When times are tough financially or unexpected bills pop up, having an emergency fund set aside can alleviate stress. Unfortunately, many people choose not to or struggle to find spare cash to put aside. This article explains the importance of an emergency fund and offers clever savings tips to get your fund growing.

It’s the most common story financial professionals hear. Unfortunately, too many people fail to set aside emergency savings to see them through life’s hiccups. So when the inevitable happens, and an unexpected bill arrives, they are put under pressure to find the funds to pay it.

In turn, this leads to maxed out credit cards or taking out expensive short term loans. And so begins the bitter downward cycle of falling behind on essential bills and other regular payments.

Statistics

The Household Financial Comfort Report, published by ME Bank, found 21 per cent of Australian households had less than $1,000 in cash savings.

Additionally, 24% of households reported that if they lost their income, they’d only be able to maintain their current lifestyle for one month, and 11% for just two weeks, which is the equivalent of living life on the financial edge.

How much should I have in my emergency fund?

Financial professionals recommend having emergency savings set aside for life’s unexpected bills, but how do you go about doing this, and just how much money should you set aside for rainy day expenses?

The best place to start is to work out just how much money you have now and what income you can expect to earn over the next twelve months. Against this, determine what your expenses are likely to be and hopefully, they are less than what you earn. If not, you need to cut back.

Then decide how much you need in an emergency fund. Just how much you set aside will depend on your circumstances. Most experts suggest you should have the equivalent of between three to six months of living expenses set aside.

Start building up your emergency fund

The best way to achieve this is to break it down into achievable goals. For example, try to set aside one month’s worth of living expenses or, say, $2,000. That means saving $330 a month or going without two takeaway coffees each day for the next six months.

Once you’ve achieved that, try to save a second amount of $2,000 until you reach your goal.

A clever way to fast track this is to think about holding a garage sale or selling those things you have sitting around that you no longer need or perhaps even take up a part-time job for a few hours each week and put these wages towards the creation of your emergency fund.

Where to keep your emergency fund

The next step is to decide where you should keep these funds. Ideally, you want them to be separate from your day-to-day finances but still within easy reach, should you need them.

If you have a home loan, establish a mortgage-linked offset account. In doing so, these funds will not attract interest, which would be taxed at your marginal tax rate, but instead will work to reduce the cost of your overall mortgage.

Another option is to establish a ‘micro’ savings account. The rules on these vary, but most are based on rounding up every purchase made on a debit card and setting these ‘cents’ aside in a free savings account.

Whichever strategy you adopt, remember having a small amount set aside as rainy-day money, no matter how small that amount might seem, is better than having no funds set aside at all.

At Hejaz Financial Services, we have investment accounts to help you grow your savings Islamically. Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our licensed financial adviser about what best suits your situation.

This article highlights the importance of seeking financial advice, the cost-effectiveness, and the essential role of a financial adviser in your life. It also discusses how the recent education and compliance requirement changes have affected the financial advice profession.

It is commonly assumed that seeking financial advice is for the wealthy, and it only helps the rich become richer, yet financial advice can prove useful to anyone who wishes to better their financial future.

Financial advice is like getting a health check-up for your financial situation. Your financial adviser is like your personal trainer, assisting you in achieving your best possible financial health.

Seeking professional financial advice provides you with a clear path to achieve your financial goals, and that is an investment worth making.

Why invest in financial advice?

Imagine a couple in their early 30s who started investing in the share market in 2019 to save for their children’s private school fees over the next 10 years. Their shares dropped by 35% during the March 2020 market crash caused by the COVID-19 global pandemic. They panic and sell their shares, incurring a loss. However, a good financial adviser would explain the risks, provide examples from their experience and probably would have advised them to hold the course because theirs was a 10-year long term plan. Within a year, the share markets recovered and are now higher than ever.

Financial advice isn’t only about investing your money in the share market. Want to save to buy your first home? Want to protect your children in case of your death? Want to enjoy a comfortable retirement? Don’t understand what to do with your super or how to invest in the share market? Think of a financial adviser as a one-stop shop for the majority of your financial issues in life.

