then invested by a professional fundmanager on your behalf. Depending on thetype of managed fund, the pool of moneycan be invested in one or more of the fourmain asset classes.

Increase your financial strength

12


Different asset classes andtheir characteristics

Cash Fixed interest Property Shares Internationalinvestments

Volatility

Returns

Time frame(years)

Possible taxbenefits

Examples ofinvestmentsin these assetclasses

Low-med

Low-med

1+

No

Bank accounts,bank bills,cash funds

Medium

Medium

3-5+

No

Govt bonds,debentures,bond funds

Med-high

Med-high

5+

Yes

Houses,offices,factories,property funds

High

High

5-7+

Yes

Shares, sharefunds, listedinvestmentfunds

High

High

5-7+

Yes

Share funds,fixed interestfunds

Courtesy of the Investment and Financial Services Association

Please note: the opinions and recommendations of your financial planner or financial institution may differfrom those shown in the chart above.

Which investments are right for me?

So you want to invest, but what should youinvest in? Should you look at investmentsthat are short term or long term? In order todetermine the types of investments that bestsuit your needs, you’ll need to identify a fewfactors that are unique to you and yourfinancial situation, such as:

• what you want to achieve fromyour investments

• your time frame, or how long you wantto invest for

• what level of risk you are comfortablewith (and can afford to take).

These are some of the factors that help todetermine which sorts of investments wouldbe right for you. A financial planner canassess your circumstances and help youchoose an investment mix that best suitsyour financial needs.

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15

Checklist to building financial assetsthrough investing

If you’re new to investing, educateyourself. Organisations such as theAustralian Stock Exchange and theNational Information Centre onRetirement Investments provideinformation and education to assistpeople make better informed decisionsabout investing.

Talk to a qualified financial plannerabout your financial goals andwhich types of investment would bebest for you.

Make sure you understand the taxeffects of your investments and talk to a registered tax agent (or a financialplanner) if you’re unsure.

Understand how much risk you arecomfortable with and how long youwant to invest and select yourinvestments accordingly.

Start sooner rather than later andtake advantage of the power ofcompound interest.

Invest small amounts regularly to boostyour investment over time and reachyour goals sooner.

Make diversification part of yourinvestment plan and ensureinvestments meet your time frames.

Review your investments regularly andwhen your circumstances change. Talkto a financial planner to make sure yourinvestment plan still meets your needs.

Remember that all investments involvesome level of risk. Be wary of get-rich-quick schemes. If an investment isoffering high returns from little or norisk, it’s probably too good to be true.

Don’t be pressured into making aninvestment that you are not comfortablewith and always read the relevantinformation about any investment (suchas offer documents, product disclosurestatements and prospectuses) in full,before you make a decision.

Choosing a financial planner

Before consulting a financial planner, make sure you take the time tocheck the planner’s credentials. Financial planners operating inAustralia are required by law to be properly licensed. At the end ofthis document, we have included contact details for a number oforganisations that can help you determine if a planner isappropriately qualified to provide you with advice.

Take action:


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Retirement planning

Did you know that the aged pension and youremployer’s compulsory contribution to yoursuperannuation probably won’t be enoughfor you to retire at the same living standardthat you currently have?

If you’re looking forward to 20 years ormore of retirement, how enjoyable will it beif your money supply retires at the sametime you do?

You simply can’t put off planning foryour retirement.

Financially fit at any age

How much might you need?

Many financial professionals estimate that to have the same living standard in retirement thatyou currently have, your annual retirement income will need to be about 60% of your currentincome. The following table gives a basic estimate only of what you might need to set aside inorder to fund a retirement of 20 years.

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$18,000

$24,000

$30,000

$36,000

$42,000

$48,000

$54,000

$60,000

$66,000

$72,000

$360,000

$480,000

$600,000

$720,000

$840,000

$960,000

$1,080,000

$1,200,000

$1,320,000

$1,440,000

Current annual income 60% of current income

Retirement savings requiredto enjoy 20 years of

retirement at 60% of yourcurrent income

Note: this table is a simple example only. It does not account for theeffects of taxation, inflation, or investment earnings, nor eligibilityfor social security benefits.


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Checklist for a financially fit retirement

Seek the assistance of a qualifiedfinancial planner to help you shoparound for the super arrangement thatwill best suit your requirements anddetermine how much you should besaving now. Your super investmentmight be the most importantinvestment you ever make.

Work out how much money you willneed to have a comfortable retirementwith the financial flexibility to allow youto live life to the full – budgeting is asimportant during retirement as at anyother time in your life.

