Managing the "Top Four" Expenditures

Nrma Home Insurance - Managing the "Top Four" Expenditures

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Most people would place their lifetime "top four" expenditures as paying taxes, buying a home, having and raising children, and buying and maintaining major assets such as cars. Paying for education comes on top of these four. I've pulled together some tips for you to consider.

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Nrma Home Insurance

Income tax and wages containers

Generally speaking, there are a few ways that commonplace Paye employees can carry on their tax take. The best strategies will depend upon what type of industry in which you work, and specifically if you work for a "Public Benevolent Institution" (Pbi) or not. As of early 2003, employees of Pbis such as charities and religious organisations are entitled to earn ,450 of their wages tax free, and can box personal expenses such as groceries, school fees and health insurance. Communal hospital employees can earn ,755 tax free in the same way. Employees working in the Communal sector ordinarily do not have access to these concessions without having to pay Fringe Benefits Tax (at the top marginal rate of 48.5%).

Depending upon your circumstances, and with the advice of your financial adviser, if you are a Paye laborer you be able to cut your wage tax through: superannuation contributions through wages sacrifice, because contributions are taxed at 15% for Paye employees (self-employed people enjoy best terms - the first ,000 is tax deductible and then 75% of each dollar is deductible according to inevitable age restrictions);

superannuation contributions through wages sacrifice, because contributions are taxed at 15% for Paye employees (self-employed people enjoy best terms - the first ,000 is tax deductible and then 75% of each dollar is deductible according to inevitable age restrictions); contributions to a spouse's superannuation provides a possible benefit if he or she earns less than ,800 per year - in this case you can receive an 18% tax offset for after-tax contributions up to ,000 made on their behalf splitting income, such as interest or other income-producing assets with a spouse on a lower tax base; negative gearing investments such as asset and share purchases (see also "margin lending" in this section); deferring assessable wage into the following or later year (such as bonuses, back pay, directors' fees and eligible termination payments for employees, and quarterly wage for contractors or self-employed individuals), especially where you expect your tax rate to be lower in the future; bringing forward deductible expenses into the current tax year, especially where amounts can be prepaid, such as interest on a geared venture loan; realising or deferring capital gains in or to a year where your assessable wage is anticipated to be low; carrying forward capital losses, recognising that capital gains are currently taxed at a maximum of 24.25%, and that offsetting losses can be carried forward against hereafter gains; making charitable donations of or more to any eligible organisation, where you don't receive whatever for your money; setting up a family trust to help split assessable income, minimise capital gains tax and protect the value of your estate in case of illness or death; recognising franked dividends, assuming that you earn less than ,000 per year, the wage tax rate is less than the tax paid by the enterprise at the enterprise tax rate; packaging enterprise expenses that would otherwise have been made out of after tax income. wages containers provides the greatest benefit where the items are concessionally taxed and used for enterprise purposes. Some of these contain car leases, car parking, laptop computers and personal organisers, and even childcare in case,granted by employers on their premises. Because your situation may change, it's regularly best to only commit to those items in your box that you would have purchased anyway.

This list is not exhaustive and deductions are also ready for expenses linked to running a enterprise or for self-employment expenses (travel, uniforms, self-education, and maintaining tools and equipment, home office, and a library, etc). Primary output schemes have been touted in the past as ways to cut your tax - some are legitimate and some are not. Again, ask your adviser for help in working out what's best for you and what is proper in the eyes of the tax office.

Buying a home

No one needs to tell you that next to taxes, your next biggest outlay over time is likely to be your mortgage. And over the past five years or so, owning a home in a good location and close to a major city has ordinarily been a good investment. But there's no point in looking back, especially if you are new on the store - you've got to deal with the present and with the opportunities and risks at hand. If you read the newspapers, which just happen to get a lot of their revenues from property-related advertising, there appears to be a lot more upside in the real estate market. Other, maybe more objective sources say that the store has overshot and that prices will come down as interest rates rise and economic and global uncertainty starts to bite.

