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Provision Newsletter

Love and loans

Posted On:Sep 11th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Has a family member or friend asked you to be a ‘co-borrower’ or guarantee a loan for them? Before you say yes, think carefully – you could lose not only your money, but valuable assets such as your house or car.

What is a guarantor or co-borrower?

Co-borrower

You are a co-borrower if you sign a loan with someone else.

In most instances both

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Has a family member or friend asked you to be a ‘co-borrower’ or guarantee a loan for them? Before you say yes, think carefully – you could lose not only your money, but valuable assets such as your house or car.

What is a guarantor or co-borrower?

Co-borrower

You are a co-borrower if you sign a loan with someone else.

In most instances both you and the other co-borrower are jointly and individually liable for the debt. If the person you borrow the money with is unable to pay their share of the loan, you will be responsible for repaying the full amount outstanding.

Guarantor

If a credit provider is not willing to give a loan to a person on their own, they may ask for a guarantee. If you sign a guarantee for a friend or family member, you are known as the ‘guarantor’ of the loan.

When you sign your name as a guarantor, you are legally responsible for paying back the entire loan if the other person cannot or will not make the repayments. You will also have to pay any fees, charges and interest.

As a guarantor you don’t have the right to own the property or items bought with the loan.

Reasons you might have to say no

Think very carefully before guaranteeing a loan. Is there another way you could help without becoming a guarantor? For example, could you contribute to a deposit so that a guarantee is not needed?

Consider how you will pay back the loan if your friend or family member can’t. Can you afford the repayments? Do you have savings you can use or assets you can sell to pay the debt? If you do have to use your own money or assets to pay off someone else’s loan, you could be risking your financial future.

What about your relationship with the borrower if something goes wrong? It may be better to say ‘no’ now and avoid damaging your friendship.

The effect on your future loans and credit report

You will need to tell your credit provider about any loans you are a guarantor for, when you apply for credit. They may take into account the loan repayments on the loan you have guaranteed when they assess your ability to repay a new loan. This may stop you getting a new loan even if the person who’s loan you are guaranteeing is making the repayments.

You may end up with a bad credit record if you and the borrower can’t pay back the guaranteed loan. The loan will be listed as a default or non-payment on your credit report, making it hard for you to borrow money for several years.

You may also affect your credit score, a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your credit worthiness.

If you provide security, such as a mortgage on your home, to guarantee someone else’s loan, you may not be able to use your home as security for your own loan. You may even end up losing your home if you don’t pay out the guaranteed loan.

You may also be made bankrupt by the credit provider. Even assets you haven’t offered as security for a guarantee may then be sold to pay the outstanding debt.

Case study: Connie guarantees a business loan for her son

Connie’s family ran cafes for years until her late husband became too ill to work. Her son Leo grew up working for the family business, and Connie thought he could make a go of it. But she didn’t know he had a gambling problem.

A few months after Connie guaranteed a business loan for him, Leo fell behind in his repayments. Then he was evicted from the cafe for not paying rent. She asked relatives to contribute to Leo’s repayments but even with their help, there was not enough money to pay off the debts.

The bank and landlord contacted Connie to pay back what was owed. Connie is talking to the bank about repayment arrangements, including postponing enforcement proceedings, but is resigned to the fact she may have to sell the family home to pay off Leo’s debts.

Questions you must ask before you sign the loan

Before you guarantee a loan, ask the credit provider the following questions.

Q. What type of loan am I guaranteeing?

Be very careful about guaranteeing a loan that has no specific payback time, such as an overdraft. This kind of loan could potentially go on forever.

Q. What should I check if I am asked to guarantee a business loan?

Find out everything you can about the business. Ask for a copy of the business plan to understand how it will operate. It’s also important to look at the business’ financial state. For example, check past financial statements and speak to the business’ accountant to make sure the company is in good financial health and has good prospects.

Q. Is the guarantee for a fixed amount of money, or is it for the total amount owing?

You are better off guaranteeing a fixed amount because you will know exactly what you owe. If you sign a guarantee for the total amount owing, you will be legally responsible for what the borrower owes now and in the future. This could include interest, fees, charges and penalties. If you think there has been an increase in the amount you agreed to guarantee without your consent, seek legal advice straight away.

Q. Exactly how much am I guaranteeing?

The guarantee should clearly describe how the amount of money you owe will be calculated if the worst happens and the borrower does not pay. If you are not comfortable with the amount, ask if you can reduce it.

