Tuesday, October 25, 2016

Convention 2016 - Takeouts

Another conference done and dusted, and surprisingly enough, this one wasn't a junket.  It was full of workshops, guest speakers and idea swapping.  Of course, we had to be fed, luckily to Sydneysider standards, not the country style steak and chips that I'm used to, so there were a few dinners.  But I digress. 

A big focus of convention this year was the need for holistic planning and why this is so important to clients, as well as assisting us as firms. At Achieveit Financial Planning we have always focused on holistic planning, but the emphasis was actually on holistic planning from the client's perspective.  After all, we know what we know, but a client doesn't.  We need to work at communicating this with our client and our prospective clients.  Letting the client know what will be, and has been, considered will demonstrate the value of the advice provided.  As advisers, we are aware of the different ways we can assist in achieving our client's goals, but communication of this to the client involved is key.

Technically, the workshops were great.  We went over current proposed legislation and the effect on Self Managed Superannuation Funds including changes to segregation and CGT and the revised non-concessional caps.

Timing of the Notice of Intent to Claim for concessional contributions and the impact of enduring rollover insurance policies was also covered, as well as the estate equalisation impact of the removal of the anti-detriment payment.

Succession planning for businesses was covered; the right money to the right person at the right time.  So very important if you don't want to end up working with your newly deceased business partner's spouse.

There were also motivational speakers, including Daniel Flynn from Thankyou and Matina Jewell, a best-selling author, leadership expert and former UN Peacekeeper.  The common themes with both of these very inspirational people are that communication and devotion to your mission are the key to your success.  Both Daniel and Matina stumbled with roadblocks, but they picked themselves up and carried on.  Not everything will go to plan, but inaction will often lead to a worse outcome than not getting it quite right.

As a self-confessed geek, I can't wait to experience the learning curve at next years Convention.

Find Erin* at Achieveit Financial Planning or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687.
This is general information only and does not consider your personal circumstances.  You should not act on any recommendation without obtaining professional advice specific to your circumstances.  We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Wednesday, October 5, 2016

BBQs with mates and ladies who lunch

The superannuation space is constantly changing, and there are a lot of resources available for those of us who have industry or retail superannuation funds.  As a matter of fact, now that the Government has dropped its punitive taxation penalties for over contributing, the superannuation space is a lot more user friendly.  Sure, as an average Joe, you might not know all of the ins and outs associated with re-contribution strategies, or spouse splits, but you don't need to be afraid of superannuation.  Unless, of course, you trample blindly into the Self Managed Superannuation Fund (SMSF) space, in which case you should be afraid...very afraid.

As of the 01st of July 2016, your accountant is required to be licensed to recommend the establishment of a SMSF.  The purpose of this new licensing regime is to crack down on the establishment of SMSFs that are inappropriate for the client.  This may mean that the client does not have the funds to make it worth the client's while, or it may mean that the client hasn't got the ability to deal with the compliance issues that surround being a trustee of a SMSF.  Now, I'm not saying that all accountants are shady (and a financial planner is as only as good as their software, says my Uncle Kevin...the accountant), but now the industry has standardised parameters to ensure that the client is well educated before making this decision. And the scenario outlined below will show why it's so important.

A client of mine was at a ladies lunch the other day, and overheard a conversation regarding purchasing jewellery using funds from super.  Luckily, for all that she likes to push the boundaries, she contacted me to confirm that this is actually the case.  Now, a SMSF is on the cards for this particular client, but not for another five or so years, so she was quite excited about this prospect.  After a bit of digging, it was admitted that she had approached the conversing ladies and found out that the jewellery in question was actually the one being worn.  "How old was she?" I asked, "In her 50s" the client replied. "Right", I said, "This is the way it works".

Other than the fact that collectibles (art, jewellery etc.) are in themselves a very speculative asset class (cue disapproving financial planner face), you cannot purchase assets with superannuation funds, which are legally restricted for your retirement, and then wear them before you retire.  As the trustee of a SMSF, you are liable for non-compliance, and one of those many potential breaches is the failure to keep SMSF money separate from personal assets.  This means that the collectibles must be stored away from the personal place of residence (I would suggest a bank vault leased to the SMSF), and cannot be loaned to related parties.  The penalty for this, is 20 penalty units, which at $180 per unit, is $3,600 for each individual breach.

