A ticking time bomb ...

You kissed your husband goodbye and told him to have a good time and enjoy himself with the boys. But he had an accident and never made it home. Never.

After the initial shock and grief you realized that he was the one that looked after the family finances. You simply have no idea how much money you have. Would you be able to pay the mortgage or do you have to sell up and rent?

It is always sad to have to attend a funeral. And extremely sad when it is for someone young and they leave behind a young family.

But for me the real tragedy is when the surviving wife is consoled and she breaks down due to the financial mess that she is now in. Yes it would be tough looking after the kids but she would get a helping hand from family. After all there are lots of broken families who have to manage these days.

Unfortunately 2010 started this way for me when a good mate passed away on New Year’s Day. He was only 39 and had left behind five kids under the age of ten. Well respected in the community, the funeral attracted more than 1,000 people from all over the country. There wasn’t a dry eye in the place as people came to grips with the tragic news.

She doesn’t know anything about their financial situation as her husband did everything. She had no idea what the passwords were to their online accounts or how much was on the credit card.

His wife will survive but it won’t be easy. It is just so annoying as it could have been easily avoided.

When I find out the bombshell that he had never got around to organizing his life insurance nor write up a will that is when I get really mad.

How could he have been so selfish and not guarantee that his family was looked after? This scenario is a ticking time bomb only waiting to happen in most Australian households. We are dreadfully underinsured and terrible in arranging a will. But we must change our attitude or expect to face the same consequences.

What you should do:

• Talk to your partner and make sure that you are both abreast of your financial affairs;
• continuously update your list of assets and liabilities;
• keep account numbers, logins, passwords, professional contacts and other key financial information in a safe;
• organize a will, preferably prepared by a legal expert and update it regularly;
• make sure that your executors are also aware of your financial situation;
• arrange adequate insurance cover for death, total & permanent disability (TPD) and critical illness (CI)

Don’t make the mistake that you are too young to die. Have a look at the table below. If you lined up your husband and nine of his mates you can expect that at least one of them won’t be around when they turn 65. Fancy a game of Russian Roulette?

Still don’t believe that you will die young? Look in today’s paper and read the murder or accident stories. Now look at the age of the deceased. Cemeteries are full of fit and healthy people.

You can’t predict the day that you die but there is a 100% chance that you will die.

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Looking for some New Year’s Resolutions?

The last few years have been horror ones financially for alot of people. But 2010 is starting to look pretty good. Here are a few ideas from Mr Taxman Adrian Raftery for creating your own list of New Year’s resolutions to help put your finances in better shape in 2010.

Just because the economy appears to be improving doesn’t mean we can relax. Now – the start of a new year - is the best time to get serious about your finances. To help put them in better shape why don’t you make up a list of New Year’s Resolutions. Here are some for you to try and achieve in 2010:

Cut up the credit card
It is probably the hardest thing to do as most of us view the credit card as our “security blanket”. But it’s really the devil and the quicker that you take decisive action the better.

Government co-contribution
Want some free money? If you earn less than $31,920 then put an extra $1,000 into super and the Government will match it. It phases out when your income reaches $61,920.

Start saving for rainy days
Got caught out in the GFC? Don’t let it happen again and open savings accounts for education, holidays, Christmas and emergencies. Put a regular amount from every pay into each account. Remain disciplined and don’t access these funds!

Start studying
With the economy recovering I am predicting that there are going to be some great opportunities in the job market later in the year. The best investment you could make is in yourself and acquire more skills.

Control/reduce debt
We were blessed with a some large interest rate cuts but they are on the rise ... and fast. Just how much they will rise by is anyone’s guess but I suggest you prepare for them to rise by 2%. There will be pain so try & pay off your debt ASAP.

Spending diet
Most people get put off with having to write up a budget but they are really important. “Cut out the fat” out of your spending. Eating out, socialising, technology, clothing and transport are the main areas to focus on.

