Author Archive for: Robert Laurie

Do you and your family need life insurance?

Most people are familiar with life insurance, but fewer are familiar with self-insurance. Self-insurance includes borrowing money, selling assets, or using cash savings in the event of death, as opposed to paying for an insurance policy.

There are pros and cons to both approaches. Life insurance can be expensive, and it may not cover everything. On the other hand, self-insurance can be less expensive, until an event occurs. Ultimately, the best approach is the one that best meets your needs and available resources. If you’re not sure which approach is right for you, consult with a financial adviser.

Do you need life insurance?

There’s no easy answer to the question of whether you need life insurance. It depends on a variety of factors, including your age, health, life stage, and whether you have dependents. However, there’s one thing that it can offer that self-insurance can’t: peace of mind.

With life insurance, you know that your loved ones will be taken care of financially in the event of your death. With self-insurance, there’s always the risk that your savings won’t be enough to cover all of your expenses. And if something unexpected happens, like a medical emergency or job loss, you could find yourself in a difficult financial situation.

For example, if you’re the primary breadwinner in your household, then you’ll likely want to have life insurance in place in case of your death. This way, your family will be financially taken care of if something happens to you. On the other hand, if you’re not the primary breadwinner or don’t have any dependents, then it may not be as necessary.

When it comes to life insurance, there’s no one-size-fits-all answer. The truth is, whether you and your family need it depend on a variety of factors. Ultimately, it’s up to you to make the decision about whether it is right for you and your family.

What is life insurance and what does it cover?

A life insurance policy is a contract between you and an insurance company. You pay premiums, and in exchange, the insurer agrees to pay a death benefit to your beneficiaries if you die during the term of the policy. The death benefit can be used to cover final expenses, like funeral costs and outstanding debts, or it can provide financial security for your loved ones. When deciding if life it is right for you, it’s important to consider how the death benefit will be used and who will receive the money.

If you have young children, for example, it can help ensure that they will be able to afford college if something happens to you. If you’re single with no dependents, on the other hand, it may not be necessary. Ultimately, it is a personal decision, and there is no right or wrong answer. The most important thing is to educate yourself about how life insurance works and make the decision that’s best for you and your family.

How much life insurance do you need?

When it comes to life insurance, there’s no one-size-fits-all answer. The amount of coverage you need depends on factors like your age, health, life stage, and dependents. If you’re young and single with no dependents, you may not need as much life insurance as someone who is older and has a family to support.

That said, life insurance can be a valuable safety net for your loved ones in the event of your death. The death benefit can be used to cover final expenses, like funeral costs and outstanding debts, or it can provide financial security for your loved ones. When deciding if it is right for you, it’s important to consider how the death benefit will be used and who will receive the money.

When should you get life insurance?

There are a few life events that generally signal the need for life insurance. For example, if you become part of a couple, having life insurance can help protect your partner financially if something happens to you. Similarly, if you have children, it can provide for their future if you are no longer around. Ultimately, the best time to get life insurance is when you have someone who depends on you financially.

The benefits of having life insurance

Life insurance is one of those things that a lot of people don’t really think about until they need it. It’s an important safety net to have in place, though, and it has some real advantages to that everyone should be aware of:

It can provide you with a stream of income if you are disabled and unable to work. If you die, it can help to provide for your family and loved ones financially.
It can be used to cover debts and other expenses. So, if you’re looking for a way to protect your family financially, it is something worth considering.

Now that you already know more about life insurance, it’s time to start thinking about what kind of policy is right for you and your family.

If you have any other questions regarding life insurance or would like to get a policy for yourself and your family, don’t hesitate to reach out to us here at Wealth Factory. Wealth Factory is here to help you every step of the way, from figuring out how much coverage you need to finding the best policy for your needs.

We would be more than happy to help you explore your options and find the best fit for you. Life insurance is an important decision that shouldn’t be taken lightly, but we are confident that we can help you make the best choice for you and your loved ones. Give us a call today!

10/11/2022/by Rob Laurie

How much life insurance you need

When it comes to how much life insurance you need, it’s a bit like “How long is a piece of string?” (2 times half its length). What this means is that its is going to be different for everyone and depends on what your circumstances and goals are. Its also varies over time as circumstances change, so there is no simple answer other than what your super fund gave you as default, is probably wrong. Some factors to consider when choosing a cover amount include total household income, any debts, future expenses, and number of dependents.

As a starting point, Moneysmart has a life insurance calculator that can help you to form some goals and estimate some amounts. It is pretty simplistic and not as comprehensive as what we use to calculate insurance needs through the financial advice process, but it’s a good starting point.

There are many financial aspects for families after the premature departure of an income generator or carer that need to be considered when calculating life insurance levels. Some potential needs are discussed below.

Cover the cost of my funeral

When considering how much life insurance you need, one important factor to take into account is the cost of funeral expenses in Australia. Funeral costs can vary widely depending on the type of funeral you want, but the average cost of a funeral in Australia is around $4,000 for a basic one up to $15,000 for a more elaborate one.

If you want to make sure your loved ones are not left with a large bill to pay after you die, you should consider taking out a life insurance policy with a sum insured that has considered the cost of a funeral. Doing so will help to ensure that your loved ones have the money they need to cover the cost of your funeral and give you peace of mind knowing that your final expenses are taken care of.

Pay off my mortgage

A home loan and life insurance are two of the most important financial products you’ll ever buy. But how do you know how much life insurance you need to cover your mortgage?

There’s no one-size-fits-all answer, but there are a few things to consider:

First, think about the mortgage amount you’ll need to cover. This should be the mortgage balance at the time of your death, not the original loan amount;

Second, consider the number of years remaining on your mortgage. The younger you are, the longer your mortgage is likely to be;

Finally, think about the interest rate on your mortgage. A higher interest rate will mean a higher mortgage balance over time.

The sum insured of a life insurance policy can be reduced over time inline with your mortgage. Of course many people move home or upgrade their home and may need to borrow more funds. This should be a consideration before you reduce your life insurance sum insured as increasing this cover again due to changes in circumstances will likely require medical or financial underwriting which means as get older, health events occur making insurance harder to obtain without exclusions or premium loadings.

In Australia, the average mortgage size is about $600,000. So, if you have a mortgage of this size, you’ll need a minimum sum insured of $600,000 to make sure your family can pay off the mortgage if something happens to you.

Of course, this is just a rough guide – your actual insurance needs will depend on your individual circumstances. It may not be important at all to pay the mortgage off in the event of death, but this is a common goal and a good starting point for thinking about how much life insurance you need.

Clear other debts

If you have a credit card debt, car loan or personal loan, you’ll need to make sure that your life insurance policy has a sufficient sum insured to pay off those debts in the event of your death.

In Australia, the average credit card debt is $4,200, while the average car loan is $31,000 and the average personal loan is $15,000. So if you have any of those debts, you’ll need to make sure that your life insurance policy has at least that much coverage. Otherwise, your loved ones will be stuck with those debts after you’re gone.

Pay for my children's education

When it comes to life insurance, one of the most important considerations is how much life insurance you need. This is especially true if you have children, as you’ll want to make sure their education expenses are covered in the event of your death.

So how much life insurance you need to cover education expenses in Australia? The simple answer is that it depends on the education expenses themselves.

If you have a child who is attending a private school, for example, their education costs will be higher than if they were attending a public school. As such, you’ll need to take this into account when determining your sum insured.

Ultimately, the amount of life insurance you need to cover education expenses in Australia will depend on your individual circumstances. However, by speaking to a financial advisor and considering all of the factors involved, you can ensure that your family is taken care of should the worst happen.

Help with my family's living costs

When it comes to life insurance, one of the biggest questions is how much life insurance you need. There are a number of factors to consider, but one of the most important is the loss of income from the breadwinner. If the breadwinner were to die, the family would need to replace that income in order to maintain their standard of living. Therefore, the sum insured should be enough to cover the family’s living expenses for the future.

One way to determine how much coverage you need is to calculate your family’s living expenses. This includes things like mortgage payments, food and utility bills, and any other regular expenses that would need to be covered if you were no longer around. Once you have an idea of your living expenses, you can then compare that to the sum insured on your life insurance policy. The goal is to make sure that your family would be able to maintain their current lifestyle in the event of your death.

Of course, life insurance is just one part of a comprehensive financial plan. But it is an important piece of the puzzle, and it’s worth taking the time to make sure you have the right amount of coverage in place. With a little planning, you can give yourself and your loved ones peace of mind knowing that they will be taken care of financially if something happens to you.

Another important factor to consider is whether or not you have a stay-at-home partner who provides care for your children. If you do, then you’ll want to make sure that there’s enough life insurance in place to cover the cost of a nanny or day-care should your partner pass away.

The Bottomline

The bottomline is that you need to figure out how much life insurance you need based on your individual circumstances. This includes taking into account things like your total household income, debts, future expenses, and number of dependents. Once you have all of that information, you can start to look at different policy options and find one that fits both your needs and budget. If you’re not sure where to start, Wealth Factory can help. Our team of experts will take a look at your unique situation and recommend the best course of action for you. So if you’re ready to get started on finding the right life insurance policy for you, get in contact with Wealth Factory 07 4659 5222 to discuss your options today.

08/11/2022/by Rob Laurie

Life insurance in retirement – what you need to know

As you head towards retirement, it’s important to think about what insurance you need. What kind of coverage are you looking for? Do you want to cover your retirement income? Your health care costs? Or both? There are a variety of options available, so it’s important to do your homework and find the right fit for you.

Regardless of what you decide, having life insurance in retirement is a smart move. It can help to cover unexpected expenses and give you peace of mind. So take the time to research your options and find the right retirement insurance plan for you.

Life insurance in retirement

As you get closer to retirement, your insurance needs decrease. You no longer need to insure your income, since you will no longer have earned income. You also might not need as much life insurance in retirement, since your family is likely to be financially independent by the time you stopped working. However, there are still some key insurance coverage areas you should consider as you approach retirement.

Ultimately, your insurance needs in retirement will vary depending on your individual circumstances. But retirement doesn’t have to mean leaving all insurance coverage behind – it just means rethinking your coverage needs and making sure you have the right protection in place for this new stage of life.

Life insurance coverage in retirement

As you approach your golden years, it’s important to take a close look at your life insurance in retirement coverage. If you’re like most people, you probably have a policy that was put in place when you were younger and that no longer reflects your current needs. For example, if you have debt or other financial obligations, you may need to increase your coverage to make sure that those obligations are taken care of in the event of your death. Alternatively, if you’ve paid off your debts and don’t have any major financial responsibilities, you may be able to reduce your coverage and save money on premiums.

Regardless of your situation, it’s important to make sure that your life insurance in retirement coverage is appropriate for your needs. Otherwise, you could be leaving your loved ones with a financial burden that they’re not prepared to handle.

Benefit of life insurance in retirement

Life insurance is one of those things that you hope you never have to use, but you’re glad to have it just in case. In Australia, life insurance is often bundled with superannuation, or retirement savings plans. However, what many people don’t realize is that having life insurance can actually decrease the retirement benefits that they receive from their superannuation. This is because the insurance premiums are deducted from the account balance, leaving less money to grow over time. For this reason, it’s important to weigh the costs and benefits of life insurance before deciding whether or not to purchase a policy. While it’s always nice to have peace of mind, it’s important to make sure that you’re not sacrificing your retirement security in the process.

Insurance through super

If you have retirement savings and life insurance through your superannuation, it’s important to remember that both may have an expiry date.

In Australia, retirement savings typically cannot be accessed until you reach a certain age, typically between 55 and 60. Life insurance policies may also have an expiry date, usually around the age of 65. This means that if you’re not careful, you could end up without life insurance when you need it most. To avoid this, it’s important to keep track of the expiration dates of your insurance through super, and to make sure you have alternative coverage in place before they expire if you still need the coverage. Otherwise, you could find yourself unprepared and facing a financial crisis if something happens to you.

Reviewing your life insurance cover as you approach retirement

As you approach retirement, it’s a good idea to review all of your coverages and make sure that there are no duplicates or life insurance in retirement coverages you may not need.

At this stage in your life, you may have different needs than you did when you were raising a family or starting a business. For example, you may no longer need as much life insurance coverage if your children are adults and financially independent. Or, if you have paid off your mortgage, you may no longer need to carry life insurance.

