Money and Life
(Financial Planning Association of Australia)

Does it sometimes seem like money is standing in the way of your happiness? How we feel about money can really have an impact in the role it plays in our lives, how we spend it and how secure we feel about our future. Find out how our emotions positive or negative can influence money habits and what you can do about it.

Our feelings about money can be as strong as they are volatile. One day you're elated because you got the mortgage to buy your first property. A month later you're stressed out from unexpected maintenance bills on your perfect new home. Or perhaps you experience this cycle of excitement and anxiety from everyday retail spending on clothes, gadgets, or a night out with friends.

It's only natural for people to seek satisfaction from spending money. After all, money is an essential tool for meeting our needs for shelter, food, transport and many other things that make our lives comfortable and complete. But we all place different value on these various needs and our feelings about money can be just as wide-ranging. So we each have a money story that's fairly unique.

What's your money story?

Researchers Bradley and Ted Klontz coined the term 'money scripts' to describe the feelings and beliefs we have around money and how these affect our financial behaviours. According to their research, these scripts tend to be inherited from the family and culture you come from. "Money scripts are typically unconscious, developed in childhood, passed down from generation to generation within families and cultures, contextually bound, and often only partial truths.[1]"

Patterns you might recognise

While yours might seem absolutely true to you, money scripts for different people can be quite opposite, but still lead to the same behaviours. According to Brad and Ted Klontz, there are four main categories our money beliefs fall into.

1. Money avoidance - feelings of shame about having money and that you don't deserve it are the hallmarks of the money avoider. You may assume people with wealth have either inherited it or used deceit to get it.
2. Money worship - you basically believe money can solve all your problems. If only you could have more of it, you'll stop worrying and enjoy life more, instead of feeling stressed and working too hard.
3. Money status - spending money shows the world who you are. Your sense of personal worth and value is demonstrated by your wealth and the things that go with it. Spending more than you earn is an easy trap for you to fall into.
4. Money vigilance - money is your security blanket. Having it makes you feel safe and protected and spending it feels like putting yourself in the path of danger, even when you still have plenty to live on.

Your own personal money relationship may be a combination of two or more of these identified scripts. According to the research, the first three can all lead to negative behaviours such as compulsive spending or gambling, overwork and financial dependence or denial. While having a 'vigilance script' can certainly keep you from being reckless with money, it isn't necessarily any better for your wellbeing to avoid spending money because it scares you.

Acknowledge how you feel

Findings from the Klontz research suggest it may not be necessary to actually change your money script. It's more a case of acknowledging what your feelings are and looking for practical ways to disrupt the behavior they cause. Being a money worshipper, for example, often comes with feelings of envy when faced with the trappings of a life that seems better than yours. If this sounds familiar, remember to take regular breaks from social media feeds, like Instagram and Facebook that remind you of the upgrade to your home, wardrobe or holiday your money script has you longing for.

Switch to a new feeling

Another way to disrupt money feelings that make you feel bad when you spend it or don't spend it is to substitute a positive feeling for a negative one. Perhaps trading envy for gratitude is a way to break the cycle of dissatisfaction. You could do this by practicing gratitude as you pay for your food shopping, mortgage and electricity bills to remind yourself that a secure, comfortable life is already yours.

Team up

When you're trying to work against something as powerful as your money beliefs, the last thing you need is to be surrounded by people who aren't supportive of the change you're trying to make. As some of your money feelings are likely to come from family, they may not be the best ones to look to as a sounding board for your new money goals.

Finding yourself a money buddy can be a great way to get support to change financial behaviours that hold you back. Whether their script is similar to yours or completely different, you can get to know each other's weaknesses when it comes to money. Then you rely on each other to call out old negative money feelings and encourage you to act on positive new ones instead. 

Looking for ways to overcome negative financial behaviours, one step at a time. Discover 7 little ways to be better with money and find out how other Aussies feel about their money.

[1] Journal of Financial Planning, How Clients' Money Scripts Predict Their Financial Behaviors, Bradley T. Klontz, Psy.D., CFP® and Sonya L. Britt, Ph.D., CFP®

Money and Life
(Financial Planning Association of Australia)

Money talk is one of our biggest taboos in Australia. But if we can't be open about it, how will our kids learn to thrive in the invisible money age? Find out more about the potential benefits of opening up about money for you and your kids.

