Having your everyday banking account linked to your home loan for 100% offset is an easy way to reduce the interest you pay without making extra payments on your loan.

Offset is a feature that you can add to your variable rate home loan. It links an everyday banking or savings account to your loan, and uses your account balance (the money that you have in the bank) to offset your loan balance (the amount that you owe).The more money you have in your linked everyday banking account, the less interest you pay on your home loan.

When you borrow to purchase a home, the bank will charge you interest on the amount that you borrow. And when your bank works out the interest amount, you’re usually charged interest on your whole loan balance (ie. the total amount you owe on your home loan).

Having offset changes this. Instead of being charged interest on your full home loan balance, you’re charged interest on your home loan balance minus the amount in your linked everyday account.

For example, $10,000 sitting in your everyday banking account for the life of your loan could save you $46,319 and help you to pay off your loan much sooner. (These savings are calculated on an interest rate of 7.22% per year and a 25 year loan term.)

Home loan interest is usually calculated every day, based on the balance of your loan each day. At the end of each month your lender will total up the interest from each day in that month (and charge it all at once). That means that every dollar you have in your everyday banking account saves you interest every day that it’s there. And, whenever you need to access your money it is always available to you in the usual ways, like through an ATM or online.

You don’t need to have a lot of money in the bank for an offset account to save you interest. Over the life of your loan, even a small amount in an offset account can save you thousands of dollars.

For example, if you take a $400,000 loan with a 30 year term and interest of 7.22% per year you’ll see that always having just $500 in your offset account could save you $3,824.

The trade off: Offset accounts don’t earn any interest

Maybe you’re used to keeping your extra money in a high interest savings account. Keep in mind that setting up an offset account means you won’t earn interest on your savings like you normally would. This is a trade-off usually worth making though, as explained below.

Offset vs savings accounts

So long as your home loan interest rate is higher than your savings account interest rate, you’re generally better off using offset, and not earning the interest.

That’s because you’re saving more money by paying less interest on your home loan, compared to the interest you’d be earning on your high interest savings account.

Don’t forget that you’d probably have to pay tax on any interest that you earned in a savings account too. But because an offset account doesn’t earn any interest, you won’t pay this tax by using an offset account (you should check this with your own tax advisor).

You’ll probably find that home loans offering offset don’t charge any extra to set this feature up. It’s a good idea to check, though, and consider any fees when making your decision. Also check what fees you’ll have to pay for the account you plan to use as your offset account.

If you bundle your home loan into a banking package, you may be able to include offset to avoid paying any account fees (some banks will charge these). That’s because banking packages often include discounts and savings on banking products, like account fee waivers.

Source:  NAB Learn (www.learn.nab.com.au)

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

“As early as possible! May the power of compounding interest bless you”

“Your first job”

“13 is a great age to start learning about it!”

“62”

“As soon as you can… time is key…”

“Now!!!!”

“At birth – its never too early”

“Kids should be taught with the very first buck they earn. Early habits stick with a person. Poor, spend-it-all, habits also stick with a person. Saving as a child teaches discipline and will make them better with their finances as an adult”

“The sooner you start the sooner you have enough money. The two most important components of how much you have at retirement are not return, but rather how often you save and how much. “Compound interest is the greatest invention ever.” –Einstein”

“I’ve been meaning to”

“Birth”

“About 2 years old, seriously. A piggy bank at least!”

“Isn’t Obama gonna take care of us all?”

“Your parents should invest on you from the day you are born. You yourself should invest in getting an education. Then with the first check/first job, one should invest in their future/retirement.”

This highlights the differences in everyones thinking. Some think they will be looked after by the government, some leave investing too late, some get taught good financial habits from an early age and others don’t.

Some don’t invest money they invest in themselves and their education and others live and die by the philosophy of compound interest and “time in the market”

‘So, when is the ideal age to start investing? A good question….. Speak to an Income Solutions Financial Adviser to discover when is the right time for YOU’

By Income Solutions Financial Planners

*Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The course required around 60 hours of pre-reading and study on the successes and failures of a variety of businesses and their leaders including; Dell Computers, British Airways, IBM, Harrah’s Casinos and Da Vita Kidney Dialysis Centres.

