Financial planning for the future generation

Most parents would like to provide their children with a life that they can enjoy. What that looks like can differ greatly from one family to another, and even from one parent to the other. Many parents would like to provide financially for their children into adulthood, and then there are others who prefer to focus on life skills, and have a sink or swim attitude (no prizes for guessing where I sit on the spectrum).

One of the things that we always ask at Achieveit Financial Planning is what your ambitions for your children are. Your answers can tell us a lot about where you sit, and what kind of allowances that will need to be made for your own personal financial plan. For instance, if you would like to help your children attend University, then we need to establish what that assistance will look like, and work that into your future cash flow considerations. Or perhaps University isn't a priority, but giving the children a leg up into the property market is? Others still may provide board-free accommodation until the children are in full time work, and then they're out on their own. There really is no right, or wrong choice, as long as the expectations between the child and the parents are communicated.

Having this conversation about your children, with your partner is essential. There is the chance that you may not be on the same page, in which case, you will need to negotiate to find some common ground. Once you have these goals in mind, then we can start planning for them. What is your timeline, and how can we best use your resources to accomplish your goals? As always, the earlier you start with these things, the better.

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.

Negotiating between the future you, and the current you (using the past you)

Last year, I had the opportunity to listen to Dr. Jason Mitchell from Harvard University while at the AFA Conference on the Gold Coast. For those not in the know, he is the Principal Investigator at the Harvard Cognitive and Affective Neuroscience Lab, and therefore, is much more interesting than I can ever hope to be (no...seriously, this guy has the most amazing job).

I am a firm believer that there is always room for improvement, whether personally or professionally, and two things that Dr. Mitchell spoke about really resonated with me. I would like to share this with you, because it will help us understand how our brains work, and therefore be able to assist ourselves, and our client's to overcome behaviour that may not be in our best interests.

The first concept is that your brain doesn't "see" your future self as an extension of you. It sees the future you as a third person, which is why many of us struggle to feel urgency about preparing for the future, and/or, controlling your instant gratification impulse. There is a disconnect between doing something positive, such as saving for retirement, and the end result, because according to your brain, that end result is happening to someone else. I know that this is probably an "Ah ha!" moment to many financial planners, especially when it comes to the push back with insurance. I know that I have had clients who acknowledge the benefits of personal insurance cover, but in the same breath say "just not for me". When quizzed further, these clients invariably say that it's not for them because they just don't see themselves ever needing it - it happens to other people.

The second interesting thing that Dr Mitchell brought up is that we, as a species, like to have consistent behaviour. We think of our past, and future selves as a third person, but we "like to keep consistent what we think, say and do, and will change to ensure this is so" (Mitchell, 2017). When you start to reflect, you will probably find dozens of examples where you have changed what you were going to say, or do, in order to display behaviour consistent with your audience's expectations. This is a problem when you are trying to break bad habits. An easy example is a spouse who hesitates over a purchase, knowing that things are tight, but might overspend on an item because the other spouse would be "disappointed" if they didn't.

So, how to we go about changing this? The first point is the way the brain is wired. So, in order to work with biology, we must bring our future self to our present self. In my opinion, the ability to do this is what separates a really good Financial Planner from the rest of the pack. Turn your empathy towards yourself, and imagine if your future self was your right now? What would you do, right now, if you had been diagnosed with cancer? What would you do, right now, if you had to retire? What would you do, right now, if that school fee bill turned up in the mail? Bringing the future problem to the present moment will hopefully create the feeling of urgency (and light up the right areas of the brain) so that changes can be made.

Now that we acknowledge that the change needs to be made, we need to have a solution to the problem of overcoming our need for consistent behaviour. The solution seems to be all about incremental change. Rather than trying to make a big change, you make seemingly small, and inconsequential changes. Then you build on that change. For example, rather than buying that coffee on your morning commute, you put the money in a tin. Such a small thing, but if a coffee is $5, then at the end of the week you have $25, by the end of the month, you are on a roll, have saved an extra 20 minutes per day, and have an extra $100 put aside. From that 20 minute time saving, you could possibly make your lunch in the morning. This might save you a further $10 per day. So now, you are saving $300 per month, which is $3,600 a year. All of this from such a little change.