"But, how would they know that you had worn the jewellery?", the client asked, slightly less excited than she was earlier. "The better question", I replied, "is how do they know you have not?"  It is not up to the ATO to prove that you are in breach, it is up to the trustee to prove that they are not.  And, after reviewing your auditor notes, if the ATO suspect that you may be in breach they will take a very close look at what is going on.  If Facebook shows that you have worn the jewels to multiple events, then that is multiple breaches, which means multiple fines.  Which the trustee pays out of their personal pocket, not from the SMSF.

Luckily, this client has a good relationship with her planner and could be put back on the straight and narrow, and, I would assume, her accountant (under the new regime) would have done the same rather than facilitating the client's request.

The moral of the story is, if you are at a BBQ with mates, or happen to overhear some ladies at lunch, please make sure you speak to a qualified professional before acting on it.  After all, we all know what happens in those stories that are too good to be true.
Find Erin* at Achieveit Financial Planning or call for an appointment on 07 4638 5011.
*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687.
This is general information only and does not consider your personal circumstances.  You should not act on any recommendation without obtaining professional advice specific to your circumstances.  We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Tuesday, September 20, 2016

Life is not always rainbows and butterflies...

As planners, we sometimes need to step up to the plate and accept that things can go badly for our clients in the worst possible way.  Protecting your family is a cornerstone of a sound financial plan, and although this subject is high profile, it pulls on the heart strings, and we hear about it all the time on our Facebook newsfeed, many Financial Planners don't bring it up when it could have made a very real difference to their client's life plan.  So, let's talk about Child Trauma cover.

The idea behind Child Trauma cover is that you insure your child so that, in the event of Baby Johnny suffering a Children's Medical event, one of the parents can take the time to be with them through treatment.

One of the other big benefits with Child Trauma cover is that it has a continuation option to an adult policy with no medical underwriting.  This means that if Mum gets breast cancer while Baby Jane is in her teens, but has a Child Trauma policy in place, then it will not have any effect on Baby Jane's policy.  No breast cancer exclusion, even if Mum has found out that she is carrying the BRCA gene.  Now that is pretty handy.

It is a macabre subject, but it is also something that I feel needs to be addressed.  I fervently hope that the policy doesn't get used, but honestly, what parent is willing to take the risk?  You have bills to pay, probably other mouths to feed, so you cannot take indefinite unpaid leave.  But at the same time, you really don't want to send your child for treatment with anyone but yourself.  Insurance doesn't solve all of our problems, but it does provide you with the ability to buy time to work through them.

Find Erin* at Achieveit Financial Planning or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687.
This is general information only and does not consider your personal circumstances.  You should not act on any recommendation without obtaining professional advice specific to your circumstances.  We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Wednesday, August 24, 2016