Come to think of it, be it your parents telling you to save money from your first job or an Instagram ‘finfluencer’ explaining the benefits of compound interest while dancing to a trendy song, these are all informal pieces of financial advice you receive throughout your lifetime.

However, a professional adviser can legally provide holistic advice by reviewing your entire financial situation and your risk-taking capacity to recommend an appropriate investment portfolio. Also, an adviser’s investment recommendations are based on research which can give you comfort over your decisions rather than constantly worrying about the investment you made based on your work colleague’s stock ‘tip’.

Is financial advice cost effective?

The financial advice industry has undergone a monumental transformation following the Financial Services Royal Commission of 2017-2019. As a result, new education and compliance requirements have been legislated to further protect the client’s best interests.

This has led to a drop in the number of financial advisers Australia-wide – from approximately 28,000 in 2018 to just 19,000 in 2021.

The silver lining here is that while there are fewer advisers to choose from, the quality of advice is deemed to improve exponentially.

As per Russell Investments “Value of an Adviser” report, advisers added a value of approximately 5.2 percent to their client’s portfolios in the 2020 COVID-19 pandemic.

Still, the true value of financial advice is much more than comparing the fees you pay against the performance of your investments, or the tax saved on your income.

A financial adviser can be a sounding board for your financial ideas, a resource to answer the simplest or most complex of queries, provide research-backed recommendations, and guide you over the long term based on their experience.

Ready to make the investment?

Your day to day job may not allow you to focus on the financial aspect of your life. In contrast, your financial adviser’s primary daily responsibility is to help you handle your finances efficiently.

At Hejaz Financial Services, our financial advisers can help manage your Superannuation, Home Finance, and Investments all in an Islamic compliant manner. Your financial future begins today.

Visit https://www.hejazfs.com.au to learn more.

Making a personal budget

To get ahead financially, creating a budget is essential to control your spending and visualise where you are in relation to your financial goals.

1. Set your financial goals

• Setting your short-term, mid-term and long-term financial goals is an important step towards becoming financially secure. If you are not working toward anything specific, you are likely to spend more than you should.
• After setting your goals, you will be able to visualise your goals and track your progress to reaching your goal. Make sure to set S.M.A.R.T goals, goals that are specific, measurable, attainable, relevant and time based.

2. Determine your income and expenses

• With everything becoming digital, you will be able to access your income and expenses at the tip of your hands. Hence, it would not be too difficult to determine your income and expenses. Record all your income, how much money is coming in, when it is coming in and where the money is from. After that, add up all your expenses and separate them into fixed expenditure, unnecessary expenditure and unexpected expenses such as medical bills. Separating them into different categories will help you determine where you can cut down on and how much of those expenses are fixed and necessary.

3. Check for unnecessary expenses (prioritise spending needs vs wants)

• Now is the time to eliminate unnecessary spending. Once you have reviewed your spending, you will probably find unnecessary expenditure. Identifying all your unnecessary spending and adding it up will show how much money you could put towards saving. Of course, you do not want to feel like you are depriving yourself and a treat each week is fine. So, set aside a small portion of your money to enjoy yourself while still living within your means.

4. Set spending limit

• After knowing exactly how much your income compares to your expenses, you will be able to determine what are unnecessary expenses and where you can cut back. Knowing how much income is coming in and how much fixed expenditure you are incurring will help you set a spending limit. After setting your spending limit, make sure to stick to it. There are many free online budgeting tools available, such as the MoneySmart Budget Planner found here.
• There is also a multitude of smartphone apps that can help you record everything you spend. This can be an interesting exercise. At the end of every month, you can easily compare your total purchases and outlays to your budget. You might be amazed to see where your cash is actually going.

5. Review budget

• Make sure to review your budget regularly and record any change in your income and expenditure. Also, make sure to see where you are in relation to the financial goals you have set for the short to long-term and adjust your budget to achieve them.

At Hejaz Financial Services, we have investment accounts to help you grow your savings Islamically. Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our licensed financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level, and design an investment strategy that’s right for you.

