The Costs of Owning a Pet!

Oh, the glory of owning a pet. Before you own one, you can only see upside. After you own one, you realise there is actually some downside. Problem is, you love them too much to possibly part with them. The more they misbehave the more they wriggle into your heart. Or maybe that’s just me!

If you are thinking about adding a new member to your family, there are definitely a few things to consider before you make the leap. In this post most of my content will cover domestic pets like cats and dogs, I know little about horse and farm animal costs & I see no point really covering fish as you can probably work that out pretty easily!

Can You Afford It?

The first thing to consider is if you can actually afford to own a pet. Pets come with all types of costs, including, but not limited to:

  • Food costs
    • The cost of food will depend on what type of pet you have and how much they need to eat. It also depends how energetic they are. My dog, who is a kelpie cross eats 20kg of food every three months, which until recently was costing me $130 a bag.
    • My last 20kg bag of dog food cost me $45, which I sourced from a country produce store (where you can buy food for cattle, chooks, working dogs etc). Because the food isn’t name brand, it costs half as much! It still has the same nutrition percentages, but saves me almost $100 a bag! I live rurally so there is a store right in town, but I’m sure with a bit of searching you would be able to find one near you.
  • Vet bills
    • Again, this will depend on the type of pet and if they are more likely to have certain health conditions. Things like de-sexing and microchipping will set you back a few hundred dollars. Animals will generally require vaccinations across their lifespan so this is another thing to consider. Also, depending on how much your pet likes being an idiot (which in my case a lot) they may also get injured and will require care from a vet. Consults alone can be around $100 so it is a costly exercise.
  • Worming & flea treatments, medications
    • Worming treatments, flea treatments, ointments, and any other ailments that require treatment are bound to come up will also cost you some money.
  • Leads/harnesses/car restraints
    • If you are like me you are going to want collars and harnesses that look cute and are also practical. It is also hard to stop at just one item, but see how you go.
  • Bedding/housing
    • It’s also important to consider where your pet will sleep, if this is a kennel, inside bed, any hutches or enclosures etc. Then also what you are going to put in there like blankets, straw/pet flooring etc.
  • Pet sitting/kennel costs for when you go away
    • If you go away will you have someone to look after your pet? Will you be able to pay someone to look after them or will you have to pay to put them in a kennel?

Should You Get Pet Insurance?

The answer is: it depends.

At the end of the day, it is going to be up to you whether you think it is worth it or not. I personally do not have pet insurance, instead I put aside a bit of money each week for pet costs, and my emergency fund has a few thousand extra dollars in it in case I have an emergency. You may find that pet insurance really is worth it for you, and other times it may not be. It’s important to look at the inclusions and exclusions the pet insurance provides. From what I believe if you have a pet that is known to have certain conditions (for example French bulldogs with airway issues), the insurer won’t cover for that even though thats probably the reason you want to have it in the first place.

As I said, look into all the criteria of the insurance before deciding if its worth it for you. If it isn’t it may be worth doing what I do which is putting money away weekly & having an emergency fund for my pet in case something happens! The last thing you want is for your pet to need the vet and you can’t afford it!

Adopt Don’t Shop

A great way to save money is to adopt, don’t shop! I adopted my beautiful dog for just $360, which included all her microchipping, de-sexing, first vet check up & vaccinations. I also gave her a more loving home than what she had previously and I feel so good knowing I have given her a better life.

Summary

At the end of the day, pets do cost money, but they are totally worth it! Having a pet to come home to can’t be beaten, and I wouldn’t trade mine for the all the money in the world. Below is a summary of costs to expect when looking to get a pet. ccccccc

Initial Once Off Purchases
  • The animal (obviously)
  • Bedding/enclosure
  • Microchipping
  • Desexing
  • Collar/harness/lead
  • Car restraint or pet carrier for smaller pets
Ongoing Costs
  • Food
  • Vet check ups & vaccinations
  • Pet insurance
  • Worming treatments
  • Toys
  • Kennel/pet sitting costs

Hope this post helped!

Step by Step Guide to Investing

First Step to Investing is Choosing a Broker

A broker is where you place all your trades! They are basically the middle man, and while it used to be a man (or maybe woman but probably not), brokers are now all online platforms where you can place trades at any time of the day. They will only be executed during market hours, but you have 24/7 access to these platforms. I originally used NAB Trade, however have recently moved across to Pearler. If you are new to investing, want something simple and easy to understand, I’d go with Pearler over one of the big 4 banks platforms.