In two recent surveys[1] on what Aussies prefer not to talk about, money came out on top. Personal finances are the topic most likely to make us squirm, even more so than sex, religion and politics[2]. This is hardly a surprising discovery when was the last time you had a casual discussion about your personal debts, income and how much you spent on that overseas holiday last year? But it's ironic and perhaps even worrying, that in a country where household debt and financial stress are rising, talking about our finances is still off-limits. Instead of opening up, for the benefit of ourselves and others, we're still keeping money matters good and bad under wraps.

Where's the harm in keeping quiet?

Should we start talking about money more? Surely there are good reasons for steering conversations away from troubling things like debt. Sharing salaries and how much we owe on our credit card can make us uncomfortably proud or ashamed, not to mention the feelings we might trigger in others. Being open about money leaves us vulnerable to judgement and introduces the possibility of making others feel envy or pity.

But these risks are likely to be worth the rewards, according to research conducted by ME Bank. In their 2015 survey, they found that getting finances out in the open can make a difference when it comes being less stressed about money. 78% of people who avoid discussing money are stressed about their finances, compared with 35% of those who are comfortable with money talk[3]. The survey also found that being open about money often means you're likely to be more active in managing your finances too[4]. While these findings might tell us that people who feel relaxed about money and in control are going to be more comfortable talking about it, perhaps it's also important to note that bottling up money problems and worries isn'tgoing to help you work out a solution or sleep at night.

At the extreme end of the spectrum, dishonesty about money can lead to serious problems with your partner and other family relationships. The ME Bank survey also notes that being open about finances in a relationship can cut your chances of arguing about money by almost half. 61% of couples who talk money will rarely or never fight about it, compared with only 34% of couples who consider money off-limits as a subject for discussion.

Money matters for a new generation

It seems clear from the ME Bank survey that talking more freely about money could be good for all sorts of things, including happier marriages and relationships. But we should also consider the benefits of changing the script about money for our kids. The Share the Dream report from the Financial Planning Association shows the majority of parents see their kids as more confident with money (69%) and financially literate (57%)[5]than they were as children. But this doesn't stop parents from being concerned about how well equipped their children are to become successful with their money as they reach adulthood. Almost half of parents surveyed (45%) worry their kids won't have the skills they need for financial success in the future[6].

What holds us back from opening up

In spite of this concern, only half of parents had talked money with their kids in the last month[7]. What's perhaps more concerning is that 68% of parents feel some reluctance to talk about money, even though 62% believe their kids are likely to be worse off than they are, financially speaking[8]. Surely it's worth overcoming this continuing view of money as a taboo topic if kids are going to stand a chance of being financially secure and independent. It's hard for them to learn positive money lessons if parents are hesitant to share their knowledge.

Get talking about invisible money

For parents who are taking on the task of money education for their kids, their number one lesson is on how to spend and save (52%), followed by how to earn money (43%)[9]. What they're not talking about much is the important subject of invisible money. Less than one in five parents have talked about online shopping (19%) or in-game app purchases (13%) in the past six months and the numbers discussing things like Afterpay are tiny a mere 5%[10].

While around one in 10 parents[11]might feel their own knowledge of money matters like these is stopping them from being open, far more of them are well aware that digital money could be a serious challenge for their kids financial wellbeing. Two thirds of parents agree digital money is making it harder for children to grasp the value of real money[12].

Getting the balance right

Whether it's traditional money issues that parents are addressing with kids, or the more modern ones like tap and go payments and bitcoin, it's important to make it a positive conversation. No-one wants to pass on financial worries as part of the lesson, so try to keep to yourself any stress or concern about your own finances. You can be honest about your experiences and still help kids to understand that money can be a positive thing in their lives if they get into good habits early and learn to manage cash flow when they're earning and paying their own way.

