Time to break up with your old habits?
We all have bad habits, and they can be many and varied. They can be as big as poor time management which can impact your productivity, or as small as nail biting which drives your loved ones crazy! You might self-sabotage, such as tucking into that tub of ice-cream even if you’ve vowed to eat better or checking your phone during face-to-face conversations which can cause hurt feelings.
It’s of course unrealistic to be perfect, but you can part company with the habits which are not having a positive impact on your life.
How habits are formed
It’s estimated that 40% of our activities are performed daily in the same situations. It can be hard to trace back how habits (good and bad) were formed but they served a purpose at some stage in our lives. Perhaps you took up smoking to fit in or deal with stress, or learned to self-soothe with sugary treats.
A bad habit for one person isn’t necessarily a bad habit for someone else. Having a glass or two during wine o’clock might be problematic for someone, but a welcome treat for another.
Why habits are hard to break
Habits become deeply wired over time and often reward us in some way thanks to our brain chemistry. However, we don’t have to remain at the mercy of them.
As the common failure of our New Year’s resolutions show, it’s hard to break habits and/or form new ones. Fortunately, there has been significant research into how habits are formed, which can help when it comes to breaking our less desired habits.
Leveraging the habit loop
All habits can be broken down into three main components; first comes the cue or trigger which could be in your internal or external environment; then the action (good or bad); and lastly the reward, where your brain receives the positive feedback for your action.
Appreciating how habits are formed and maintained will enable you to consciously adjust your behaviour, intercepting the habit loop and making your desired behaviours finally stick.
Firstly, create an environment that reminds and encourages you to take action. This could be having your clothes set out for your early morning workout, or scheduling time and moving to a separate space to allow for deep thinking work.
Next identify your current external and your internal cues that trigger your behaviour and set up a process for more productive response, removing any barriers to your success. Are you prone to the 3pm afternoon slump? Take a walk or have some healthy snacks at hand to save you from that sugary snack.
Creating a positive feedback loop for success
Ever wondered why your most addictive habits are often the easiest to adopt and the hardest to kick? These habits, while they may not have a positive impact on your health and wellbeing, have inbuilt reward systems which release a cocktail of positive chemicals in your brain including dopamine, encouraging you to continue your new found habit.
While not all habits have a natural inbuilt reward system, you can create a positive feedback loop to stimulate your brain and embed a new habit, particularly when you are just getting started. For example, studies have shown that a small amount of dark chocolate after a workout can stimulate the same chemicals that will eventually be released by the workout itself. Creating an immediate reward to spur you on.
…and pace yourself
It takes time to break habits and form new ones – on average, over two months. Be patient with yourself and realistic with what you can achieve. If you do fall back into your old ways, don’t be too hard on yourself, most people fail multiple times before they make it work. Treat yourself with compassion and persevere. It will be worth the effort to dump those habits that just aren’t working for you anymore.
Inflation, deflation – What’s in the name?
When the inflation rate fell into negative territory in the June quarter, it was so unusual it begged the question of what this means for the economy. Are we facing deflation or even stagflation and what is the difference?
In the June quarter the annual inflation rate fell to minus 0.3 per cent, only the third time in 72 years of record keeping that the rate has been in the negative.
Much of the fall was attributed to free childcare (part of the special COVID-19 measures) and low petroleum prices during the quarter. The general view is that the September quarter will return to positive territory when childcare fees resume.
So what is inflation and why does it matter?
What is inflation?
In Australia, the main measure of inflation is the consumer price index (CPI). This measures the rate of change in the average price of a basket of selected goods and services over time.
While the index can move up and down, a negative inflation rate – no, that’s not an oxymoron – is referred to as deflation.
Generally, the Reserve Bank of Australia (RBA) aims to keep the inflation rate between 2 and 3 per cent. But in the current environment, the RBA is now expecting the CPI to remain below 2 per cent until at least December 2022.
A falling consumer price index – particularly one that is in negative territory – sounds like it should be a good thing as it will give you greater purchasing power with the lower prices. After all, who doesn’t like a bargain? But in reality, it can play havoc with retail businesses who are faced with lower profits but not necessarily lower costs. This can put a squeeze on their business, which can often lead to retrenchments and a spike in unemployment.
The other two occasions when Australia experienced deflation were in 1962 and in 1997-98.
The 1962 negative rate was after then Prime Minister Menzies implemented two credit squeezes to end the inflation caused by the Korean War Boom. The 1997 episode was in the wake of the Asian Financial crisis.
A slowing economy
Clearly, we are living in extraordinary times with COVID-19 and until the pandemic is more under control we can expect further slowing in the economy.
But at least this curtailment of economic activity is not coinciding with higher prices for goods. If that were the case, the country would be faced with stagflation which poses a far greater squeeze on households than deflation. Stagflation is a situation with rising inflation (prices) and slowing economic growth, often accompanied with high unemployment.
Of course, if your job is not in jeopardy, you will benefit from cheaper goods. But if lower prices become the norm, people may hold off major purchases on the expectation that they can buy even more cheaply in the future. This is not good news as consumer spending makes up 60 per cent of total economic activity, so a contraction in spending generally results in a contraction in the economy.