Reviewing your coverages on a regular basis helps to ensure that you’re not paying for more coverage than you need. Policy expert can help make sure that you have the right coverages in place for your needs. So, whether you’re just starting out or approaching retirement, it’s a good idea to review your life insurance policy to make sure it still meets your needs. Review your policies regularly to make sure they still meet your needs.

Reviewing your life insurance in retirement policies regularly is a good idea for several reasons. For one, as you get older your life insurance needs will change. For example, when you retire you will no longer need coverage for earnings replacement.

Additionally, over time your beneficiaries may change, and it’s important to make sure that the people who are most important to you are taken care of in the event of your death. Finally, reviewing your life insurance policies on a regular basis ensure that they remain up to date with any changes in your life. This is especially important if you have made any major life changes, such as getting married or having children.

By reviewing your life insurance policies regularly, you can be sure that they will always meet your needs.

So, there you have it. As you get closer to retirement, your need for insurance decreases and in some cases, your existing cover could continue well into retirement. It’s important to review your situation before making any decisions as to whether you need to adjust your current policy. Just remember that insurance premiums will decrease your overall retirement benefits so weigh up the pros and cons before making a decision.

If you want help reviewing your options, please don’t hesitate to reach out. We’re here to help make sure you have a comfortable retirement without spending more than you need to on insurance. Get in contact with Wealth Factory to discuss your options today

08/11/2022/by Rob Laurie

Costs of keeping up with the Joneses

Spending too much on keeping up with the Joneses

A popular quote about money and happiness states that while money cannot directly buy happiness, it can provide the means to enjoy experiences and possessions that can bring happiness. For example, one might use their wealth to buy a luxurious yacht, which can then be used to access and enjoy the natural beauty and relaxation of the ocean, bringing happiness as a result.

If you have a lot of money, it is true that you can spend it on luxurious items that bring you happiness. However, for most people, our spending is typically on everyday items like clothing, gadgets, and cars.

According to the Australian Bureau of Statistics (ABS), consumer spending is influenced by factors such as job security and economic conditions like interest rates and inflation. When the economy is doing well, it leads to increased consumer confidence and more disposable income. However, it is also important to consider the emotional aspect of consumer spending, with marketers often using phrases such as “be the envy of your friends” or “today only” to evoke feelings and drive purchases.

In our consumer-driven society, we often feel pressure to keep up with the latest trends and possessions of those around us. Everywhere we look, whether it be on television, online, or on social media, we are bombarded with advertisements and sales pitches. Influencers on social media, who often receive lucrative deals from advertisers, can also influence our purchasing decisions.

It may appear that the constant barrage of advertising in the modern world can easily lead us to lose control and end up in debt.

Unlike Yacht-guy from the quote, our finances may be more limited, but there are still ways we can stay in control of them.

Ways to ensure you stay in control of your finances

Budget

Creating a budget and sticking to it can help you make more mindful spending choices and improve your financial situation. Instead of viewing a budget as a tedious task, consider it a tool for enabling you to live your best life. By being mindful of your budget, you may choose to forego small, unnecessary expenses in order to save for more meaningful purchases and investments in the future.

The government’s SmartMoney website offers a free calculator to help you create a budget that works for you.

Debit, not credit

It is recommended to use a debit card instead of a credit card. A debit card can be connected to a bank account or have funds loaded onto it. In either case, the money spent is from your own account rather than borrowed from the bank, preventing overspending. There is also no interest to pay on the transactions.

Furthermore, it is advisable to avoid using Buy-Now-Pay-Later schemes as they can lead to accumulating significant debt without realising it.

Payment plans

Many utilities and insurance companies offer the option to set up a regular payment plan, where you pay a fixed amount on a regular basis. This ensures that you always know how much you will be paying and the payments are automatically processed. Your gas or electricity provider can assist you in setting up a regular payment plan.

Avoid social media

Have you ever noticed that after searching for something on Google, like camping equipment, you start seeing ads for tents and camp stoves on social media? This is because algorithms on the internet track your searches and help advertisers target you with ads.

We understand that it can be hard to avoid social media, but if you’re easily influenced by targeted online advertising, it may be best to limit your exposure to it for a while.

Pause

Before making a purchase, it’s important to consider whether the item is something that you really need or if it’s just a status symbol. Advertising is designed to appeal to our emotions and desire to fit in, but buying things we don’t need can put us on a repayment plan for months. Take a moment to think about whether the item is worth it before making the purchase.

If you think you need help with managing your finances, visit MoneySmart.gov.au and download their online guide, Managing your money. It contains helpful tips and advice for maintaining a budget and achieving your financial goals. Remember, as David Lee Roth once said, “Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.”

05/11/2022/by Rob Laurie

Can a US recession be a good thing?

US recession

The hot topic at the moment seems to be about the US recession and whether it will avoid it or go into it. But we are in Australia, so should we care? Well, unfortunately our market sentiments are largely connected, so if the US sneezes, we catch a cold. If the US market drops overnight, the Australian share market is likely to do the same.

So how did we get to this point in the economy? Consumer spending on goods in particular, but also services, has been a bit of a spending boom post COVID. If you have been trying to buy nearly anything over the last year or so, prices have risen, supply has dropped (other supply chain issues impacted this as well) and demand is high.

No one enjoys a recession. It’s a time when businesses suffer, jobs are lost, and the economy seems to be in a downward spiral. But could there be a silver lining to all of this? No one ever wants to see their country go through a recession, but sometimes it can be just what the doctor ordered. A good reset can help get things back on track and moving in the right direction. Some experts believe that a recession can be good for the economy – as long as it’s followed by a reset.

What is a recession and how does it happen?

A recession is a general downturn in economic activity. It is typically defined as two consecutive quarters of negative economic growth, as measured by a country’s gross domestic product (GDP). While recessions are often associated with falling stock prices, rising unemployment, and other negative economic indicators.

It is visible in industrial production, employment, real income and other indicators. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between these turning points there is a period of declining economic activity.

Recessions are generally characterized by falling prices, low levels of investment and rising unemployment. Excessive debt accumulation can also lead to a financial crisis and to recessions. Government policies can be used to help stabilize the economy during a recession. For example, Keynesian economics recommends increasing government spending and expanding social welfare programs during a recession.

Can a recession be good for the economy?

There are two reasons as to why a recession can be good for the economy:

Recessions can help to reduce inflation

When the economy is booming, prices for goods and services often rise very quickly. This can erode people’s purchasing power and make it difficult to afford necessities. But when a recession hits and demand drops, prices usually fall as well, therefore reducing inflation. This gives people a chance to catch up on their bills and save money for the future.

Recessions prompt economic reforms

For instance, after the dot-com bubble burst in 2001, many companies were forced to re-evaluate their business models and become more efficient. As a result, the overall economy became stronger and more resilient. While it’s admittedly never fun to go through a recession, there may be some silver lining to the dark cloud.

What are some of the benefits of a recession?

While a recession may not sound like something to be excited about, there are actually some benefits that can come from it.

A recession can help to clean out the economy and get rid of weak businesses that are struggling to survive. This can be good for the overall economy in the long run, as it allows stronger businesses to take their place.

A recession can help to reduce inflationary pressures. When demand is down and businesses are struggling, prices tend to fall as well. This can be helpful for consumers who are looking to get more bang for their buck.

A recession can often lead to lower interest rates. When the economy is struggling, the Federal Reserve will typically lower interest rates in an effort to stimulate growth. This can be beneficial for borrowers who are looking to get a better rate on their loans. While a recession can certainly be disruptive, there are some positive aspects that can come from it as well.

How can you protect yourself from the negative effects of a recession?

A recession is when the economy slows down for at least six months. This can lead to negative effects such as job loss, pay cuts, and increased debt. So how can you protect yourself from a recession?

Make sure you have an emergency fund saved up. This will help you cover unexpected expenses if you lose your job or have a pay cut.

Try to reduce your debt. This will make it easier to manage your finances if you experience a decrease in income.

Diversify your portfolio and have a mix of investments. This way, if one asset class takes a hit, you’ve got others that can cushion the blow.

Have some cash on hand in case you need to take advantage of opportunities that pop up during a recession, as the market may well be on sale at some stage and a buying opportunity.

Remember that recessionary periods don’t last forever. So while it’s important to be prudent during tough times, don’t forget to keep your long-term goals in mind.

By following these tips, you can weather any recession and come out ahead.

How to make the most of a recession

A recession can be a tough time for some, but there are still ways to make the most of it. One silver lining of a recession is that it provides buying opportunities. With businesses struggling and people tightening their belts, many items can be had at a discount. However, it’s important to be smart about what you buy. Look for items that are high quality and will last long into the future.

Another way to make the best of a recession is to use it as an opportunity to get your finances in order. This is a good time to reassess your budget and find areas where you can cut back. It’s also a good time to start saving for the future.

By taking these steps now, you’ll be in a much better position when the recession finally comes to an end.

What happens if the US avoids a recession?

It’s a well-known fact that a recession tends to be followed by a period of lower inflation. In fact, it’s often one of the key indicators that a recession has ended. But what causes this to happen? There are a few different theories out there, but the most likely explanation is that during a recession, people and businesses spend less money. This reduction in demand helps to push down prices, which leads to lower inflation. Of course, this isn’t always the case – there have been periods of falling inflation without a recession – but it’s generally true that if you want to see lower inflation, you’ll need to see a recession first.

Historically things have not gone well when the federal reserve attempts to avoid a recession, as evidenced by “The Great Inflation” of 1965-1982.

The Great Inflation was a macroeconomic event that lasted from 1965 to 1982, led by economists to rethink central bank policies, and caused by Federal Reserve policies that allowed for an excessive growth in the money supply. The origins of the Great Inflation were motivated by Keynesian stabilization policy in pursuit of lower unemployment rates, which was believed to be achievable through modestly higher inflation rates.

The Federal Reserve accommodated large and rising fiscal imbalances during the Great Inflation, which accelerated the expansion of the money supply and raised overall prices without reducing unemployment. Economist Athanasios Orphanides has shown that policymakers were likely underestimating the inflationary effects of their policies.

Federal Reserve officials were well aware of the dual mandate that required monetary policy to be calibrated so that it delivered full employment and price stability. Nevertheless, the employment half of the mandate appears to have had the upper hand when full employment and inflation came into conflict.

By 1979, Paul Volcker became chairman of the Federal Reserve Board with a mission to reduce inflation rates by controlling reserve growth rate more stringently than before. This meant higher interest rates & slower economic activity (us recessions in 1980 & 1981), but eventually led to reduced joblessness & stable growth.

Two key lessons from the Great Inflation era remain relevant for the Federal Reserve today:

First, price stability is paramountfor a strong and growing economy. The Great Inflation showed that tolerating high levels of inflation in an effort to stimulate the economy would ultimately prove detrimental.

Second, the public must be confident in the Fed’s ability to lessen inflationary pressures—both now and in the future (Lopez, 2012).

Bottomline

Is a recession good or bad? It depends on how you look at it. From one perspective, recessions are natural events that happen in response to imbalances in the economy and can be beneficial in the long run. On the other hand, recessions can cause hardship for individuals and businesses alike.

If you’re worried about how a recession may affect your personal finances, get in touch with me to discuss your options. No matter what the future holds, we can work together to make sure you come out ahead.

02/11/2022/by Rob Laurie

Ways to avoid credit card debt – learn 4 methods

This article emphasizes the importance of managing credit cards and provides simple suggestions for using them as a tool for effective money management.

Best ways to avoid credit card debt

To avoid credit card debt, there are several approaches that can be taken. One effective strategy is to pay off the balance each month. Additionally, this article highlights four methods to avoid accumulating credit card debt.

Credit cards can be very convenient, but it is crucial to carefully monitor spending and avoid overusing them, particularly as interest rates rise.

By considering whether purchases are wants or needs and using the tips provided in this article, it is possible to maintain control of credit card debt and ensure it works in your favor.

The Importance of a routine in avoiding credit card debt

We all know how easy it is to neglect important tasks. Just like that power bill that gets lost in your inbox or when you “accidentally” binge-watch a whole season of a show on Netflix while ignoring the laundry, we tend to put off dull but crucial tasks.

To avoid credit card debt, establish a routine and make certain tasks a habit. This can be as simple as setting a monthly reminder in your calendar to check that your credit card payments are up to date and paying off the balance in full each month to avoid interest fees and late fees.

Technological solutions for avoiding credit card debt

If you struggle with organisation, there are many apps and services that can help. For example, Mint is a popular app that helps you categorise your spending and make sure you have enough money to pay off your credit card bills. Many banks also offer similar services through their online portals or apps.