Next You Need to Sign Up

The next step is signing up to a brokerage platform. You will need to just give your basic details, including name, address, DOB, TFN etc. You will receive a holder identification number (HIN), which is a unique number that ties you to the shares you buy- kind of like a username or something similar. If you choose to go with Pearler, use the code MINDOVERMONEY for a free trade! Most brokerage platforms won’t charge you to sign up, they will charge a standard, once of fee each time you execute a trade. There may be some services that use a subscription model and make you pay monthly or annually, however I’d suggest to avoid those, at least to start with. Once you have signed up, set up a recurring deposit or transfer a lump sum so you have some money to get invested!

Now is the fun part: Choosing a share and buying it!

The reason I love Pearler is because they have a list of their most popular shares. While this shouldn’t make your decision for you, it is a great place to start and see what you like. Another place to start is looking at the ASX and seeing what companies you use all the time and think would be a good investment. You aren’t going to get it perfectly right, as long as you start you are doing well!

Once you have decided on the share you want to buy, it is time to buy it! Use your broker to place a trade, you will have to enter the amount of money you want to use and/or the number of shares you want to buy. You will most likely be charged a once off brokerage fee, generally ranging from $5-$20 depending on the broker you are with. Once you have placed the trade, when the market opens you will have bought your shares! Congrats!

Soon You Will Receive Some Paperwork

Once you have received a HIN you will get some paperwork giving you a copy of that number. Once you buy your first investment, you will also receive a letter encouraging you to sign up to a share registry. There are a few around, so depending what you buy will determine which share registry you will need to sign up to. The registries keep track of all your investments under your HIN, and it is on these sites that you can update your bank details to receive dividends and distributions from your investments. The share registry is also where you can choose to take part in dividend reinvestment plans (DRP) where your dividends are automatically reinvested back into the same share. There should be details in the letter about how to sign up. The main two share registries are Computershare and Link Market Services.

Continue to Invest Regularly

The best gains are made with consistent, regular investing principles. Transferring a set amount of money over each week into your account, and investing every fortnight/month/quarter/year is the key to success in share investing. Consistently investing over the long term in a well diversified portfolio is a proven method of building wealth.

Reap the Rewards

Compound interest is the 8th wonder of the world and for good reason! If you continue to invest regularly over a long period of time, eventually your returns will outgrow what you are contributing and you will see exponential growth. The longer you invest the better return you will see, and eventually you will be able to reap the rewards. Whether that is being able to go part time and supplement your income with income from your dividends, or retire all together. The best part about investing is that it gives you choice to do what you want in life.

How Much Do I Need to Retire?

How much do you really need to retire? Do you need to own your home outright? Do you need millions in super? We will discuss below.

The amount of money you need to retire will vary significantly, but will mainly depend on:

  • How high your expenses are in retirement
  • What kind of lifestyle you want to live

Obviously, the more money you spend, the more money you will need. Therefore, if you want a comfortable or even extravagant lifestyle in retirement, you will need a pretty large sum in your super. It will also depend on how long you live for, which with most people living into their eighties you will need that money to last for at least 20 years. The positive note is that even if you run out of super, you won’t go completely without. The age pension will cover your very basic expenses, but won’t do much more than that.

The Age Pension

The age pension is currently only accessible once you are over the age of 67. There are also a number of other factors that may allow or disqualify you from receiving the age pension. These include your residency, your income (from super etc), and your assets. The maximum amount you can receive in a fortnight from the pension currently is $967.50 for a single, and $1458.00 for a couple. If you earn over $180 a fortnight as a single, for every dollar over that your pension will decrease by 50c. For couples this number is $320.

The age pension means everyone will have enough money to live off of, but for less than $1000 a fortnight it isn’t really enough to live well or comfortably. This is where your super then comes in.

How Much Do I Need in My Super?

While you have the age pension to fall back on, it really isn’t a great option for a comfortable retirement. If you want to live a similar lifestyle to what you are now, you are going to need to fund that lifestyle from your superannuation. For a quick way to work out what you may need, if you know what your expenses are now, you could just multiply that by twenty to get a rough estimate of the lump sum you can aim for.

