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Holistic

5 ways to navigate your finances in your 40s

By | Financial advice, Holistic | No Comments

Although marriage, mortgage, and young children may have characterised your 30s, your 40s often feature growing responsibilities and ever-competing priorities.  Your parents are older, your mortgage is still on foot, children’s education costs are growing, and though retirement may seem a distant reality, planning for that reality becomes an important consideration.

The good news is that in your 40s, the financial planning you undertook in your 30s begins to come to fruition.  Perhaps even better news for many is that it’s still not too late to start this planning in your 40s if you haven’t already done so.

Getting organised and keeping your finances fit

A common goal across all age brackets is to organise and optimise your financial affairs.  Everyone needs a financial plan, and all plans should be in writing so as to be measurable and accountable.

At a minimum, your financial plan should encompass your current circumstances, such as specific financial goals, budgeting, emergency funds, cash flow, as well as your road map for achieving these objectives.  This road map should cover both wealth-accumulation strategies – that is, growing your investments – and wealth-preservation strategies, which can include using appropriately structured life and income insurance as well as appropriate legal documentation, should something happen to your health, life, or family situation.

Once you have this plan in place, you need to regularly review it and adjust it when changing laws and circumstances dictate.

Maximising your cash despite vying priorities

Do you have a budget?  In your 40s, you should have a family budget that you also regularly review.  Simply writing down and ranking your key priorities, then allocating the cash flow accordingly, can bring valuable clarity and simplicity to your budgeting.

Often, you don’t need to earn more to improve your cash flow; you just need to better manage the money that passes through your hands.  Depending on your marginal rate of tax, a dollar saved can almost be worth as much as $2 earned.

Paying off your mortgage faster

In your 40s, with luck, you’ve left behind the credit card debt and personal loans from your 20s and 30s.  After all, these days, you’ve got enough to juggle and should be dealing with only one non-deductible debt.  For everything else, don’t buy it if you can’t afford it (this includes upgrading to a bigger house that you really can’t afford).  There are a few techniques for accelerating the repayment of your mortgage and saving thousands of dollars of interest over the life of the loan:

Consolidating your debt;

  • Finding a loan with a great rate;
  • Making extra repayments;
  • Making repayments fortnightly;
  • Efficiently using a mortgage offset account;
  • A combination of the above.

Using superannuation effectively

Although superannuation is an important vehicle for your retirement wealth, if you’re in your 40s and more than 10 to 15 years away from retirement, it’s generally better to use your surplus cash flow for the repayment of non-deductible debt instead of additional pre-tax super contributions.  Within 10 years of retirement, it’s typically better to flip this strategy and focus on maximising superannuation contributions with your surplus cash flow.

Growing and accelerating your wealth

Given Australia’s ever-changing superannuation rules, it’s a good idea to have some investments outside of this retirement vehicle.  These investments can provide you with the flexibility of a retirement before the superannuation preservation age (the age at which you can access those funds).

You can grow your personal wealth either from your own cash flow (after tax savings) or by borrowing money to invest.  It may be appropriate to consider your wealth accumulation and debt management strategies together (that is, a debt recycling strategy).  A well-constructed portfolio is one that takes into account your objectives and personal circumstances. It should be well diversified and should focus on performance.

Navigating your 40s and your finances can be a challenging combination, but with some help and careful financial planning, you can achieve your financial goals and live the life you want.

Source: Money & Life.

Failure

Using Failure to fuel your future success

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To help us grow, sometimes we have to overcome our fear of failing – with this mind, here’s some ways you can use past failures to fuel your future success.

Almost everyone is afraid of failure, even if many of us know it’s an unavoidable feature of eventual success.  The list of people who have achieved incredible things despite experiencing disasters is long.  The more famous examples include Steve Jobs (the Apple board once ousted him from his own company), J.K Rowling (multiple publishers rejected her Harry Potter pitch), and Jeff Bezos (he ran a dud online auction site before starting Amazon).

But those are big names – how does failure fit into a less high profile career?

Don’t be afraid of failure

Bri Hayllar, a psychologist and business coach at the Centre for Corporate Health in Sydney, says it’s worthwhile understanding that failure is possible and acceptable “because often the alternative is doing nothing”.