Raising the financially independant female

I recently read an article regarding Disney Princesses and how exposure to these fictional characters can lower girl's body image in childhood.  As a mother whose 3.8 year old daughter spent most of the weekend dressed up as Rapunzel from Tangled, or Elsa from Frozen, I have some awareness of the impact that this can have in developing my daughters tastes in life.  As a Financial Planner, I have, anecdotally noticed this Disney effect with young, female clients, and, if truth be told, have even been a victim of this myself.
It seems to me, that there are a large proportion of young women who are waiting for "their Prince to come".  It may not be deliberate, but whereas young men are encouraged to be the proactive provider (aka The Prince), and take control of their finances at a young age, young women seem to hold off making important financial decisions until The Prince comes along.  For example, although young men will save and purchase their first home, organise their personal insurances and even start a regular investment plan, young women seem to be whiling away their time in their tower until The Prince can come and show them the way.  As a matter of fact, I'm pretty sure that if it wasn't for the superannuation carrot, I wouldn't see any single women in their 20s come through my door.  And we all know what a abysmal carrot superannuation is.
As a female, I find this stereotyping irritating, as a parent, I find it incredibly worrying, but as a financial planner, I am wracking my brain to think of a counter example.  And the best I can come up with is that they are few and far between.
I have women in networking groups, I have female friends, and even the daughters of existing clients who all fall into this category.  I talk ad nauseam about the importance of having goals and taking control of your financial future, and sometimes I even see a flicker of excitement about the idea of giving yourself options, but it very, very rarely seems to manifest in a young lady walking into our office.  This wasted financial potential upsets me.  Not in the quiet, reflective way.  In that outraged, angry and outspoken way that I do so well.
Money may not buy you your happily ever after, but it sure does help the world go round.  Having your own asset base does not make you less feminine.  You shouldn't wait until you are married to purchase your first home.  Creating options for your future self is not only a smart thing to do, but also an attractive thing to do.  It gives you confidence because, as a friend of mine once said to her own daughter, "life is your journey.  Some people are there for a long time, and some people are only there for a short time, but the only person taking your journey for the whole trip is you".
So, I urge all young, single women to stop waiting for The Prince or your Knight in Shining Armor, saddle up your own horse and ride into your own sunset.  If you're the parent of a young woman in their 20s, then rather than sending them on a cruise for their 21st, pay their consultation fee and let them use the money to invest (sorry, ladies).  Their future self with thank you.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, August 2, 2016

Lets talk STDs (Sexually Transmitted Debts)

Whether you're a health professional or a financial planner, talking to your client about their STDs is an uncomfortable experience.  The fact that the client has walked through your door in the first place is an indication that they are getting desperate for help, because, as with a traditional STD, they are embarrassed and just don't want to talk about it.

The end of any relationship is a traumatic experience, and the majority of us have been through the feelings of abject failure and loss that comes with it.  Couple this with the stress of being left to foot the bill, and it's easy to see why there are so many bitter and twisted ex-partners out there.

Avoiding an STD is all about prevention, and I have a discussion regarding the "Separation of Church and State" with all of my single clients.  I explain that this concept can be used in relationships as well, in that your emotional attachment and romantic relationship should be viewed as separate to your financial state.  Communicating your financial goals with your partner, understanding theirs, and setting "couple" goals is important.  Opening a joint bank account to save for holidays or a wedding is a great idea.  Going guarantor on a car loan is not.

What you bring into a relationship should be protected, and most people understand and accept this basic principle, even when their only exposure to it has been through rom-coms (thank you Hollywood).  But you also need to have the discussion about what happens once you have moved in together.  What happens when one of you need a new car, or your bundles of joy come along sooner than expected?  I have heard many horror stories of one partner co-signing a car loan and then the other leaves with the car and refuses to pay their half.  In this scenario, you can't sell the asset without joint consent, but if you only pay your half, then a default will go on your credit record as well.  In one way, investing in a relationship is the same as investing in the share market.  Everyone is a high risk investor when things are going well, and everyone is looking for someone to blame when it goes badly.

Now, I'm not sure of what other planner's experiences are, but my clients seem to be less and less dependant on a traditional partner arrangement when building their wealth.  I have an increasing number of clients, male and female, who are going into their first serious relationship with an asset base.  Those of us who have already been through the wringer will be screaming "co-habitation agreement", but will they listen?  It is easy to get caught up in the warm and fuzzy, and the discussion of legal documentation before co-habitation is hardly the most romantic form of courtship, but a full disclosure and understanding of your partner's financial health and attitude is necessary. Jumping in without knowing will not only make your financial planner very cranky, but it can also have long term ramifications for your credit rating and wealth strategy.

For those of us who have already had the unfortunate experience of encountering an STD, don't be embarrassed.  Think of it as a learning experience.  A good financial planner will be able to adjust your strategy around this roadblock, and will help you rebuild your finances, one bitter little step at a time.  

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, June 28, 2016

Spender vs. Saver = Know your couple goals

My role as a Financial Planner can be very varied, and it depends on which client you speak to as to how I am described.  I have one client who describes me as her financial conscious, which seems flattering until she describes me as this annoying little voice in the back of her head disputing the need for a prospective purchase.  I have other clients who want me to track their financial position, some who give me a specific goal to help them meet, and those who have retired and just really want a cup of tea and a chat.  I can't think of a client that I don't like (I usually send those ones to Naomi), but some couples need a little more of a helping hand than others.  To these couples, I range from a referee to a financial crisis manager.