Class would start at 8.00am and run until around 9.30pm each day.The classes were facilitated by the Professors of Stanford University with the MC for the sessions being Bill Barnett; Facility Director for the Stanford Business Faculty.

I’d like to talk about a few of the highlights of the course. On the Friday we were taken to Silicon Valley and visited a number of businesses one of which was Scanadu. There is a passionate belief held by Scanadu that healthcare around the world is broken. It is the last remaining infrastructure of the industrial age that is yet to be decentralised, waiting for the empowered medical customer to take the place of the patient. They are developing a mobile auto-diagnosis tool, smaller than your phone, to monitor and diagnose a multitude of health conditions that an individual may have.

Another business was Moon Express who have set themselves the ‘modest’ goal of of putting the first commercial robot on the moon and winning the Lunar X-Prize. The aim is to use this robot to mine the moon for various metals and minerals to be sold commercially back on Earth. We visited their office at the NASA building where I met some of the people responsible for putting the robot on Mars!

After five days of these amazing experiences I was, as you can appreciate, completely overwhelmed by the excitement and enthusiasm of the people I met and the passion they had for developing exciting solutions to the needs and problems of the world at large. However I was about to truly have my mind ‘blown away’.

The final visit was to Singularity University. The institution was founded by Dr. Peter Diamandis and Dr. Ray Kurzwell to leverage the power of exponential technologies in order to solve humanity’s grandest challenges.

One example of these type of technologies that we discussed is the driverless car. The thinking behind the vehicle is that humans have a terrible track record behind the wheel. Driving whilst drunk or on drugs, texting or falling asleep leads to tragic deaths and horrendous life altering injuries. The cost to society is huge, from grieving families to police and other emergency services attending the scene and the pressures put on our hospitals. There seems to be no end to the misery, suffering and cost; they simply ask “Why should we put up with it?” Remove the driver from the equation and the change will be profound. If you think the concept is a bit pie in the sky or like something from science fiction I need to tell you that the car has been built and it has already accumulated 500,000km’s on the roads of California with no accidents and performs better in precision driving tests than any human!

So what does all this mean for you, a valued client of Income Solutions looking to build wealth. (Or a future client, looking to join our team)  As you know our definition of wealth is; an absence of financial worry, an income stream that you won’t out live and a meaningful legacy for those whom you love. I have never been more convinced that our philosophy and investment strategy of owning the best businesses in the world and living off the dividends that they produce for us, their shareholders, is the very best way to create such wealth.

The market will capture all of the value that these new technologies produce and reward long term shareholders as it has done for centuries.

The trip was a wonderful experience and I thank you for continuing to be a client of Income Solutions, for giving me the reason and purpose to continue investing in my Purple Box ( education )  and for continuing to work on ways to make our business and its people better so as to ensure we look after our clients to the very best of our abilities.

I hope I have been able to convey the excitement I have for the future, there is so much more I could say but in respect of how busy I am sure you are I will leave it at that for now.

By David Ramsay

Income Solutions Financial Planning

Not only might they lose their income through not being able to work, but they might also have to tap into their savings, sell their home or face major costs for medical treatment and rehabilitation. Not a pretty picture.

Critical Illness insurance can help remove many of your financial worries and concentrate on getting better if you became critically ill.

Critical Illness Insurance can cover a wide variety of illnesses that can occur in an adult’s life such as Stroke, Parkinson’s disease, Cancer, Loss of independence and speech, blindness and deafness, Multiple Sclerosis and many other things. Illnesses covered will vary from insurance providers so it is important to read the Product Disclosure Statement.

Critical Illness insurance will pay you a lump sum payment if you were to meet any of the illness definitions covered in your insurance. As illnesses are unplanned its important to have the insurance in place to cover you for this. Below are two various scenarios of various illnesses that have occurred and the financial impact on the families:

Source : MLC Limited

Children’s critical illness insurance

Childrens Critical Illness insurance is able to provide you with lump sum insurance payment that can cover help to go towards expenses such as travel to and from hospital, care for any other children, tutors and also to cover the loss of income so you can take time off to work for your child as well as medical expenses.