Planning your next money conversation with your kids? There are some great tips and activities in our free eBook: How to talk money with children

[1] Finder media release, Talking about money off limits for Aussies (but sex and politics OK), 17 February 2016,https://www.finder.com.au/press-release-talking-about-money

[2] ME Bank, Sex and money are our top taboo subjects, 4 November 2015,https://www.mebank.com.au/news/sex-and-money-are-our-top-taboo-subjects/?r404=1

[3] ME Bank, Sex and money are our top taboo subjects, 4 November 2015 "The more you talk openly about your finances with others, the less worried you are about them. Of respondents who said they don't like talking about their finances, 78% were worried about their finances compared to 35% of those who do like talking about their finances."https://www.mebank.com.au/news/sex-and-money-are-our-top-taboo-subjects/?r404=1

[5] Financial Planning Association, Share the Dream report, page 5

[6] Financial Planning Association, Share the Dream report, page 9

[7] Financial Planning Association, Share the Dream report, page 6

[8] Financial Planning Association, Share the Dream report, page 5

[9] Financial Planning Association, Share the Dream report, page 6

[10] Financial Planning Association, Share the Dream report, page 6

[11] Financial Planning Association, Share the Dream report, page 10

[12] Financial Planning Association, Share the Dream report, page 5

Money and Life
(Financial Planning Association of Australia)

Maybe you've heard about salary sacrifice as a way to increase your retirement savings. But did you know it can be a very tax-effective way to make voluntary super contributions? Find out how you could boost your retirement savings and pay less tax all in one go.

What is salary sacrificing to super?

In very simple terms, salary sacrificing into super means paying an amount from your pre-tax salary into your chosen superannuation fund. The amount you decide to contribute could depend on lots of things, including how long until you retire, how much you currently pay in tax, and how much you can afford alongside your current financial commitments including mortgage and loan repayments, household bills and other living expenses.

What are the benefits?

Up to a certain amount, these extra contributions are taxed at a rate of 15%. If you're paying a higher marginal rate of tax on your income, you'll save on the amount of tax you're paying. Putting more into your super now helps you build your balance faster, so you'll have more money to draw on when the time comes for you to retire. So this way of saving for a retirement can be a win-win for your tax bill now and your future income when you're no longer working.

As well as potentially saving you money on your tax, there are two other key advantages of saving for your retirement in this way. The first is all about timing and compound interest. The earlier you start making extra contributions, the more potential investment returns you'll earn from your super balance over time. Even a very small contribution over time can make a significant difference in the long run. The MoneySmart Super Contributions Optimiser can show how much impact extra contributions could have on your super balance at retirement. It can also help you calculate whether making extra pre-tax payments is the right approach for your circumstances.

Salary sacrifice can also be a way to make sure you're taking steps to boost your super without having to prioritise payments from your day-to-day cash flow. There can be many reasons to delay saving for retirement, and salary sacrifice can work in your favour by automating your extra contributions so you don't have to make the effort to budget for super savings.

Things you should be aware of:

• Does your employer offer salary sacrificing?

Many employers offer you the option to salary sacrifice contributions into your super but some may not. Check with your company payroll to make sure it's something they can do for you.

• Will your employer continue to pay into your super under the Super Guarantee?

Your employer is required by law to pay contributions to your nominated super fund under the Superannuation Guarantee (SG)[1]. The current SG rate is 9.5%[2], so your employer must pay 9.5% of your annual salary as a contribution to your super.

• Will your extra super payments stay under the annual cap for pre-tax contributions?

Current government policy allows you to make up to $25,000 in pre-tax (also know as concessional) contributions in each financial year[3]. That amount includes the 9.5% SG payments made by your employer. So the amount you'll be able to salary sacrifice will depend on how much you earn and the level of your annual SG contribution from your employer.

• How will making these contributions affect your other financial goals?

Saving for super can be an important goal, but there may be other financial priorities you need to budget for. Saving on interest by paying off your mortgage earlier, for example, could get you further ahead with your finances than saving tax dollars.

• Can you afford to have this amount of money tied up until retirement?

It's important to remember that you won't be able to withdraw from your superuntil you retire or reach your preservation age, except under a few special circumstances. If you think you're going to need access to the extra money you're paying into super, you might want to consider saving or investing it in another way.

Expert help

While salary sacrificing has advantages, it may not be the right strategy for you, depending on your age and circumstances. Advice from a CERTIFIED FINANCIAL PLANNER® professional can help you determine whether salary sacrificing should be part of your strategy for saving for retirement and how much you should contribute to make the most of the benefits.