Basically, these clients are not on the same page as their spouse financially, and it can end up a deal breaker.  For example, one may be a spender and the other a saver.  The spender is interested in funding their lifestyle, and the saver is worried about their future.  There are many reasons this happens, for example my ex-husband's Dad died very young, and so he tends to live in the moment with his spending habits.  Another reason may be that the saver doesn't want to end up in the same financial position as their parents, or that there was a lack of financial education while the spender was growing up.  The "She'll be right" attitude gone wrong. 

Having this conversation is hardly romantic, but you will save yourself a lot of pain if you have it before you cohabitate.  The goal is to know where each of you stand as an individual, before joint finances become an issue.  From these individual goals you can form an idea of what your couple goals are, and whether they are acceptable to each individual.  The key is to effectively communicate why the individual goals are important, so that they can be assessed at a couple level and you both have the opportunity to articulate what it brings to the relationship. 
Not having this conversation and understanding of your partner can bring conflict when the relationship encounters stressors.  A stressor may be having children, loss of employment or even having to pass over an opportunity due to a lack of, or hoarding of, resources.  If both individual spouses have their own agenda, it is difficult to get full commitment to the goals of the couple.
Some moderation on your individual view of finances may be needed, and some couples never get there, and continue to have separate financial lives.  Other couples work hard to come to a middle ground over time.  Neither option is right or wrong; use what works for you as a couple. That way, you can get back to nagging each other about the important things in life...like who left the toilet seat up again.

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, June 7, 2016

Personal reflections from the other side of Aged Care

My grandfather, who is 98 this year, has recently entered an Aged Care facility.  I could bore you with the details of the RAD, the fact that he has a qualifying pension (WWII veteran), or how the family has decided to rent out the family home.  All of these facts are relevant, and very important when my Father, who is sole Enduring Power of Attorney, approached me for help (convenient having an Aged Care Specialist in the family, hey Dad), but none of them really tell the real story.

The real story is this: my Grandmother died three years ago, and, despite the efforts of my Mother and two Aunts, my Grandfather spent the majority of his time by himself.  My Grandfather has always been the strong patriarch of the family, and watching him suffer cognitive decline of his once sharp wits, has been hard on the children.  As in many family situations, they could not reconcile that this, increasingly, frail old man was their father, and so resisted my Father's urging to look into care.  Without united family support, my Father only had two options, to bide his time or forcibly step in, which would have been more traumatic for my Grandfather.  And so, for better or worse, he waited until the inevitable hospital visit where the good Doctor refused to discharge him.

Now, for the happy ending.  After all the tears, what-iffing and hesitation, my Grandfather is happily settled in.  He spends his time playing the piano in the common area lounge, eats well (the food is fantastic), and is socialising with his peers.  He no longer needs to worry about when to take his medication, pay a bill or decide to mow his lawn.  My Grandfather can now relax and live out his days in dignity, in a community where he does not feel like a burden.

My family are not horrible or mean people, but the question that comes to my mind is how many other families are condemning their parents to a half-life where they spend their time alone, day in and out?  Where they are constantly waiting for a visit, a phone call, or for someone to take them grocery shopping?  I can only hope that when I am in this same situation, my Daughter stands up and makes the decision to improve my quality of life, no matter how querulous I may be.  After all, isn't that what I do for her now?

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Monday, May 9, 2016

Keep your eye on the ball

The final lesson from George Samuel Clason's "The Richest Man in Babylon" is to track your wealth, or if you're just starting out, lack thereof.  After all, how will you know if you are getting closer to a goal if you don't actually track your income and expenses?  Setting a budget is the easy bit, actually sticking to it in order to achieve your goals is the hard part. 

Lesson 8: Track your wealth

Achieving your goals will not happen overnight, and "The Richest Man in Babylon" focuses on behaviour modification rather than being a get rich quick scheme.  It does work, but as with all things, it is important to track how you going against your benchmark, which is this case, is your budget.

