Dividends are a part of the profits that a company make in a financial year and decide to share with all its shareholders. Every share or stock has a certain dividend value which is announced at the annual general meeting or the meeting with shareholders. Usually, it is an executive decision with the entire board of directors having a vote. Companies can be generous and announce handsome dividends after a great year. They can announce no dividends for years if there isn’t enough profit or if they are incurring losses. Let us explore the dynamic concept of dividends.

• Companies have different approaches to deciding on dividends. You must understand these differences if you are to pick the most rewarding stocks. There are growth oriented companies that would hold onto the profits to finance expansion and scaling. This prevents them from paying handsome dividends. They may not pay any dividend at all, despite churning a profit. There are yield companies that have done fairly well for years, if not decades, and don’t need more funds to expand. They would happily share the spoils with the investors who have stood by them, dividends.
• As a smart investor, you must learn a bit more about dividends than just the amount being announced for a given year. There’s dividend yield ratio which is essentially the number of dividends divided by the present share price. You would typically get to know the dividend yield ratio from the press release and you can calculate the earnings you would have depending on the number of shares you own.
• Dividends aren’t necessarily paid once a year. Many large-cap companies will pay dividends once every six months, there can be interim dividends and a final dividend at the end of the financial year. Listed funds can pay quarterly and small companies usually don’t pay any dividends till they grow and amass a certain ready capital. Companies can always choose to pay special dividends to motivate investors or to retain shareholders. They can also pay special dividends when there are windfall gains. There’s another type of dividend known as franked dividends, which are essentially paid by companies after they have filed their taxes. Once the taxes on profits are paid, companies may choose to announce a certain dividend, which will also allow shareholders or investors to get a credit on the tax paid.
• Get accustomed with a few important terms, like ex-dividend date, record date, payment date and dividend reinvestment plan.

Interest rates will fluctuate from time to time. At times, the changes are negligible and will have almost no bearing on your repayments but you need to look out for substantive changes. When interest rates are low, you ought to make sure that you are paying the lowest or one of the lowest interest rates. You cannot have your bank; credit card company or other lenders keep your interest clocked at higher rates when the central bank has already lowered the lending rates.

• If you have a fixed rate of interest on your mortgage, then it would be advisable to change to an adjustable rate before you can benefit from the reduced rate of interest. If you already have a floating or adjustable rate of interest, then you can find out if it has been reduced to the extent it should have after the rate cut. It is imperative that you try to make the most of the period when interest rates are low as they would not remain low forever. They will be increased in the future and your interests, hence your repayments will increase.
• There are many ways you can take advantage of low interest rates. You can consider fixed rate options when the interest rates are low. That will help you to fix the low interest rates for a certain number of years. This can save you a ton of money. Many people wait for such times when rates are low to borrow money and they opt for fixed rates.
• You may wish to review your existing loans. You can consider switching to a cheaper mortgage or you can always opt for any provision of transferring a loan to a lender that charges a lower rate of interest. Refinancing and revising your repayment can be another solid option.
• Lower rates of interest provide the perfect opportunity to reduce your debts or to be completely free of debt. You can repay quickly, make lump sum repayments or you can try to repay as much as is possible so you have little to repay when the rates spike up again.

 

As always we recommend speaking to your YFG Lending specialist to guide you to the best strategy for you!

The purpose of loan applications is solely to establish your eligibility and to assure the lender that you would pay back, with interest and on time. Hence, only two things matter in loan applications: your financial health and personal profile.

• Financial health pertains to present income, assets or savings you have, financial liability and source of income or employment history. The income determines how much you can spend and your financial liabilities will determine how much you can save or have to spare. The loan amount you are applying for will be repaid in instalments, which would most likely be monthly. The lender will check if you can afford to pay that instalment every month. The general approach is deducting all existing financial liabilities including monthly expenses from the income. The result should be considerably higher than the instalment that must be re-paid.
• Source of income and employment history will be quintessential factors as that would tell the lender if an applicant has a steady income and if one has been employed long enough to consider it as a secured job or profession. Lenders are not concerned about your entire professional future. They just want to be reassured that you wouldn’t be out of job or be unable to repay the loan because of fluctuating income. If you are self-employed or have a business, then the history of your self-employment or history will be considered.
• Both financial health and personal profile are assessed relatively. The type of loan you are opting for, the loan amount you apply for, the purpose of the loan, term and the instalments that you would have to bear will be kept under consideration while assessing your financial health and personal profile. The personal profile includes everything from your professional experience to your academic qualification. Not all lenders ask for these details but high loan amounts will call for increased scrutiny.
• Your credit score will be the next checkpoint, followed by savings and investments. Your existing liabilities or loans will also be considered. Credit score obviously tells a lender if you have re-paid your past loans or have been good at repayment. Savings and investments will assure the lender that the applicant is bankable. Existing loans and other liabilities will tell the lender if you will be able to manage an additional financial obligation.