That being said, not every culture treats failure the same way.  The United States has a deserved reputation for entrepreneurial success – and for tolerating failure.  The theory goes that unless you have failed at least once, you probably have not tried hard enough.

In Australia, by contrast, failure is sometimes seen as a career killer – and this fear of crashing and burning can stifle innovation.  So here are some tips to help overcome that fear.

Get in the right frame of mind

Hayllar says when people are in a very negative emotional state, it alters their cognitive processes – in a bad way.  They shut down.  On the other hand, those with a positive emotional state are more aware and more open to information, which in turn increases their creativity, problem-solving and decision-making skills.

“If we go into a job or a role thinking ‘I must protect myself, I must avoid risk, I mustn’t fail’ then we’re in that threat-negative space which is counterproductive to success.”

Learn from your setbacks

Of course, continual failure is not desirable.  The key is to process errors and improve.  Bill Gates and Paul Allen will forever be known as the creators of Microsoft.

They are less well known for Traf-O-Data, a failed attempt at using computerised data to improve traffic surveys for municipal governments.  Their time on the project was not wasted, though; it taught them the skills to simulate how microprocessors work, a key element of Microsoft’s success.

As part of their learning process, Hayllar says people should be conscious of their statements.  Avoid the temptation to say “I’m hopeless and I’ve failed”, and instead say “This project didn’t work, but what can I learn from it?”

Try and try again

Legend has it that Thomas Edison discarded thousands of prototypes before perfecting his light bulb.

Such resilience is a common story with successful people.  Hayllar is a firm believer that effort, grit and determination trump intelligence.  “For instance, we often see that really determined students will achieve more than the intelligent kids who don’t put in the effort.”

Just as artists don’t expect their first painting to be a masterpiece, we all need to appreciate that perseverance is required to achieve true success.

“You’ve got to have that grit to try again and keep doing things,” Hayllar says.

Source: Colonial First State

Adviser

When is the right time to get advice?

By | Financial advice, Holistic | No Comments

We are often asked “when is the best time to come and see a financial adviser?” Our answer is always now! The sooner you engage with a professional who has the ability to improve your overall financial position and provide long term financial guidance, the sooner you will feel in control of this aspect of your life.

If you think financial advice is just about helping you save more for your retirement, think again. No matter where you are in life, getting good financial advice can help put you in the best possible place to achieve your life dreams, and protect you if things don’t go to plan.

Here’s how advisers can help you through some of life’s big events.

1 – Moving in with your partner

Starting a new relationship can be an exciting time and it can be easy to get carried away. As you start your life together, a financial adviser can help you plan a new budget, so you can start saving for mutual goals.

Your adviser can also make sure you’re both protected with adequate insurance, something that’s particularly important if children are involved.

2 – Setting up house

These days, buying your first home is harder than ever, with property prices at record highs in most Australian cities. An adviser can help you create a realistic plan to save for a deposit, helping you get your start in the property market.

Once you’ve found the right property, your adviser can help you choose a mortgage and manage your repayments potentially saving you thousands of dollars in interest over the life of your loan.

3 – Ending a relationship

Not every relationship lasts, and break ups can be painful and often financially detrimental.

Your adviser can help you work out how you and your ex-partner can split your shared assets (once you have reached an agreement with your ex-partner), including super and the family home. They can also help you get your finances back on track, with a budget to suit your new situation and lifestyle.

4 – Changing direction

It’s unlikely that you’ll stay with the same job for your entire lifetime. So if you’re thinking of changing your workplace or embarking on a new career, it’s time to sit down with your adviser. They can help you understand the financial implications of working less, or help you make the most of a higher income or overseas promotion.

If you’re nearing retirement, you may want to discuss a transition to retirement strategy, so you can spend less time in the office and more time at home. Or if you want to be your own boss, make sure you talk to your adviser about making tax-effective contributions to your super, so you don’t retire without a nest egg.

5 – Taking time out

There may be times in your life when commitments like parenting, taking care of elderly parents, studying or travelling will take priority over full time work.

If you’re planning on taking a break from work, your adviser can help you understand your financial options for funding this time off. Remember that while you’re not working you won’t receive any employer contributions to your super. So it’s important to talk to your adviser to help make sure your retirement savings don’t fall behind.