Setting up automatic payments through your banking app can help prevent credit card debt by ensuring timely payments and requiring minimal effort on your part.

Smart strategy to avoid credit card debt by avoiding cash advances

When individuals are struggling financially, they may turn to cash advances on their credit cards as a last resort, resulting in additional fees and high costs.

If you use your card to withdraw cash, you will start incurring interest charges immediately and at a higher rate than for purchases. This applies even if you have an interest-free card. It is advisable to repay any cash advances on your card as soon as possible to avoid high interest charges.

The role of emergency funds in avoiding credit card debt

It is important to have an emergency fund because the COVID-19 pandemic has shown us how quickly financial situations can change. This is especially true for changes in the cost of living or interest rates. Having some extra money saved is crucial in these situations.

Saving money is a key way to prepare for emergencies.

Using an emergency fund calculator is a great first step. It will take into account your income, savings, and living expenses to give you a rough idea of how much money you should be setting aside for unexpected expenses.

Many of us rely on credit cards in our daily lives, but it is important to use them responsibly in order to avoid falling into debt. The key to success with credit cards is to carefully consider your purchases and pay off the full balance each month. Otherwise, the only beneficiaries will be the banks.

01/11/2022/by Rob Laurie

What are exchange traded funds?

Have you ever heard of Exchange Traded Funds (ETFs)? You might have some but not know what they are. As investors, we are always looking for ways to grow our portfolio and protect our savings. One way to do this is by investing in exchange traded funds (ETFs).

Exchange Traded Funds are a type of investment vehicle that allows you to invest in a basket of assets, such as stocks or bonds, without having to purchase each individual asset. In Australia, there are a number of ETF providers offering a wide range of investment options.

In this blog post, we’ll give you everything you need to know about an ETF, including the benefits and risks of investing in ETFs; the different types of ETFs available; methods on how to invest in ETFs; how to choose the right ETF for your investment portfolio; and tips for buying and selling ETFs. So, let’s get started!

What are exchange traded funds and how do they work in Australia

Exchange traded funds, or ETFs, are a type of investment fund that trades on stock exchanges. They are similar to index funds but differ in that they are exchange traded, meaning that they can be bought and sold like stocks.

ETFs typically track an underlying index, such as the S&P 500, but can also track commodities, currencies, or other assets. ETFs are popular because they offer investors exposure to a wide variety of asset classes in a single investment.

In Australia, Exchange traded funds have been available since 2001 and have become increasingly popular in recent years. There are now over 200 ETFs listed on the ASX with a combined value of over $40 billion.

ETFs are typically managed by large financial institutions, such as banks or asset managers. The largest ETF provider in Australia is Vanguard, with over $20 billion in assets under management.

ETFs are traded on stock exchanges and can be bought and sold like any other stock. They can be bought through a broker or online trading platform.

When you buy an ETF, you are buying shares in a fund that holds a basket of assets. For example, if you buy an S&P 500 ETF, you are buying shares in a fund that holds the 500 stocks that make up the S&P 500 index.

Because ETFs are exchange traded, they can be bought and sold throughout the day. This flexibility makes them a popular investment for traders and investors who want to take advantage of short-term market movements.

What is the difference between ETF and ETP?

While researching ETFs, you may have also encountered ETPs. Exchange traded funds (ETFs) and exchange traded products (ETPs) are both investment vehicles that are traded on an exchange.

Exchange traded funds generally track an index, a commodity, or a basket of assets and can be bought and sold like shares. ETPs include exchange traded notes (ETNs), exchange traded commodities (ETCs) and exchange traded currencies (ETCs).

The main difference between ETFs and ETPs is in the structure of the product. ETFs are structured as open-ended trusts, while ETPs are structured as debt instruments. This means that ETFs are not subject to counterparty risk, while ETPs may be.

ETFs are also required to have a published prospectus, while ETPs do not.

Investors should consider their investment objectives and risks carefully before investing in exchange traded products.

The Benefits of Investing in ETFs

There are several key benefits to investing in ETFs:

Diversification

By purchasing an ETF, you are instantly diversified across a basket of assets. This diversification reduces your risk and can lead to higher returns over time.

Cost-Effective

Exchange traded funds are generally more cost-effective than traditional managed funds. This is because they have lower fees and expenses.

Tax-Efficient

ETFs are also more tax-efficient than traditional managed funds. This is because they generate fewer capital gains taxes.

Liquidity

ETFs are highly liquid and can be bought and sold throughout the day. This flexibility is ideal for traders and investors who want to take advantage of short-term market movements.

If you’re looking for a cost-effective and tax-efficient way to invest, exchange traded funds (ETFs) could be the right choice for you. ETFs offer a number of key benefits, including diversification, liquidity, and low costs. However, there are also risks to be aware of before investing. These include counterparty risk, market risk, interest rate risk, and currency risk. When investing in ETFs, it’s important to choose a reputable provider and to diversify your portfolio across a range of different asset classes.

What are the risks in investing in ETFs?

Like all investments, there are risks involved with investing in ETFs. However, these risks can be mitigated by diversifying your portfolio across a range of different asset classes.

The main risks to be aware of are:

Counterparty Risk

This is the risk that the ETF provider will default on their obligations. This is typically not a concern with large and well-established providers.

Market Risk

This is the risk that the underlying assets will fall in value. This risk can be mitigated by diversifying your portfolio across a range of different asset classes.

Interest Rate Risk

This is the risk that rising interest rates will negatively impact the value of fixed-income assets, such as bonds. This risk can be mitigated by investing in ETFs that track floating-rate assets, such as short-term corporate bonds.

Currency Risk

This is the risk that changes in exchange rates will impact the value of foreign assets. This risk can be mitigated by investing in ETFs that track currency-hedged assets.

The different types of ETFs available in Australia

There are a number of exchange traded funds (ETFs) available in Australia, each with its own distinct features and benefits. Here is a quick overview of the different types of ETFs that you can choose from:

Equity ETFs

These funds invest in a basket of stocks that track a particular index, such as the ASX 200 or the S&P/ASX 300. Equity ETFs offer exposure to the Australian stock market, without the need to directly purchase individual shares.

International ETFs

These funds provide exposure to foreign markets, such as the US or Europe. International ETFs can be a great way to diversify your portfolio and reduce your overall risk.

Property ETFs

These funds invest in a basket of property-related assets, such as real estate investment trusts (REITs) or exchange traded property securities (ETPS). Property ETFs offer exposure to the Australian property market, without the need to directly purchase individual properties.

Fixed Income ETFs

Commodity ETFs

These funds invest in a basket of commodities, such as gold or oil. Commodity ETFs can be a great way to hedge against inflation and protect your portfolio from market volatility.

Currency ETFs

These funds invest in a basket of foreign currencies, such as the US dollar or the Euro. Currency ETFs can be used to hedge against exchange rate risk, or to speculate on the movement of foreign exchange rates.

Alternative ETFs

These funds invest in a basket of alternative assets, such as hedge funds or private equity. Alternative ETFs can offer exposure to investments that are not typically accessible to retail investors.

Leveraged ETFs

These funds use financial derivatives to provide leveraged exposure to an underlying asset, such as an index or a commodity. Leveraged ETFs can be used to magnify your returns, but they also come with higher risks.

Inverse ETFs

These funds use financial derivatives to provide inverse exposure to an underlying asset, such as an index or a commodity. Inverse ETFs can be used to hedge your portfolio or profit from market declines.

Choosing the right ETF for your investment goals will depend on a number of factors, including your risk tolerance and time horizon. It is important to speak to a professional financial advisor to get tailored advice before investing in any ETF.

How to invest in ETFs?

Investing in Exchange traded funds is a straightforward process. First, you need to choose an ETF provider. There are a number of providers to choose from, including Vanguard, BlackRock, and State Street Global Advisors.

Once you have chosen a provider, you need to open an account with them. This can be done online or through a broker.

Once your account is open, you can then start buying and selling ETFs. It’s important to remember that ETFs are traded on stock exchanges, so their prices can fluctuate throughout the day.

How to choose the right ETF for your investment portfolio?

If you’re looking to invest in exchange traded funds (ETFs) in Australia, there are a few things you need to consider before making your decision. Here are three tips on how to choose the right ETF for your investment portfolio:

Consider your investment goals

It’s important to think about your investment goals before investing in an ETF. Are you looking to generate income or grow your capital? Do you have a short-term or long-term time horizon? Once you know what you’re hoping to achieve with your investment, you can start researching which ETFs align with your goals.

Compare fees and expenses

All investments come with associated costs, and ETFs are no different. When you’re comparing ETFs, be sure to take a close look at the fees and expenses associated with each one. These costs can eat into your returns, so it’s important to choose an ETF with low fees.

Consider the risk level

It’s also important to think about the level of risk you’re comfortable taking on before investing in an ETF. Some ETFs are more volatile than others, so it’s important to find one that aligns with your risk tolerance.

By following these tips, you can be sure to choose the right ETF for your investment portfolio.

Tips for buying and selling ETFs in Australia

If you’re looking to invest in exchange traded funds (ETFs) in Australia, there are a few tips you need to know on how to buy and sell ETFs so that you can make the most of your investment.

Due to their flexibility and ease of trade, ETFs are becoming increasingly popular as an investment option as well. They also offer investors exposure to a wide range of asset classes and sectors, which can be helpful in diversifying a portfolio.

When buying ETFs, it’s important to consider the fees charged by the provider. Some providers charge higher fees than others, so it’s worth shopping around to find the best deal. It’s also important to remember that ETFs are subject to market volatility, so it’s important to have a clear investment strategy in place before investing.

When selling ETFs, it’s important to remember that you may have to pay capital gains tax on any profits you make. It’s also worth considering the fees charged by your provider, as these can eat into your profits. Finally, it’s important to have a clear exit strategy in place so that you know when to sell your ETFs.

Following these tips will help you make the most of your investment in exchange traded funds. With a little research and planning, you can trade ETFs with confidence and maximise your returns.

Exchange traded funds can be a great investment for those looking to build their portfolio and who want the benefits of diversification without having to do all the research themselves. They are also a good option for people who want to invest in specific sectors or regions but don’t have the time or knowledge to pick individual stocks. However, like any other investment vehicle, there are risks associated with investing in ETFs. If you’re thinking about adding ETFs to your portfolio, please contact Wealth Factory so we can help you find the right funds for your needs.

27/10/2022/by Rob Laurie

What are retirement income streams?

Everyone’s idea of retirement is different. For some, it means travelling the world and never having to work again. Others see it as an opportunity to finally focus on their hobbies and spend more time with their families. However you choose to spend your retirement, one thing is for sure: you’ll need a reliable stream of income to make it happen.

In this blog post, we’ll explore the different types of retirement income streams available to retirees and help you find the right one for you. So sit back, relax, and let us teach you how to make money.

Retirement income stream is an income received by a person after retirement. Retirement income streams can come from different sources, such as the government, private companies, or individual retirement savings.

Retirement income streams can be used to cover the costs of living, such as food, housing, and healthcare. They can also be used to travel, purchase leisure items, or to help family and friends. Retirement income streams are an important part of retirement planning, and it is important to understand the different types of retirement income streams available.

Types of Retirement Income Streams

When it comes to retirement planning, one of the most important things you can do is to set up a retirement income stream. This will provide you with a regular source of income in retirement, which can help you cover your basic living expenses and enjoy a comfortable lifestyle.

There are a few different types of retirement income streams available in Australia, so it’s important to understand your options before making a decision. Here’s a brief overview of the most popular types of retirement income streams in Australia:

Superannuation

Superannuation is a compulsory retirement savings scheme for employees in Australia. If you’re employed, your employer must make contributions to your super fund on your behalf (usually equal to 9.5% of your salary). You can also make additional contributions to your super fund if you wish.

Age Pension

The Age Pension is a government-funded retirement income stream for eligible Australians. To be eligible, you must meet certain age, residency, and income requirements. If you’re eligible, you’ll receive a regular payment from the government that can help cover your basic living expenses in retirement.

Annuities

An annuity is an insurance product that provides you with a regular income stream in retirement. You can purchase an annuity with your superannuation savings or other retirement savings (such as a lump sum from the sale of your home).

Investments

Another option for generating retirement income is to invest your savings in growth assets such as shares, property or managed funds. This can provide you with a regular income stream in retirement, but there is also the potential for capital gains (or losses) over time.