Q. Do I have to put up assets as security?

If the loan is not for personal, household or domestic purposes, you may be asked to put up an asset, such as your house, as security. This means the credit provider can sell your house to pay the debt if the borrower defaults on their loan.

Q. What should the loan contract tell me?

Get a copy of the loan contract from the credit provider. It should tell you:

  • The amount of the loan

  • The interest rate, fees and charges

  • Whether the loan is secured (where the borrower has to put up an asset, such as their house, as security)

  • How long the borrower has to repay the loan

  • The amount of the repayments

How to get help and free legal advice

Never let a family member pressure or force you into signing anything.If you’re feeling pressured, seek financial counselling – it’s a free and confidential service.

You can also visit our webpage on financial abuse for some red flags to watch out for, as well as the contact details of organisations that can help you.

If a large amount of money is involved, talk with a lawyer or get free legal advice so you understand the risks you are taking on.

Challenging a claim

In certain situations, guarantors may be able to challenge a claim even though they have signed contracts.

You should get advice immediately if you:

  • Only agreed to sign through pressure or fear

  • Suffered from a disability or mental illness at the time of signing

  • Did not receive legal advice before signing and did not understand the documents or the extent of the risk you were taking on; for example, you thought you were guaranteeing a certain amount but a much larger amount is now being claimed

  • Believe the credit provider or broker used unfair tactics, or tricked or misled you

What to do if a personal relationship breaks down

A breakdown in your personal relationships affects every part of your life, including your finances. If you were a guarantor or co-borrower for your ex-partner, you may be liable for their debts if they can’t or won’t repay their loan.

In most cases, you won’t be able to get out of loan contracts you made in the past, but speak to a lawyer or get free legal advice about where you stand. Also see divorce and separation and relationships and money for more information.

Stop and think before agreeing to be a co-borrower or to guarantee someone’s loan. If they cannot or will not pay off the loan, you will be responsible for the debt. Take the same care that you would if you were taking a loan out for yourself.

Please contact us on |PHONE| if you seek further assistance on this topic.

Source : ASIC MoneySmart

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://www.moneysmart.gov.au/borrowing-and-credit/borrowing-basics/loans-involving-family-and-friends

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page. 

 
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Budget Travel: Holidays that won’t break the bank

Posted On:Aug 28th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

There’s nothing quite like jetting off for a holiday, but wouldn’t it be great to do so without stretching the budget too far? With great-value accommodation, cheap cuisine and spectacular attractions galore, these top spots are easy on the wallet without compromising on incredible experiences. 

Hoi An, Vietnam

The calm waters of the South China Sea, villages in the midst of rice

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There’s nothing quite like jetting off for a holiday, but wouldn’t it be great to do so without stretching the budget too far? With great-value accommodation, cheap cuisine and spectacular attractions galore, these top spots are easy on the wallet without compromising on incredible experiences. 

Hoi An, Vietnam

The calm waters of the South China Sea, villages in the midst of rice fields and a UNESCO-listed ancient town combine to make Hoi An a dream holiday destination. Although Vietnam is becoming more popular by the second, finding cheap homestays, hotels and resorts is a breeze, and you’ll dine on delicious local dishes for small change. 

In terms of budget activities, it’s easy to cycle around town to explore rice paddies, sundrenched An Bang Beach, charming canals and French-Colonial architecture. Hoi An’s master tailors are famous for original or recreated designs, so you can pick up a new wardrobe too, for a fraction of the price at home. 

Tasmania, Australia

If it’s a camping holiday you’re looking for, head to Tasmania for an array of free spots smack bang in the heart of nature. Mayfield Bay Coastal Reserve is a short drive from Swansea, with a sandy beach and views over Great Oyster Bay to Freycinet Peninsula. 

For breathtaking ocean views, Bay of Fires offers campsites in the conservation reserve, which is home to orange granite boulders on a backdrop of turquoise seas. 

Only small fees apply for camping in National Parks, giving you access to astounding natural wonders on a shoestring budget. 

Lisbon, Portugal

With its scenic seven hills, charming cobbled streets, ancient ruins and delectable cuisine, a Lisbon holiday offers a perfect slice of sundrenched Europe. Best of all, it happens to be one of the continent’s most affordable cities, with great-value hostels and guesthouses, along with tasty, cheap treats like healthy Caldo Verdi (soup) and the obligatory Portuguese custard tarts. 

Just strolling around the colourful districts is enough to fill delightful days, however there are plenty of cheap things to do. See the works of Picasso, Andy Warhol and Dali at the Museu Colecao Berardo for free on Saturdays, hop on the train for a short ride to dazzling beaches and navigate the labyrinth of narrow streets in historic Alfama. 

