Be careful of loading up on ‘buy now, pay later’ purchases this Xmas

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‘Tis the season to be jolly, but it’s important not to get carried away when using ‘buy now, pay later’ providers to fund that festive spirit. That’s because one-in-five users struggle to make their repayments, new research has found.

“Christmas is a time for giving” – it’s a line that’s been drummed into us since we popped our first piece of chocolate out of an advent calendar.

But it’s important not to go overboard and spend more than you can afford to pay back if you use ‘buy now, pay later‘ services such as Afterpay and Zip Pay.

That’s because a new report from ASIC shows one-in-five users were late paying their other bills, including home loan repayments, as a result of using the services.

Below we’ll discuss why it’s important to budget properly if you plan on using a ‘buy now, pay later’ service this festive season.

But first, what are ‘buy now, pay later’ services?

‘Buy now, pay later’ arrangements allow you to buy goods and services immediately, and repay the amount over a series of instalments.

If you make a purchase using market leader Afterpay, for example, you’ll pay your first instalment at the time of purchase, and then the remaining three instalments over the next three fortnights.

If you pay on time, there’s no fee for you (that’s charged to the merchant). However, if you’re late to make a repayment, you’ll cop a small fee (usually $10).

On the face of it, it’s a pretty good arrangement. And don’t get us wrong – these are perfectly legitimate companies.

But where you can run into financial trouble is using several ‘buy now, pay later’ services without a plan to pay the money back over the coming fortnights, especially over the holiday season when your focus doesn’t tend to be on the household budget.

One-in-five consumers miss paying other bills on time

As mentioned earlier, 20% of ‘buy now, pay later’ users miss or are late to pay other bills in order to make their ‘buy now, pay later’ payments on time.

The bills most commonly affected are household bills (44%), credit card payments (32%), and, worryingly, home loan repayments (22%).

What’s really surprising though, is that 15% of 1,655 users surveyed by ASIC say they took out an additional loan in order to make their ‘buy now, pay later’ payments on time.

“[Some consumers] are experiencing financial hardship, such as cutting back on or going without essentials (e.g. meals) or taking out additional loans, in order to make their ‘buy now, pay later’ payments on time,” the ASIC report says.

Some final considerations

Look, we’re certainly not trying to play Grinch this Christmas.

But with many families doing it tough right now, it’s important not to take on any debt that you can’t afford to comfortably pay back – no matter how straight forward and low risk it might seem.

It’s also worth noting that while the Afterpay approval process doesn’t (generally) involve credit report checks, Afterpay (and its competitors such as Zip Pay) is still a credit liability that needs to be disclosed when applying for a home loan.

So if you have any doubts about whether a ‘buy now, pay later’ purchase might affect your ability to secure a home loan – or pay off your existing one – then feel free to get in touch.

We’re happy to chat in more detail to help you make this Christmas more jolly, and less folly.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

8 ideas to improve your business’s cash flow over the festive season

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The festive season is fast approaching and this year, more than ever, it’s important for businesses to ensure they have their cash flow management in order. Here are our top 8 ideas to help you through the upcoming period.

While the holiday period is usually a boon for retailers, cash flow problems still hamper many businesses, as accounts departments across the country take a much needed holiday.

With COVID-19 causing all sorts of headaches and heartaches for businesses big and small in 2020, you’ll want to make sure you’re transitioning into 2021 with your best foot forward.

So, with the festive season just around the corner, below are 8 cash flow tips for navigating the silly season.

Top tips

1. Invoice now: Begin sending out your invoices now, and start with clients who have a history of being tardy.

2. Discounts: If you want invoices paid super fast, consider offering a 10% discount to clients who pay within 7 days.

3. Extension, please? Chat to your major suppliers about possibly extending your terms over the upcoming period to 30 days (or more, if possible).

4. Outsource: If you don’t want to personally ask clients to pay overdue invoices for fear of getting them offside, use accounting software such as Xero, or hire a third-party bookkeeper, to chase up the payments on your behalf.

5. Invoice Financing: If you don’t want to hassle your clients to pay you promptly, another option is Invoice Financing, which is a line of credit secured by unpaid sales invoices (get in touch to find out more).

6. Request deposits: For new projects over this period, consider requesting a 20% to 50% deposit from the client.

7. Minimise expenses: Minimise unneeded expenses where possible. For example, if you don’t have the personnel to onboard new clients during the holiday period, consider switching off or dialling back your Google and/or Facebook ads.

8. Last but not least, get in touch

If you think you’ll still have a gap in your business’s funding over the months ahead – especially with JobKeeper winding down – then it’s important to start considering your financing options as soon as possible.

It’s worth noting that the RBA recently cut the official cash rate to record low levels, and many lenders are offering competitive financing options to businesses as a result.

So to find out more about what financing options are available to you and your business, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Australia is building the biggest houses in the world once again

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We dream big in Australia. So it’s little surprise that when the Great Australian Dream becomes a reality it means bigger houses than anywhere else in the world, according to a new report.