Get fit
Enter into a few fun runs and challenge yourself to get fit. Behind the scenes you will be reducing your binging on junk food and alcohol which always put a dent into savings.

Don’t incur late fees
Get into the habit of paying bills on time. Don’t be lazy and get slugged with late fees by being inefficient. $30 here and $50 there adds up over 12 months.

Monitor your resolutions
The worst part about setting New Year’s Resolutions is not following through with them. A note in your diary to review your goals every three months can set you back on track if you have been slack.

GOLDEN RULES WHEN SETTING GOALS

Write them down – by putting your goals onto paper you develop a challenge for yourself to try and achieve. Don’t be afraid to put some pressure on yourself.

Be specific – don’t just say that you are going to save. Put down an exact figure that you want to save such as $325 per month.

Goals must be realistic – you are not going to make a million dollars so it is a waste of time putting that down. You want to set goals that are challenging yet attainable if you put in the hard yards. Dangle the carrot sufficiently in view by not making them easy either.

Set timeframes – don’t leave your goals open ended. Set a date that they must be achieved by. For example, pay off your credit card by April 2009.

Monitor your goals – put a note in your diary or Outlook calendar to review your goals every three months. A mid-year financial check-up can set you back on track if you have been slack.

Don’t get lazy – get into the mindset that you are going to take control of your finances this year and just do it!

Do you have an interesting New Year’s Money Resolutions that you want to share?

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Is the Taxman becoming Father Christmas? Don't bet on it!

We heard before Christmas that voluntary tax returns won’t be far away as it is one of the key recommendations of the much anticipated Henry Tax Review.

It is proposed that taxpayers will receive a one page summary from the ATO which will show your income together with a standard deduction for necessary work expenses. If you are happy with the ATO’s calculation they you simply tick a box and get your refund. Sounds good in theory for those with basic tax returns and don’t want the hassle of filling out a return.

But does anyone seriously trust that the taxman will look after us? Do you really think the ATO will be Father Christmas when granting refunds?

Of course not.

Just consider the taxpayers who spend alot for work related expenses such as car, study, home office, internet, phone, subscriptions and conferences. They will miss out if they simply accept the standard deduction. We don’t even know what the “standard deduction” is exactly going to be anyway as Dr Henry has hinted it will be based on your income and occupation.

So it is likely to be based on an average for a particular occupation. Which begs the question as to which occupation would have the highest work related expenses claim? I would guess someone in a sales and marketing who receive car allowances and use their own car to see clientele. So why don’t we all become sales and marketing people and get a big deduction as well??

And remember an average is just that an average … people who spend more than the average will miss out whilst those under the average will be happy. Don’t shortchange yourself simply be being lazy as it could cost you thousands.

And what happens with inflation? Does the “standard deduction” increase for inflation? Or does it stay at the same level like a lot of other standard tax figures (eg $300 no receipts figure) have been over the years?

So will accountants lose work as a result of this? Basic preparers such as ITP and H & R Block will lose out but they have lost over 2.2 million in business in the past decade with the introduction of the Tax Pack and E-Tax. It is very unlikely that other qualified accountants will suffer. If a tax return is complex then you will still need help with an accountant – so those returns with business income, rental property or capital gains you won’t get any benefit from the proposed change.

In fact I think my business will make a lot of money by charging a fee if we can find discrepancies in the taxman’s calculations. Perhaps our slogan will be … “We will do your tax for free if we can’t get you back more!”

The last three years the ATO have been trialing a pre-filling report where information such as salary, interest, dividends and managed fund distributions can be downloaded. This will no doubt form the basis of the proposed one page document. But this information is based on the provision of tax file numbers and also the reporting to the ATO by the respective institution. It takes a good four months to get information that is close to accurate but it rarely is 100% accurate. There are missing PAYG Payment Summaries, missing bank accounts, missing shares and the like. I can’t see much improvement in the future.

What do you intend on doing? Will you trust the taxman and accept his verdict or will you still prepare your own tax return as normal?

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