Kuala Lumpur, Malaysia

KL is a popular stopover destination for longer flights. However, this dazzling city of glittering highrises, exquisite street food and endless shopping opportunities deserves much more than a glimpse. Accommodation in the heart of the city is fantastic value and it’s a very walkable place, though there’s also the free GO KL bus to get you around the main sites. 

The incredible Petronas Towers act as a signpost no matter where you are, so you can get happily lost throughout unique districts. Explore the old fashioned shop houses of Chinatown, sip on cheap cocktails in Bukit Butang and pick up bargains to stuff your suitcase with, at Central Market. 

For cheap flights to any of these destinations, it pays to be flexible in order to snap up sales. If that’s not possible, travelling during shoulder or off seasons is the way to go, for fantastic holidays that don’t break the bank.

This provides general information and hasn’t taken your circumstances into account. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page. 

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5 hidden costs of running a business (even from your own home)

Posted On:Aug 26th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

For the first-time business owner, your ability to control costs is a critical success factor. But have you factored in these often-overlooked costs of running a business?

What could be more cost-effective than starting your own small business from home?

No mandatory commute means money saved. No managers or investors to keep most of the profit for themselves and no (additional) rental

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For the first-time business owner, your ability to control costs is a critical success factor. But have you factored in these often-overlooked costs of running a business?

What could be more cost-effective than starting your own small business from home?

No mandatory commute means money saved. No managers or investors to keep most of the profit for themselves and no (additional) rental overheads.

For many, it sounds like the perfect antidote to a busy, expensive lifestyle. But is it?

Truth is, running a business carries various costs that are easy to overlook, even if you’re operating it out of your parents’ garage. And if you don’t prepare for all eventualities, you can find your dream business has become a financial nightmare.

To help you get prepared for running your own startup, here are five hidden costs of running a business from home.

1. Your working time

The irony is many entrepreneurs begin working for themselves to better value their time, but most of them completely fail to do so.

Instead, they fall into the habit of trying to do everything themselves, assuming their effort is innately productive – but that isn’t the case.

Part of the reason for this is that it’s possible to value your time in an abstract sense (recognising that you have useful skills) without monetarily valuing it.

As a business owner, you need to understand what every hour of your time is worth and use that as a yardstick to figure out what you should (and shouldn’t) be spending your time doing.

READ: How to price services when starting a business

2. Staff (full-time or freelance)

The dream of flying solo isn’t sustainable if you have any ambition to scale your offering.

There’s only so much a person can accomplish in a day, no matter how skilled or dedicated they are. Sooner or later you need to start building a team.

Why is this a hidden cost? Because however inevitable it may be, it’s all too easy to ‘kick the can down the road’ and treat it as something that might happen one day but isn’t an immediate priority.

But, if you know you’ll need employees worth investing in some day, you need the funds to offer competitive salaries, and that requires preparation and saving.

READ: Freelance of full-time? Here’s a simple formula for hiring talent

3. Business software subscriptions

Without the advent of software-as-a-service (SaaS), or cloud-based software, it wouldn’t be possible for a lone entrepreneur to build a scalable online business.

From your word processor to your website, if it’s digital then it can be delivered over the internet for a relatively low monthly rate.

One obvious example of a business-critical solution is your online accounting software. Incorporating this type of software early on makes it easier to get paid faster with automated invoices, capture your receipts and prepare cash flow forecasts.

Many new business starters figure they can do all this manually, but your time is valuable, and much better spent on other things. Furthermore, the introduction of Single Touch Payroll in Australia and Payday Filing in New Zealand means that, if you intend to employ staff, you will need to acquire this kind of software to report salaries and super with each pay run.

There can be also be hidden costs in choosing between SaaS utilities. What you think is the best deal might work out as more expensive in the long run. I follow e-commerce closely, and both Shopify and BigCommerce are great website hosting solutions, with the latter being nominally cheaper – but the former’s native multichannel selling, automation options and higher growth rate may justify the higher and ultimately make it cheaper as your business scales.

READ: Understanding business systems

Ultimately, the right software solution for your business will come down to your individual circumstances, so be sure to consider your options carefully.

4. Industry memberships

These costs can really take people by surprise, because many people don’t know they exist.

Industry memberships are sometimes mandatory, but more often simply recommended, and involve businesses joining governing bodies (of sorts) that oversee their industries – whether regionally or internationally. The ACCC lists a number of these industry associations on its website, while New Zealand also have an array of industry and trade associations.

