Money and Life
(Financial Planning Association of Australia)

When working more means earning more, it makes sense to take that promotion or extra shift to get ahead financially. But when expenses go up and quality of life goes down, is the price you're paying for longer hours too high?

So you've been offered a pay rise at work that comes with more responsibilities. If that's going to mean staying late at the office or taking work home with you, is the extra income really going to make it worth your while? Here are 3 important things to ask yourself before changing your lifestyle and habits to make more time for earning money.

1. Where will you be spending more?

Working more hours gives you less time to spend on looking after your other needs. By being tied up at work for longer, things like a clean and tidy home, shopping for meals and other essentials could end up costing you much more. Some examples of where your expenditure might go up when working hours increase are:

• Less time to plan, shop and cook your own meals means spending more on take-away and restaurant food.
• Extra hours and stress at work can make that mid-afternoon coffee or chocolate fix more tempting, and those extra dollars spent add up over time.
• When you're tired at the end of a long day, taking taxis and Ubers to get you home faster will bump up your transport budget.
• When leisure time is rare and precious, you're more likely to spend extra money on household maintenance, cleaning and laundry services.

If you do end up working longer hours for more money, beware of letting these expenses eat into that extra income. Otherwise you could be putting in all that effort and see very little difference in the budget you have available to save or spend on things you really value.

2. What will you be missing out on?

It's all too easy to get caught up in the idea that earning more is the path to greater security. And if you feel more secure, then you're going feel less anxious and more positive right? Well it depends a lot on your personal definition of what security and happiness means for you. Perhaps it's a priority for you to have comfortable home you can enjoy. If extra work commitments take you away from home more, then you're paying for something you actually enjoy less and less. And when you value things like your health and time with family and friends, there's a very good chance that working more will mean investing less time in these things too. If you're only getting to the gym every other week and skipping family dinners because of work, it's worth asking yourself if the extra dollars are really making up for these missed opportunities.

3. Could you be better off without earning more?

Although getting ahead financially may be important to you, earning more isn't the only way to go about it. Taking a good look at where your money is going is a positive step towards making better spending choices for you and your family. If you're really clear about what matters to you, and your day-to-day budget matches those priorities, you could be better off in a financial sense and have a stronger commitment to your goals and values. A financial planner can act as a sounding board to help you reflect on what's most important to you. They can also guide you through the process of setting goals and managing your budget to make the most of the income you have now.

Looking for ways to save on your day-to-day budget? Get tips on cutting back on the three biggest household expenses. Or follow our savings and budget checklist for more ways to start saving.

Money and Life
(Financial Planning Association of Australia)

Debt isn't a welcome guest for any family at Christmas time. And yet blowing the budget and paying it all back next year is tempting when we're trying to make it the best festive season ever. Get tips on how to keep your finances in the best of shape as you get ready for Christmas so you can enjoy a debt and stress-free new year.

The festive debt hangover

Getting into debt at Christmas is becoming about as common in Australia as feasting on prawns, turkey and ham. And it's not hard to see why as spending goes into overdrive in the days leading up to 25 December. In 2016, the National Retail Association was expecting sales of more than $48 billion in the period from mid-November to 31 December. That's more than $1 billion spent every single day[1].

So if you get a little carried away with shopping for the biggest celebration of the year, you're in good company. But this spending frenzy can have big consequences for months to come. According to survey data gathered by finder.com, families are taking months to get over their festive debt hangover. On average, a family took until 10 March 2018 to clear their 2017 Christmas debt and one in six people took between four and six months to catch up[2].

What you can do about it

If you're finding yourself facing credit card balances and other debts in January and beyond, it might be time to save yourself hundreds of dollars in interest by curbing those holiday season spending urges. Here are five great ways to make budgeting work for you when the pressure is on to spend:

1. Stick to cash - when we wave our card at an etfpos terminal, it's easy to be blasé about the amount we're actually handing over. And if that card is credit rather than debit, you're spending big with dollars you may not actually have in the bank. BBC broadcaster and psychologist Claudia Hammond suggests using cash for your Christmas purchases for a more conscious approach to spending. "When you are about to buy something on a credit card, imagine taking the equivalent money out of a cash machine" she says. "Would you still want to spend it?"