So if your expenses are $30,000 per year, multiplying that by 20 would give you an amount of $600,000. This obviously doesn’t take into consideration any investment returns, fees, increased living costs etc so while it won’t be exact, it is a great starting point. There are plenty of calculators online that can help you to work out what kind of money you will need in retirement, which I have attached down the bottom under resources.

A good rule of thumb is if you own your home, you’ll need two thirds of your pre-retirement income to maintain the same standard of living in retirement. The ASFA provides a retirement standard, as follows:

ASFA Retirement StandardComfortable LifestyleModest Lifestyle
Single$44,818 per year
$859 per week
$28,514 per year
$546 per week
Couple$63,352 per year
$1,214 per week
$41,170 per year
$789 per year
A lump sum for a single comfortable lifestyle is $545,000, and a sum for a couple looking for a comfortable retirement is 640,000.

If you don’t own your home, you will have additional expenses like rent, which can considerably increase your expenses. You will need to take this into account when working out how much super you need.

In my own opinion, I’d say the more super you have the better. I am definitely not aiming for a number in particular, but as I continue to get older will continue to contribute more and more towards my retirement. The earlier you start the better, as time really helps the compounding process. As long as you are putting money aside now for things like property, investments, or super, you are probably in a great place and will have enough to retire! If you are still living pay check to pay check, don’t even know what super company you are with, and have $0.01 to your name, unless you want to live off the pension, you may want to get your finances sorted!

Resources

Retirement Planner Calculator- Money Smart

https://moneysmart.gov.au/retirement-income/retirement-planner

https://moneysmart.gov.au/grow-your-super/how-much-super-you-need

Super contributions optimiser calculator

https://moneysmart.gov.au/grow-your-super/super-contributions-optimiser

Things to Look For When Choosing an ETF

An Exchange Traded Fund (ETF) is a great way to get instant diversification with just one trade, and is perfect for the passive, long term investor. ETF’s have only continued to become more and more popular, and for that reason the number of ETF’s have grown considerably. There are ETF’s for whole markets (AU, US, UK, etc), different industries (agriculture, IT, banking, etc), different commodities (gold, oil, lithium, etc) and soon there will be some cryptocurrency ETF’s available in Australia. Thanks to the abundance of ETF’s, there are plenty of options for you and there is an ETF for every need. The downside to this is when you are starting out the amount of options can leave you overwhelmed and potentially give you analysis paralysis (a term for being so overwhelmed with making a decision that you make none). I’ve written this post as a bit of a guide to what to look out for, what you look for in an ETF, and why you may choose one over another, in hopes it will help get you invested sooner.

1. What Do You Want to Invest In?

The first thing to look for when looking to invest in an ETF is to think about what you personally want to invest in. For example, you may just want a simple, uncomplicated, highly diversified fund (for example VDHG) that covers you for the whole world and keeps it easy for you. On the other hand, you may want a very specific ETF that invests in, for example, only ethical companies (e.g. ETHI, VESG) or something that only invests in tech companies (e.g. NDQ). Asking yourself what you want to invest in and why is probably the first step to finding the ETF/ETF’s that is/are right for you.

2. Are You Looking For Income or Capital Growth?

The next thing to consider when looking to invest (in anything for that matter) is whether you are wanting capital growth, or a good yield/income. With shares and ETF’s, capital growth comes from the increase in share price, and you don’t need to pay tax on the profit until you sell. Also, if you hold onto the share for more than one year, you are entitled to a capital gains tax discount. If you are looking for income when it comes to shares, this will be through the dividends. Dividends are payments made from the company to the investor (you) at set intervals throughout the year. These can come quarterly, bi-annually or annually. You will have to pay tax on these when you receive them, however some companies may have already paid tax on some of the profits and you can receive franking credits for your dividends. This basically means that you may not need to pay tax on the majority, if any, of your dividends. This provides a great, tax effective way to earn money, and you will see many retirees living off these low taxed dividends.

Obviously, if you can have both then that is ideal- but it’s not always possible! Generally speaking, tax concessions are better for dividends here in Australia and therefore most of our top companies pay out their profits to investors as dividends. In America, the opposite is true, and some large companies will never pay a dividend to an investor. Instead, the company will reinvest that profit back into the business to increase it’s capital and therefore increase its share price.