Source: Colonial First State

The power of investing in yourself

The power of investing in yourself

By | Holistic | No Comments

What do you really want out of life? Investing in yourself is an important way to prepare for achieving your personal goals. Here are 5 ways to make sure you’re ready to meet the future as your very best self.

1 – Take care of your body and mind

Being in poor health can make almost anything feel like an impossible challenge. That’s why making a commitment to your physical wellbeing is one of the most important ways of investing in yourself. For some of us that means slowing down and making time to walk, sit and reflect. For other it’s about firing up your energy and drive with exercise in whatever form that takes – a run, a swim or session at the gym.

All these activities also hit pause on the constant planning and preparation, stress and anxiety we can all get caught up in. As well as giving your brain a break now and again, take some time to explore new interests with your mind too by taking a course or reading books that are inspiring and informative. If reading isn’t your thing, there are thousands of podcasts available that can feed your mind with amazing stories, facts and opinions on hundreds of topics.

2 – Celebrate your creative side

When we feel like we’re stuck in a rut, doing something creative can remind you about all the sources of inspiration there are in the world. Being creative also opens up new learning pathways and new social groups too, so it’s a great way to expand your horizons and break out of your routine. If you don’t think of yourself as the creative type, just start by keeping a journal of things you notice that interest and inspire you. It won’t be long before you’re making connections between these observations and your experiences to come up with your own creative ideas.

3 – Work on your bucket list

You might think you’re too young for a bucket list but if you wait until mid-life or retirement to seek out experiences that will make your life richer, you’ll already be running out of time to make them happen. They needn’t be as complicated and costly as going on a cruise or cage diving with sharks. Try to include simple things on your bucket list that you can achieve in your local area. Growing a plant from seed, rock climbing or singing in a choir are all things that you might want to try for the first time. It might take a little time, dedication and research to make it happen but you’ll really enjoy that feeling of satisfaction from your new experiences – and from ticking things off your list.

4 – New ways to earn

You’re living in a time when change is a constant and this presents us with a wide range of opportunities as well as risks. One of those risks is losing the income you’re relying on from your job. So an important way of investing in yourself is to look at ways to secure new income streams. This could mean putting money in property or other assets that will bring you extra income that you can reinvest, save or spend depending on your needs or you could be interested in setting up a new business on the side with the ultimate goal of selling it for profit or taking it up as a full-time role.

5 – Get a coach

Figuring out what your most important priorities are and how to make time for them in a busy schedule can be challenging. Working with a coach is a great way to review and set your goals, explore what’s holding you back from achieving them and create a plan and schedule to keep you moving forward. It’s important to find a coach who really understands and cares about what’s important to you so they can help you figure out what’s working and what’s not. Find the right coach and you’ll have a valuable partner who can guide you on the path towards success and wellbeing in your lifestyle and finances.

Source: FPA, Money & Life.

Bitcoin

Bubbles, busts and Bitcoin

By | Financial advice, Holistic | No Comments

The surge in Bitcoin has attracted much interest. Over the last five years, it has soared from $US12 to over $US8,000; this year alone it’s up 760%.

Its enthusiasts see it as the currency of the future and increasingly as a way to instant riches with rapid price gains only reinforcing this view. An alternative view is that it is just another in a long string of bubbles in investment markets.

Bitcoin’s price in US dollars has risen exponentially in value in recent times as the enthusiasm about its replacement for paper currency and many other things has seen investors pile in with rapid price gains and increasing media attention reinforcing perceptions that it’s a way to instant riches.

However, there are serious grounds for caution. First, because Bitcoin produces no income and so has no yield, it’s impossible to value and unlike gold you can’t even touch it. This could mean that it could go to $100,000 but may only be worth $100.

Second, while the supply of Bitcoins is limited to 21 million by around 2140, lots of competition is popping up in the form of other crypto currencies. In fact, there is now over 1,000 of them.  A rising supply of such currencies will push their price down.

Third, governments are unlikely to give up their monopoly on legal tender (because of the “seigniorage” or profit it yields) and ordinary members of the public may not fully embrace crypto currencies unless they have government backing. In fact, many governments and central banks are already looking at establishing their own crypto currencies.

