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.

The changing space of the public servant's "safe" superannuation funds

Most Government employees that I work with are employed by the State Government as teachers and nurses. These clients will often report to me that their Superannuation accounts are "incredibly safe" because it is Government superannuation. Unfortunately, this misnomer is no longer correct. Yes, if you have a Defined Benefit, then your superannuation is underwritten by the state, and in Queensland it is in strong position (check out the actuarial report here), but if you are in an Accumulation account, then you are in the same boat as the rest of us. Sure, you still get 12.5% in contributions, as opposed to the measly 9.5% the rest of us get, but that is your only advantage as you are in the same system as those working in private enterprise, and are subject to the same market movements and vagaries of trustee decisions.

Sorry...what? I am a nurse at the base hospital, and you're telling me that my super is no different? That it isn't safer? Yes, that is exactly what I am saying. You, as a Government employee, used to live with this security blanket that your superannuation would be as "safe as houses". The reality is that this no longer exists. That secure system has been dismantled because it was costing too much money, so from now on in, you had better pay attention, otherwise, you may find that your "safe house" was actually located in a town like Moranbah.

So, now that you know, what do you do? Well, option one, which I don't recommend, is that you can put your head in the sand, and keep parroting that "it is the best super out there", because Joan in accounts said so, and she has been with the Government for 40 years (and, by the way, probably has a Defined Benefit account), or, you can start to educate yourself on what you actually have.

In educating yourself, look for the the things that matter. The things that matter are, your risk profile, the asset allocation you are in, the investment choice that is available, diversity of investment managers, how the managers invest your money, the liquidity of the assets, the transparency of the fund, the ease of access to reporting, the insurance cover. What about the return, I hear you ask. Well, if you get these right, then the return will follow. It's when Lehmen Brothers 2 hits that you be thankful that you looked at your superannuation fund with more scrutiny than Joan suggested.

If you do all of this, and you're satisfied that you are still in a good spot, then happy days! If not, then please get yourself to a Financial Planner, and go over it with them. Still doubting? Well, I'll need to pull out the conspiracy theory that I've heard bandied around the employee campfire more than once, the Government never changes things unless there is an advantage to one thing...the Government.

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.

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.

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

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

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

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

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

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

90 years old and still going strong...

According to the great authority that is my Facebook newsfeed, 2016 is going to be a great year.  Much better than 2015...apparently.  Personally, I have always subscribed to the idea that your year is what you make of it and that there is an opportunity in each challenge and a lesson in each opportunity.  With this in mind, my first post of 2016 will focus on the positives going forward rather than lamenting the choices made in 2015 (ahem...credit card anyone?).

Most of my clients, whether they realise it or not, are concerned about building their net worth without impacting their lifestyle.  What they are trying to articulate is that they would like to build passive income.  That is, gradually replace the income that they go to work everyday for with income from investments.  Do not confuse passive income with easy income, because creating passive income requires capital and you work hard to build it.  It is being sensible now and not trying to keep up with The Joneses, so that in 10 years’ time, your passive income is helping to pay off your mortgage, or putting your children through private school, or allowing you to cut back on your hours at work.  It is the hardest thing of all, balancing your current lifestyle so that you can be financially independent.

If you haven't read "The Richest Man in Babylon" by George Samuel Clason, then I highly recommend doing so.  It provides guidelines on how to achieve financial freedom, using common sense.  Unfortunately, it was written in the style of a biblical parable, in 1926, so it can be a bit on the dry side for those who aren't of a...literary nature.  There are eight lessons in total and, so that I don't overload you and cause you to fall asleep at your computer, I will be going over each of them one at a time.

Lesson number one: Pay ourselves first.

Clason suggests putting 10% of your earnings away in savings.  As in genuine savings...not the type of savings that were accidently used at Ikea on Boxing Day (although, my new curtains are pretty amazing), or the savings you plan to use for your holiday in Fiji next year.

Paying yourself is the first step to building your passive income.  Here is an example, if you earn $1,000 per week after tax and save $100 (10%), you will have $5,200 saved after year 1 to invest.  If you had started this 20 years ago, and left the money in a bank account, you would have deposited $104,100 and earned $55,354 in interest (based on an average Cash Rate of 7.5% less average inflation rate of 3.5%, Vanguard 2015 Index Chart).  A total of $159,454 in your pocket, earning a passive income.  Not too bad when you consider that most of us have 45 years in the workforce.

So, when considering your New Year’s resolutions, don't forget to start paying yourself, the long term gain is worth the short term pain.

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.