Because real estate has a essential cost of entry, especially in states like Victoria with high stamp duties, and because it can take three or more months to complete a sale, it can be argued that there are better, more flexible ways of investing your money. Of course, if you don't own a house, and plan to stay in an area for more than five years, it's probably a good idea to get into the market. The million (or so) dollar ask is "when?", given the view by some that properties are overpriced and set to fall. If you already own a house and are paying off a mortgage, it's also a truism that paying off your mortgage may be a best venture than alternatives. This is especially true when considering factors such as capital gains tax exemptions on the family home (your financial adviser may have other views about the merits of paying off your house, such as using your debt as leverage for other investments). Assuming that you want to buy a home to live in, let's look at a few guidelines:

Review your prestige history and spoton any problems - Assuming you are going to seek the best terms for a loan, you'll want to make sure you can negotiate the best deal, based upon your credit-worthiness. Consider what you can afford - think your financial position, your view of your (and your partner's) job security and marketability, and the amount of funds ready to you from lenders. Put all this in perspective with your whole financial plan and goals (discuss your Goal Setting results that you should have completed with your financial adviser), so that "affordability" also means having funds in keep to spend in other areas and accomplish lifestyle goals. Pick your lender - Speak with your financial adviser about the lending options ready and what terms may be involved. The best loans may not come from Primary banks. Approach prospective lenders and negotiate lending terms in principle before contracting to buy a house. Consider increase locations - The axiom used to be "location, location, location". This will still be true in a rising market. If you believe that the asset store has come to be overheated, you may think looking at "second-tier" neighbourhoods with good access to transportation and schools, but that don't carry the name and high price tag. Use technology to your benefit - The Internet is becoming a essential tool for searching for properties in your price range. If you can believe the quoted range, that is. Agents ordinarily quote prices colse to 10% less than the vendors expect. Look beyond the furniture - A "plain Jane" asset can look worth ,000 more with French antiques, fresh flowers and Primary oils on the walls. Agents know this and often commission decorators for as much as ,000 to bring in furniture for the sale. After settlement, all you're left with is the house and nominated fixtures and fittings. You may like to bring along a digital camera to remember what you've seen. Don't get tricked by "helpful" estate agents - Unless you regain the services of a buyer's advocate, agents do not work for you as the buyer. They get paid to sell vendors' homes, and to get the most money from you that they can. The auction theory is often derided as a theory that plays upon anxiety and fear (for the buyer) and greed (for the vendor) in equal measure. There may be some truth in that view, so be particular about how much information you give about yourself to the agent. Consider a asset inspection - Hiring a asset inspector to check out the house will be helpful in looking out what inexpressive faults there are, especially when buying at auction and with no recourse to the seller after the sale. Of course, the risk in doing this is that now the agent and the seller know you're a serious contender for the house and they will hold out for their best price. Set your price - If bidding at auction, decree what the price should be based upon study into sales of similar properties in the area, set your price and stick to it. If the rule of investing is to "buy low and sell high", you've got to start low to begin with.

In some locations and situations there's an argument for renting instead of (or in addition to) buying. If you believe other investments will contribute you with a best return, or if you move colse to a lot and don't expect prices to rise more than other venture in the future, you may prefer to rent. You may also think buying a asset and putting a tenant in it, and then renting the place you live in. There are tax implications both for and against this approach, so speak to your adviser before production a decision.

Having children

According to new estimates, it costs colse to 0,000 to raise a child to 18 years of age, and significantly more if you intend to send Junior to inexpressive school or cover the cost of their university years (see below). And that's before considering the chance costs of one breadwinner being out of the job store and maybe losing some of their work momentum. But the financial pain can be less if you plan ahead and carry on your expenses along the way. It's a good idea to learn more about your employer's policies on maternity or paternity leave and discuss with your spouse how you will carry on while a period away from work. Your manager may also agree to permit you to continue working part-time to enounce your skills and place in the pecking order. It's likely that many young parents will also be juggling a mortgage.

It's worthwhile discussing your situation with your bank and rescheduling your payments for the period one of you is on leave. You might even think prepaying some of the mortgage payments before you have a discount in your income. In the early years, and in addition to a possible loss of income, you'll probably be keen to spend big on the nursery, and then on the nappy service, clothing, babysitting and childrens' activities. It's easy to let emotions run riot at this happy time, especially with a first child, and throw financial caution to the wind. Think twice about some of the linked costs and the alternatives ready before reaching for your wallet before and while the first five to seven years. When you have a second child you probably won't think twice about using the older sibling's cot, bassinette, change table and other paraphernalia.