Personally, I invest in both Australia and the US, so I get a healthy mix of capital gains and income. There are high yield ETFs available, which invest in companies that pay high dividends and are usually Australia based. This could be an option if you are searching for that income, otherwise almost any US ETF will provide you with strong capital gains over dividends.

Once You Have Chosen the ETF’s Type/Region/Industry..

Once you have decided on the style of ETF you are looking at & the region it is in, you may have a few similar ETF’s to choose from and don’t know how to distinguish them further. There are a few ways to work out which will be best for you, however at the end of the day if all of the ETF’s are invested in what you want to be invested in and align with your values, these next few things aren’t going to be a very high priority.

Fees

Fees are definitely worth looking at, and for most ETF’s they should be pretty low as they are generally passively managed. Comparing the fees between funds may help you decide which provider you will go with. For example: A200 fee is 0.07% & VAS 0.10% fee. You may choose to go with A200 as you like low fees however both of those are ridiculously low and good value in my opinion.

Number of Holdings

Another thing to consider is the number of holdings the ETF’s have. Using the same example as above, the A200 ETF has 200 holdings, while VAS has 300 holdings. If you want just the top 200 hundred companies you may choose A200, or if you want even more diversification, you may go with VAS.

Equal Weighted vs Market Cap Weighted

Another difference between ETF’s may be how they are weighted. There are two different ways, either they are equal weighted, or weighted by market capitalisation. Equal weighted means that the companies all make up the same percentage of the ETF. For example, if you are looking at a ETF with 100 companies, each company will make up 1% of the ETF. An ETF weighted by market capitalisation will mean that the biggest companies will make up the largest portion of the ETF, and reflects the index it is tracking. For example, CBA has the largest market capitalisation in the Australian Share Market, so an ETF tracking that will have CBA taking up the largest percentage of the ETF.

If you believe the big companies are the ones that will continue to perform, you may want to invest in a market cap weighted ETF. They take up the majority of these ETF’s so if they do well the ETF will do well. If you think the smaller companies will perform better, you may want to invest in an equal weighted ETF as they will have the same weighting as the large companies and probably a larger weight than what they do in market cap ETF’s.

Things You Shouldn’t Compare:

Share price per unit

The actual share price in comparison to other funds doesn’t really matter. It doesn’t matter how many units you own, it only matters how much you have invested.

If you have $3500 invested in Amazon, and $3500 in Commonwealth Bank of Australia, you will have:

  • Amazon- 1 unit
  • CBA- 34 units

At the end of the day, it doesn’t matter if you have one or one hundred units, it matters only about the dollar amount. In this example, you have $3500 of Amazon and $3500 of CBA.

Past Performance

Past performance is not a reliable indicator of future performance, and therefore should not be used to base a decision on. While it can give you some insight into how the fund is performing it should not form the basis of your entire decision.

Summary

It is important to note that while you can look at these things to make a decision, at the end of the day, it’s best to just invest in something rather than wait trying to make the ‘perfect’ investment. How I invest now is different to how I was when I started, but if I had spent this last three years trying to decide exactly how I was going to invest without diving in, I would have missed out on all the gains I’ve now made. You can always change your tact later, and that is the same for which broker you go with as well. Just getting started is better then waiting for the perfect time, and buying any investment is going to be better then buying the “perfect” one (if that even exists). So don’t be shy, have a look at some of the websites below, find an ETF that is interesting to you or you think will do well, buy it, and hold on for the ride!

Don’t Know Where to Get Started? Try Pearler!

Pearler literally makes it so easy to get started, you can search some of the most popular ETF’s and see what you like there. If I want more information on the ETF I just google the code (normally three or four letters) and look at the ETF’s website for more information.

Searching for ETF’s on Pearler- easiest thing ever!

If you think Pearler may be for you, use the code MINDOVERMONEY to get a free trade! Sign up is free, there is no minimum number of trades and no minimum amount to transfer in to the account. If you want to try something else, there are plenty of other brokers out there. If you want more market data and research, try one of the big four banks. Or if you want something cheap like Pearler, you could try Self Wealth or Super Hero. At the end of the day, any investing is better than none so get started!

If you aren’t ready to start but want to start doing some research, have a look at some of the websites below of the major ETF providers here in Australia. You might see something on there that sparks your interest enough to sign up to a brokerage platform!