And if you're buying online and using your card to make this happen, try to avoid storing your credit card details or using one-click features in shopping carts. This will give you more time to think about what you're buying, why and for how much. And try not to be tempted to buy just a few more gifts with Afterpay. If you find yourself unable to make repayments on time, you'll be struggling even more when late fees are added to your balance.

2. Start with the essentials.. - if you're going to rein in your spending, that doesn't have to mean giving up on the Christmas treats and traditions you enjoy most. Make a budget for anything you and your family consider to be essential to make Christmas special for you. Maybe that's a real tree, decorating gingerbread houses or pavlova for dessert. This will give you a baseline amount to allow for in your budget. So when it's a choice between baubles for the tree or fairy lights for the verandah, you'll know which one is more important and can spend accordingly.

3. But don't forget the extras - having said that, there are lots of small details in preparing for Christmas that can sabotage your best budgeting efforts. Things like gift wrap and postage for overseas presents are small costs that can mount up. So remember to allow for these when planning how much you'll spend altogether.

4. Have a Christmas cut-off - the final days before Christmas can be the time when your budget flies out the window. From their survey, finder have also learnt that almost half the amount we each spend at Christmas[3] is handed over during the five day count-down to the 25 December. To save you from making expensive or unnecessary panic purchases, stick to a deadline of 20 December to have your shopping all done and dusted.

5. Share the catering load - in their Christmas forecast for 2018, finder are expecting Aussies to spend $122 per person on food and $131 on alcohol[4]. In your family, you may be footing the bill for many Christmas guests this year. If your catering spend is threatening to push you over what you can actually afford, ask relatives and friends to make a contribution. You could suggest they bring a dish, something to drink, or pay a share of the grocery bill.

Feeling worried about Christmas and money? Find out more on dealing with financial stress during the festive season.

[1] Canstar, 9 Ways To Stay Out Of Debt This Christmas, Regina Collins, 17 October 2017, "The pre-Christmas and Boxing Day Period runs from the final two weeks of November right up to New Year's Eve a total of 46 days and the National Retail Association (NRA) was expecting more than $48.1 billion to be spent during that time last year."https://www.canstar.com.au/budgeting/surviving-christmas-without-the-debt-hangover/

[2] Sydney Morning Herald, Most Australians will still be in debt from Christmas next Easter,Nicole Pedersen-McKinnon, 19 December 2017, https://www.smh.com.au/money/saving/most-australians-will-still-be-in-debt-from-christmas-next-easter-20171218-h06o5a.html

[3] Sydney Morning Herald, Most Australians will still be in debt from Christmas next Easter,Nicole Pedersen-McKinnon, 19 December 2017, https://www.smh.com.au/money/saving/most-australians-will-still-be-in-debt-from-christmas-next-easter-20171218-h06o5a.html

[4] https://www.finder.com.au/christmas-spending-statistics-2018

Money and Life
(Financial Planning Association of Australia)

You've heard people brag about the great "returns" they may be earning, but there is more than meets the eye when it comes to talking about returns.

Just as the word suggests, returns are what comes back to you from your investments or savings.

So if you've put money in the bank, your returns will include the interest you've earned over and above the money you invested.

Total returns

If you have successfully invested in property or shares, you will get back two types of returns, which together make up your total return.

First, there's the capital growth. That is, the increase in value of the asset over time. For a property, it will be the difference between the price you can get for your property in the market at present, less the price you originally paid for it, your real estate agent's commission, stamp duties and any large renovation costs.

For shares, it will be the value you can sell your shares for on the stock exchange, less your original purchase price.

Second is the income you generate from your investments, less expenses.

For property, that income may include the rent received, less any expenses such as mortgage payments, rental agent's commissions and any small repairs you've made.

For shares, it includes the dividends the listed company pays out less brokerage costs. Dividends depend on the earnings of the company and the proportion of those earnings the company decides to distribute to its shareholders.

But that's not the end of the story.

The ATO awaits

As we know, nothing is certain in life, but death and taxes, and the Australian Taxation Office (ATO) certainly expects to receive a slice from your returns in two ways.

Income

Firstly, depending on your marginal tax rate, you could pay tax on your investment income, including on any interest earned, rent, dividends from your shares and distributions from managed investment funds. Super, pensions and trusts also have different tax rates.