It can cover a wide range of illnesses such as cancer, bacterial meningitis, blindness, coma, deafness, chronic kidney and liver failure, major burns and other major illnesses that may occur in a child’s life.

For some insurance companies, Children’s critical illness insurance is covered with your own critical illness insurance. It is important to ask if this is a feature that your insurance may have.

The Statistics

Around half of all Australians aged over 30 will suffer at least one of the seven health conditions that can lead to long-term disability and, consequently, a long-term loss of income.

Source: NATSEM, Health and Income in Australia, 2003.

About 2 million Australian women have cardiovascular disease – about 226,000 women have coronary heart disease, 168,000 have had a stroke and 176,000 have heart failure

Source – Australian Institute of Health and Welfare, Women and Heart disease 2010

According to the Children’s cancer institute of Australia, every year more than 600 children are diagnosed with cancer.

By age 85, one in every two males will have been diagnosed with cancer at some stage of their life

Source – Australian Institute of Health and Welfare, Cancer in Australia, an overview, 2010

By Steven Nickelson , Certified Financial Planner.

Income Solutions Financial Planners

Please note : The article on this site  is of general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

Here are four key issues to consider when establishing or reviewing a Will.

1. Who should you appoint as your beneficiaries?
While you can leave your estate to pretty much anyone you like, you do need to be careful. Challenges against a Will often occur when people feel they haven’t been provided for fairly. If you think your Will is likely to be challenged, you may want to leave a letter of wishes. This is an additional document explaining why the Will has been drafted in the manner chosen and can be referred to when a claim is being defended.
2. What assets do you want your beneficiaries to receive?
While some people feel the need to specifically gift every asset they own, a lengthy list of gifts is usually not encouraged. Assets held at the time of making your Will (and their value) may differ significantly from the assets owned at the time of death. It can therefore be a good idea to only gift a small number of specific assets in your Will and assign a percentage of the remainder of the estate to each beneficiary.
3. Who should you appoint as your executor?
Your executor is responsible for a range of tasks, such as locating the Will, organising the funeral, arranging probate, collecting the assets, repaying debts and distributing the assets. When choosing your executor, make sure you select someone who is trustworthy, in tune with your objectives, and capable of performing this very important role.
While some people appoint a family member as their executor, a Trustee company can be a good alternative – particularly if your Estate is complicated and/or suitable friends or family are not available. A Trustee company provides expert administration and legal services and charges a fee, typically paid from your Estate, after your death.
4. Should you establish a testamentary trust?
A testamentary trust is a special type of trust that comes into effect upon your death, if you have included specific provisions in your Will. Because the Trustee owns and controls the assets, your estate can be protected from a number of potential risks and your beneficiaries can be provided for in a tax-effective manner.

In addition to these four factors –  education and getting the right lawyers to help you is key. We will be holding monthly seminars with experts from Coulter Roache Lawyers to explain in easy to understand language – what is estate planning and what you need to consider

By Income Solutions Financial Planners and MLC Limited

Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

Whilst many of us love our jobs and arrive every Monday morning with a spring in our step and a smile on our face the reality is that the base level motivator that gets out of bed is the need to earn income to pay bills and, hopefully, enjoy life.

Some may argue that their car is their most valuable asset as it is what gets them to work in the first place; without income how do they put petrol in the car or pay the rego’ and insurance?

Some would argue it is their house; without income how do they pay rent or make mortgage, rates and maintenance payments.

Without income we can’t build our super and investments and without income we can’t have the wonderful adventures that create those lasting memories.