Of course, in order for this to be of any value, you need to actually do it. Dr. Mitchell suggested changing your mindset by using your brain's idiosyncrasies to benefit your future self. You can cut the tie by acknowledging that your "third person" past self is a different person to your present self, and therefore your present self can have different behaviours than this past self stranger.

Wordy, I know, but so very, very interesting. If you ever get a chance to see Dr. Mitchell speak, or come across his work, then jump at it. It really is an experience.

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.

Mitchell, J. (2017) 'Building consumer trust through higher professional standards' [PowerPoint Presentation]. (Accessed 12 October 2017).

How to eat an elephant, and live the life you want

How do you set goals so that you are living the life you want? It can seem overwhelming and difficult, so many people put it into the too hard basket. Four years ago, I separated from my husband and became a single Mum. Three years ago, I decided to take control of my life and consciously move towards my "ideal" life. Taking into account that there is always room for improvement, I am happy to say that I am 90% of the way there. How did I do it? It was surprisingly simple once I had made the decision that I wanted to be happy living my life.

Step 1: What does your ideal life look like?

Take a good hard look at your life. Now think about the life you want to live. I am not talking about the glitzy jets, and owning more Rolex than you have arms. I am talking about connecting with your friends, volunteering, pursuing that hobby, enjoying time with your special someone, building your career (or perhaps an Empire...notice the capital "E"?). If I told you that it would all be over tomorrow, what would your life's regret be?

For example, after separating and moving back into town, I was renting a cheap two bedroom unit, with no backyard and mold in the laundry. I had no friends, as I had lived out west on a farm for the last six years, and had gradually lost touch, or outgrown, what friends I did have. I was in a three day a week job that had no scope to improve my skills, and it didn't provide me with the work/life balance, or the satisfaction, that I craved. It was all in all a pretty dismal existence.

What I wanted was a life that would allow me time with my daughter, work satisfaction, and enough money to purchase somewhere for the two of us to live, save for my little one's schooling, and still being able to have ice-cream when we go to the park. I wanted friends that I could spend time with, with similar interests, who are good humans. Mentally, and physically, I wanted to be fit, and strong, so that my daughter has a good role model, and a healthy Mum.

Step 2: Identify the obstacles to being your ideal you

Now, grab a piece of paper, and a pen, and write down everything that you think could be holding you back. Is it your age? Is it your income? Is it time? Concentrate on why you don't do the things that you want to do, rather than why you are doing what you currently do.

My obstacles were a lack of income, social networks, and profile in town. Never one to sit around and feel miserable, I decided that things needed to change.

Step 3: Plan to change each obstacle, one at a time

The list becomes a blueprint for your goals list. Each thing that is holding back is something that needs to be changed. Too old too start again - change your perspective to "I'm running out of time to start again". Can you increase your skill level, reputation, or employment to earn more? Working smarter applies for those of us who need more time in our lives.

Put a time line on each obstacle so that you can track your progress. Acknowledge that they won't all be able to be changed at once. For example, you may want a career change, but you have a young family and so you can't afford the pay cut. Is it possible to study, and save, until the children are older and then switch careers with minimum fuss?

The first thing I did was increase my income by delivering pamphlets around town on my days off. This achieved two things; it meant I could save a deposit for my unit, and it also increased my fitness without me having to pay for a gym membership. Sure, it wasn't necessarily the funnest thing in the world, pushing a pram with a toddler around a hilly suburb, but it kicked two goals at once.