Why not enjoy these savings with the first child and buy things from other parents for from shops gift clean, recycled furniture? A nappy assistance may save you from facing the more organic delights of parenthood, but convenience comes at a cost. If a partner is at home anyway, cloth nappies can be more environmentally friendly, although they may give your Simpson Minimax a bit of a workout. Also think joining or beginning a babysitting club - you'll make new friends in the same position as you, and you'll be able to go out without spending a fortune on that adolescent girl raiding your refrigerator. And before you send two-year old Philippa to ballet lessons, remember that most authentically young children probably won't remember their plies from their first positions for long. You may be able to expound the cost of these activities as a socialisation practice for you and the baby, but be particular that you don't fall into the trap of signing up for the fees, the tutu, ballet shoes, the photo session and the instructional flip cards for tiny Philippa where a daily stroll in the park might be just as beneficial. Remember that the baby enterprise is big business, and it plays upon peoples' pride as well as their fears.

If you are considering beginning a family, you'll need to revisit your priorities, your spending habits and think financial plan and your allocation (assuming you have one). It's foremost to speak with your financial adviser to make the best way to plan for the advent years and to make some good habits early. This is especially true if you need to set aside money to fund your childrens' education. There are special funds and kindly societies set up for this purpose, and your adviser can guide you in the right direction.

Buying a car

For some people, buying a car is the second most expensive purchase they will make, next to buying a house. Having a new car sure makes you feel good, but it can be expensive. It's foremost to get one that best suits your needs as well as your finances. It's easy to be attracted to the siren song from advertising media. Before you go out and buy a car, think what you are using it for, how you drive and what you authentically need. It's no good buying a flash new tiny sports car with a five-speed hand-operated transmission if the man authentically driving the car can't drive a manual, and is planning to carry colse to lots of kids and their gear.

Before you decree to buy, you'll need to drive the car to see if it meets your needs. You may even think hiring one over the weekend before you buy so you can get an objective view without any sales pressure. Load up the family and see if that covenant will get you and your family to Noosa without losing Fido out the window. Just like when shopping for a house you need to think your allocation and set a price - and then stick to it. You may also want to think the impact of total running costs (including insurance, registration, maintenance and petrol) on your cash flow before production a final purchase decision.

If you aren't paying cash, you'll need to organise your financing. It's best to do your study before you get to the dealer. Dealers can offer you the convenience of a car loan while signing for the car, but it's likely it will cost you more than you might get elsewhere. It's the same with insurance. Call colse to before you accept the dealer's offer. You may even think buying a used car over a new one. Most people know that a new car loses a lot of its value as soon as it's driven out of the car yard. You can do some of your introductory shopping and pricing on the Internet, through sites such as Carpoint.com.au or Drive.com.au.

There is a point, though, where an older car starts costing you more in repairs and maintenance, especially foreign ones. Either you are buying a new or used car, it's also a authentically good idea to know your legal possession before you enter into a contract. You can get more information from your local car club, such as the Racv in Victoria or Nrma in New South Wales. See their websites for more information. Unfortunately, car salespeople have earned a bad prestige for themselves. Sometimes, this isn't unwarranted. But, think twice before you agree to "just sit down in my office and we'll look at how the numbers stack up". Know what you authentically need, what it should cost you, what extras you want and can live without, and that the particular car authentically suits your needs before sitting down with a contract.

Sales people are also good at the "bait and switch" approach, where they draw you in with a business transaction offer, only then they convince you that you authentically need the alloy wheels, Cd player, sunroof, and so on. Oh, and you need the rustproofing and extended warranty and tinted windows and metallic paint and... All these extras can add up. And, just like buying a house, the salesman is likely to be trained to find out as much about you as possible and how to capitalise on their perception of your needs or weaknesses. Concentrate on the task at hand, which is getting the best price, not production a new friend. It's a good idea to discuss this selection in information with your adviser, since leasing is not for everyone, especially if you aren't including the lease in a tax-effective wages package.

I hope you have new knowledge about Nrma Home Insurance. Where you may put to used in your day-to-day life. And most importantly, your reaction is passed about Nrma Home Insurance.