There are many ways that you can track your progress.  You can create an excel spread sheet, use an app or keep a hand written ledger.  The important thing is to ensure that you are going forward, and that your debts are decreasing, while your assets are increasing.

If you've committed to paying yourself first, are living below your means, and are on top of your household expenditure, then all you need is to set your goals, and track your forward progress.  Treat your finances like a business, because ultimately, that's what will fund your retirement.

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, April 26, 2016

You are the most important person in your world

And don't let anyone tell you otherwise.  No, this is not a feel good Pinterest quote for the down and out, it is one of those self-evident life truths.  The only person who can make change in your life is yourself.  The only person that you can truly rely on, is yourself, and so this brings us to our seventh lesson from George Samuel Clason's "The Richest Man in Babylon".

Lesson 7: Invest in yourself

As pointed out in Lesson 4: Insure Yourself (Life is a game of Russian roulette, Feb 15 2016), your biggest asset is you, and so it makes sense that you invest in your own wellbeing and potential.  This can be interpreted in many ways, and we hear it often.  Invest in your health by eating well and exercising.  Invest in your own sanity by taking time for yourself, whether this is reading a book, getting a massage or spending time with your friends.

Financially, the best way to increase your earning power is to invest in your own potential.  For instance, I am currently studying for my Masters of Financial Planning.  At first, I was resistant to the idea, after all, I have been in the industry for over 10 years, I hold a Bachelor's degree in International Business, a Diploma of Financial Services (Financial Planning) as well as various specific qualifications such as in SMSF and Aged Care.  Other than complying with the change in licensing regulations and a nice tax deduction, what could the Masters possibly bring me?

I am now onto my second subject (of eight), and have completely changed my tune.  As far as financial planning strategy goes, I doubt that this course will bring anything new to the table.  What it does do (so far), is make me delve deeper into the mechanics that go into business, such as the overall business plan, the marketing and the general approach to networking.  This will help me work more efficiently in my role as well as provide direction to my small business clients, which is a value add to them, and will make me a better financial planner overall.  This should, in theory, increase my earning power.

So, take the time to unlearn, learn and relearn.  If you are working at capacity and have hit your earnings limit, it may be time to work smarter rather than harder.  Take the time to improve your skill set, because it doesn't matter where you are employed, you own those qualifications and, as they say, knowledge is power.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, April 12, 2016

Live in the moment by putting a future plan in place now

One of the benefits of having a financial planner is that they work to future proof your goals.  Financial planners think of the client's long term, so that they can live in their short term with as little stress as possible.  This is all reliant on the client providing the long term goals, or, at the very least, an idea of their end game so that the skills of the financial planner are utilised as effectively and efficiently as possible (and trust me...financial planners have a deep and abiding dislike of inefficiency). 

Lesson 6: Have a retirement plan in place

I often paraphrase Lewis Carrol's Alice in Wonderland, "if you don't know where you're going, it doesn't matter how we get there".  If you're a 25 year old earning $40,000 per annum, with a increase of 3% per year, and you have implemented all of the previous lessons, then by the time you are aged 50 your finances should (broadly) look like this:

Salary: $81,000, Investment account: $378,411 (return 7%, contributions increasing with salary 10%, earnings reinvested), Superannuation $309,241 (return 7%, contributions increasing with salary 9.5%, 15% tax on earnings, earnings reinvested).  Now, this scenario has assumed that you've remained single, and therefore it's unlikely that you will have purchased your own house.  Your after tax funds are $63,000, less your annual savings of $7,725, leaving your living expenses at around $55,000. 

If you had wanted to have the option of retiring at age 50, then you will have missed the mark. You cannot access your superannuation for another 15 years, and your investment account will only last slightly less than 7 years.  This means you have two options, work longer or spend significantly less over the next 15 years.

Your ability to meet your long term plans are impacted by your short term decisions, so it's important to plan your retirement outcome now, so that you can work out the milestones you need to achieve to get there.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Wednesday, March 30, 2016

Home is where the heart is (and the media room, and the third bathroom, and the four bay garage....)

