Steve wanted to upgrade his work ute.  It was old, business was booming and he knew his old ute wasn’t doing him any favours getting new work. The old Triton couldn’t keep up with the demand of his growing and successful business and  he needed more towing capacity, as well as a larger tray to fit more machinery. The problem was, the quote from the car yard for a trade in wouldn’t even cover how much he owed.
 
“Liz, what do I do?! I thought I’d get heaps more on the car but the trade in quote means I’ll still have a few grand left owing on the truck with Capital!”

Trading in your car can be an exciting time, new wheels means more capacity to do more work. You can’t help but feel like your business is doing you proud when it can afford shiny new equipment and investing in your business is investing in your future.
 
The issue is that cars are losing their value faster than ever: “Steve, cars are devaluing faster than ever, so we have to be careful that when we finance this upgrade we take this into account!”

Cars are devaluing faster – particularly some makes here is a great link to explain some of these issues. http://wealthartisan.com/why-do-new-cars-depreciate-sharply/
 
I asked Steve “Did you put a large balloon payment to the end of your term?”

“Yeah I seem to recall I did.  I didn’t put any deposit down at the time either.  The other thing is, I’ve put tons of clicks on the car as there have been lots of jobs out of town. I’ve really worn the old thing out to be honest.”
 
“Ok” I said, “that’s fine, and perfectly normal, but now that you’re trading in and upgrading,  the wear and tear means you’re getting less than what you owe on it. This is called negative equity. “
 
I explained to Steve that we’d be able to roll the remaining debt owing into the new finance with no issues, but we were going to build in a smaller residual this time, and accelerate his repayments so that he wouldn’t fall into the same trap. We only allocated 15% to the balloon instead of the normal 30% as he really wears his cars down.  Given rates had dropped so much since his last car finance the repayment was only $40 per month more. “Gee that’s ok, and now I can rest assured this won’t happen again in 5 years as I’ll be ahead in my repayments!”
 
We like to know how your business operates so that we can understand and strategize your finances in advance. Simple tweaks like this won’t be noticed over the short term, but can deliver benefits at upgrade time by not punching you in the wallet!
 
Wilson Financial, we understand the fine print so you don’t have to.

​For Lockie, it was time. Time to buy his first home! His first port of call was the bank. "We need you to prove you have genuine savings," was their response. Lockie, being the kind of bloke that he was, nodded wisely, but left the meeting utterly confused. He found us soon after. "Ok, so I need advice. What the heck are genuine savings? What does that even mean? You gotta give it to me straight!"
 
Those two words that provide the magical gateway to many a home loan approval; Genuine Savings. What it means, is that the bank wants to know that you have the capacity to save. This means keeping money saved in an account for three months or more. Do this, and the bank will deem you to be a lower risk client. Genuine Savings are  important for:

• People without equity in another property
• Low deposit home loans where the borrower is putting in the minimal 5 - 10% deposit.

For Lockie, as a first home buyer, this was his situation exactly. 

"Well that’s fair enough really! I can do that!' Lockie replied. We laughed, sitting him back in the seat. 
 
"Genuine Savings can't be choppy. What that means, is that you can't put $2000 in, then a short time later, take $2000 out. $5000 in, and then $3000 out…that sort of thing. Sure, a lot may be going in, but a lot is also going out. Genuine Savings looks more like steady growth in the total amount, through repeated deposits only."

This is an example of choppy NON genuine savings. 

A lightbulb went off for Lockie "Oh ok, so I really should have a separate account for this shouldn't I?" he said.

"Yes, it can't look like slowly saving $500 per week over a few months, and then at the last minute, dump in $10,000 from selling an asset or a sudden windfall. The windfall portion won't be considered 'genuine'!"
 
"But…" he trailed off, a bit exasperated. "What about the savings I already have? It's taken me a fair while to save it up, but I did get wiped out when I bought a car a month ago.  Don't tell me I have to start all over again!?" He slumped, his dreams of soon owning a home threatened.
 
"It's ok, since you started saving after the car purchase, will count as one months genuine savings, so you just have two more to go" we reassured him.

Below is a perfect example of how genuine savings should look but please note, plateaus are also ok.

​Also, if you do get a lump sum, you can simply stick it in the bank for three months and if you haven't touched it, or even grown on it, the bank will deem it Genuine Savings, because you've proven your ability to hold on to it and save. Believe it or not, that’s really hard for many people!