In 2019/20, the average new house built measured a whopping 236m2, up 2.9% on the year before and the biggest size increase in 11 years.

That’s according to data commissioned by CommSec from the Australian Bureau of Statistics, which shows our houses are now being built bigger than anywhere else in the world.

In fact, we just reclaimed the number one spot from the US, which saw their new house size fall for the fourth consecutive year in 2019 (latest data) to 233m2.

Apartment sizes have grown too, with the average new apartment increasing 6% in the last year to hit a decade high of 137m2.

The jostle for the number 1 spot

It’s important to note that new houses aren’t the biggest they’ve ever been.

That time was 11 years ago, when the average new free-standing house was about 244m2 – then the biggest in the world by far.

Australia relinquished the number one spot to the US a few years later in 2013.

But despite the average new house size shrinking throughout the majority of the 2010s, new houses are still a whopping 27% bigger than they were 30 years ago.

And last year Australian new-builds jumped up in size as US house sizes dipped – putting us back in number one spot.

“Over the past year there appears to have been a perception that Australian homes had shrunk a little too much,” explains CommSec chief economist Craig James.

So what’s next for Australian houses?

There have been numerous shifting trends in terms of house sizes and styles over the past decade, and COVID-19 is sure to throw another element into the mix.

More people could embrace working from home – opting to move away from apartments in, or near, the CBD in preference for larger homes in regional or suburban areas.

Another factor that could increase the size of new homes over the year to come is the federal government’s $25,000 HomeBuilder grant.

The federal government scheme aims to assist owner-occupiers (including first home buyers) who want to buy a new home, or begin work on eligible renovations, by providing them with a $25,000 tax-free grant.

It’s available to people building a new home for less than $750,000, or to those who spend between $150,000 and $750,000 renovating an existing home, subject to an eligibility criteria.

The $25,000 grant has led to a recent surge in new builds and renos, and will no doubt also assist in helping Aussie families build bigger and better new homes.

So if you’re thinking of fulfilling your own Great Australian Dream in the near future, then get in touch today. We’d love to help you make it become a reality.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Switch lenders if rate cut is not passed on: RBA

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Mortgage holders and business operators are being encouraged by the RBA to switch lenders if their bank doesn’t pass on the latest cash rate cut.

The Reserve Bank of Australia (RBA) delivered mortgage holders and business operators a Melbourne Cup Day win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

Better yet, the RBA board says it’s “not expecting to increase the cash rate for at least three years”.

However, there are concerns that not all the banks will pass the rate cut on to borrowers across all of their products.

For example, within 24 hours of the RBA rate cut several of the big banks announced cuts to their fixed rates and business rates, but not their variable rates.

RBA Governor Philip Lowe says if the banks don’t lower their standard variable rates, “ask them for a better deal”.

“And if they don’t give it to you, switch to a bank that will,” Governor Lowe adds.

Federal Treasurer Josh Frydenberg is also urging lenders to pass on the RBA rate cut to reduce the cost of borrowing for households and small businesses.

“It’s my expectation that the banks will now look for ways to pass on those rate cuts. Pass it on to small businesses and pass it on to mortgage holders,” he says.

How we can help you play hardball

Now, here’s the important part.

It’s all well and good for our nation’s leaders to urge the banks to pass rate cuts on to you, but whether or not your lender will actually do so is another matter altogether.

The good news is, the power is with you – the borrower. And we can help you harness that power.

That’s because competition amongst lenders is fierce right now, so if your lender won’t budge, there’s a good chance another lender will.

We’re keeping a keen eye on which lenders are passing the rate cut on to their customers, and which lenders aren’t.

So if you’re keen to explore your options during this time of record-low interest rates, get in touch today.

We’d love to help you pay less interest on your mortgage each month.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

RBA trims cash rate to new record low 0.10%

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If you didn’t back a winner on Melbourne Cup Day then fret not: the Reserve Bank of Australia (RBA) has delivered mortgage holders a win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

RBA Governor Philip Lowe says the cash rate cut is part of a package of measures to support job creation and economic recovery from the COVID-19 pandemic.

“Given the outlook for both employment and inflation, monetary and fiscal support will be required for some time,” Governor Lowe said in a statement.

As such, Governor Lowe added the low cash rate is likely here to stay until actual inflation is sustainably within the 2 to 3% target range.

“Given the outlook, the board is not expecting to increase the cash rate for at least three years,” Governor Lowe said.

Want to know what this rate cut means for your home loan?

This is the last rate cut the RBA is able to make before venturing into negative territory (which it’s previously indicated it won’t do).

It’s also the sixth RBA rate cut since June 2019, which means if you haven’t had a home loan health check in the past year, there’s a good chance you’re paying more interest than you need to on your home loan each month.

So if you’d like to explore your options – whether that be refinancing with another lender or renegotiating with your current one – then get in touch today.

We’re here and ready to work through your options with you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.