 

Lenders look for clarity, accurate details, truthful declarations and honest conversations.

Budget planning is all about numbers. The firmer grasp you have over your incomes, expenses and savings, the better you would get at budget planning and long term financial planning. To get started with budget planning, you need to know five numbers.

• The first number is the amount of money you are earning. Depending on how many earning members you have in your family and how any of you are contributing towards the same financial goals, there may be one or more incomes. Also, you must factor in the returns on any investment that you have. From interests accrued on savings to dividends on shares, every incoming fund including but not limited to your salary goes into this first number. For effective budget planning, every earning member in a family must be a part of the exercise. Else, it is futile.
• The second number pertains to the expenses. The timeline for expenses must correspond that of the income. If you are earning fortnightly or calculating quarterly incomes, then your expenses must also be for a fortnight or three months and likewise. To calculate the expenses, factor in all your financial obligations and expenditure that you have to attend to. From mortgage payments to credit card bills, utilities to groceries, shopping to discretionary expenses, everything must be calculated to get to that number.
• Once you have your total income and total expenses, you must arrive at a number that you wish to save. Make sure you have a timeline. Deciding to save ten thousand is futile if you don’t have a deadline. This number, the number of savings you need in a certain period of time, has nothing to do with the dreams you may harbor. Forget the reasons why you are saving. Just focus on the number. Now, figure out how much you have saved already and how much you need. Do the math and arrive at a monthly figure or quarterly if you like. Going for the least denominator is always better. Putting aside a hundred bucks a week is easier than extracting a thousand bucks all of a sudden from one pay cheque.
• You would have a long term goal and very short term goals. Between the two have a midterm review policy. Every three months or six months you must check on your savings and record your progress. This interim number is very important as it will determine if you have the right heading.
• Finally, you must have a threshold for specific periods of time that you must cross. For instance, twenty thousand in five years can be broken down to five thousand in the first two years, fifteen thousand by the fourth year and the remaining five thousand in the final year. The more you save now, the better it is. You cannot predict untoward developments in your life.

There is no start date or end date for saving. One should start saving money at a very young age, preferably in the teens so that it can really develop into an old habit, hard enough to shun. Those who do not get enough allowance or don’t have part-time jobs as a student can start saving right from the first pay cheque. The longer you delay the onset of saving, the longer it would take for you to amass the necessary assets. Aussies need to become money saving smart, especially at a time when cost of living will only grow dearer, healthcare costs will skyrocket further and our demanding lifestyles will stress our financial prowess.

The Motivation

Saving requires motivation. Very few people are habitual misers in the twenty-first century. With so much around begging for attention and our hard earned cash, one cannot distract oneself enough. Staying secluded or distanced from the provocations and the enticements is very difficult. The only thing that can compel you to save is a healthy motivation. Saving for a home, car, emergency funds, higher education, marriage, kids’ education, vacation, business or even early retirement can be strong motivating factors.

It is necessary that you work on short term and long term goals. Short term goals will motivate you every day. Long term goals will motivate you once a month or remind you every year to have a savings target for the fiscal.

Be Pragmatic

You know how much you earn. Decide how much you wish to save. Then decide how much you can spend. Don’t have an approach where spending comes first and then whatever you can save. Have it backwards. Set a budget and then spend accordingly. The budget must include everything from rent or mortgage to groceries, entertainment to dining out, shopping to the odd weekends away.

Comply with your Nature

You wouldn’t be able to do anything that is absolutely against your natural self. If you are someone who enjoys partying, you cannot shut yourself at home or deny yourself even an iota of socializing. You must have an approach to savings that complies with your lifestyle, your needs or desires and who you are essentially. Work on a budget within that realm of possibility.