Beta Shares
http://www.betashares.com.au

iShares by Blackrock
https://www.blackrock.com/institutions/en-au/investment-capabilities-and-solutions/ishares-etfs_en_AU

Vanguard Australia
https://www.vanguard.com.au/en

The ETF’s on all of these websites can be bought through any brokerage platform that trades on the ASX- this includes Pearler, Self Wealth, Commsec, Nab Trade & many more!

Lets Talk Tax!

We all have to pay tax, yet many of us don’t understand it. How much we pay depends on how much we earn and what tax bracket we are in.

What is a Tax Bracket?

Tax brackets are used to determine how much income tax we pay. Below are the 2021 tax brackets according to the Australian Taxation Office (ATO):

Taxable IncomeTax on this Income
0-$18,200Nil
$18,201-$45,00019 cents for each $1 over $18,200
$45,001-$120,000$5,092 plus 32.5 cents for each $1 over $45,000
$120,001-$180,000$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over$51,667 plus 45 cents for each $1 over $180,000

Why You Want to be Paying More Tax!

Paying tax is good! It means that you are earning more money. Sure, you do have to give some more to the government, however the more you pay, the more money that is in your pocket as well. You may have heard people say how they are avoiding going up to the next tax bracket, which if you actually know how they work you would know that is crazy talk! If you go to the next tax bracket, it doesn’t mean all of your money is now taxed at a higher rate, it is only the money over that bracket that gets taxed higher.

For example, if you earn $50,000 a year:

  • $18,200 of your income would be tax free
  • $26,799 ($18,201-$45,000) of your income would be taxed at 19c per dollar
  • $4,999 ($45,001-$50,000) would be taxed at 32.5c per dollar

If you income doubles the next year and you earn $100,000 a year:

  • $18,200 of your income would be tax free
  • $26,800 ($18,201-$45,001) of your income would be taxed at 19c per dollar
  • $54,999 ($45,001-$100,000) of your income would be taxed at 32.5c per dollar

Therefore, going up a tax bracket isn’t going to affect all of your income, just the dollars that go over into the next bracket. So if you are trying to avoid going up into the next tax bracket- don’t, as it is only going to cost you 4.5c extra per dollar over (if you are in the 45k-120k tax bracket) and the rest is yours!

What Income You Need to Declare

You need to declare all income to the ATO, this includes:

  • Income from any job
  • Share investment income (capital gains and dividends)
  • Property investment income (rent)
  • Bank interest
  • Any other additional income

How to Decrease Your Tax Bill (Legally)

While it is good to be paying more tax, it is also nice if you can cut down on that tax by claiming tax deductions. It is important that these are done legally and correctly, because if you get audited and you have declared things you shouldn’t have you could end up owing more than what it’s worth.

My suggestion would always be to see an accountant at tax time. They obviously work professionally in the area so know exactly what you can and can’t claim, making it a simple and easy process while also getting the most tax back. The appointment is also tax deductible for the following year!

How does a Tax Deduction Work?

Tax deductions increase your tax refund by decreasing your overall taxable income.

For example:

If you earn $80,000 for the year, the tax you will pay is $16,467.

If you have $2000 in expenses that you can claim, these will reduce your taxable income to $78,000. This means instead you would only pay $15,817 in tax, saving you $650 for the year. A tax deduction does not mean you will be totally reimbursed for those costs, so it is important to not just buy things to save on tax as it will still cost you!

To claim a deduction for a work related expense:

  • You must have spent the money yourself and wasn’t reimbursed.
  • The expenses must directly relate to you earning an income.
  • You must have a record to prove it (usually a receipt).

If the expense is for both work and private use, you can only claim the work related part. For example, if you have a mobile that you use mainly for personal use but occasionally for work, you could claim a percentage of your plan as a tax deduction.

Other Expenses

You may also be able to claim deductions on a variety of other expenses, including:

  • Gifts and donations
  • Cost of managing taxes (accounting fees)
  • Personal super contributions
  • Interest, dividend and other investment income (franking credits, etc)

As I said earlier, seeing a tax accountant is the best way to make the most of your tax return while also knowing that you are doing it right! If there is anything you think you may be able to claim it is also important to keep any of those receipts in case you get audited by the ATO. Get started now so you are ready to go at tax time!