Remember that super can be atax-effective vehicle, as it is taxedat a lower rate than other formsof investment.

Make sure you’re aware of the fees youare paying on your super fund, as theremay be other, cheaper funds that suityour needs just as well.

Make sure you read the fine print anddon’t be afraid to ask questions aboutyour super fund if you are unsure.

Try to consolidate some or all of yoursuper if you have collected a number ofsuper funds from different employersover the years. Not only can it makeyour super investments easier to keeptrack of, it can also reduce the amountyou pay in fees.

If you’ve had a number of employersover the years and you think you mighthave lost track of one of your funds –track down that unclaimed super androll it into an existing fund. See thedirectory on page 20 for a list ofservices to help you find lost super.

Think about making extra contributions to your superannuation.The earlier in life you start making frequent, additional contributions to your super, the greater the impact the powerof compounding will have on your retirement savings.

Take action:


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Protecting your assets

The most important assets you have are yourhealth and your income. Just as you insureyour house and your car, you also need toprotect your health and ability to earn money,for yourself and your family.

You might think you could live without yourincome for a few weeks, or a few months,but have you considered how much youmight stand to lose over the long term if yourability to earn that income is unexpectedlytaken away?

Ask yourself this: how long would your money last if you were suddenly unable to work…even if it was just three monthswithout an income? And how would yourfamily or partner cope financially if youbecame disabled, or if you died?

While income protection usually won’treplace 100% of your salary (most policiesprovide cover for up to 75% of your salary),insuring your earning power can still meanfinancial security if events take an unforeseenturn. And, income protection insurancepremiums may be tax-deductible.

Health insurance for your finances

Keep track of any existing insurancepolicies and check the insurance coverof your super fund. Some super fundsautomatically provide incomeprotection insurance, or death anddisability insurance.

Consider the different types ofinsurance available – from insurancefor your car, your house and itscontents, to health insurance, incomeprotection insurance and life insurance.

Talk to a qualified professional whocan provide advice about your (andyour family’s) insurance requirements.

With any insurance policy (whether it’sone you’ve had for years or somethingyou’re thinking about taking out), readthe fine print and make sure you

understand exactly what you are or arenot covered for and exactly what it’scosting you. Shop around for a policythat suits your needs and providesvalue for money.

Talk to a solicitor about drawing up awill if you don’t have one already, orpurchase a do-it-yourself ‘Will Kit’.Having a valid will is the only way toguarantee that your assets will beallocated according to your wishes.

If you’ve already got a will, make sureit’s up to date – circumstances canchange, as can your preferences forhow you would like to have your assetsdistributed upon your death.

The asset protection checklist


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Preparing for tax time

Tax time usually catches most peopleunprepared, so why not be ready this year?These basic tips will help you get ready for

June 30. A little bit of organisation will go along way towards maximising your potentialtax refund.

Mastering the tax-time treadmill

Keep records of yourearnings, including:

income earned from all employers; youremployer(s) should provide you with apayment summary at the end of eachfinancial year

bank interest; as shown on your bankstatements for the year

income from investments; such ascapital gain on shares, or income in the form of interest or dividends, yourbroker or investment manager shouldprovide you with statements of thesetransactions

details of Government benefits andpensions received

superannuation fund payments (your superfund should provide you with a statement)

details of assets you’ve sold, for example ahouse, a car or shares.

You can complete your tax return yourself or seek professional tax advice. Aregistered tax agent can prepare yourreturn, explain how the tax rules apply toyou and ensure any tax you owe or anyrefund you are due is correct by taking intoaccount all legally available deductions andrebates, etc.

Keep receipts for any potentialdeductions, including:

work-related expenses for which youhave not been reimbursed; e.g.equipment and tools, travel costs,subscriptions to trade journals, studyexpenses, etc

gifts or donations to registered charities;these must be of $2 or more in orderto be deductible and the charity mustbe registered

health-related expenses; if you incurredexpenses such as medical bills, or costof medications etc which, after anyrebates, may exceed the currentGovernment threshold, you may beeligible for a tax offset

depreciation; some items used for workpurposes may be depreciable, such ascomputer equipment, motor vehicles,and tools of the trade.

Remember to keep all the records youuse in preparing your personal taxreturn for five years from the date youlodge your tax return. Check theAustralian Taxation Office website fordetails at www.ato.gov.au.