Remember, some dividends have an imputation or franking credit attached to them. This represents the amount of tax the company has already paid. If your top tax rate is less than the company's tax rate, the ATO will refund you the difference.

Capital gains tax (CGT)

This is a tax on your capital growth. You need to report any capital gains and losses in your income tax return and are likely to pay tax on your capital gains. Although it's referred to as CGT, this is actually part of your income tax, not a separate tax.

So don't forget taxes when talking about your returns. The taxes you pay on them reduce your final returns.

Real returns

What interest rate is your bank paying you at the moment on your savings? 1.8%, 2%, 2.2%, 3%?

That might sound great, but did you know that the inflation rate or Consumer Price Index (CPI) rose by just 1.9% through the year to June quarter 2017, according to the Australian Bureau of Statistics.

That means a big chunk of what you may have earned in interest has been eaten away by inflation, leaving the true value of your assets almost where you started from. If you are then taxed on your interest earnings, the returns from your savings may have even gone backwards.

It's the same story with your gains from other investments such as property, shares or managed investments.

The savings example shows how important your real rate of return is that is, your rate of returns after inflation. Without assessing this, you may be earning less than you think on your investments or even getting poorer over time.

Why not talk to a CERTIFIED FINANCIAL PLANNER® professional to ensure you are earning the best returns possible in your circumstances and that the word "returns" don't mean you are moving backwards?

Scamwatch is warning people to be careful about being caught out by holiday season scams.

"Scammers will take advantage of special days or major events like Christmas to fleece people of their money or personal information," ACCC Deputy Chair Delia Rickard said.

Here are three common holiday season scams people should look out for:

• Online shopping scams: scammers will set up fake online stores or post goods for sale in buy swap-sell groups or online classified sites to trick people into buying items that don't exist. This scam has cost Australians nearly $3 million in 2018, with more than 8,700 reports.
• Travel scams: scammers trick people into believing they've won a holiday or scored a really good deal on a travel package, like a cruise. Unfortunately the prize or the cheap accommodation are phony. In 2018, nearly $135,000 has been lost to this scam.
• Parcel delivery scams: scammers may ask you to print off a label, do a survey, claim a prize, or view the status of your delivery by clicking on a link or downloading an attachment. Some scammers may even call or text with claims about an unsuccessful delivery. These scams are aimed at getting people to download malware onto their computer, or give up their personal information. People have lost about $31,000 to these scams in 2018.

"Scamwatch has also seen a massive influx of reports and money lost to tax scams. In November we received 7,500 reports of these scams and $400,000 was reported lost," Ms Rickard said.

"This isn't a usual holiday season scam, however a lot of people are getting calls from scammers pretending to be from the tax office or the police and threatening them with arrest over unpaid tax debts."

"This is a scam. If you ever get a call or email containing threats like this, hang up the phone or delete the email," Ms Rickard said.

Ms Rickard added that the key to avoiding a scammer's con these holidays is a healthy dose of scepticism and research.

"We love snagging a great deal online for a loved one's Christmas present and the idea of a bargain holiday is perfect for many after a long year. But don't fall for it," Ms Rickard said.

"Be sceptical about an online store you haven't used before. Do some research to see if they're legitimate and don't be fooled by big discounts. With travel deals, call the accommodation provider directly, for example the cruise line or hotel, to check if the deal is legitimate."

"If you see a seemingly great deal on an accommodation rental website like Airbnb, make sure you only communicate and pay through the official site to avoid getting stung by a fake listing," Ms Rickard said.

"We're all expecting parcels this time of year but be careful about online links and never download attachments. If you're wondering if a delivery notice is legitimate, check the tracking number at the Australia Post or other delivery company website, or call them directly using a number you find from an online search or the phone book."

"While with friends and family over the holidays, consider taking the opportunity to spread the warnings about these scams particularly to those loved ones who may be vulnerable." Ms Rickard said.

Further information about holiday season scams is available at www.scamwatch.gov.au.

Money and Life
(Financial Planning Association of Australia)

International research shows leaving work early may not be so good for your life expectancy. We bring you a checklist of things to consider before you leave work and ride off into the sunset for your happily ever after.

Retire early for a longer life?

If you've already squirreled away enough super for an early retirement, it's probably pretty high on your list of priorities. But money isn't the only thing that's going to help you enjoy retirement for longer. What if you knew that retiring early could actually mean dying sooner?