Attention all home owners.  I have some bad news.  Contrary to popular belief, your home is not your biggest asset, it is actually your biggest expense.  I'll just let that sink in while I introduce our next lesson from George Samuel Clason's "The Richest Man in Babylon".

Lesson 5: Make your house a profitable investment

Yes, a profitable investment.  To do this, we need to draw on a couple of the previous lessons.  When looking for your house, do not go in with a "Keeping up with the Jones'" mentality.  Work out what you need space wise, and where you would like to live.  I live in a unit, which suits me well because I'm never home and enjoy low maintenance living.  However, it is not in a ritzy part of town because it doesn't make sense to sink that amount of money into something that is not creating an income.  Make a list of your wants and your needs with your significant other (if applicable), and purchase wisely.

The next thing we need to consider is living within your means.  What are the ongoing costs associated with your house?  This includes your mortgage payments or rent. Now, I'm not saying that it's possible to live for free, because it's not.  I'm just saying that you need to be realistic with your expectations.  Let's go through an example:

Asset value $350,000, mortgage at $320,000 at 4.99% = $15,968 in interest per year.  Insurance, body corporate, rates etc. = $3,684. Stamp duty (Queensland) and legal expenses = $4,500. This means that I am down $24,152 in initial expenses for the first year.  To put this in perspective, I am negative 6.9% for the first year and, all things being equal, I need to make at least 5.6% every year in capital gain to cover my mortgage, body corporate and insurance expenses. 

If I want to break even when I sell the property in 10 years, then the property market needs to have increased by 5.7% year on year, or a value increase of $201,020.  So I will need to sell my dated, used asset for $551,020, just to recoup the expenses, not turn a profit.  Not impossible, but definitely something to think about when looking at possible purchases.  Remember, you are sinking your hard earned cash flow into this asset, hoping that the property market moves in the right direction and you get it back.  That's a lot of eggs in the one basket, and every dollar that gets eaten up in your mortgage is a dollar that could be out there working for you and bringing in an actual income.

So, before you get tied up in the colour of the blinds, stop!  Will this property help you reach your goals, or become a hindrance?  It may be pretty and in the "right" area, but you can't sell the bathroom to pay the paper boy.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Monday, March 14, 2016

Life is a game of Russian roulette

How many times have you been watching the News and heard of a family whose house has burnt down and they didn't have insurance?  Did you shake your head in disbelief?  They have nothing now.  Not even a toothbrush.  How could you not have insured your possessions?  Your house?  "Not me", I hear you say.  "I'm a responsible adult.  My car, house and contents, they're all insured.  I've got this."  But have you?

Lesson 4: Insure your wealth

This is the next lesson from the Richest Man in Babylon, insure your wealth.  And do you know what your greatest source of wealth is?  It's you, my friend.  If you are earning an average of $70,000 pa over a 40 year working life, that's $2.8 million (not accounting for inflation).  That's a lot of money.  So, if you're willing to insure a $40,000 depreciating asset (your car), perhaps you should also consider insuring a multi-million dollar, appreciating asset (your income).

Other things to consider are Life cover, which will provide a lump sum if you die or are terminally ill, Total and Permanent Disablement cover, which provides a lump sum if you are totally and permanently disabled and can no longer work, and Trauma cover, which provides a lump sum if you are diagnosed with a specific illness.  Each of these cover a slightly different area and work together to protect your current position.  Risk mitigation is just as important as building your wealth.  There is nothing more distressing than seeing a family liquidate their hard earned assets, and try to start again, all for the sake of a simple life insurance policy.  You don't believe me?  Give me a call, I have all of the horror stories and I'm more than happy to share.

Life is a game of Russian roulette; we can't stop bad things from happening, but we can limit the financial consequences by being prepared.  Insurance buys your family the time it needs to recover.  Give your family financial security, review what you have, because it's probably not enough.

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Monday, February 29, 2016

Money trees take work

We're two months into 2016.  This means that it is time to end all of the procrastination that comes with the holiday period.  It's time to look forward and start working towards our exit strategy from earned income (work) and make the move to passive income (from our investments).

So far, George Samuel Clason's "The Richest Man in Babylon" has taught us to pay ourselves 10% of our income, and live within our means on what remains.  So, what do we do with all this money that we are putting aside?