When choosing a retirement income stream, it’s important to consider your personal circumstances and objectives. You may wish to speak to a financial adviser to get professional advice on the best retirement income stream for you.

Are retirement income streams taxable?

Are retirement income streams taxable in Australia? The answer may surprise you.

As we all know, retirement is a time when we finally get to relax and enjoy the fruits of our labour. After years of working hard and saving for the future, retirement is often seen as a chance to finally kick back and enjoy life.

However, one important question that many people don’t think about until it’s too late is: are retirement income streams taxable in Australia?

Unfortunately, the answer is yes. Retirement income streams are considered taxable income in Australia and are subject to the same tax rules as other forms of income. This means that if you’re receiving a retirement income stream, you may be required to pay taxes on it.

There are a few different types of retirement income streams, and each one has its own tax rules. For example, pensions and annuities are taxed differently to superannuation income streams.

The good news is that there are some tax concessions available for retirement income streams. For example, the government offers a seniors and pensioners tax offset (SAPTO), which can help reduce the amount of tax you need to pay on your retirement income.

If you’re receiving a retirement income stream, it’s important to speak to a qualified accountant or tax agent to make sure you’re paying the right amount of tax. Ignorance is no excuse when it comes to taxes, so make sure you’re up to date on the latest tax rules.

Tips on how to make the most of your retirement income stream

There are a few different retirement income streams available to Australians, and it can be difficult to know which one is right for you. Here are some tips on how to make the most of your retirement income streams.

The first thing you need to do is understand what retirement income streams are available to you. There are a few different options, and there is no one-size-fits-all approach, so it’s important to do your research and understand the option that best suits your individual needs.

Once you know what retirement income streams are available, you need to consider your personal circumstances and decide which one is right for you. You need to think about things like your age, health, lifestyle, and financial situation.

Once you’ve decided which retirement income stream is right for you, the next step is to start planning for retirement. This means saving as much money as you can and investing it in a way that will give you the best chance of achieving your retirement goals.

Another tip is to think about how long you want each retirement income stream to last. Some options will provide an income for life, while others may only last for a set number of years. Choose the option that best suits your retirement goals.

Lastly, make sure you keep track of all your retirement income streams and how they are performing. This will help you make any necessary adjustments along the way to ensure you are making the most of your retirement savings.

There are a few different ways to save for retirement, so it’s important to find one that suits your circumstances. You might want to consider things like salary sacrificing, superannuation, or a retirement savings account.

The most important thing is to start planning for retirement as early as possible. The sooner you start, the more time you have to save and the more likely you are to achieve your retirement goals.

If you’re approaching retirement and don’t have enough saved, there are still a few things you can do to improve your situation. You might want to consider working part-time or finding ways to boost your income.

No matter what your retirement goals are, there are a few things you can do to make the most of your retirement income streams. By doing your research, planning ahead, and making the most of your money, you can enjoy a comfortable retirement.

That’s a lot to think about when it comes to retirement income streams, but don’t worry, we can help. Wealth Factory offers complimentary reviews of your insurance policies and investments as part of your financial plan. We want to make sure you have the best chance for a comfortable retirement, so get in touch today.

27/10/2022/by Rob Laurie

How do I apply for an age pension?

Retirement planning can be a Byzantine process, so determining the right time to start drawing on your superannuation or when to apply for the age pension can be difficult

For those of us who have worked hard our entire lives, receiving an age pension can be a bit of a shock. It doesn’t seem fair that after contributing so much to society, we are now considered charity cases. Thankfully, the application process for age pensions in Australia is straightforward, and there are plenty of resources available to help you through it. In this blog post, we’ll discuss the eligibility requirements for an age pension, and walk you through the application process step-by-step. Let’s get started!

Eligibility Requirements for an Age Pension

To apply for an age pension in Australia, you must meet the following eligibility requirements:

Age

You must be 66 years old or older. This age restriction will rise by 6 months every two years until July 1, 2023, at which point it will be 67 years.

Residency

To be eligible for the Centrelink Age Pension, you do not need to be an Australian citizen. However, you must have been a Permanent Resident for at least 10 years AND spent at least five of those 10 uninterrupted years living in Australia (excluding short holidays).

Income Test

If you’re a single person, your assessable income must be less than $58,318; if you’re a couple, it must be less than $89,211.

Asset Test

If you own a property, you can have up to $622,250 for singles and $935,000 for couples. Singles can receive up to $846,750, and couples up to $1,159,500 if they don’t own their property.

The Assets Test will help Services Australia work out if you can get paid Age Pension.

If you get a full pension

Your pension will be reduced if the value of your assets exceeds the permissible limit for your situation.

If you’re part of a couple, the limit applies to the combined assets of you and your spouse, not to each of you individually.

Your Situation	Homeowner	Non-homeowner
Single	$280,000	$504,500
A couple, combined	$419,000	$643,500
A couple, separated due to illness combined	$419,000	$643,500
A couple, one part eligible, combined	$419,000	$643,500

If you get a part pension

Part pensions terminate on September 20, 2022, when your assets exceed the limit that applies to your situation.

If you’re part of a couple, the limit applies to the combined assets of you and your spouse, not to each of you individually.

Your Situation	Homeowner	Non-homeowner
Single	$622,250	$846,750
A couple, combined	$935,000	$1,159,500
A couple, separated due to illness combined	$1,103,500	$1,328,000
A couple, one part eligible, combined	$935,000	$1,159,500

If you meet all of the above requirements, you can apply online to claim age pension. The best way to claim an age pension is through online. You’ll need a myGov account linked to your Centrelink online account. If you don’t have a myGov account or a Centrelink online account, you’ll need to set them up. Make sure you submit the claim within 13 weeks from when you started it. If you don’t, it’ll expire and you’ll need to start again. After you submit your claim online, you’ll get a receipt and Services Australia will send a letter with the result either to your myGov Inbox or Express Plus Centrelink mobile app.

What documents do I need to apply for age pension?

You must give Services Australia the following details before or when you submit your claim. If you’ve already provided these, you may not need to do so again. To apply for an age pension, you’ll need to provide some documents that show:

your age
your bank account details
Your tax file number (TFN)
Your Australian residence status, unless you’re an Australian citizen who was born in Australia
Your income and assets
A centrelink reference number – you can apply for one if you don’t already have one

You might be required to provide Services Australia with identification documents prior to submitting your claim so that they can verify your identity. Having them prepared will enable you to complete your claim without adding to the wait time.

Services Australia will tell you in the claim which documents to give them, as this depends on your circumstances.

Application Process for Age Pension

If you’re over the age of 66 and looking to retire, you may be eligible for an age pension from the Australian government. Here’s a quick overview of the application process:

Firstly, you’ll need to meet the age and residency requirements. You must be an Australian citizen or permanent resident, and you must have lived in Australia for at least 15 years.

2. You’ll also need to meet certain income and assets tests. The income test looks at how much money you earn from work, investments, pensions, and other sources. They deem an income from assets as well. The assets test looks at how much money and property you own. Centrelink will pay the lowest amount of the two tests.

3. Once you’ve determined that you meet the eligibility criteria, you can start the application process by setting up your online account.

4. You’ll need to provide some basic personal information, as well as details about your income and assets. Centrelink will use this information to assess your eligibility for the pension.

5. If you’re eligible, you’ll start receiving payments within a few weeks (or months – apply up to 12 weeks early!). The amount you receive will depend on your individual circumstances.

6. If you’re not eligible for the full pension, you may still be able to receive a partial payment. This is known as the Partial Pension.

7. You can reapply for the age pension at any time, if your circumstances change. For example, if you move house or your income changes and you have lost the pension due to assets or income tests.

The application process for an age pension is relatively straightforward. However, it’s important to make sure that you meet all of the eligibility criteria before you apply. If you have any questions, you can contact Centrelink on 136 240 or visit your local office.

Maximum Rates of Pension Payments

Age Pension benefits vary in amount depending on whether a person is single or in a relationship. If you live with a partner, Services Australia needs to know about both of your income and assets.

The Department of Social Services examines these rates on a regular basis in order to adjust for changes in the Consumer Price Index. The amounts shown here represent the highest rates for each fortnight. You may have the option of receiving your money every week in specific situations. Depending on your situation, you can possibly receive a payment in advance.

Normal Rates

Per fortnight	Single	Couple each	Couple combined	Couple apart due to ill health
Maximum basic rate	$936.80	$706.20	$1412.40	$936.80
Maximum pension supplement	$75.60	$57.00	$114.00	$75.60
Energy Supplement	$14.10	$10.60	$21.20	$14.10
Total	$1026.50	$773.80	$1547.60	$1026.50

Transitional Rates

Some people who were getting part pensions on 19 September 2009 are on transitional rates. This is until they catch up with the current normal rates.

Per fortnight	Single	Couple each	Couple combined	Couple apart due to ill health
Maximum Rate	$842.30	$680.30	$1360.60	$842.30
Energy Supplement	$14.10	$10.60	$21.20	$14.10
Total	$856.40	$690.90	$1381.80	$856.40

If you have any questions, please do not hesitate to contact Centrelink or us for assistance. We hope this article was helpful and provided all the information you need to apply for an age pension.

27/10/2022/by Rob Laurie

Six steps to effective debt management

Australian households are among the most indebted in the world, and it is crucial to take action now to avoid losing everything. This article provides six key steps for effective debt management that will help you quickly and efficiently get your cash flow back on track.

Your Guide Towards Effective Debt Management

According to a 2020 report by the Organisation for Economic Co-operation and Development (OECD), Australian households are the fifth most indebted in the world. The report showed that the average Australian family with a disposable income of $100,000 has about $203,000 worth of debt. The cost of living in Australia is rising, and this trend is expected to continue in the future. With rising rates and inflation affecting all areas of society, from food prices to healthcare bills, it is not surprising that many people are feeling the financial strain without taking any steps to alleviate it.

Given the large number of individuals experiencing debt-related stress, it is not surprising that there are 1.5 million Australian households currently facing financial difficulties due to mortgage stress. A combination of home loans, credit cards, car loans, and personal loans contribute to this financial pressure. Having so much debt can also affect your debt-to-income ratio. While dealing with debt can be overwhelming, it is possible to regain financial stability through commitment and a well-crafted debt management plan.

1. Understanding current financial situation

To effectively manage your debt, it is essential to reduce it. However, before you can take steps to decrease your debt, it is important to have a clear understanding of your current financial situation. This can be challenging, especially if you are struggling to make ends meet. The initial step in addressing your debt is to determine the exact amount you owe. To do this, create a list of all your debts and their monthly payments, then add them up to get the total.

2. Comparing money in versus money out

To determine how much debt you can afford, calculate your monthly income from salary and any investment earnings such as stocks and bonds. Next, subtract essential living expenses like housing, food, utilities, and transportation. This will give you an idea of how much money you have available for non-essential expenses. The government offers free budgeting tools on the Moneysmart website to help you manage your spending and avoid going into debt.

3. Prioritising debt repayment

High interest rates on credit cards make them one of the most harmful debts to have. To minimise this risk, try to pay off this debt in full each month if possible, including personal loans and car loans. If this is not an option, consider requesting financial hardship assistance from your service provider to reduce the burden on your household finances, particularly when other critical expenses like mortgage payments and council rates need attention. It is better to be proactive and work with your providers to come up with a payment plan that best fits your financial situation.

Consult with a knowledgeable financial advisor to assist with organising your financial arrangements. If possible, reach out to your financial advisor before taking on loans or other costly debts, such as mortgages, to develop a manageable payment plan and avoid high-interest rate bills.

4. Avoiding bad debt

When managing your debts, avoid taking on more debt to pay off your loans. If borrowing money can help you build wealth or generate income, such as through a mortgage or education loan, go for it. But avoid taking on “bad” debts for things like vacations or entertainment, which can end up costing you more than the original amount owed. A good rule of thumb is to only borrow for things that will improve your financial position.

5. Building a safety net

Once you have paid off your debt, you should use any extra income to establish an emergency savings fund. As a homeowner, one option to save for emergencies is to get an offset facility on your mortgage, which will let you pay off more of the principal each month while reducing interest and having cash available for unexpected expenses.

6. Seeking help if you need it

Being in debt can be overwhelming and feel like there is no end. If you need help with your debt management plan, consider seeking advice from a financial adviser. It’s important to reach out for professional help when needed.

25/10/2022/by Rob Laurie

What good is a financial plan without a regular review

Why is it vital to review and update the financial plan?