Multipronged Approach

Have a multipronged approach. Keep aside a bit of your monthly income every time you get your pay cheque. Make abrupt decisions of putting aside a larger sum of money whenever you get the chance. There will always be months when you would spend less and that is the time when you boost your savings. Don’t go out to spend the spare cash you have when the month has been kinder on your finances. There will soon be a month turning against you.

You shouldn’t approach financial planning unless you understand the type of personality you have. We aren’t talking about your personal or professional attributes. Every person has a certain personality when it comes to money matters. There are six money type personalities.

 

1. There’s the enthusiast. The enthusiast is a person who is proactive with his or her finances. Most enthusiasts will have a financial plan in place, would know where to put in how much money, how to make smart investments and will be financially informed and confident. The enthusiast is decisive. It is estimated that less than 14% of all working Aussies are enthusiasts and they are mostly men. These people have more than one third of the personal wealth of adult Aussies.
2. Then there’s the delegator. You could equate the delegator and the enthusiast but they differ in one key aspect. Delegators don’t really delve into the money matters themselves. They are proactive and want to be financially empowered but lack the knowledge and confidence to get things done without any help. Delegators would always get some advice and may even hand over the money for a professional to manage. That is not an unwise thing to do when one lacks knowledge and may end up making poor choices. The purpose is to end up with substantial wealth, legally and it does not matter if you are getting someone to manage your money.
3. The third money type personality is the avoider. The avoider will find some way or the other to avoid financial planning, he or she would not see a planner, not get any advice and even if someone gives them sane unsolicited advice, it would fall on deaf ears. More than one fifth of the working populace in Australia is of avoiders. Not surprisingly, they have less than 10% of the personal wealth of working Aussies.
4. You could be a conservative DIY. There are many young and old people who don’t want to hire a financial planner, who don’t wish to tread the same line that has been tread for decades and would rather have their own way to getting things done. A conservative DIY would do all the research, indulge in the legwork, assess all options and make decisions pertaining to savings and investments. Conservative DIY usually does well and they are typically medium to high net worth individuals.
5. You could be a player if you like the scintillating world of stock markets, shares, commodities and myriad kinds of trading. Being a player is not necessarily a bad thing if you can use the tides in your favour. Again, the objective is to amass wealth.
6. The sixth money type personality is too busy. These people may have all the right intentions but do nothing about. They procrastinate and suddenly it is old age and nothing more can be done.

With age comes wisdom, which means that many of the mistakes that we make can be blamed on youth and ignorance. However, you can save yourself from learning lessons the hard way by paying attention from wise people that have been in your shoes before. When you are young, there are some common money mistakes that you make that could actually be avoided if you have just a little bit of basic financial knowledge.

It is important for you to know about the most common money mistakes, so that you know what not to do when you are just starting out.

Here are the common money mistakes that you should avoid:

Home Buying Rush

Just because you are out on your own, does not mean that you need to be in a rush to buy a home. One of the biggest money mistakes that young people tend to make is buying a home before they are financially secure enough for this type of purchase. Many young people feel the allure to buy their own home, but it is not always the wisest money decision that you can make. It is best to resist the urge to buy a home until you are really ready. Owning a home can be a great experience, but it also comes with stress, expenses and is a huge commitment.

Borrowing Money for Nuptials

Many young people are in a rush to go down the alter. When you find your one true love at a young age, you are often in a hurry to get married. This means that you are getting married when you might not have the funds available for a huge celebration. To solve this problem, a lot of young people choose to borrow the money for their wedding. This is never a good idea and will only ensure that you are in debt for a long period of time. The average cost of a wedding is $28,000, which is more than what most young people have in their savings. When you are planning your wedding, you need to have a budget in mind and make sure that you are only spending what you have.

No Health Insurance

It is also common for young people to not have adequate health insurance coverage. You might think that you are immune from illness, but this may not be the case. When you do get sick, you will have huge medical bills that will put you deeper in debt.

As the world undergoes economic upheavals and conventional notions of financial jurisprudence get debated, many people are endorsing what is being called collaborative consumption.

For centuries now, we have approached life with personal pursuits in mind. The objective has been to survive, live without indulging in risks and securing as much resources as one can, but for oneself and the immediate family. In the process, people buy homes, make investments, own cars and build up an infrastructure of their own that contains a few utilitarian and many nonessential items.

Many expenses that are still considered imperative are being questioned and their rationale is being bombarded with some enlightening facts. The math shows that renting is more economic than owning a home. Yet, everyone dreams of owning a home. Not owning a car can make someone richer by a small fortune over the years but no one thinks of a life without a car.

