Do you fail to plan?

As the old saying goes, ‘if you fail to plan, you plan to fail’.

You are very unlikely to achieve your major life goals if you fail to firstly articulate these goals and then secondly do not put any framework in place to achieve them.

Step 1 – To really think about your major life goals - Visualise your goal.  If you want to travel the world then visualise you stepping on the plane.

Step 2 - Once you can see the vision of your goal, you then need to articulate what it is.  Be specific and vocal. Once you verbalise a goal – it becomes real.

Should you reduce debt first or start a savings plan to buy a house?

Scenario: Clients have several credit card debts and a personal car loan debt. Both husband and wife have good paying jobs and no children so have a good surplus cash flow position - they just have not been disciplined with where they money goes.

The new goal is to buy a home and get out of the rental system.

So the dilemma: do they pay off the existing debt first at a faster rate or do they keep making the required payments and put the surplus cash into a savings account for the house deposit.In this situation, I assisted the clients in developing a strategy to make additional repayments to clear the credit card debts as soon as possible whilst also starting a small savings plan.

Normally I would recommend you clear all debts first before putting money into savings as the interest that you are charged is always at a higher rate that what is offered on savings accounts. In this case however, the credit cards can be cleared within 18 months and a small savings plan held in place over a few years will give greater lending confidence when the time comes to seek a home loan. For these clients, they can clear credit card debt, reduce car loan to manageable level and save up a house deposit within 3 years.

Everyone's situation is unique so if you know anyone who has this dilemma - let them know that in seeking professional advice they too can find the best solution to meet their goals.

Cash flow management

I have held several discussions lately about household cash being tighter with the cost of living going up. In all instances I asked if they knew exactly where the household income was being spent and did they have any strategy to combat the financial strain on the house. The answer: no idea where the money really goes so no idea what can be done.

I tell clients all the time to do a budget then to monitor the monthly expenses. This year I have decided to practice what I preach! I have made a commitment every month to sit down and add up all of my receipts, it is has been a real eye opener. $2 here and $5 there all do add up and often to alot. It has  made me stop and think before I buy - do I really need it?

My biggest appreciation in this process has been that everyone is different when it comes to understanding cash flow and that you need to have a system that works for you. There are many different ways to structure your bank accounts and payment options. The system needs to be easy to use otherwise the money juggling act becomes too stressful and overwhelming. I have plenty of budgeting tips and tools so let me know if you, your friends or family want to know exactly where the money is going and more importantly, how do you combat the cash flow stress in life.

Changes to superannuation contribution limits from 1st July 2012

Are you salary sacrificing or making deductible contributions to superannuation?  If so the new contribution limits announced in the recent budget may affect you.

The current arrangements are if you are aged 50 years plus you are able to contribute up to a total of $50,000 to superannuation each year without penalty.  This applies to salary sacrifice and employer Superannuation Guarantee contributions if you are an employee, or if self employed to your deductible contributions.

However from the 1^st of July this limit has been reduced to $25,000 a year.

What does this mean to you? 

1.      If you have the opportunity to maximise your contributions to superannuation prior to 30 June this maybe your last chance to do so.

2.      If you are salary sacrificing to superannuation it may be time to review your arrangements so you don’t exceed the reduced limits in the future.  (Excess contributions are taxed at the highest marginal tax rate negating the benefits of contributing to superannuation)

If you are affected by the changes please call us to make an appointment to review your current arrangements.

The Internet can not provide quality advice.

So in this world of the big wide web, it turns out that you can not replace the human touch when it comes to strategic advice for your finances and retirement planning.

This week I had a new client come in who has for many years looked after his family finances. He has done a great job of placing his super funds with the most appropriate product, ensured that the family had sufficient insurance to protect themselves in the event of any injury, illness or death and has been astute with the weekly cash flow. He had been able to get a budget from the Internet. He had also researched the superannuation and investment products available and learnt to trade the share market - all from information available from the Internet.
However when it come time to prepare their financial position for his retirement date of 5 years time, the Internet only provided confusion. Trying to work out how Centrelink assesses assets and income when calculating age pension entitlements became an arduous task and without this assessment, the amount of money needed to fund the family in retirement could not be ascertained. From speaking to his colleagues he understood that a plan of the steps was needed to position the finances to maximise Centrelink and minimise tax payable not one Internet site could explain these steps, let alone guide him through the steps. When asking his colleagues how they managed the transition to retirement, they referred him to their financial planner.

So I now find myself sitting in front of a new client to provide the strategic advice on pre-retirement planning. My first question to any new client is "How can I assist?" so imagine my joy in hearing the words "I need your help so I can retire like Bob because the Internet can't help. I have printed out pages and pages and I just don't understand it."

It is great to be reminded that good advice from a financial planner will never be replaced by a computer!

Federal budget summary

We recently heard the news that the Reserve Bank of Australia decided to reduce our cash rate by 0.5%. Now we hear the news of how our current government would like to manage the federal budget. Find out how the budget announcements will affect you.....

Budget video

Federal budget update 09 May 2012

Family Trust structures do not have to be complicated

I meet with a new client who thought his business structures were very complicated and had trouble understanding what his accountant had set up for him. 

 The first question I asked before even looking at the structures set up was: What are your goals?  What do you wish to achieve?

As a small business owner, they work hard so the main dream was to build up a direct investment portfolio that can one day provide for their children.

Owning several small businesses, the accountant had set up the structure as two separate family trusts each with a company as the corporate trustee for these trusts as well as another separate company operating a third business.

Working with the accountant, I fully understood the tax efficiency and asset protection reasons for the business structure.  With the help of the white board, I was able to step the client through the structure so that they fully understood the importance of the asset protection and the ease of tax efficiency.

We then devised the strategy for this client to direct the net profit funds to the correct entities to ensure that they can build their direct investment property portfolio.

The role of the accountant is to set up the business structure however their role is not to delve deeper into what the overall picture is that you wish to achieve.  In this example, the accountant never knew that these clients wanted to build up this direct investment property portfolio so was not aware of the best solution to suit the client’s needs.

My role as the financial adviser is to ensure that you utilise the structure to the best advantage for your goals and dreams.  Only your financial adviser looks forward towards the “big picture”.

How do you stay motivated?

Being a small business owner it is hard to continually lead and motivate yourself.  Again I was privileged to work with new clients last week to devise a new strategy for them to achieve their goals.  

The work that I do can change lives. Seeing this happen is such a motivating and moving feeling and reconnects me to doing what I love - working side by side with my clients to guide then along the path of financial success. 

How we are saving a retirement couple $8100 in taxes.

This last week I experienced the enjoyment of my role in helping others achieve their goal.  I meet with clients who own a commercial property in their personal names.  They are retired and are living off the rent received from the commercial property.

The rent of $60,000 per annum is being taxed as per their individual tax brackets so total tax of $8,100.  This meant that instead of receiving the full $60,000, they had to forgo some activities in their retirement.

I have worked with their accountant to recommend a strategy to restructure the ownership of the commercial shed into a self managed super fund.  Now that the rental income is being received inside super, the clients are able to draw their full $60,000 in income without any tax. 

To advise these clients that they can now earn $60,000 tax free in retirement has bought this couple such joy as they can now travel more often to see their grandkids.

It is times like this when I see the smiles on faces that I know I can make a difference and help achieve dreams.

Market Update for Quarter 4 2011 and what this means for us in 2012.

Click to view the video below, hosted by Elliot Bullock, our Investments Specialist. In this easy-to-understand video, Elliot explores:

- the outlook for global growth
- the latest from the United States, Europe and China and what this means for Australia
- the outlook for interest rates.