Secondly, I networked like a Queen Bee. This let me meet people, raise my profile, and eventually led to the friends I have now. I also revived old networks that I had before moving out to the Farm, and put a plan in place to up-skill by studying at night time. All of this led me to the position that I have now, which at four days a week, allows me the work/life balance that I need as a single Mum, remunerates me well enough that I could drop the pamphlet delivery, pay a mortgage, save for education costs, get a gym membership, and most importantly provides me with the job satisfaction that I crave.

By taking one realistic bite at a time, and putting a plan in place, you have something to aim for, and more importantly, you are always moving forward towards that ideal you.

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.

Planning for the single ladies

Over the last couple of years, I have noticed an increased trend of single women who have never partnered and are nearing retirement, or who have no prospect of partnering and are in late accumulation phase. This may not have been a conscious decision on the ladies part, but rather a consequence of the changing times. With women more active in the workforce, and career satisfaction at stake, the goal of marriage and children seems to have taken a back seat to the long hours, and further education that many women now prioritise.

The single ladies who come to see me have two overriding goals, long term financial security, and maintenance of lifestyle. Remembering that these ladies are in perpetual SINK (Single Income, No Kids) phase, the problem that they face is how to have your cake and eat it too?

The first thing to determine is what is financial security to each individual client? Financial security for myself is to have a buffer in the bank, no lifestyle debt, a paid down mortgage, a healthy superannuation, and an investment account on the side. For another individual, it may be being able to pay the rent, the bills, and maintain cash flow. Identifying what financial security means helps establish goals for the client to strive for, while framing each individual goal in the context of the big picture.

Once each stepping stone goal is established towards financial security, it is important that there be a reward. This could be as simple as a dinner out with friends, or as encouraging as a card in the mail. Singles don't have a partner to celebrate the small milestones, so it is important to provide positive reinforcement, as well as that pat on the back.

In my experience, financial security cannot be seen to come at the cost of lifestyle, with this client demographic. It may be a challenge for planners as they need to be able to articulate how the goals work with lifestyle needs, and that they don't take away from the client's lifestyle wants. Going over needs vs. wants, and getting the client to own the process of prioritisation is key to the success of the strategy.

So, next time a single lady comes through the door, remember that they are not just looking for a strategy, they are looking for a sounding board and a lifestyle plan. Taking on a client in this cohort will mean that you may need to reassure them that they are making the right decisions, however, the advantage is that you won't need to help them negotiate with another person like you do with the marrieds.

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.

Is super really the be all and end all?

Personally, for myself, the answer is yes, because every few years politicians seem to either try to make superannuation easier for the everyday person, or more complex to drive a further wedge between the role of the accountant and financial planner.  So, as a financial planner, these constant changes mean that I will not be lacking in work for the next 30 odd years, and so superannuation is the be all and end all for funding my career.

However, as a layperson, the answer will often depend on your age.  For those less than 10 years out from retirement, the focus shifts heavily from assets outside of superannuation to getting those assets inside superannuation.  There are two reasons for this.  The first is that, in general, accessibility to the funds is less of a problem as the client is more or less setup and their expenses (aka...children) have decreased.  The second is that we can be about 80% sure that the powers that be won't be changing the rules too drastically, and that any changes that are made, we should be able to cope with.

What I find interesting is that there seems to be a lot of hand wringing and teeth gnashing that younger people, those with more than 10 years until retirement, don't want to contribute more to superannuation than the stock standard 9.5%.  My question is, why should they?

I spend a considerable amount of time with my younger clients emphasising and encouraging them to forward plan their budget so that as their income increases, their expenditure stays the same and they can build for their future.  This often requires a steady hand, with deliberate and well thought out decisions using stable, legislated tax systems.

So, rather than more changes to help the Government balance their books (much like the ones coming in on July 1, 2017), the politicians could provide some consistency and surety in the superannuation system, rather than gimmicks one year and austerity the next.  Perhaps then, we could attract the economy's younger cohort to the superannuation party.

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.

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

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.

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”.