That is where collaborative consumption is making heads turn.

Let us explore what collaborative consumption truly is.

• Today, many families are wondering if investing in a standalone house is really a good idea. Many people opt for strata titling and cooperative ownership. Many people are opting for mixed use developments or residential buildings where the total cost of upkeep or maintenance and service requirements is being shared. Even if you want to travel, you could use collaborative consumption by putting up your home for tourists to stay at and you can earn your right to use the same service when you travel to some city or town. There are websites dedicated to house swapping or renting a space of the property while on holiday, Airbnb,com is one example.
• People living in big cities often shun the car because they have adequate public transportation. For those living outside big cities or in remote towns, that is not an option. But people are exploring car pooling, sharing and renting cars when they need instead of owning a car. A car is a depreciating asset which will never really allow you to recoup all your investment or even a substantive fraction of the expenses.
• People are sharing tools at their homes, pets and crucial resources that modern lifestyles cannot do without. Concepts like crowd funding and sharing software solutions have already become popular. Why spend a lot of money to have exclusive access to something that can easily be shared and used by many people, thus reducing the cost to a fraction?

 

Collaborative consumption may eventually change the way we perceive and approach financial planning.

If there is one thing that you are always running low on, it is probably money. Between bills and unexpected expenses, it can be really difficult to add to your savings. This means that you need to look for new ways to save. No matter how much money you are saving, it can make a real difference. Even small amounts can add up over time and every little bit helps. It is time that you learned about some of the best ways that you can begin saving right now.

Here are some of the best saving tips that will work for you:

Refinance

It might be time to consider refinancing your home. If you are one of the many people that have both a savings account and a mortgage that you are paying off, you can combine the two in order to get access to the biggest savings. This means that you have the ability to refinance your home and get access to a lower interest rate. The interest rate on your mortgage is important to have as low as possible because the amount that you pay on interest adds up over time due to the long life of a mortgage. An offset account is great because the savings will help pay off the interest, but it is money that is still accessible to you. This gives you the best of both worlds and the biggest savings possible.

No Fees

Check out if you need to be paying any annual fees of any type. This means that if you happen to have a credit card that comes attached with an annual fee, you should call the credit card company to see if you can have the fee removed. If they are unwilling to do so, you are best off cancelling the card.

Stop Daily Splurges

You might think that a $5 coffee each morning or a $10 lunch out each day is a small expenditure, but they add up over time and are actually a major expense. This means that you should try brewing your own coffee from home or packing your lunch for work in order to save now.

These are just a few of the ways that you can start saving today. Sometimes, however, a loan is necessary and we recommend speaking to your YFG lending specialist in order to get expert and professional assistance in securing a loan today.

Did your car recently breakdown and drain your savings completely? If one small disaster or unexpected expense can cause you to be behind on rent or unable to pay your utility bills, you are one of the many Australians that are living paycheque to paycheque.

Most weeks you are able to pay your bills on time, but when you are just scraping by, you are never able to build up your savings. Most people that are living paycheque to paycheque know the struggle and understand how difficult it can be to meet all of their obligations on a restricted budget. Many people are living this way, but you do not have to stay on this course. It is possible for you to finally get ahead and have money built up that allows you to be out of this vicious cycle for good.

Here are a few of the best ways to stop living paycheque to paycheque:

Don't Spend It All

Even if you are on a restricted budget, you most likely do have more money coming in than expenses. This means that you should not get in the habit of spending every dime that you have. It is important for you to get on a tight budget and not only look to reduce some of your expenses, but also find ways to stop spending everything that you earn. This might involve not eating out as much or changing to a new phone plan that offers more savings. You need to find ways to stop spending everything that you make. There are ways that you can save money if you get a little creative. When you start having some money saved up each month, this will help to lighten the stress that you feel.

Pay Down Debt

One of the biggest reasons why you are living paycheque to paycheque is because you have a lot of outstanding debt. This means that you need to make paying down this debt a priority to help you finally obtain a little bit of financial freedom. It might take you a long time to pay off all of your debt, but if you are making some type of effort it will help you to be more financially stable. It might be at a slow and steady pace, but paying down your debt will allow you to not be so reliant on each paycheque and will have more options.

As always, if you are in need of a loan, we recommend speaking to your experienced YFG lending specialist who will be able to guide you through the lending process.