When it comes to financial planning, many people think that they are done once they have put together a plan. However, this could not be further from the truth! A good financial plan is one that is regularly reviewed and updated. This is where a good financial adviser comes in – someone who can help you review your progress and make necessary adjustments.

Regardless of how much money you make, it’s always a good idea to have a financial plan. A financial plan includes setting goals, tracking progress, and reviewing your progress on a regular basis. A financial planner can help you create a long-term financial plan that fits your unique circumstances.

Reviewing your financial plan on a regular basis allows you to make adjustments as needed and keep track of your progress. It’s also a good way to identify any potential problems so that you can address them before they become serious.

Benefits of reviewing your financial plan regularly

There are many benefits of reviewing your finances regularly, including peace of mind, reduced stress, and increased savings. Here are a few more benefits of reviewing your financial plan regularly:

A financial plan is a roadmap to help you achieve your financial goals. It should include your income, expenses, savings, and investment goals. A financial planner can help you create and maintain a strategic financial plan that fits your unique situation. They can also help you stay on track and make changes as your life changes. Financial planning is important for everyone, regardless of age or income. If you don’t have a financial plan, now is the time to create one.

Reviewing your financial plan regularly can help ensure that you’re on track to reach your goals. Reviewing your financial plan on a regular basis can help ensure that you’re on track to reach your goals. This process can also help you identify any potential problems or areas where you may need to make adjustments. Of course, financial planning is not a one-time event. Your circumstances will change over time, so it’s important to review your financial plan regularly and make changes as needed. By doing this, you can help keep yourself on track to financial success.

Financial planning software can make it easy to review your finances regularly. By reviewing your finances regularly, you can catch any potential problems early and take corrective action. Financial planning software makes it easy to see where your money is going and how much you have left to save or invest. It can also help you create a budget and track your progress over time. If you are not sure where to start, there are many financial planning software programs available online. Do some research and find one that fits your needs. Financial planning software can help you take control of your finances and reach your financial goals.

Financial planning is like flossing: you know you should do it, but it’s not always at the top of your mind. However, by making financial planning a regular part of your routine, you can be confident that you’re doing everything possible to reach your financial goals. Reviewing your financial plan on a regular basis can help you stay on track and make adjustments as needed. And just like brushing your teeth, the sooner you start financial planning, the better off you’ll be in the long run. So don’t wait until tomorrow to start financial planning for your future – today is the day to take control of your finances.

A financial adviser can help you set realistic goals and monitor your progress toward them. Whether you are working towards saving for a down payment on a house, paying off your student loans, or simply building up an emergency fund, having someone to guide you and hold you accountable can be an invaluable tool. Accountability is an important aspect of achieving goals, whether that be exercising, dieting or using your money wisely.

An ongoing relationship with a financial planner gives you access to the latest industry insights and strategies. This can help ensure that your investments are always performing at their best, no matter what the market conditions may be. Your adviser will also be up to date on changes to the superannuation tax breaks. Your adviser can review strategies and find opportunities that may be relevant to you.

An adviser can also give you expert advice on all aspects of personal finance, from budgeting and investing to retirement planning and insurance coverage. Having someone who is knowledgeable about these topics will give you peace of mind and help you feel confident in your financial choices.

Five benefits of having an ongoing relationship with a financial adviser:

A financial adviser can be a great asset when it comes to saving money. They can help you to invest your money wisely and make sure that you are getting the most out of your financial situation. They can also help you to set up a budget and stick to it, which can be a difficult task for many people. In the long run, a financial adviser can help you to save a great deal of money.

2. When it comes to retirement planning, there are a lot of moving parts. You’ve got your savings, your investments, your budget, and more. It can be tough to keep track of everything, let alone make progress towards your goals. That’s where a financial adviser can be a big help. By reviewing your progress regularly, they can keep you on track and help you make adjustments as needed. They can also offer guidance on difficult decisions, such as when to claim government benefits or how to invest appropriately for your situation. In short, an ongoing relationship with a financial adviser can be a great way to ensure a successful retirement.

3. Having an ongoing relationship with a financial adviser is beneficial because it helps you stay disciplined with your money and strategies. A financial adviser can review your progress regularly and help you make changes to your financial plan if needed. They can also help you set financial goals and provide guidance on how to achieve them. If you are not disciplined with your money, you may end up spending more than you can afford or making poor financial decisions. A financial adviser can help you avoid these mistakes and keep your finances on track.

4. As anyone who has ever tried to save for a financial goal knows, it can be difficult to stay on track. Life happens, and unexpected expenses always seem to pop up when you can least afford them. This is where having a ongoing relationship with a financial adviser can really help.

A good financial adviser will review your progress regularly and make sure you are still on track to reach your goals. This gives you peace of mind, knowing that someone is keeping an eye on your finances and making sure everything is going according to plan. Plus, if anything changes in your life (such as a job loss or a major purchase), your financial adviser can help you adjust your plan accordingly. In short, an ongoing relationship with a financial adviser provides peace of mind and helps ensure that you will ultimately achieve financial success.

5. It’s important to find the right adviser for you. Many people think that financial advisers are only for the wealthy. But the truth is, financial advisers can offer valuable insights and guidance for people of all income levels. Having an ongoing relationship with a financial adviser can help you make sound financial decisions, reach your financial goals, and navigate life’s financial challenges. But finding the right financial adviser is important. You want someone who is knowledgeable and experienced, but also someone who you feel comfortable communicating with and who shares your values. With so many financial advisers out there, it can be difficult to find the right one. But it’s worth taking the time to find someone who you can trust and who will be a valuable partner in your financial journey.

Overall, having an ongoing relationship with a financial adviser can be an essential part of meeting your financial goals. There are many benefits to having a financial adviser, including saving money in the long run, being able to plan for retirement, staying disciplined with finances, and having peace of mind. However, it’s important to find the right adviser for you.

A good place to start is by looking for someone who offers a free consultation so that you can get to know them and their process before committing to anything. At Wealth Factory, we offer free consultations because we believe that it’s important for our clients to feel comfortable with us before making any decisions. We want to help you achieve your financial goals and we believe that regular review of your finances is an important part of achieving those goals.

Financial planning software makes it easy to review your finances regularly so that you can be confident that you’re on track. Schedule a free call today to learn more about how Wealth Factory can help you reach your financial goals. So if you haven’t already, consider reaching out to an adviser today and start working towards a brighter financial future!

21/10/2022/by Rob Laurie

How to stop living paycheck to paycheck?

The article explains that living paycheck to paycheck is not a desirable situation, but rather a financial emergency. It provides advice on how to break the cycle of constantly needing to rely on each paycheck to get by, through making better financial decisions and getting back on track with one’s expenses.

It is not uncommon for people to borrow money from their parents. Jodi, who is skilled at repaying her loans, is one of these people. Despite her proficiency, it can be challenging to be in a position where she needs to borrow money from her parents.

5.9 million Australians struggling to survive on their paychecks

A recent survey conducted by Deloitte between November 2021 and January 2022 found that 30% of the over 14,000 respondents from the Millennial (born 1983-94) and Gen Z (born 1995-2009) generations did not feel financially secure, with 47% living paycheck-to-paycheck. The cost of living was the primary concern for these respondents, surpassing issues such as climate change or unemployment.

It may be easy for those of us with higher wages to assume that individuals with lower wages don’t make much, but there could be various reasons for this, such as the possibility of having student loans.

Like many others, Jodi, an I.T. specialist, found herself struggling to make ends meet during certain weeks. Despite having a good salary, her income sometimes did not align with her expenses, leading to a need for extra cash until her next paycheck.

Although Jodi’s lifestyle was not overly luxurious, she did treat herself to monthly facial treatments and nail appointments. She also subscribed to two streaming services and regularly paid for a gym membership.

Aaron, a physiotherapist, struggled with cash flow like many others. Despite not needing them, he enjoyed buying new gadgets. His active social life included weekend trips with friends, dining out, and attending concerts and plays. As a result, he maxed out his credit cards and lost track of his Buy Now Pay Later (BNPL) plans. After making minimum monthly payments, he relied on credit until his next payday and lived paycheck to paycheck.

Due to his car breaking down, Aaron needed to get it fixed but the finance company rejected his loan application. This left him feeling trapped and unable to escape his current situation of living paycheck to paycheck. The constant worry about his financial situation began to affect his work and caused him to lose sleep at night.

Beyond Blue, a mental health support organization, states that financial worries can greatly impact our physical and mental health. This is because they can cause more financial stress, which has been linked to a higher risk of unhappy moods or depression, as well as other issues like anxiety disorders. It is crucial that we learn to manage our money in order to avoid living paycheck to paycheck and prevent debts from accumulating.

Jodi’s parents sought out a financial adviser for her in order to help her improve her financial habits and overall financial standing. They believed that working with an experienced adviser would allow Jodi to become more self-sufficient in managing her finances. As a result of the adviser’s guidance, Jodi was able to cancel a subscription and save $15 per month, as well as switch to bimonthly facial treatments, saving $140 every two months.

Jodi deposited money in an account that she can access whenever she needs it. In the first year of saving, she was able to save over $1,000 without borrowing from her parents. She has focused on improving her cash flow, which has allowed her to start regularly saving and investing for future studies. This will qualify her for a promotion at work.

Aaron’s financial adviser recommended that he sell unused gadgets online to generate the funds needed for his PNBL plans. This tactic was successful, allowing Aaron to pay off all of his scheduled debts. The adviser then suggested a unique debt-reduction strategy for Aaron: reducing his nights out and occasional weekend trips would allow him to be debt-free within three years, or even just one year if he stayed at home.

Aaron needed to come up with a feasible plan to overcome his debt. He and his adviser decided to compromise and meet in the middle. The adviser proposed a weekly budget for Aaron and assured him that if he controlled his love for technology, he would be debt-free in 18 months.

To effectively manage your finances and avoid falling into debt, it is important to first assess your spending habits and make sure you are not consistently spending more than you earn. Using credit cards or loans to borrow money instead of saving can put you in a cycle of debt that can be difficult to escape. Seeking the advice of a financial adviser can help identify issues with paying off existing debts and plan for future savings.

17/10/2022/by Rob Laurie

Responsibilities of the executor of a will

If you’re considering taking on the role of an executor for a will, this article is a must-read. It outlines the responsibilities of the executor of a will and helps you understand what to consider before taking on such an important role.

The death of a loved one can be a traumatic and difficult experience. It’s not just the emotional turmoil that family members have to work through, but also the practical aspects of managing your relative’s estate which can be daunting and time-consuming. One important role in this context is that of an executor – essentially someone appointed by the individual who has passed away to manage their estate according to their final wishes. If you’ve been asked or are thinking about becoming an executor, it’s helpful to understand what responsibilities you may be taking on before making any decisions.

This blog post will outline some key considerations for anyone considering assuming such a duty.

What is an executor in a will?

When it comes to estate planning, an executor is a key component. An executor is an individual who is chosen by the deceased to settle their affairs after death. The individual must be named in the will and is responsible for ensuring that all of the tasks required by the will are completed. Executors play a crucial role in ensuring that a person’s wishes are carried out correctly, making them an essential part of any estate plan.

Duties and responsibilities of the executor of a will

An executor is the person appointed to carry out the wishes of a person after they have passed away. This is done by administering their estate according to the instructions in their Will. The duties and responsibilities undertaken by an Executor involve:

Arranging a funeral;
Collecting and protecting the assets as described in the Will;
Filing tax returns for the estate and deceased;
Paying any outstanding bills or debts;
Ensuring all liabilities have been cleared before completing the administration of the estate;
Announcing intentions to distribute remaining assets; and
Distributing these assets to beneficiaries once probate (court approval) has been granted.

It is important to remember that an executor must adhere strictly to the instructions given in an individual’s will when carrying out their role. Executors are held personally responsible if a mistake is made in carrying out their duties and therefore should seek professional advice prior to taking on the role.

Pros of becoming the executor of a will

Serving as the executor of a will is a big responsibility and requires dedication and patience. It often requires significant time and knowledge of estate planning, as well as the intricacies of local probate laws. State laws also regulate fees executors can collect, ensuring beneficiaries receive their intended portion of any estate they are due. Despite these obligations, there are several positive aspects to assuming the executor role.

Being an executor gives you access to see how a well-crafted will can benefit those who are named in it and be a part of this process for family or friends who want things done in a certain way.
You can also gain valuable experience related to estate law that could be beneficial for your own future plans or passed on to others.
Ultimately, it is an action taken out of care for those in your life and carries many possible rewards.