For instance, if you ran a decorating business, you may need to join a regulatory body tasked with making sure all decorators are working safely and correctly (depending on the country). And even if you require no such membership at the moment, are you certain that you won’t pivot your business down the line?

5. Insurance policies

When you start running your business, you’re riding on a wave of optimism. Finally, everything’s going to go your way. You’ll make the money you were previously denied, have the freedom you always craved, and be able to truly express yourself – but things won’t always go your way, and unless you want to hit a bump in the road and crash, you need business insurance.

READ: Considering insurance for a new business? Start here

Depending on the type, breadth and level of insurance you go for, this can be a modest cost or a massive one. Either way, it’s not something that any business owner should ignore.

The long-term survival of your fledgling business is more important than your early profit levels, so take it seriously, shop around to find the best insurance deal, and get your operation covered.

These costs can sneak up on you if you’re not careful, so pay close attention. Running your own business can be hugely rewarding, but it will turn into a negative experience if you hit financial troubles.

 

Source : MYOB

Reproduced with the permission of MYOB. This article by Kayleigh Alexandra was originally published at https://www.myob.com/au/blog/hidden-costs-running-business/

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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Burnout! Is it time to take some time?

Posted On:Aug 22nd, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

By Emily Connell Nutritional Medicine

Self-care – it’s a bit of a ‘buzz’ word. Everyone is telling us we need more of it – can’t pour from an empty cup and all that. But it’s harder than it sounds! It’s so much more than pedicures and massages (don’t get me wrong – these are great!), but it’s actually about scheduling in

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By Emily Connell Nutritional Medicine

Self-care – it’s a bit of a ‘buzz’ word. Everyone is telling us we need more of it – can’t pour from an empty cup and all that. But it’s harder than it sounds! It’s so much more than pedicures and massages (don’t get me wrong – these are great!), but it’s actually about scheduling in regular time for YOU.

As a mum, dad, daughter, son, business owner, partner, colleague, volunteer, retiree…whatever combination it may be for you, there are some common conversations we have with ourselves when it comes to self-care:

#1 “I don’t have time for this self-care business” and
#2 “How can I even justify putting me first when so many others need my help?”

Newsflash! It is exactly these thought patterns and belief systems that get us into trouble in the first place, leading to burnout and fatigue, that ironically means we can’t help anyone, despite the best of our intentions.

We can’t truly understand self-care without first providing context and explaining this concept of ‘burnout’. Burnout, another popular saying, especially in the corporate sector, can be a term thrown around the office or home flippantly – but it is a real thing.

It is now recognised officially by the World Health Organisation, so it is about time we took it seriously! Here are some burnout signs:

  • Feeling tired all the time?

  • Lacking motivation where you were once so driven?

  • Struggling to find joy in the everyday?

  • Not sleeping and mind racing?

  • Gaining weight, health niggles starting to surface mixed with a good splash of coffee and sugar cravings?

  • Moods that mean you answer every question with your middle finger?

  • You just know that you are not feeling like your best self.

Welcome to the world of burnout!

But how did we even get here? We have relentless schedules and can’t say no. Or we dread the thought that we might have a spare 5 minutes of unscheduled time in a day where we can allow ourselves to sit down and have a cup of tea. God forbid – we might fall asleep in the chair, or even worse, breathe! Guilt and ‘shoulds’ (“I should be more”, “I should do more”, “I should do better” – I know you hear me) are our closest friends. But let’s face it, it’s really nice to have some friends because our relentless schedule doesn’t allow for any real-life catch-ups. Most of all, we are reluctant to admit we’re struggling – because vulnerability is the enemy! But the reality is, as humans, we are not made for this, and burnout is the inevitable consequence.

Self-care is not a luxury – scrap that! It’s an essential practice, critical in being able to serve those we love and care for in the best way we can. It’s about taking a pause, making an appointment with yourself, and discovering the little acts of self-care that work for you in each day, in each moment. It is these daily intentional acts that have such a profound impact on our health and wellness – mentally, physically, spiritually and emotionally.

Ultimately, it’s about knowing what works for you, scheduling it in, and then making a commitment to making it happen. I’ll repeat – MAKING A COMMITMENT to yourself! Is it about going to bed a bit earlier because those hours before midnight are the most restorative? Is it about moving your body each day? Is it about having an extra glass of water? Is it about eating less out of a packet and enjoying some ‘real’ food? Is it about challenging those negative thoughts and perfectionist tendencies that keep us on the hamster wheel of burnout? Is it about breaking up with the ‘guilt’ of ‘I should be everything to everyone’ and stopping to connect with a friend in real life? Is it actually about accepting the care of others – because we need to receive support to give support?