A 35 year old earning an annual salary of $40,000 will generate more than $2,000,000 of income over the course of their working life (to age 65 with an annual inflation linked increase of 3.5%pa). Typically this person will insure their car and their house and their possessions but not the one thing they have that drives their lifestyle (and actually puts money in their pocket rather than taking it out) their INCOME! (See below figures provided by MLC)

Income protection can pay you a monthly benefit of 75% of your income, potentially up to age 65 if you are unable to work due to illness or injury. It can remove the financial concerns of the family’s day to day running costs if you cannot go to work and generate your normal income.

The premium can be paid from cash flow and allow you to claim a tax deduction for the cost, or you can utilise your superannuation fund to pay premiums and so not impact the household budget.

If we have lifestyle goals of owning a nice house and driving a nice car, if we want to plan for a secure financial future through super and non-super investments and collect wonderful memories along the way, then it is an imperative that we protect what is truly our most valuable asset.

With tax effective options for paying the premiums the reality of not having appropriate cover could easily prove a lot more expensive than putting the protection in place.

By Gareth Daniels, Associate advisor

Income Solutions Financial Planners

Please note: The advice on this site is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information

We will be running the MLC Hot Shots tennis program in Westfield Geelong using the travelling Australian Open blue mini court. Hot Shots is ideal for kids aged between 4 and 12. We will have Tennis Australia qualified coach Simon Keeble and his team teaching the kids

There will be heaps of giveaways and prizes to win a family trip to the 2014 Australian Open, Tennis racquets and other great prizes.

For all our Melbourne clients the MLC Hot Shots will also be hosting a kids tennis day at Melbourne Park on 12th of January where SpongeBob Squarepants, Dora the Explorer, Captain Feathersword, Guy Sebastian and superstar tennis players will be appearing!!

Come visit Income Solutions at  Big W this school holidays, bring the kids and come have a hit!

How the fall in interest rates over the last year affects you depends on whether you’re a borrower or a lender.

For personal and business borrowers, lower interest rates are good news because the price they pay for borrowing money should be lower. So people with a variable rate mortgage will benefit when interest rates fall (if their bank passes on the rate cut) because they’re paying less on their mortgage and have more money to spend on other things; the reverse tends to happen when interest rates rise.

While lower interest rates benefit some, they may disadvantage others. Many people use cash-based investments, such as term deposits, because they think investing in shares is too risky and want a more certain return on their investment. Unfortunately, today’s lower interest rate environment means less income for investors in cash.

For example, the average interest rate for a one-year term deposit with Australia’s five largest banks is around 4.4% (based on RBA data at 30 September).  A year ago, the same average rate was 5.45%, and in September 2010 it was 6%. In just two years, someone with $100,000 in a one year term deposit has seen their interest income drop by $1,600.

For many retirees who rely on term deposits for income, falling interest rates can put pressure on the household budget and lifestyle choices. They may need to take fewer holidays and eat out less, or even be forced to cut back on necessities like food, insurance and medical treatment.

While higher interest rates are on offer at financial institutions other than banks, investing through some non-banks can involve more risk. The thousands of unfortunate depositors with the recently failed Banksia Financial Group, for example, are well aware of this risk.

The challenges of the lower interest rate environment can be managed, and an experienced financial adviser can help you make informed decisions.

By David Ramsay Certified Financial Planner

By consolidating your super there are potentially big savings to be had, especially when you have multiple funds. Below shows an example of rolling over three funds, each worth $10,000 into a new superannuation

Currently you would be paying $948.40 over the three funds versus  now paying one yearly set of fees of $264 by rolling over into Fund x . This is a saving of $684.40 per annum.

By consolidating your super you also have the added bonus of:

• Saving costs by only paying one set of fees
• Reducing the amount of statements and paperwork to keep track of
• Knowing exactly where your super is invested and invested according to your risk profile assessment

Consolidating your super can be done easily by your financial planner. It is always best to consult a professional however, to make sure that:

• You are invested in the right investment option for your risk profile and age group
• You are comparing apples with apples – some insurances within superannuation funds may offer products / features that others don’t, which most people will not realise until it’s too late
• Fees and charges are comparable (2% might not seem like a lot but as can be seen above – it adds up)

By Amy Flett

*Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.