Cons of becoming the executor of a will

Taking on the responsibility of becoming an executor of a will can be overwhelming and time consuming.

It involves navigating through a lot of paperwork, filing court documents, and sorting out financial obligations.
There could be disagreements among family members about how to distribute assets or challenges in carrying out the wishes of the deceased.
Being an executor can take months or even years depending on the complexity of the estate.
It carries with it a heavy burden and any missteps along the way can impact your reputation as well as personal relationships.

Given these items to consider, it is important to think seriously before deciding if becoming an executor is right for you.

To be or not to be the executor of a will

Deciding whether to be the executor of a will can be a difficult choice. It does come with certain advantages, such as being able to express your love for the deceased by carrying out their final wishes, but it involves a lot of responsibility and financial burden.

Before taking on the position you must consider your level of comfort in managing an estate. Are you prepared to spend countless hours administering assets and dealing with creditor claims? It’s essential that you understand all the duties and responsibilities of the executor of a will before making a decision that could have legal ramifications. Discussing your options with a trusted financial advisor or lawyer can help make it easier to weigh the pros and cons of becoming the executor of a will.

However, if you determine that you are unable to carry out the responsibilities of being an executor, it may be better to decline the offer after taking all factors into account. Alternatively, you can propose that your friend or relative enlist the services of a professional executor, such as a trustee company or solicitors, if you are uncertain about declining. This will guarantee that the executor is not already deceased at the time of the will-maker’s passing.

It’s important to note that estate laws differ in various Australian states and territories. Seeking advice from an estate planning solicitor with expertise in this area could be beneficial.

From an overall perspective, an executor is a crucial position and requires someone who is knowledgeable and familiar with the complexities of estate planning. An executor should take this appointment seriously as they act as trustful guardians over how the deceased has chosen their property and assets to be handled. Taking these steps will guarantee that the deceased’s wishes are followed accurately and respected accordingly.

11/10/2022/by Rob Laurie

Do you need income protection insurance?

Many people think that their income is safe until they lose their job. But what would you do if you lost your income tomorrow? Would you be able to continue paying your bills and meet your financial obligations? Protect yourself with Wealth Factory’s income protection insurance advice and rest easy knowing that you and your family are taken care of financially if something happens to you and you are unable to work due to sickness or injury.

Most people only think about buying insurance when something bad happens. But the truth is, it’s always a good idea to consider insurance. And with Wealth Factory, you can get advice on coverage that’s just right for you—without breaking the bank.

What is income protection insurance?

Income protection insurance is a type of policy that helps protect your income in the event that you can’t work because of an illness or injury. It can provide a monthly payment to help cover your costs if you’re unable to work for an extended period of time.

So, do you need income protection? the answer depends on your individual circumstances. That’s why it’s important to seek financial advice from a financial advisor to know what’s best for you.

However, for you to assess yourself if you truly need income protection insurance, here’s what you need to know about it and whether it’s right for you.

For many people, income protection insurance is an essential part of their financial safety net. This type of insurance provides a replacement income if you are unable to work due to illness or injury. It can cover a portion of your income, up to a certain amount, for a set period of time. It can be an important safety net for families, as it can help to cover living expenses and other bills if the breadwinner is unable to work. It is important to shop around and compare income protection policies before buying, as there can be significant differences in coverage and cost.

Income protection claims could add up to a lot if you’re out of work for an extended period of time. If you have a policy that covers 70% of your income for 30 years, that’s a lot of money that could be coming your way. Obviously, the sooner you can return to work, the better off you’ll be, but it’s good to know that you have a safety net in place just in case. It is a great way to protect yourself and your family in case of an unexpected job loss or injury. Make sure you’re fully protected by shopping around and getting the best policy for your needs.

Is it worth getting income protection insurance?

Income protection insurance is one of the most important forms of insurance for people to have, and yet some choose not to take it out. There are a number of reasons for this, but the most common one is that people underestimate how important their income is. They think that they will never be affected by injury or illness, and so they discount the chance of them ever needing to claim on their income protection policy. This is a dangerous mistake to make, as the reality is that anyone can be affected by an accident or illness at any time. Even if you are young and healthy, there is always a chance that you could be injured in an accident or develop a serious illness. If you have one, then you will be covered for any loss of income due to an accident or illness, giving you peace of mind in knowing that you will be able to maintain your standard of living no matter what happens.

Income Protection Insurance Premiums

When taking out insurance, particularly income protection insurance, there are generally two ways you can pay your premium: stepped and level premiums.

Stepped Premiums

Stepped premiums can be more affordable in the short term, but they may increase over time as your income and circumstances change. Income protection can be funded by your superannuation or by cashflow.

Level Premiums

Level premiums are generally more expensive than stepped premiums, but they offer more certainty about your future income protection costs.

The tax deductibility of income protection insurance premiums in Australia depends on your individual circumstances. You should speak to a financial adviser to work out what is best for you.

Importance of Income Protection Insurance

Income protection is one of the most important insurance policies a person can have as it is well worth the investment.

Provides peace of mind and financial security in the event that you are unable to work due to illness or injury.
The policy will pay out a monthly income, which can be used to cover your mortgage payments, rent, bills, and living expenses.
This income can be vital in preventing you from falling into debt or becoming homeless.
Gives you peace of mind, knowing that you will be able to support yourself and your family financially if something happens to you.

How do you go about getting income protection insurance?

There are a few things to consider when getting income protection insurance. Above all, you’ll want to work with a financial adviser who can help you understand the options available and make the best decision for your needs. Here in Australia, there are a few different ways to apply for it, and a financial adviser can help you navigate the process. They can also help you understand its benefits, like how it can provide peace of mind in the event of an accident or illness. Ultimately, working with a financial adviser is the best way to ensure that you get the income protection coverage that’s right for you.

Income Protection Financial Advice

Income protection insurance is an important part of any financial plan and one that should not be overlooked. At Wealth Factory, we can review your insurance as part of your overall financial planning and make sure you have the coverage you need in case of an unexpected event. So if you’re wondering whether income protection insurance is right for you, contact us today for a free consultation. We would be happy to answer any questions you may have and help you get the coverage you need.

04/10/2022/by Rob Laurie

Everything you need to know about life insurance in Australia

When it comes to life insurance, there is a lot of information to take in. This can be especially daunting for those who are looking for their first policy or are unsure about how the process works. Here, we provide an overview of how life insurance works in Australia, including the different types of policies available and how premiums are calculated. So, if you’re considering taking out life insurance, make sure to read on!

Life Insurance in Australia

Life insurance in Australia is designed to provide financial protection for you and your family in the event of your death. There are a range of different policies available, which can be tailored to suit your individual needs. For example, you can choose to take out cover for a specific period, or you may want to have cover that lasts until you choose to cancel at some point in the future. Premiums are calculated based on several factors, including your age, gender, smoking status, and the amount of cover you require. Some providers give discounts over a certain level of cover, so make sure you investigate higher levels of cover to see if that can be provided at a lower cost.

Types of Life Insurance Policies

There are two main types of life insurance policies in Australia: Term life insurance and whole life insurance.

Term life insurance

Term life insurance provides cover for a set period, typically between one and a maximum age. If you die during this time, your beneficiaries will receive a lump sum payment.

Whole life insurance

Whole life insurance provides cover for your entire life. This means that if you continue to pay your premiums, your beneficiaries will receive a payout when you die. These types of policies are no longer available in Australia but were popular during the 1970s and 1980s.

When it comes to choosing a life insurance policy, it’s important to consider your individual needs and circumstances. For example, if you have young children, you may want to take out cover until they reach adulthood.

Considerations when calculating the life insurance sum insured

There are a few things to consider when calculating the life insurance sum insured.

You need to think about how much debt you have and how much of that debt you want to be covered by life insurance.
You need to consider your future income needs or expenses that you want to be covered by life insurance as a lump sum.
You need to think about any immediate expenses such as funeral costs and time off work for your partner.
You need to consider any legacy needs that you might have.

All these factors will help you determine the right life insurance sum insured for your needs.

There are several ways to apply for life insurance in Australia. You can purchase life insurance in Australia through your superannuation fund, directly through the insurance provider such as on TV, through an insurance broker, or through a financial adviser.

When applying for life insurance in Australia, you will need to provide some personal information such as your name, date of birth, and contact details. You will also need to disclose any medical conditions that you have and provide details of your lifestyle, including your smoking status and whether you play any dangerous sports. Once you have provided this information, the life insurance company will assess your risk and give you a quote. If you are happy with the quote, you can then proceed with the life insurance policy.

Having life insurance is one of the most important things you can do to protect your family. If something happens to you, life insurance will pay out a death benefit to your loved ones. This can help them cover funeral costs, pay off debts, and maintain their standard of living. Life insurance can also give you peace of mind, knowing that your family will be taken care of financially if something happens to you.

Fully underwritten life insurance policy

A fully underwritten life insurance policy is one that is underwritten before you purchase it. This means that the life insurance company will review your medical history and other factors to determine whether you are eligible for coverage. If you are not eligible for coverage, the life insurance company will not sell you a policy. A life insurance policy that is underwritten at claim time is one that is not underwritten until you make a claim. This means that the life insurance company will review your medical history and other factors after you die to determine whether you are eligible for coverage. If you are not eligible for coverage, your loved ones will not receive a death benefit.

The benefits of a fully underwritten life insurance policy are certainty and peace of mind. When you purchase a fully underwritten life insurance policy, you know that you are covered, and your loved ones will receive a death benefit if something happens to you. With a life insurance policy that is underwritten at claim time, there is no guarantee that your loved ones will receive a death benefit.

Benefits of obtaining financial advice on life insurance

The benefits of obtaining financial advice on life insurance in Australia are numerous. Here are a few:

A financial adviser can help you understand the different types of life insurance policies available and choose the right one for your needs.
A financial adviser can help you compare life insurers and find the best deal on cover.
A financial adviser can provide valuable guidance on how much life insurance cover you need and how to keep your premiums affordable.

Considerations when choosing a beneficiary for your life insurance policy

If you have life insurance in Australia through your superannuation or a policy that you purchased directly, you may be wondering who will receive the proceeds of the life insurance in the event of your death. While it is possible to simply list a beneficiary in a life insurance policy, there are a few other things that you should keep in mind when making this decision.

You should consider whether you want the life insurance proceeds to be paid out to your estate or directly to the beneficiaries. If you choose to have the life insurance paid out to your estate, it will be subject to probate and may be subject to income tax. On the other hand, because the life insurance proceeds are paid directly to the beneficiaries of a deceased estate, they will not have to pay probate fees or income tax on the proceeds.
You should consider how much life insurance you need. You don’t want to leave your beneficiaries with too much life insurance money that they will be unable to manage.
You should review your life insurance policy regularly and update it as needed. This will ensure that the life insurance policy is up-to-date and that the beneficiaries are still accurate.

By following these tips, you can ensure that your life insurance policy is set up in a way that best meets your needs and those of your beneficiaries.

Taxes on life insurance

When it comes to life insurance in Australia, there are a few things to keep in mind about taxation. First and foremost, life insurance is not taxed in Australia when paid out of pocket. This means that the premiums you pay are not tax deductible. However, if your life insurance policy is held within your superannuation, the premiums may be tax deductible. When it comes to payout, the benefits of life insurance may be taxable if paid to someone who is considered a non-superannuation dependent.

The Claims Process

If you have life insurance in Australia, you may be wondering how to make a claim. The claims process can vary depending on the insurer, but there are some general steps that you will need to follow.

First, you will need to notify the insurer of the death of the policyholder. This can usually be done by calling the customer service number or sending a letter. You will then need to provide the insurer with a copy of the death certificate.

Once the insurer has received this information, they will begin the claims process. They will likely ask you for additional information, such as the policyholder’s medical history and beneficiary details. The insurer will then assess the claim and decide on whether to pay out. If your claim is successful, you will either receive a cheque for the sum assured or it will be paid into the superannuation fund and await approval for withdrawal by the superannuation trustee.

Considerations before you cancel your life insurance policy

If you’re like most people, you probably don’t think much about your life insurance policy until it’s time to renew it. But what happens if you need to cancel your life insurance policy? Whether you’re no longer required to have life insurance or you’re simply switching to a new provider, there are a few things you need to consider before you cancel your policy.