Regulators are likely to crack down on it over time given its use for money laundering and unregulated money raising. China has moved quickly on this front. Monetary authorities are also likely to be wary of the potential for monetary and financial instability that lots of alternative currencies pose.

Fourth, while Bitcoin may perform well as a medium of exchange it does not perform well as a store of value, which is another criteria for money. It has had numerous large 20% plus setbacks in value (five this year!) meaning huge loses if someone transfers funds into Bitcoin for a transaction – say to buy a house or a foreign investment – but it collapses in value before the transaction completes.

Finally, and related to this, it has all the hallmarks of a classic bubble. In short, a positive fundamental development (or “displacement”) in terms of a high tech replacement for paper currency, self-reinforcing price gains that are being accentuated by social media excitement, all convincing enthusiasts that the only way is up.

Because Bitcoin is impossible to value, it could keep going up for a long way yet as more gullible investors are sucked in on the belief that they are on the way to unlimited riches and those who don’t believe them just “don’t get it” (just like a previous generation said to “dot com” sceptics). Maybe it’s just something each new generation of young investors has to go through – based on a thought that there is some way to instant riches and that their parents are just too square to believe it.

But the more it goes up, the greater the risk of a crash. Many people also still struggle to fully understand how it works and one big lesson from the Global Financial Crisis is that if you don’t fully understand something, you shouldn’t invest.

At this stage, a crash in Bitcoin is a long way from being able to crash the economy because unlike previous manias (Japan, Asian bubble, Nasdaq, US housing) it does not have major linkages to the economy (eg it’s not associated with over-investment in the economy like in tech or US housing, it is not used enough to threaten the global financial system and not enough people are exposed to it such that a bust will have major negative wealth effects or losses for banks).

However, the risks would grow if more and more “investors” are sucked in – with banks ending up with a heavy exposure if, say, heavy gearing was involved. At this stage, it’s unlikely that will occur for the simple reason that being just an alternative currency and means of payment won’t inspire the same level of enthusiasm that, say, tech stocks did in the late 1990s (where there was a real revolution going on).

That said, it’s dangerous to say it can’t happen. There was very little underpinning the Dutch tulip mania and it went for longer than many thought.

While crypto currencies and blockchain technology may have a lot to offer Bitcoin’s price is very bubbly at the current time.

Source: AMP

Helping the grandkids

Helping the grandkids

By | Estate Planning, Holistic, Wealth Creation and Accumulation | No Comments

There is an increasing trend for Grandparents to factor in grandchildren when deciding how they want to allocate their money in their later years. For some, it may be via business succession planning, leaving a legacy for the family or simply contributing to important financial events (tertiary education, house, car etc). Passing on wealth can be one of the greatest gifts you can give your family.

With increasing child care costs and housing affordability issues, it is becoming common for Grandparents to look after the children while their parents are at work. This means Grandparents are having a greater involvement in the day-to-day lives of their grandchildren and often electing to pass on some wealth.

However, there are some traps for the unprepared and it’s important to consider the various options and risks to allow for an effective transfer of intergenerational wealth.

Asking the right questions

Typically, strategies around wealth transfer fall into the category of having “the right money in the right hands at the right time”. However, it is not always that simple.  It’s important to discuss wealth transfer in detail. Ask plenty of questions, understand what your objectives are and seek professional advice.

As an example, if you want to help your grandchildren with their first home; here are a few questions to consider above and beyond the usual cash flow, assets and liabilities:

  • Do you want to help pay for the deposit and/or repayments?
  • Do you want to invest this money in them now, at retirement or leave it in your legacy?
  • How much money will be available for the grandchildren after you have provided for your own retirement?
  • What is the income of their parents?
  • Are your grandchildren financially dependent on you?

The above considerations are very important and will help determine the appropriate strategy structure you undertake (i.e. family discretionary trusts, testamentary trusts, or gifting).