Lesson 3: Make the most of your money

The first thing to be done is to keep and maintain an emergency fund.  This can be anything from one to twelve months worth of income.  Where you sit depends on your occupation and skillset, employment situation, your family situation and what the economy is doing.  For example, a contractor in a specialised industry will be, arguably, more sensitive to a weak economy than an employee in a general administrative role. 

Using the example from Lesson 2 (Keeping up with the Jones', January 17, 2016), on a salary of $70,000, you are saving $5,430 a year and will therefore need a minimum of $4,177 in your emergency fund to cover one month of unemployment.  This may sound like a lot, but keep the big picture in mind.  Having this in place will mean that you won't need to liquidate your investments if you find yourself suddenly unemployed, under employed or just having a career inhibiting mid-life crisis.  

Once you have that sorted, you can concentrate on the fun stuff.  What to do with the money that you paid yourself?  Remembering that the idea is that these funds will provide a passive income, so your best move would be to invest it.  Where you invest the funds is something that you should consult a professional on (cough, cough).  There are many, many different investment vehicles out there and they are definitely not all created equal, nor are they all appropriate for everyone.

While you are still in the earned income phase of life, the income from your investment should be reinvested.  Take advantage of compounding and let time be your friend.  If we use the example from Lesson 2, and you are investing the $5,430, then over 10 years with a return of 7%, you will have $88,916 in your investment.  That's not too bad, and that's assuming that your income remains the same over the next ten years, so your 10% contribution also stays the same.

At this point, I can hear my Australian audience muttering about superannuation.  It is true that most employees in Australia will be putting away 9.5% into superannuation for when they retire.  Keep in mind, however, that there are age restrictions as to when you can access the funds.  Does this fit with your plan?  More importantly, have you ever even looked at where your superannuation is invested?  My guess is that most of you have not.

Finally, a special note to my non-resident friends working in Australia. I would recommend seeing a taxation specialist and a financial planner to work out what investment strategy will fit you best.  All the rules that apply to residents don't apply to yourselves, so you can forget all the tips that you hear over a few tinnies at the much beloved Australian BBQ.  If you listen to the conventional wisdom that floats around, you could end up paying 47% tax when you leave our shores and return to your Motherland.  Yes, you read that right...47% tax.  I don't make the rules, I just help you navigate them.

By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011

Tuesday, February 16, 2016

Keeping up with the Jones'

Spend within your means.  This is the second lesson of the 'Richest Man in Babylon' series.  It is something that the most lauded investor of our time (Warren Buffett) follows, and yet seems to be the most difficult for the general population to maintain.  One of my favourite Buffett quotes is "Do not save what is left after spending, but spend what is left after saving". 

Living within your means is not about making sacrifices, but investing in your future.  If you have started with Lesson 1, and are paying yourself 10% of your income, then you have 90% of your income to spend, so you are automatically living within your means.  It seems so simple, but the thing that a lot of people don't realise is that the road to financial security is relatively easy.  All that needs to happen is that you manage your expectations.

Let's look at a practical example; if you are earning $70,000 per year, this is what your savings/expenditure should look like:

$70,000 less tax $15,697 = Net income of $54,303 less savings $5,430 = Amount available to spend $48,873 per year, or $939 per week.

How you spend your $939 per week is a lifestyle choice.  There are a couple of things to keep in mind when developing your budget.  The first is to be realistic.  You cannot live a champagne lifestyle on this budget.  Managing your expectations is key here.  Set a budget, and then review it in three months’ time to see how you are tracking.  If you need assistance in setting a budget, then there are people such as myself.  For help tracking it, there are plenty of Apps and software to be downloaded.  But, at the end of the day, only you can make the decision as to what your life looks like, because you are the one who needs to live it.

Contrary to what Instagram tells you, you cannot have it all.  So please don't be tempted by credit.  As a Financial Planner, there is nothing worse than seeing a client whose cash flow is being eaten up by interest repayments.  These people are the Jones'.  You do not want to try and keep up with them, because, I can guarantee you, they stay awake at night trying to work out how they are going to pay for their children's school shoes without missing a mortgage payment.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011