Your self-care challenge right now – write down a list of what brings you joy and schedule one thing in. We all know, if it’s not in the diary, it doesn’t happen so get out your calendars! Be kind to yourself so you can be well enough to be kind to the world. Live your best life.

 

Source: Emily Connell Nutritional Medicine

Emily is a Nutritional Medicine practitioner, writer, speaker, facilitator & trainer. Emily combines her skills in Nutritional Medicine with her background in Occupational Therapy, mental health & management to support people to achieve health, inspire wellness and banish burnout. Emily facilitates wellness workshops and is available for online clinical consultations and corporate speaking events.

 

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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5 sustainable holiday destinations to add to your travel list

Posted On:Aug 22nd, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

From wildlife-filled jungles to some of the world’s most spectacular beaches, sustainable travel is on the rise across the globe. While there’s nothing like swaying in a hammock with a cocktail or two, it’s even better when you know your holiday dollars help to support communities and environmentally-friendly practices, while protecting cultural and natural heritage.

Sink into that hammock at one

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From wildlife-filled jungles to some of the world’s most spectacular beaches, sustainable travel is on the rise across the globe. While there’s nothing like swaying in a hammock with a cocktail or two, it’s even better when you know your holiday dollars help to support communities and environmentally-friendly practices, while protecting cultural and natural heritage.

Sink into that hammock at one of these sustainable travel destinations.

Republic of Palau

Turquoise lagoons, volcanic landscapes and magical underwater worlds await in Palau. This diver’s paradise in the Western Pacific not only captivates holiday-makers with an adventurous spirit, it’s one of this year’s winners in the Green Destinations Sustainable Top 100 Destination Awards

Innovative approaches include the ‘Palau Pledge’, which you sign upon entering the country as a vow to protect natural and cultural heritage. New regulations will ban the use of reef-toxic sunscreens in 2020 and it’s also home to the world’s first shark sanctuary. Don’t miss out on kayaking around the Rock Islands and stay on Koror for a blend of tourist facilities and island-hopping fun.

Fraser Island, Australia

When you want to get off-road in a 4WD, float in shimmering, freshwater lakes and camp under the stars, Queensland’s Fraser Island is calling your name. The world’s largest sand island is an irresistible blend of towering rainforests, wild surf beaches and natural wonders, like deep green Lake Wabby and The Cathedrals coloured sand dunes.

Eco-friendly initiatives abound, with Kingfisher Bay Resort leading the way. Designed to integrate with the island, it holds nine Advanced Ecotourism Certifications and has been credited as a Green Travel Leader by Ecotourism Australia. From ranger-led walks to canoeing and bush tucker education, a holiday on Fraser Island means total immersion in nature.

Galapagos Islands, Ecuador

The human footprint is most certainly kept to a minimum on the Galapagos Islands, which is evident in the abundance of wildlife that barely blinks an eye at people in their midst. Around this archipelago of 19 islands, volcanic rocks and islets, expect to see playful sea lions, gigantic tortoises, sun-loving lizards and penguins galore.

Tourism activities in the Galapagos Islands are subject to conserving natural resources, recycling, sourcing local produce and hiring local employees. Different institutions govern sustainable development and ongoing conservation projects help to ensure the pristine state of this incredibly unique destination.

Ljubljana, Slovenia

If you’re looking for an eco-friendly city trip, pop the capital of Slovenia on your European itinerary. Described as a ‘city with a green soul’, it’s been globally recognised for measures including waste management and sustainable development. In 2012, the inner city centre was closed to traffic and free bicycle sharing is the preferred mode of transport.

Along with exploring lush, green pedestrian ways along the picturesque Ljubljanica River, launch into museum-hopping across cobbled streets, coffee-sipping in quaint cafes and foodie trips to local markets.

Petra Archaeological Park, Jordan

Carved into dramatic desert canyons, Petra holds the secrets to the mysterious ancient civilisation of the Nabateans. The sprawling site encompasses the Petra Archaeological Park, with majestic caves, tombs and temples carved into rose-coloured sandstone.

From regional to international collaborations and the formation of the Petra National Natural Protected Area, sustainable travel here has a strong focus on preserving rich culture and otherworldly landscapes.