6 key issues to consider when helping out grandchildren

  1. Age and income of the grandchildren – Remember investment income for minors is taxed at penalty rates (up to an effective rate of 45%). Whereas, for over 18s, investment income up to their respective marginal tax rate may be tax free. This can be particularly important when developing strategies to help pay education costs.
  2. Centrelink benefits – It’s important to remember that if you receive a pension or part-pension from Centrelink you are only able to gift up to $30,000 every five years at a maximum of $10,000 per year without adversely affecting your entitlements.
  3. The right team of experts Selecting an appropriate Financial Adviser can make life easier as they will often access a team of other specialist experts such as Accountants and Estate Planning Lawyers – thus ensuring your advice is comprehensive and consistent across all areas.
  4. Relationship risks – Consider the risks associated with relationship breakdowns in the family such as sibling rivalry on the death of a parent or divorce of family. This may mean a well intended gift for a grandchild ends up being fought over in divorce courts. Consider if testamentary trusts or drip feeding financial assistance may be more appropriate than gifting lump sums.
  5. “Pay yourself first” – Be very clear on your retirement funding needs and look after yourself before committing to help your grandchildren. It’s a rewarding act to help out your family financially as long as you ensure you are not forgetting about yourself.
  6. Manage family risk – Families are often called on for help in the event of illness and injury of a child or grandchild. Discuss the option of funding grandchildren’s income protection or trauma insurance premiums; that way you create peace of mind and minimise financial stress if the unfortunate occurs.

For further advice on the most tax effective strategies to transfer wealth, make an appointment with us today.

life after redundancy

There is life after redundancy

By | Holistic | No Comments

Redundancy is one of the unfortunate by-products of challenging and changing economic times. As some companies lay off employees, ordinary Australians are starting to bear the brunt of these times. There’s no way to ease the pain of being retrenched. It can prompt a period of soul searching and reflection, and may force you to reassess your long-term priorities and goals.

Redundancy also raises many pressing immediate questions, such as:

  • How long will it take you to find another job?
  • How long will your redundancy payout last?
  • How will your family live in the meantime?

Finding another job

Your emotional response to redundancy may depend a great deal on your age and background. In some cases, the younger you are or the more marketable skills you have built up, the easier it may be to treat retrenchment as an opportunity rather than a threat. Whatever your circumstances, you can look for openings in your line of work through the usual avenues such as online job sites, newspaper advertisements and employment agencies.

In some cases, redundant employees can be victims of long-term economic trends such as offshoring or technological advances. If work in your trade or profession is becoming harder to find, you may need to look further afield. You could use your existing qualifications and experience to find work in another field or even start your own business. Alternatively, you might consider retraining in a new field. A recruitment consultant can help you match your skills and goals with a new career path.

What to do with your payout?

Your monthly mortgage repayments are likely to be among your biggest expenses. If you think you’re likely to have trouble meeting your repayments, it is worth talking with your financial adviser about ways to restructure your finances.

Redundancy may lead to a period of uncertainty and liquidity is therefore important. Be wary of tying up your payout in investments that penalise withdrawals until you know when you will be receiving a regular income again.

Help with meeting your living expenses

You may be eligible for social security benefits, subject to asset and income tests. Waiting periods may apply, particularly if your redundancy payment includes a component of annual leave, sick leave or long service leave. Register with Centrelink as soon as possible to discover whether you’re eligible.

For more information about redundancy, please contact Revolution Financial Advisers.

Find out what can a financial adviser do for you.

What can a financial adviser do for you?

By | Holistic | No Comments

A skilled financial adviser can make an incredible and positive difference in your life.  Below we explore some of the ways in which a financial adviser can help you.

1.  Manage your cash flow and budget

Do you have a budget? Do you stick to it? It’s a simple statement to say that you’ll never get ahead if you spend more than you earn, yet in many households spending more than you earn is what happens on a regular basis. Your adviser can work with you to review your cash flow and develop a budget, one that suits you and your lifestyle and will set you on the right path to live the life you want now and in the future.

2.  Put your debt to work

There are different types of debt – good and bad. Your adviser can explain the difference and make sure that – where possible – your debt is working for you and your future.

  • Credit cards
  • Mortgage
  • Investment loans
  • Business loans
  • HECS
  • Personal loans
  • Margin loans

3.  Assist you with a savings plan

The benefits of a good, regular savings plan cannot be stressed enough. How do you start? How much can you afford? What will your short-term, medium-term and long-term goals be? What will your savings milestones look like? As your financial coach, your adviser can help you develop a plan that will work for you and will also help you meet the goals you set together.