However, if your employment is insecure and the overall unemployment rate rises, this will depress household spending. It will also have an impact on the property market.
Unemployment takes its toll
According to the latest figures, more than one million Australians are currently unemployed and many more could face uncertainty going forward. Whether you rent or are buying your property, finding the funds can present problems.
In some areas, as demand dried up in the June quarter, rents dropped by as much as 25 per cent. This may be good for renters, but it is not for those with investment property as part of their retirement strategy. If rents fall – or indeed if your property is vacant for some time – it may jeopardise retirement income.
Property prices are also under attack with distressed sales coming to the fore as the unemployment rate grows. When property values fall, mortgages become more expensive in real terms as your equity may be reduced – and in some cases you could find yourself with negative equity in your property.
Hopefully, the measures introduced in Australia to counter COVID-19 will prove successful and the economy will begin to recover.
Our ongoing relationship status… with our devices
If your New Year’s resolution was to spend less time glued to your phone, you’ve probably found that unexpectedly challenging this year. While the impact of COVID-19 differs from state to state, many of us have experienced social isolation and the call to stay and work from home where possible, resulting in an increase in the amount of time we are spending online.
In fact, data demand over the NBN increased by more than 70 to 80 per cent during daytime hours in March compared to figures calculated at the end of February. Due to greater usage, internet speeds across Australia slowed to cope with the uptake.
It’s not just the time we are spending online that’s being impacted, our relationship with technology is evolving as we adapt to the changing world around us.
The benefits of technology
While technology usage often gets a bad rap when it comes to mental health, it has also brought positives into many of our lives, especially during 2020: greater work flexibility, connection to loved ones, and access to online resources and support groups.
During social isolation, many of us relied on technology to keep our lives as normal as possible. For some that meant working from home, keeping up a regular exercise regime with online classes, or having a regular video chat scheduled with family and friends.
Changing nature of how we use our devices
Technology has stepped up and is filling the gap in areas we previously hadn’t relied on it for. With gyms and boot camps off limits across many parts of Australia during stages of lockdown, online workouts started popping up on platforms such as Zoom and Facebook.
Online shopping is understandably booming as the trend away from ‘bricks and mortar’ retail quickens pace and people embrace the convenience and safety of shopping online during pandemic conditions. Based on Australia Post deliveries, there was an 80% increase in online shopping during the months of April and May.
When concerts were cancelled and movie theatres and galleries closed, we also turned to our devices increasingly for entertainment. Netflix saw a boom in their subscribers, up a whopping 15.8 million users in April, while Instagram Live was up 70% in the US in March.
Transforming how we work
Many workplaces have had to put in place processes to support working remotely. Prior to the pandemic, besides face-to-face meetings, most workplace correspondence was done via email or phone. Due to social isolation and increased feelings of loneliness as a result, video meetings and catch-ups have become more of the norm. The cameras on our phones and computers have been able to make us feel more ‘in person’ as a result.
Collaboration has also been on the rise, with collaborative platforms and online communities such as Slack, Asana and Trello making it easier to work together while we’re apart.
Looking out for others
Much of our online activity has tended to be a reflection of our self-absorption. The ‘it’s all about me’ approach of many influencers and content creators was tempered during the crisis by a more giving approach. We saw an outpouring of generosity, from entrepreneurs offering time to listen to pitches, master yoga instructors teaching free classes and musicians performing regular concerts. People have banded together to keep us feeling connected.
Local communities used technology to engender a sense of support and inclusion, with groups springing up to assist others in a myriad of ways such as offering to shop for those who were in isolation, providing free produce from gardens, or toilet paper for those who missed out in the panic buying frenzy early in the pandemic, to just making sure that everyone in the community had a ‘voice’.
Our relationship with our devices and the way we conduct our digital lives is ever-evolving. If we take the positives that have come from the way the crisis has influenced our lives in the digital realm, we’ll continue moving in a direction that not only makes our lives easier but also supports genuine human interaction.
Getting your retirement plans back on track
After a year when even the best laid plans have been put on hold due to COVID-19, people who were planning to retire soon may be having second thoughts. You may be concerned about a drop in your super balance, insecure work, or an uncertain investment outlook.
Whatever your circumstances, a financial tune-up may be required to get your retirement plans back on track. You may even find you’re in better financial shape than you feared, but you won’t know until you do your sums.
The best place to start is to think about your future income needs.
What will retirement cost?
Your retirement spending will depend on your lifestyle, if you are married or single, whether you own your home and where you want to live.
Maybe you want to holiday overseas every year while you are still physically active or buy a van and tour Australia. Do you want to eat out regularly, play golf, and lead an active social life; or are you a homebody who enjoys gardening, craftwork or pottering in the shed?
Also think about the cost of creature comforts, such as the ability to upgrade cars, computers and mobiles, buy nice clothes, enjoy good wine and pay for private health insurance.
It’s often suggested you will need around 70 per cent of your pre-retirement income to continue living in the manner to which you have become accustomed. That’s because it’s generally cheaper to live in retirement, with little or no tax to pay and (hopefully) no mortgage or rent.