Check with your life insurance company to see if there are any penalties for cancelling your policy. Some companies may charge a fee, while others may require that you pay the remainder of your premium.
Make sure you have another life insurance policy in place before you cancel your current one. Otherwise, you and your family could be left without coverage in the event of an unexpected death.
Consider your financial goals and needs before cancelling your life insurance policy. If you’re no longer required to have life insurance, or if you have other coverage in place, then cancelling your life insurance policy may make sense for you. However, if you’re still in need of life insurance coverage, then it’s important to weigh the costs and benefits of cancelling your policy before planning.

04/10/2022/by Rob Laurie

Should you consider a testamentary trust?

This article provides an overview of testamentary trusts and how they can be utilised in estate planning.

Do you have concerns about what will happen to your loved ones after you pass away?

If so, a testamentary trust may be a helpful solution. A testamentary trust is a type of trust that is established in a Will and only becomes effective upon your death. A Will can include multiple testamentary trusts and they can cover all or part of your estate. You can create a testamentary trust to benefit your entire family or create separate trusts for each individual beneficiary.

The person or entity who is responsible for managing a testamentary trust can be a beneficiary, lawyer, trust company, or someone else. The trustee is chosen to oversee the trust until a specified time, such as when the beneficiaries reach a specific age or marriage status. The trustee has discretion over the trust and may receive a letter of wishes in some cases.

A testamentary trust can provide tax benefits and protect assets, particularly when children or beneficiaries may not be able to manage their inheritance effectively. It allows for regular income and capital access for children and grandchildren. It is often used when potential life insurance settlements may be larger than the current estate, and when beneficiaries are young or unable to manage their inheritance.

Tax Rates

Generally, children under 18 who earn income from sources other than a deceased estate are subject to higher tax rates. However, if their income is from a deceased estate, they are eligible for the low-income rebate and taxed at the normal rate.

By establishing a testamentary trust, the income from the estate, including capital gains and franked dividends, can be distributed among the beneficiaries in a tax-efficient way.

Protection of Assets

If a testamentary trust is set up properly, it can also prevent beneficiaries from having unrestricted access to the capital from your estate. This may be especially useful in situations such as:

The beneficiary is disabled and unable to manage their own finances.
The beneficiary may be financially irresponsible or you want to protect their inheritance from potential marriage breakdown.
You are concerned that your spouse or ex-spouse may not manage the estate in the best interests of your children.
You want to ensure your children receive a defined portion of your estate in the event of your spouse remarrying.

Before deciding to include a testamentary trust in your Will, it is important to weigh the potential advantages and disadvantages. The terms of the trust are established in your Will, so it is crucial to seek professional legal advice when drafting your Will and to thoroughly discuss your needs with your lawyer.

04/10/2022/by Rob Laurie

Estate planning: Avoiding inheritance headache

In this article, we follow a grieving daughter as she deals with the loss of her mother and the task of sorting out her mother’s estate. She must figure out how to use her inheritance wisely through estate planning.

Judy was hit by the overwhelming silence of her family home when she visited it for the first time after her mother’s death. She realized that she would have to cope with more than just heart-breaking grief.

As she sat among her mother’s possessions, she felt lost and unsure of how to deal with the task of packing up her mother’s house and sorting through her assets.

Judy is not alone, as more than $100 billion in assets were transferred by inheritance in 2018, which is more than double the amount in 2002. The Productivity Commission expects this number to double by 2050.

A few weeks after her mother’s passing, Judy found herself at her mother’s solicitor’s office.

They started estate planning by reviewing her mother’s Will and starting the process of closing her mother’s bank accounts and credit cards.

Since Judy was her mother’s only child and had been left everything in the Will, there were no disputes, but Judy was clearly overwhelmed, prompting the solicitor to offer her guidance.

“As terrible as today is, every day will slowly get better until there comes a day when you will think of your mother and be filled with happy memories,” he said. “She was so proud of you, she would really want you to make the most of this inheritance, so let’s make sure you do.”

He advised Judy to create a list of tasks that needed to be completed, work through the list at her own pace, and seek the assistance of a compassionate financial planner and accountant for further support.

Comprehensive estate planning to lessen the headaches

As Judy continued on her journey, she discovered that she would be able to inherit her mother’s estate without having to pay any taxes, as long as the assets were not within a Superannuation account. She also learned that she had two years to go through her mother’s assets, sell what needed to be sold, and transfer the remaining assets to her own name.

After the designated time has passed, transferring assets would result in a capital gains event, requiring the payment of taxes on any increases in the value of assets transferred at that time.

Judy’s accountant and financial adviser helped her understand the steps necessary to handle her mother’s assets.

The biggest asset was the family home, but since Judy already owned a home and didn’t want to move, it needed to be sold. The idea of keeping it and renting it out was too difficult and complicated.

In one of their early meetings, Judy mentioned that she would like to use some of the inheritance money to buy a new car, and asked if this was acceptable. The accountant thought it was a good idea and suggested that Judy take a short vacation to clear her head and prioritise her long-term plans for the money from the sale of the house and other assets. It was sound advice and Judy appreciated the time to think things through.

With the help of her accountant, Judy developed a plan after returning from her break. She would use the majority of the money from the sale of her mother’s home to pay off her own mortgage, a decision she knew her mother would approve of.

After buying her new car, Judy decided to gradually transfer the remaining funds into her superannuation account, following the contribution laws and taking advantage of the tax-friendly environment to secure her future.

She also began to reminisce about happy memories of her mother.

It is important to work with your Accountant, Solicitor, and Financial Adviser when creating an estate plan. Please consult with them for more information.

27/09/2022/by Rob Laurie

Aged Care, Estate Planning, Financial Planning, Retirement, Wealth Protection

An important conversation with parents (and kids)

Older people tend to be very private when it comes to topics such as their finances, estate planning, and aged care. This article offers guidance on how to initiate open and productive discussions with an elderly relative and your children, including topics to address and strategies for ensuring a calm and reassuring conversation for all parties involved.

It is not easy for us to think about our own death, and it can be even harder for our older loved ones to talk about.

When Lindsay fell ill, his family focused on supporting him through his treatment and maintaining his comfort and positivity.

As was typical of his generation, Lindsay had always been very private and did not share personal information, even with his closest loved ones. After he passed away, the family realized that they did not know whether Lindsay would have preferred cremation or burial. This question caused conflict among the family members at such a difficult time.

It is crucial to have open discussions with our children about sensitive topics such as drugs and sex. However, when it comes to our aging parents, conversations about medical arrangements, Wills, and finances are often put off until a triggering event occurs. By then, it may be too late to have these important conversations, making it essential to communicate and talk with our parents or kids while we still can.

After Lindsay’s funeral, the family was left with many questions about his financial situation. They struggled to find his paperwork and understand his assets and investments. If only they had asked him about his financial plans before it was too late.

What should you talk to your parents about?

Before the conversation with your parents, consider the topics that you may not want to discuss. This can help you to prepare and have a more successful conversation:

Finances, assets, investments, accounts, insurance policies, etc
Will:
- Is it current?
- Where is it kept?
- Who is the executor?
Medical:
- Medications
- Power of attorney
Funeral preferences
Aged care arrangements, family home, care facilities
Location of important documents
Usernames and passwords for online accounts
Contact details for doctor, financial adviser, trustees, power of attorney, solicitor, executor, etc.

When addressing these sensitive topics, it is important to approach them with care and consideration. Introduce them in a gentle and tactful manner, and consider involving their executor, financial adviser, or accountant for added support.

During the conversation with parents:

Extend an invitation

Ask your loved one if they would like to talk about their feelings and desires. Let them know that having this discussion can help make their life easier. Emphasise that you are not trying to control them, but rather show that you care and want them to be in charge.

Present an example

Use examples of challenges faced by others, explaining that you hope to avoid the same situation. Tell them that you would like to help them organise their paperwork to provide them with peace of mind and a plan for their future.

Support Independence

Instead of saying that you are reducing their independence, emphasise that your goal is to help them maintain their independence and continue living their life according to their own wishes for as long as possible.

Don't judge

As your loved one shares their thoughts and feelings with you, listen attentively and without preconceived notions. Encourage a dialogue about their decisions in order to gain a better understanding and offer support in implementing them.

Afterwards, fulfil any promises you made by following up.

Finally, after you have finished discussing the issue, have the same conversation with your children, but from their perspective. Clearly explain your expectations and the reason for the discussion.

Kids don’t want to think about your death and will likely not appreciate being told about it. This is just how children are.

When your time comes, they will realise that you have prevented them from experiencing a lot of pain.

22/09/2022/by Rob Laurie

Should I change my risk level when markets are volatile?

There’s no doubt that the stock market has been incredibly volatile throughout 2022 so far. Bond markets too have contributed to volatility due to interest rate and inflation uncertainty. For some people, this volatility can be nerve-wracking and lead them to consider changing their investment strategy. However, making a change in your risk level based on market conditions can be tricky. Let’s take a closer look at when it might be appropriate to make a switch and when it’s better to stay the course.

What is risk level and why should you care about it?

When it comes to investment risk, there are generally two schools of thought. The first is that higher risks lead to higher potential rewards, and the second is that you should only invest in what you understand and are comfortable with. There’s no right or wrong answer, but it’s important to understand your own risk tolerance before making any investment decisions.

So what is the risk level? Generally speaking, it’s a measure of how much volatility an investment can experience. For example, stocks are considered to be more risky than bonds because their prices can fluctuate more dramatically. That doesn’t mean that stocks are always a better investment than bonds; it just means that they tend to be more volatile.

Why should you care about your risk level? because it can help you determine which investments are right for you. If you’re uncomfortable with the idea of losing money, then you may want to focus on safer investments like bonds. On the other hand, if you’re willing to take on a little more risk in exchange for the chance of higher returns, then stocks may be a better fit. Ultimately, it’s up to you to decide how much risk you’re comfortable with. But understanding your risk tolerance is an essential part of making informed investment decisions.

How do markets affect your risk level

When it comes to investment risk, there are a few things to keep in mind:

All investments carry some risk. There’s no such thing as a sure thing, and even the safest investments can lose value. That’s why it’s important to diversify your investment portfolio and not put all your eggs in one basket;
Market conditions can have a big impact on investment risk. When markets are strong, there’s less risk of losing money. However, when markets are weak or volatile, there’s more risk that investments will go down in value; and
It’s important to remember that risk is often relative. What seems risky to one person might not seem so risky to another.

Ultimately, each individual has to decide how much risk they’re comfortable with and make investment decisions accordingly.

When you’re investment planning, one key question we ask is how different types of markets will affect your risk level. For example, if you’re looking at a volatile market, you’ll need to be comfortable with a higher potential for loss in order to invest. On the other hand, a less risky market may offer lower potential returns. So how do you know which is right for you?

The answer, of course, is that it depends on your investment goals. If you’re investing for the long term, you may be willing to take on more risk in order to achieve higher returns. However, if you’re investing for a short-term goal, like saving for a down payment on a house, you’ll likely want to choose investments with less risk.

No matter what your investment goals are, it’s important to understand how markets can affect your risk level. By doing so, you can make sure you’re comfortable with the level of risk you’re taking on and the potential rewards you could earn.

What are some things you can do to lower your risk level

Investment risk can feel like a guessing game. But there are some tried-and-true methods you can use to lower your risk level.

No one wants to lose money on an investment, but unfortunately, there is always some risk involved. While you can’t completely eliminate risk, there are certain things you can do to minimise it. Here are four tips to help you reduce investment risk:

Diversify your portfolio

Don’t put all your eggs in one basket. Invest in a variety of assets, including stocks, bonds, and real estate. This way, if one investment goes sour, you’ll still have others that can provide stability and growth.

Research investments before you buy

Understand what you’re buying and why you’re buying it. This will help you make more informed decisions and avoid rash moves that could end up costing you dearly.

Have a plan

Having a clear investment strategy will help you stay focused and disciplined when the markets get volatile. Having a plan gives you a roadmap to follow, so you’re less likely to make impulsive decisions that could jeopardise your investment goals.

Stay patient

Don’t expect overnight success with your investments. It takes time for them to grow and mature. If you cash out too soon, you may not give them the chance to reach their full potential and earn the returns you’re hoping for.

Following these tips won’t guarantee investment success, but they can help you tilt the odds more in your favour. By taking steps to reduce risk, you’ll increase your chances of achieving your financial goals.

You can also choose to invest in lower-risk options. For example, bonds tend to be less volatile than stocks, so they may be a good choice for investors who are looking to minimise risk.