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Banking and Financial Services Ombudsman

A dispute resolution service dealing with disputesthat individuals and small businesses have withtheir financial service providers.1300 78 08 08 www.bfso.org.au

Australian Securities andInvestments Commission (ASIC)

Visit ASIC’s consumer website, FIDO, for financialtips, safety checks on financial products andservices and warnings about scams. Get ASIC’sfree brochures on superannuation, ‘Superdecisions’, on financial planning, ‘Don’t kiss yourmoney goodbye’ on money management, ‘YourMoney’ and ‘You can complain’.1300 300 630 www.fido.asic.gov.au

Australian Stock Exchange (ASX)

The ASX provides comprehensive market dataand information. Visit the website for shareholderinformation, investor education and free on-line classes.1300 300 279 www.asx.com.au

Australian Taxation Office

For free information and assistance with taxmatters, call:Personal Tax Infoline 13 28 61Business Infoline 13 28 66Superannuation Infoline 13 10 20Or, visit the Tax Office website: www.ato.gov.au

Centrelink

Centrelink’s Financial Information Service is aneducation and information seminar program –available to everyone. It assists people to makemore informed financial decisions for their currentand future needs and helps people understand the consequences of their financial decisionsincluding the possible short, medium and long-term effects of those decisions. ContactCentrelink to book a place at a seminar near you.13 63 57 www.centrelink.gov.au

Consumer Affairs

The Ministerial Council on Consumer Affairs(MCCA) consists of all Commonwealth, State,Territory and New Zealand Ministers responsiblefor fair trading, consumer protection laws andcredit laws. Visit the MCCA’s website for consumernews and information, including contacts forconsumer affairs and fair trading ministers andagencies around Australia. These agencies canprovide you with information and assistance inrelation to credit and debt matters.www.consumer.gov.auOr, for detailed information on the UniformConsumer Credit Code and your rights as aconsumer, visit: www.creditcode.gov.au

Australian Consumers’ Association (ACA)

The ACA publishes independent consumer newsand information on personal finance matters,including banking, insurance, investing andborrowing. It also has a website to help youcompare transaction accounts from differentfinancial institutions and switch bank accounts.(02) 9577 3399 www.choice.com.au andwww.flickyourbank.com.au

InfoChoice

InfoChoice provides unbiased information on a range of financial products and services,including tools to help consumers compareproducts, such as transaction accounts, credit cards and home loans. (02) 9247 6788 www.infochoice.com.au

A Guide to Credit

An online guide by ANZ, helping you understandhow to manage credit and providing tips onmaintaining a good credit history.www.howcreditworks.com.auOr visit any ANZ branch and pick up a copy of thebrochure ‘How credit cards work’.

The financial fitness information directory


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Educate yourself

• Read the money section in your dailynewspaper and also the personalfinance and investment magazines atyour local newsagent.

• Tune in to finance reports on the radio and television news and to any personal finance programs.

• Ask your financial institution forinformation about managing financesand investments.

• Visit your local library for free accessto books, magazines and websites andask your local council about personalfinance classes in your area.

• Contact an adult education centre nearyou (e.g. a TAFE institute or Universityof the Third Age) and ask about shortcourses in personal finance, budgeting, investing, etc.

Financial Counselling Services

The following services provide financial counselling

for people facing financial hardship or can refer you

to an appropriate service in your State or Territory.

These services are free and confidential:

Victoria

Financial and

Consumer Rights Council (03) 9663 2000

New South Wales

Credit Helpline 1800 808 488

ACT

Care Financial

Counselling Service (02) 6257 1788

South Australia

Uniting Wesley

Mission Adelaide (08) 8202 5180

Western Australia

Financial Counsellors

Resource Project (08) 9221 9411

Tasmania

Anglicare Financial

Counselling Service 1800 243 232

Queensland

Financial Counselling

Association of Queensland (07) 3321 3192

Northern Territory

Anglicare Northern Territory (08) 8985 0000

Lifeline

Lifeline delivers a range of training and face-to-face services covering a variety of issues includingfinancial counselling.13 11 14 www.lifeline.org.au

National Information Centre on RetirementInvestments

For free information about retirement investmentsand the financial planning process. 1800 020 110 www.nicri.org.au

Financial Planning Association of Australia (FPA)

The FPA can help you find a planner in yourarea and provide information about your rights.1800 626 393 www.fpa.asn.au

FindMySuper Pty Ltd

If you have lost track of your super money from apast employer, FindMySuper can help you find it.(02) 9279 1650 www.findmysuper.com

Superseeker

The Tax Office’s online service, Superseeker, can help you search for lost super.www.ato.gov.au/super

*Please note that some of the services listed in this directory may incur fees. If you wish to make use of a particular service, check with the relevant organisation if any fees or charges apply.