Draw up a budget
To get you started, the ASFA Retirement Standard may be helpful. It provides sample budgets for different households and living standards.
ASFA suggests singles aged 65 would need around $44,183 a year to live comfortably, while couples would need around $62,435. Of course, comfort is different for everyone so you may wish to aim higher.
To put these figures in perspective, the full age pension is currently around $24,550 a year for singles and $37,013 for couples. As you can see, this doesn’t stretch to ASFA’s modest budget, let alone a comfortable lifestyle, especially for retirees who are paying rent or still paying off a mortgage.
Then there is the ‘known unknown’ of how long you will live. Today’s 65-year-olds can expect to live to an average age of around 85 years for men and 87 for women. The challenge is to ensure your money lasts the distance.
Can I afford to retire?
Once you have a rough idea what your ideal retirement will cost, you can work out if you have enough super and other savings to fund it.
Using the ASFA benchmark for a comfortable lifestyle, say you hope to retire at age 65 on annual income of $62,000 a year until age 85. Couples would need a lump sum of $640,000 and singles would need $545,000. This assumes you earn 6 per cent a year on your investments, draw down all your capital and receive a part age pension.
Add up your savings and investments inside and outside super. Subtract your debts, including outstanding loans and credit card bills, to arrive at your current net savings. Then work out how much you are likely to have by the time you hope to retire if you continue your current savings strategy.
There are many online calculators to help you estimate your retirement balance, such as the MoneySmart super calculator.
Closing the gap
If there’s a gap between your retirement dream and your financial reality, you still have choices.
If you have the means, you could make additional super contributions up to your concessional cap of $25,000 a year. You may also be able to make after-tax contributions of up to $100,000 a year or, subject to eligibility, $300,000 in any three-year period.
You might also consider delaying retirement which has the double advantage of allowing you to accumulate more savings and reduce the number of years you need to draw on them.
These are challenging times to be embarking on your retirement journey, but a little planning now could put you back in the driver’s seat.
September Tax Alert
Many small business owners and sole traders will be breathing a sigh of relief following the extension of the JobKeeper scheme until March next year. At the same time, however, the ATO is stepping up its compliance activities.
Here’s a roundup of some of the key developments in the world of tax.
JobKeeper extended to March 2021
The government has announced its JobKeeper scheme, which was originally due to wind up on 27 September 2020, will now continue until 28 March 2021.
The $1,500 per fortnight payment to eligible businesses, not-for-profits and the self-employed will, however, drop to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.
From 28 September 2020, if your business claims JobKeeper, you will also be required to demonstrate it has suffered a decline in turnover using your actual GST turnover rather than the prior method, which was based on projected GST turnover.
ATO data matching support payments
The tax man is also starting to put JobKeeper support payments under the microscope using information from a new data matching arrangement with Services Australia (formerly Centrelink).
Information about JobKeeper payments reported to Services Australia for social security payment purposes will also be provided to the ATO. This will help the ATO identify people who are receiving both JobKeeper and social support payments.
JobKeeper still open to businesses
Although most businesses suffered an immediate decline in turnover when the COVID-19 crisis started, some businesses are finding things are tougher now the new financial year has commenced. The renewed lockdown in Victoria has also dealt a new blow to many businesses, so it’s worth remembering it’s still possible to apply for the JobKeeper subsidy.
If your small business has experienced a drop in turnover of more than 30 per cent and you meet the eligibility requirements, you are still able to apply for financial support through JobKeeper.
Expenses shortcut extended
For employees who have been using the shortcut method to calculate their working from home expenses, the good news is the end date for this scheme has been extended from 30 June to 30 September 2020.
The ATO announced the new three-month extension and said a further extension may be considered.
Employees and businessowners who work from home between 1 March 2020 and 30 September 2020 on income producing activities can use the shortcut method to claim 80 cents per work hour for their home office running expenses. This all inclusive rate means you don’t need to calculate and record your actual running costs.
The shortcut is not a free pass, however, as the ATO recently noted this was one of the top three issues it was seeing in returns lodged for 2019-20. To avoid problems in this area, ensure you don’t double up on your shortcut claim by adding, for example, a depreciation claim for laptops and desktops.
Warning on TPAR requirement
The ATO is warning some small businesses may find they need to lodge a taxable payments annual report (TPAR) this financial year if they have started using contracted service providers due to the pandemic.
TPARs keep the ATO informed about payments made to contractors, with the requirement initially rolled out for the building, cleaning and courier industries.
The tax man is now cautioning restaurants, cafes, grocery stores, pharmacies and retailers who have started paying contractors to deliver goods to customers that they may be required to report.
If total payments received for delivery or courier services are ten per cent or more of your business’s total annual business income, you may need to lodge a TPAR for 2020-21.
No tax on ‘robodebt’ refunds
And some good news for taxpayers who receive a refund amount from Services Australia for a debt raised using averaged ATO income information – also known as a robodebt. You don’t need to include the money in your income tax return.
The ATO is advising no action needs to be taken regarding these refunds and tax returns for prior years should not be amended.