New research from Maria Fitzpatrick of Cornell University and Timothy Moore of the University of Melbourne shows an alarming leap in mortality rates for US citizens who retire and start claiming their social security payments as soon as they're eligible from the age of 62. The study concluded that retiring at this stage in their lives "may have an immediate, negative impact" on their health. This is particularly the case for men, who can expect a 20% increase in their mortality risk1. The flaw in these figures, as acknowledged by Fitzpatrick and Moore, is that existing health problems may be a trigger for many people to hurry up and retire. This could go some way to explaining why an earlier death is more likely for this retirement cohort.

Another study from the US classifies the health status of research subjects to make sure this doesn't skew their results. Of 2956 retirees taking part in the Healthy Retirement Study, about two thirds considered themselves healthy and their decision to retire wasn't motivated by poor health. During the 18-year period after retirement, 12% of the healthy group and 25.6% of the unhealthy group died. Compared with outcomes for a group who retired a year later after turning 65, mortality risk was 11% lower for healthy retirees and 9% lower for the unhealthy group2.

Embrace a lifestyle change

If you're determined to retire early but want to safeguard your health, what's the answer? According to Chenkai Wu, lead author of the Healthy Retirement Study, replacing the 9-5 with new commitments could be the answer. "Keeping active and getting involved in voluntary work definitely brings retirees a lot of benefits that would have been brought about by keeping on working," says Wu3.

Research from closer to home seems to confirm this tip for a longer life in retirement. A University of Sydney research study shows that, in many cases, retirement generally leads to healthier lifestyle habits. The data gathered by Dr. Ding, Senior Research Fellow at the University's School of Public Health, and her team shows that retirees were doing 93 more minutes of physical activity per week compared with their peers still in employment. They also sleep for 11 minutes longer. Perhaps the best outcome is that 50% of female smokers quit after retiring. "A major life change like retirement creates a great window of opportunity to make positive lifestyle changes," says Dr. Ding. "It's a chance to get rid of bad routines and engineer new, healthier behaviours."4

Early retirement checklist

So the trade-off between an early exit from work and shortening your life seems to be making a commitment to keeping active. Here are some other things to think about when you're planning for your best and healthiest life in retirement:

• Sharing retirement - if your partner continues to work when you retire will you be happy and keeping busy on your own? If friends are continuing to work too, it's important to have a plan for making some new ones. Aim to start your retirement with a strong social network so you can continue to have a sense of connection to the world around you.
   
• Volunteering/part-time work - volunteering in your local community or working in a part-time role are both good ways to give your new lifestyle some structure, help you meet new people and feel valued. Doing something you're passionate about like coaching, supporting a charity or turning a hobby into a business can be a very rewarding way to spend time in retirement.
   
• Making a move - when you're no longer tied to a location by work, the world is your oyster! Downsizing your home or relocating could be an important part of your retirement plan. Before making the move, do some research to check that a sea change will bring you into contact with the social groups and activities you're looking forward to enjoying in retirement.
   
• Looking after family - if you have family living locally who rely on you for care and support, you'll probably be staying put. Caring for grandchildren can be very rewarding of course, but be mindful of having time to look after your own needs and enjoy your own interests, particularly if you're in the sandwich generation and looking after elderly parents too.

Looking forward to an early retirement? Get tips from a financial planner on how to prepare yourself for the changes to your finances and lifestyle.

1 Bloomberg, Retiring Early Just Might Kill You, Says New Research, Christopher Condon, 19 December 2017 https://www.bloomberg.com/news/articles/2017-12-19/retiring-early-just-might-kill-you-says-new-research-eco-pulse

2 The Guardian, Does early retirement mean an early death?, Luisa Dillner, 2 May 2016 https://www.theguardian.com/lifeandstyle/2016/may/02/early-earlier-retirement-retire-death-risk-data-research-jobs

3 The Guardian, Does early retirement mean an early death?, Luisa Dillner, 2 May 2016 https://www.theguardian.com/lifeandstyle/2016/may/02/early-earlier-retirement-retire-death-risk-data-research-jobs

4 University of Sydney, Retirement is good for your health, 14 March 2016 https://sydney.edu.au/news-opinion/news/2016/03/14/retirement-is-good-for-your-health.html