Whether it’s ancient wonders or sparkling coastlines that beckon this year, sustainable travel destinations offer the best of all worlds.

 

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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Spending money in a cashless world

Posted On:Aug 20th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

How the move to electronic payments could be making it easier to spend…and what to do about it.

It’s Thursday morning and almost the end of the working week. You’re walking to the train station and you realise you’ve forgotten to top up your public transport card. No matter…a few clicks later and you’ve transferred $50 over.

At the station you grab

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How the move to electronic payments could be making it easier to spend…and what to do about it.

It’s Thursday morning and almost the end of the working week. You’re walking to the train station and you realise you’ve forgotten to top up your public transport card. No matter…a few clicks later and you’ve transferred $50 over.

At the station you grab a takeaway flat white before the train arrives…tap and go, too easy. At lunchtime you jump online and scroll through your newsfeed. Wow, there’s a pretty good one-day special from your local department store. You end up buying a new pair of pants, a replacement for your old wok and a couple of books.

After work you’ve got a few drinks organised with colleagues before heading home. When it’s your round you tap to pay with your smartphone. That night there’s nothing on TV. A few clicks from the comfort of your couch later and you’re settled in to watch a new movie you’ve downloaded.

Over the day you’ve spent close to $400 without touching a coin or banknote. It’s so effortless online, and the ease of tapping your card or phone at the supermarket or café beats the hassle of carrying coins and notes hands down. Plus with every transaction recorded it makes it easier to track your spending, budgeting and investments. What’s not to like?

Winners and losers

Cash payments in Australia are declining rapidly. Cash accounted for just 10% of all payments in 2017 and by 2022 this will fall to 2%. For all intents and purposes, Australia will be a virtually cashless society1.

It’s a trend that certainly has government backing. From an official perspective the notes and coins we were happily using for centuries have a lot to answer for. Banknotes and coins cost money to produce, they help to facilitate criminal transactions and they make it easier to avoid paying tax.

So the move to a cashless society dominated by electronic transactions, contactless payments and tap-and-go smartphones can only be a good thing for everyone, right?

Not necessarily. Like any technological development, there are winners and losers. In a cashless society the poor and elderly can find it difficult to access funds and pay for essential services.

Recent research in the UK highlights how much cash is still relied upon by older and poorer citizens. While only 4% of adults rely on cash, that includes some of the most vulnerable members of society. When you look at people who rely on cash day in day out, 39% are aged 65 or over and 62% have an income of less than 9,000 pounds (around $16,170)2.

How cashless impacts your spending

In the dash to cash we could be in danger of leaving more vulnerable sections of society behind. And the concerns about a cashless society don’t end there.

  • What implications are there for privacy when every transaction can be logged and monitored?

  • What protections are there against hacking and cybercrime in our electronic world?

  • What backup plan is in place if the technology fails during an outage?

But one of the major concerns about going cashless is how easy it makes it to spend money online or with the touch of a card or smartphone.

And you don’t even have to pay for the goods upfront, with AfterPay letting you order online and receive your goods before deciding whether you want them.

Managing our spending has got a whole lot more complex without the tangible reminder of dollar notes and coins in our wallets and purses.

And what about the next generation? It can be difficult to teach kids about money when they see us paying for goods so effortlessly without handing over any cash. Are they equating swiping a card with paying a physical dollar?

5 tips to control your spending in an electronic world

  1. Try going out without your credit card to remove temptation—you can still pay for essentials, but you’ll need to use notes and coins.

  2. Think about moving from a credit card to a debit card so that you’re not spending money you don’t have—even if it is tap and go.

  3. Teach your kids about money by giving them a list of things to buy with a specific amount of cash—if they run out, they’ll need to adjust their budget rather than access easy credit.

  4. Embrace the online advantages of monitoring your spending .

  5. Ringfence some of your income from temptation by setting up an automatic transfer to a higher interest savings .

The digital revolution is no different to past innovations in its capacity for good and bad. While your smartphone certainly makes it easier to rack up a pretty big bill without too much trouble, it also makes it easier to track your spending and set up a budget.

As the move to a cashless society changes our money habits, our challenge is to harness the power of the new technology to make a positive difference to the way we spend and the way we save.

Source : AMP August 2019 

1 Finder.com.au, The humble cheque to be extinct by 2019, 1 February 2018.
2 RSA Action and Research Centre, Cashing out: The hidden costs and consequences of moving to a cashless society, January 2019

Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling |PHONE|, before deciding what’s right for you.

All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person.

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