Estate Planning

Estate planning is a way of ensuring that the assets you own and wealth you have built is passed onto your beneficiaries in the most financially efficient and tax effective way possible. This is essential to protect your assets and your family.

Don’t put your family at risk, protect your loved ones.

What Is an Estate?

An estate is everything comprising the net worth of an individual, including all land and real estate, possessions, financial securities, cash, and other assets that the individual owns or has a controlling interest in.

What assets fall outside the estate?

Not all assets form part of the estate. Any property owned as joint tenants will automatically pass to the survivor. This may include real property, joint bank accounts and joint shares.

Superannuation may also fall outside the estate. If the deceased has made a valid binding nomination, then the superannuation fund will pay the superannuation to the person nominated and bypass the estate.

Similarly to superannuation, if the deceased had nominated a beneficiary of any life insurance policy, then any payment would be made directly to the nominated beneficiary and not form part of the estate.

Planning your financial future doesn’t end with super.

A good estate plan can:

• ensure the ownership and control of your assets passes to your intended beneficiaries and in the right proportions
• minimise the tax impact on your estate and beneficiaries
• ensure your estate is administered in a cost-efficient and timely manner
• protect assets if a beneficiary is involved in any legal difficulties (e.g. bankruptcy or divorce) or under a legal disability.

Once you’ve created an estate plan, you should continue to review it on a regular basis, particularly when an important life event occurs:

• getting divorced
• the birth of a child
• the death of a relative you’ve provided for
• starting work
• changing jobs
• retiring

Want to talk estate planning? Contact us here.

We all want to give our children a head start in life. This article shows you three steps that will help you instil sound financial habits in your children by setting the foundations of good money management now and lead them towards financial success. All parents want their children to be better-off than they were – more secure and financially independent, but the big question remains: where do you start?  

This article shows three steps to your kids financial success, ushering them towards financial security.

Step 1: Create good habits 

Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save.  

Help them by: 

• Providing a glass jar through which they can see their savings mounting up for very young children. 
• Teaching the difference between needs and wants. Lead by example with your own savings habits.  
• Involving them in the household budget; compare prices at the supermarket and demonstrate bill-paying. 

• Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to: 

• spending on anything they want. 
• donating to charity to instil a sense of community and empathy, 
• saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys. 

Step 2: Inform 

Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores.  

People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals. 

Helping kids understand the concept of a credit score can be a little daunting, so try these tips: 

• Brush up on your knowledge first. 
• Don’t focus on numbers, explain that it’s about financial behaviour over time. 

• Avoid complexity and keep the information age-relevant. 
• Use examples. Discuss mistakes you’ve made in the past and explain how you rectified them. Explaining to them the rationale behind some of your financial decisions will help instil good values in your child. 

Step 3: Educate  

By the age of 3, children can understand the concept of money. By age 4 your child should be able to understand the connection between money and things. You can help them by making shopping lists and bringing them to the store, this will help them make the connection between money and things at home. By age 6 you can teach them the connection between work and money, you can help them by paying pocket money for age-appropriate chores. 

With early financial education, children will be more comfortable talking and learning about finance. Searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and investments. These online resources can help in the process of educating your kids about the different types of accounts or investments available in the market to help grow their finances.  

Introduce your kids to good habits while they’re young, and you’ll be setting them up for success. 

This article provides five financial tips that all generational groups can benefit from. When it comes to money, some things stay relevant regardless of your generation. So here are five tips for getting, and keeping, control of your finances – for life! 

1. Living within your means seems obvious, but surprisingly, many people don’t. It’s why credit like store/bank cards and shop-now-pay-later facilities are so popular. Unmanageable debt has the power to keep you awake at night – and not in a good way. But you really can survive without the latest device or car.  

In short, don’t be a slave to possessions; why lock yourself into debt more durable than the item? 

2. Save. The world is full of opportunities: travel and socialising, etc., but don’t underestimate the security of a stash of cash. With a small, regular commitment, you can have a life and save too. 

Consider this example: 

An initial $500, plus $50 per week over five years, could accumulate almost $15,000! (Assuming no withdrawals and 2.5% profit over the period).  