4.  Invest your money

Saving is one thing and without the discipline of putting something aside it won’t be possible to invest. Investing is something else – investing is making sure your money is working as hard as possible. Where to invest is difficult to know. Your adviser is qualified and has the experience to help you navigate the myriad opportunities available to give you the best options available for you.

5.  Help you realise your goals

There is a way to achieving your goals. First is talk through and understand your goals. Next is to make a plan – the plan should be clear in showing how you are intending to reach these goals. The plan may change over time as your priorities change and goals need to adapt to changes of mind or circumstances. Your adviser will be able to work with you in adapting and reshaping your plan to meet these new goals. But without a plan in place reaching your goals will be much more difficult.

6.  Keep you on track

Making a plan is one thing. Sticking to it is quite another. It’s much more difficult and takes willpower and perseverance. Like working out, a coach is better than doing it all alone. An adviser is your financial coach and helps to make sure you stick to your plan. This doesn’t mean not being flexible but it does mean making sure you stick to it even when temptations abound and times become tough.

7.  Take care of your retirement

You want to stop working when it suits you. Your adviser is there to make sure that – using the right plan – you are able to make an informed decision about when it’s the right time for you to retire, and with the retirement lifestyle that you desire. Your plan should ensure that your money is ready when you want it and you can take it in the best way possible to maximise your income in retirement and continue to do the things you most enjoy doing. Retiring is not the end of life as you know it but the beginning of life the way you want to live it.

8.  Protect your lot

Building your assets is vitally important for your future, but protecting your assets is equally important. How much protection is enough? Ask your adviser. If something happens to you – or your partner – how will you continue the life you are used to? – how much will it cost to maintain your lifestyle for the present and the future? If you don’t have enough insurance your life may face drastic and unpleasant changes just at a time when this would compound other difficulties facing you. It is good to know that whatever happens, your life – or the life of your family – can continue as well as possible in changed circumstances.

9.  Look after your estate

Families are at the heart of financial planning. Making sure that everyone is looked after when one member dies is something that can make a huge difference to the financial position of the rest of the family. A financial adviser can ensure that your estate is structured effectively so that when something does happen to you or a loved one – it will upset you but not your financial plans. This is even more important when a small business is involved.

10.  Explain how things work

If finance isn’t your speciality you can rely on your financial adviser to assist you through the jargon and explain simply financial terms and concepts and make sure you understand how it all works including:

  • Salary sacrificing
  • Offsetting
  • Asset classes
  • Risk tolerance
  • TPD and trauma
  • Gearing
  • Dollar cost averaging

11.  Keep you informed

In good times and bad your financial adviser will keep you informed of how market moves are affecting you and your portfolio. He or she will also let you know about pertinent events that may affect your investments – including elections, global unrest, changes in legislation natural disasters and the like. You have more important things to worry about than the state of your portfolio at any given time, but your financial adviser does not.

12.  Teach your family basic concepts

You can’t do it alone. If your family isn’t on board with the plan it will be more difficult to reach your goals. Your adviser should be able to explain basic concepts to your partner and even your children so they understand how to manage their money and your money. Good habits are best when begun early. And bad habits should never be allowed time to take hold!

13.  Plan for your future

As your circumstances change you will need to update the way your finances are structured. A financial adviser can do this for you – make sure you are in the best shape to take the next step on your financial journey – from single to married to parents to new jobs, no jobs and even grandparents and retirement.

14.  Offer you special investment opportunities

Sometimes a financial adviser can offer investment opportunities which are not available to the general public. They will be opportunities that you know will be appropriate to you and your circumstances. And you can rest easy that the offer will be made in your best interests. As a member of a financial planning industry body – the Association of Financial Advisers (AFA) or Financial Planning Association (FPA) – the code of ethics bind your adviser to make sure your interests are served before their own.

15.  Connect you with experts

Your adviser is a professional and connected to a range of other professionals and specialists to refer you to for your various requirements. This might include a mortgage broker, a solicitor, accountant and many other experts.

The adviser can and should also work with your existing professional relationships, if you already have an accountant or lawyer. The idea is they all work together and make sound decisions that will make your financial business more seamless to manage.

It’s all about making it easier for you to be who you want to be and live the lifestyle you aspire to. At Revolution Financial Advisers, we welcome you to your future and encourage you to contact us so we can show you how we can help.