Saving more into your super isn't the only way to boost your retirement nest egg. Find out more about investing your super for the right level of risk and return to make sure you're maximising your savings and income for retirement.

[1]Australian Taxation Office, Working out if you have to pay super,https://www.ato.gov.au/business/super-for-employers/working-out-if-you-have-to-pay-super/

[2]Australian Taxation Office, Super Guarantee Percentage,https://www.ato.gov.au/Rates/key-superannuation-rates-and-thresholds/?page=23

[3]Australian Taxation Office, Concessional contributions cap,https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?anchor=Concessionalcontributionscap#Concessionalcontributionscap

Marnie Banger
(Australian Associated Press)

Small and medium-sized businesses may soon be able to borrow money at more competitive rates, under a $2 billion federal government plan to boost the funds available to smaller lenders.

The money will be injected into the small banks and non-bank lending market in the coming years through a new Australian Business Securitisation Fund.

The initiative will mean more competition in the business loans market, currently dominated by the big banks which account for more than 80 per cent of loans that are less than $2 million.

The taxpayer-backed fund will buy packages, or securitisations, of secured and unsecured loans issued by small lenders, thereby giving them more money to lend out at potentially lower interest rates.

Small businesses currently pay borrowing rates of up to four percentage points higher than those for home loans.

"We want small business more than three million of them across the economy to get access to affordable finance," Treasurer Josh Frydenberg told reporters in Melbourne on Wednesday.

"More competition, more liquidity, stronger securitisation markets, will ensure lower rates for doing business."

Small businesses can also find it difficult to get financing without offering security such as real estate.

The new fund arrangement should address that because it would support both secured and unsecured loan markets.

Labor is open to the idea but shadow treasurer Chris Bowen wants to see the details to ensure all the right checks and balances are in place.

The Australian Business Securitisation Fund is expected to be operating by 2019 and will be overseen by the federal government's debt portfolio manager, the Australian Office of Financial Management.

Mr Frydenberg said the fund would be classed as an asset, won't increase the nation's net debt burden and will support the growth of Australia's securitisation bond market.

Prospa, Spotcap and Judio are among small lenders to have swiftly praised the step.

"High costs of capital for lenders like Prospa directly impacts interest rates and the availability of affordable finance for small business," Prospa chief executive Beau Bertoli said.

The coalition is also encouraging financial institutions to establish a private-sector Australian Business Growth Fund, to help small businesses access longer-term equity funding.

This would involve banks taking a stake in a business, enabling it to grow without taking on debt or giving up control.

Similar funds are already in place in the United Kingdom and Canada.

The establishment of an Australian version requires the Australian Prudential Regulation Authority to loosen the current arrangements governing the treatment of equity for bank regulatory capital purposes.

Mr Frydenberg will meet with regulators and stakeholders to discuss the fund at a roundtable later this month.

Small business ombudsman Kate Carnell says the new securitisation fund will go a long way towards to addressing the finance needs of the sector and has urged all lenders to back the creation of a growth fund.

(Australian Associated Press)

Many Australians fear they won't have enough money to retire on, but a new study says that's not so.

The Grattan Institute research found the vast majority of retirees today and in future are likely to be "financially comfortable".

"Even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income well above the 70 per cent benchmark endorsed by the OECD," it said.

Grattan CEO John Daly also argues low-income Australians will effectively get a pay rise when they retire, through a combination of the age pension and their compulsory superannuation savings.

"The financial services industry 'fear factory' should be shut down, because it encourages Australians to worry unnecessarily about whether they'll have enough to retire on," he said in the report released on Wednesday.

But life could certainly get tougher for the poorest Australians, who are on low incomes, or don't work, and rent their homes.

To boost retirement incomes for the poorest Australians, the report calls for a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance worth more than $1,400 a year for a single retiree.

The Grattan Institute also calls for legislated increases in the superannuation guarantee awarded to workers, which will rise to 12 per cent from a current 9.5 per cent, to be scrapped.

Workers would be earning the full 12 per cent by July 2025, at a cost of $2 billion a year.

The report argues this will ultimately cheat workers because it would "take away more money from working-age Australians that could be used to pay down the mortgage", potentially leading to larger household debt in retirement.