Additionally, developing a savings habit will help create a good credit score for, say, a future home loan. 

3. Buy quality items like clothing or furniture. Pieces in good condition will generally last longer, and with care, can become classics you won’t need to replace. 

4. Learn to cook. Nothing beats a home-cooked meal for cost-savings. Find a recipe, make a list, shop and cook. Not sure what you’re doing? YouTube is your best friend. For $30, you could cook yourself and a friend a similar meal costing around $80 in a restaurant. (There’s the week’s $50 for your savings account!) 

5. Make a budget and stick to it. Record income, then expenses beginning with non-negotiable ones like rent, home payments, insurance, transport, groceries, etc.  

If you can’t account for some of your money, a budget will help you identify areas of overspending so you can reallocate funds to savings and discretionary expenses. 

The government’s MoneySmart website provides a budget planner to get you started, or create your own using a spreadsheet. 

There is our five financial tips, every generation believes there’s nothing to learn from the other, but the truth is we’re all learning, all the time.  

Visit https://www.hejazfs.com.au/ to see how our investment products can help you grow your finances and have your money work for you! 

These 8 pearls of financial wisdom will help you achieve your financial goals by shifting your focus to the long term instead of being fixated on the present.

What do you want and how will you get it? 

What are your retirement goals and objectives? Where are you now in relation to those goals? Create a plan that sees you enjoying the fruits of your labours and act now to make sure your financial goals are achieved. When creating or modifying your financial plan make sure to be realistic and set achievable timeframes.

It’s not just about returns 

Every investment has some degree of risk. Understand the differences between the various investment assets available and make your decision wisely. Everyone has a different comfort level and risk appetite, generally the more risk you take you will be awarded with a higher return. As you grow older, you might prefer stable returns as opposed to higher returns. So make sure to discuss with your adviser about your financial goals, circumstances and risk appetite to make the most suitable investments tailored to your financial circumstance. 

Share it around  

To help reduce risk, share your investments across several asset classes – and within those asset classes. The right balance can depend on your financial objectives, the time you have available to invest and your risk tolerance. Diversifying across a range of asset sectors and industries reduces market risk and can improve your investment potential. You don’t have to worry about trying to time the markets for the right time to invest. With a diversified portfolio, you are always in the market.  

Don’t forget Super 

Superannuation will be your bank account when you’re no longer working so consider ways to boost your super fund balance. At least 9.5% of your income is being contributed to your Superannuation, so make it count. How you invest your super will make a big difference to your retirement. Remember, you can choose what your Super is funding so choose a fund that aligns with your values. And if you are making additional personal contributions, be aware of the annual limits as penalties will apply if you exceed those limits.  

… Or Tax 

Tax is the trickiest area of all. Always seek professional advice. A restructure of an underlying asset, an investment vehicle or ownership structure could help you minimise tax and maximise your return. Determine your tax bracket and be aware of your claimable expenses and deductions. And make sure to lodge your tax returns on time to avoid any penalties.  

Retirement can last another lifetime 

Thanks to medical technology and improved lifestyles we are living much longer lives. Being prepared for a longer retirement means that you money must last much longer, so do not be too conservative with your investments. You can also make additional contributions to your Super, be sure to invest in a Super fund that aligns with your values and brings you positive returns.  

Stay Cool 

You are in this for the long term so when market fluctuate and investments unexpectedly fall in value, don’t panic and sell. Over the last 100 years global share markets have experienced many major setbacks, including the Great Depression of the 1930s, several wars, the ‘crash of 1987’ and the Global Financial Crisis 20 years later. But for every low, a recovery has followed – they just take time. Make sure to discuss with your adviser prior to making any decisions, review your portfolio and stay focused on your long-term goals.  

Keep Learning 

You are never too old to learn. Financial advisers have an important role in giving you tailored advice, but you still need to make your own informed decisions. Make sure you understand your plan and if not ask questions or do more research to expand on your financial wisdom.

Learn more about our premier Islamic financial services here, to see how we can build your wealth together.