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Budget A budget is simply a plan that you can draw up for yourself, stating whatyour income is and how that income will be used.

Compound interest Interest paid on your invested capital, as well as on the interest alreadyearned on that capital.

For example, an investment of $1000 earns compound interest at 5% perannum for three years. In the first year the $1000 will earn $50 in interest,bringing the investment total to $1050. In the second year, 5% interest isearned on this new balance, which means that the interest earned in thesecond year is slightly higher ($52.50) than in the first. In the third year,with a new investment balance of $1102.50, the investment will earnapproximately $55.13, taking the final balance to $1157.63.

This is different from ‘simple interest’, which is only paid on the capitalinvested and not on any interest earned. If your $1000 investment was toearn simple interest of 5% per annum for three years, the investmentwould earn exactly $50 for each of the three years. At the end of the threeyears the final balance would be $1150.

While compounding can work wonders on your savings and investments,be aware that it is also applied to most debts. If you do not focus onreducing your debts quickly, compounding will cause your debts to blow-out over the long term, as you will end up paying interest on interest.

Credit Credit is a form of loan that allows you to obtain goods before you actuallypay for them, but which must be repaid within an agreed time frame andincludes an interest payment.

Debt A debt is an amount of money that is owed to a person or an organisation.For example, if you have a loan or a credit card, or even a store-plan cardfrom your local department store, the amount still outstanding is the debtyou owe.

Deductions (tax) A tax deduction, or ‘tax-deductible expense’, is an expense that can beoffset against your taxable income – that is, when calculating your totalearnings for the year, you can ‘deduct’ the full amount of certain types ofexpenses. This then reduces the amount of income upon which you will berequired to pay tax.

Depreciation The accounting practice where the cost of specific, work-related items issystematically spread over the life of the assets. Depreciation can beoffset against your taxable income for taxation purposes.

Diversification Diversification is an investment strategy that involves investing in a rangeof different types of assets, rather than investing all your money in justone asset. In other words, ‘don’t put all your eggs in one basket’.

Financial counsellor Government-funded financial counselling services are free andconfidential and aim to assist you to regain control over your finances. A financial counsellor will help you get a clear picture of your overall

Financial fitness talk explained – glossary of terms


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financial situation, explore how you may be able to increase your incomeor decrease your expenses and will refer you to other appropriate servicesfor additional information and assistance.

A financial counsellor is different to a fee-for-service debt counsellor.Many debt counselling services are costly – if at any stage a debtcounsellor asks you to sign an agreement which includes paying any costsor fees, check this out carefully and get advice from a Government-fundedfinancial counsellor.

Insurance Insurance is a way of financially protecting yourself against potential risksand damage. Common types of insurance include car insurance, houseand contents insurance, health insurance, income protection insuranceand life insurance.

Interest Interest is the amount a borrower pays to a lender for the use ofthe lender’s money. For example, if you borrow money from a bankin the form of a loan, the bank will charge you interest for the useof that money. On the other hand, if you invest your money with a bank(e.g. in a term deposit), or in a company (by buying shares), you effectivelybecome the lender and your investment will be rewarded with interest as apayment to you.

Investing Investing is about building wealth. The aim is to invest money in assetsthat will grow in value over time so that you end up with more moneythan you contributed to that investment in the first place. Manyinvestments earn income that can be spent (or reinvested), but theoriginal amount of money is left invested so that it can continue to growand produce more income.

Long term Investments that are held over long time frames, such as seven to tenyears or more, are generally referred to as ‘long term’. When investmentprofessionals talk about taking a long-term view of investing, they areoften referring to time periods of 20 years or more.

Return The return on an investment is the amount of money yourinvestment earns.

Risk In investing, risk is the likelihood that your investment may go down invalue and that you may lose money as a result.

Saving Saving is simply setting money aside for a specific purpose. Once you’vesaved the required amount, the savings are then spent and the savingsbalance returns to zero.

Short term Investments that are held over short time frames, such as a few months,or one or two years, are referred to as ‘short term’.

Superannuation Superannuation is a vehicle used for setting aside money during yourworking life, in order to save money for use once you have retired.



If you would like toget in touch with ANZ

> Visit any ANZ branch duringbusiness hours

> Call ANZ on 13 13 14, Monday to Friday, 8 am to 8 pm (Eastern Standard Time)

> Visit www.anz.com

> To make an appointment with anANZ Financial Planner, ask at yourlocal branch or visit www.anz.com


www.anz.com

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