Finally, keep in mind that time is on your side when it comes to investment risk. The longer you’re invested, the more time you have to weather any short-term market volatility. So, if you’re worried about taking on too much risk, remember that you can always start small and increase your investment allocation over time. After all, you need to choose your investments that can help you reach your goals.

What are some things you can do to raise your risk level

If you’re looking to take on more investment risk, there are a few things you can do to increase your risk tolerance:

You can start by investing in more volatile assets, such as stocks and commodities. These asset classes tend to have higher potential returns, but they also come with more downside risk. If you’re uncomfortable with the thought of losing money, you can always keep some cash on hand to help mitigate your losses.
You can diversify your investment portfolio by including investments in different asset classes and geographical regions. This will help to reduce your overall risk level while still giving you the potential to earn strong returns.
Remember that investment risk is just one part of your overall financial picture. Be sure to consider all of your financial goals and objectives before making any decisions about how much risk you’re willing to take on.

By taking a thoughtful and strategic approach to investment risk, you can help ensure that you’re prepared for whatever the market might throw your way.

Should you make any changes to your risk level when markets are volatile?

When it comes to investment advice, there’s one question that everyone seems to be asking lately: should you make any changes to your risk level when markets are volatile? And the answer, as always, is “it depends.”

On the one hand, market volatility can be a sign that trouble is on the horizon. If you’re already invested in a volatile asset, you may want to reconsider your position and reduce your exposure to risk.

On the other hand, market volatility can also present opportunities for savvy investors. If you believe that the market will eventually rebound, then you may want to consider taking advantage of the dip by increasing your investment.

Many experts (including myself) recommend staying the course with your investment strategy, especially if you’re investing for the long term. After all, market volatility is just part of the investment landscape. Over time, markets have a tendency to trend upward, so hang in there, and your investment is likely to recover.

Of course, there’s no guarantee when markets will rebound, so it’s important to consider your risk tolerance when making investment decisions. If you’re comfortable with a little volatility, then staying the course may be the best strategy for you. But if you’re feeling uneasy about your investment, it might be worth getting in touch for a chat so we can work through your concerns.

If you’re looking for some guidance, staying the course during volatile markets is a good place to start. Ultimately, the decision of whether or not to change your risk level is a personal one. There’s no right or wrong answer, but there are definitely things to consider before making any decisions. If you’re ever unsure, it’s always best to discuss it with a financial adviser so we can explain the benefits and disadvantages clearly.

When is the right time to make a change?

Investment risk is often thought of as a binary choice—either you’re willing to take on a lot of risk or very little risk. But investment risk is more like a volume knob that you can dial up or down depending on your investment goals, time horizon, and personal tolerance for market swings. So, when is the right time to make a change to your investment risk level? Here are a few things to consider:

Are your investment goals still the same? Over time, your investment goals may change. For example, you may be saving for retirement and also have shorter-term goals like saving for a down payment on a house. As you get closer to retirement, you may want to dial down the risk in your portfolio so that you don’t lose any hard-earned savings.
Has your time horizon changed? Your time horizon is the amount of time you have until you need to access your investments. If you have a longer time horizon, you can afford to take on more risk because you have more time to weather market volatility. However, if your time horizon has shortened–say, you’re now five years from retirement instead of 10 years–you may want to reduce the risk in your portfolio.
How do you feel about market swings? It’s important to know your personal tolerance for market volatility before making any changes to your investment risk level. If the thought of seeing your investment account balance go down makes you nauseous, it may be time to dial down the risk. On the other hand, if you’re comfortable with some ups and downs in your investments, then taking on more risk may not be a problem.

Ultimately, there’s no single “right” answer when it comes to investment risk–it’s a personal decision based on your individual circumstances. But by considering these factors, you can make a well-informed decision about whether or not it’s time to make a change to your investment risk level.

At Wealth Factory, we conduct risk profiling to ensure you are not taking on more risk, or are exposed to more volatility than you can handle. Average investment returns are made up of the total return over a number of years divided by the number of years. As an example, if a balanced investment portfolio (70% growth assets) generates 6.8% on average, as an example, some returns will be negative and some returns will be significantly higher. As shown in the below table, the expected range of returns is -18.1% to 22.8%, and the number of years with a negative return is 1 in 5.

The return on this page should be used as a guide only and should not be considered a definitive representation of long-term historical performances.

Portfolios Historical Returns/Period: 30 April 2022 to 30 April 2022

	Cash	Conservative	Moderately Conservative	Balanced	Growth	High Growth
Annual Return	3.6%	5.6%	6.1%	6.8%	7.3%	7.7%
Annual Average Real Return	1.1%	3.1%	3.6%	4.2%	4.8%	5.1%
Worst 1 Year Return	0.0%	-2.4%	-10.6%	-18.1%	-26.8%	-31.2%
Best 1 Year Return	7.8%	11.5%	17.1%	22.8%	29.7%	33.5%
Chance of Negative Return	0	1 in 26.7 years	1 in 7.7 years	1 in 5.1 years	1 in 4.4 years	1 in 3.6 years
Probability of Negative Return	0.0%	3.8%	12.9%	19.6%	22.9%	27.9%

The above table shows the actual historical returns on Mercer’s five Model Risk Portfolios (Cash Portfolio excluded). The returns are calculated using the current Mercer’s Strategic Asset Allocation (SAA), which may slightly differ from the Lifespan’s SAA.

What happens if you don't take any action when markets are volatile?

The portfolios we run usually include some form of rebalancing of asset allocation or investments in between reviews (if you are receiving ongoing advice). This is important because it means as the value of growth assets drops, more growth assets are usually being purchased ready for the rebound. When the market recovers, the growth assets will be sold off to keep you in line with your risk profile and help weather the next financial event.

What happens if you don't take any action when markets are volatile?

Well, you could end up missing out on some great opportunities. On the other hand, you could also avoid some costly investment mistakes. It really depends on your investment goals and risk tolerance.

Should you stick to your investment strategy and ride out the volatility?

That really depends on how comfortable you are with risk. If you’re the type of investor who gets queasy when markets are down, then it might be best to take a more conservative approach. However, if you’re willing to stomach some short-term losses in order to achieve long-term gains, then sticking to your investment strategy is probably the best course of action.

What happens if you sell out when markets are down?

If you sell when markets are down, you’ll obviously lose money in the short term. But, depending on the severity of the market decline, you could also miss out on a rebound. It’s generally not possible to pick the market and the best time when the best time is to sell without the benefit of hindsight. Looking back is easy; looking forward—forget it. Selling out when markets are down is a decision usually followed by regret, as we saw after the global financial crisis.

The market volatility of late may have you second-guessing your investment strategy. Before making any rash decisions, it’s important to understand what your risk level is and how it affects your portfolio. Markets will always fluctuate, so there isn’t necessarily a “right time” to make a change – the key is being proactive and aware of how these fluctuations impact your personal risk tolerance. If you are feeling uncomfortable with your current risk level, please contact me for a consultation; I would be happy to help devise a plan that meets your needs during this uncertain time.

18/09/2022/by Rob Laurie

Your bank account is only as safe as your weakest password

Protecting your information online is becoming increasingly important as cyber attacks are increasing over time, especially in the health sector. There have been many successful attacks on large businesses, universities, and even government agencies that have been victims.

Small businesses are also increasingly under attack. I have seen some complex phishing scams and emails over the years, and our position is to never complete a withdrawal, change of bank account, or share any information via email without a confirmation call to a client. They are very good at it, but the language usually seems off when I know how each client would usually communicate. I encourage you to contact me if you receive an email from a fund provider, insurer, or even me asking for your personal information.

Wealth Factory has implemented many specific safeguards in place to help secure your information. For the purpose of improving your own security online, here are some tips:

Tip 1 - Cloud Storage

In the past, data was typically stored on physical servers that were located on-premises. However, more and more businesses are now turning to cloud storage solutions. There are several benefits of using cloud storage, but one of the most important is data security. When data is stored on physical servers, it is much more vulnerable to theft, natural disasters, and fire. However, when data is stored in the cloud, it is stored in a secure data centre that is protected by state-of-the-art security measures. In addition, if a disaster does occur, businesses can quickly recover their data from the cloud. For these reasons, cloud storage is a much more secure option for storing data.

Tip 2 - Password Manager

The second safeguard is the use of a password management system. Whenever we sign up for a new online account, we’re faced with the task of creating a new password. And, all too often, we take the easy way out by recycling an old password or using a simple pattern that can be easily guessed. As a result, our online accounts are vulnerable to attack. A password manager can help to mitigate this risk by generating strong, unique passwords for each of your accounts and storing them in a secure database. When you need to login to an account, the password manager will automatically fill in the correct credentials. This not only saves you time, but it also reduces the chance that you’ll accidentally use an insecure password. In addition, many password managers include features such as two-factor authentication and encryption, providing an extra layer of security for your sensitive data. When it comes to data security, a password manager is an essential tool.

Tip 3 - Antivirus software

In today’s digital age, data security is more important than ever before. There are a variety of ways to help protect your data, including antivirus software, VPNs, and firewalls. Antivirus software helps to protect your devices from malware and viruses, while VPNs encrypt your data and help to keep your online activity private. Firewalls act as a barrier between your devices and the internet, helping to prevent unauthorised access to your network. By using a combination of these tools, you can help to keep your data safe from cyber threats.

Tip 4 - Keep software up to date

As anyone who has been the victim of a computer virus can attest, data protection is essential. And while there are many steps that users can take to protect their devices and data, one of the most important is to keep Windows software up to date. By installing the latest security updates and patches, users can help to defend their devices against the latest threats. Attackers are constantly looking for new ways to exploit vulnerabilities, and Windows updates help to close these gaps before they can be exploited. In addition, updates often include new features and improvements that can help to make using Windows even more enjoyable. So, for anyone who values their data, keeping Windows software up-to-date is a must.

Tip 5 - Be cautious of links and attachments

We’ve all heard the warnings about opening attachments and clicking on links in emails, but it’s important to remember why we’re being cautioned in the first place. Malware, or malicious software, is any type of code that is designed to cause damage to your computer or steal information. It can come in many forms, such as viruses, spyware, adware, and trojans. And it can be spread in many ways, including through email attachments and links. That’s why it’s important to be cautious when opening emails, even if they appear to be from a trusted source. If you’re not sure whether an attachment is safe, don’t open it. And if you’re unsure about a link, hover over it with your mouse to see where it’s going to take you before you click. A little caution can go a long way in protecting your computer from malware.

Tip 6 - Check the website you are on is secure

It’s more important than ever to be security-savvy when browsing the web. With so much of our personal and financial information being stored online, it’s essential to take steps to protect ourselves from identity theft and other cyber crimes. One important way to do this is to make sure that the websites we visit are secure. Whenever you enter sensitive information into a website, be sure to check for the “https” at the beginning of the URL. This indicates that the site is using a secure connection, which helps to protect your information from being intercepted by third parties. So next time you’re about to make an online purchase or enter your login credentials, take a moment to check that the website is secure—your future self will thank you.

Tip 7 - Be careful when using free or public wifi

We’ve all been there before—waiting at the airport for a flight, trying to kill time by browsing the internet on our phone or laptop. And in today’s age of free wifi everywhere, it’s tempting to connect to the first open network we see. But before you do, beware—there are risks associated with using public wifi, especially at the airport.

For starters, public wifi is inherently less secure than a private, password-protected network. That means that your data-including passwords, credit card information, and more-may be more vulnerable to hackers when you’re connected to public wifi. And since airports are such high-traffic areas, they’re often targets for hackers looking to eavesdrop on unsuspecting victims.

So what can you do to protect yourself? The best defence is always to use a VPN, or virtual private network. A VPN encrypts your data and tunnels it through a secure server, making it much more difficult for anyone to intercept your traffic. If you’re not using a VPN, be sure to only connect to websites that use HTTPS encryption. You can usually tell if a website is encrypted by looking for the padlock icon in your browser’s address bar. And finally, avoid conducting any sensitive transactions-like online banking or shopping-while connected to public wifi.

So next time you’re at the airport, resist the urge to connect to that free wifi network right away. By taking a few simple precautions, you can help keep your data safe and secure.

Tip 8 - Don’t click on pop ups or virus warnings

If you see a pop-up or virus warning while you’re browsing the internet, don’t click on it! These “scareware” warnings are bogus security alerts that instruct you to click a link to download software to remove the virus from your computer. However, the links usually contain viruses themselves. So, if you see one of these warnings, just close the window and continue on with your browsing. And if you’re using public wifi, be extra careful—hackers can use public wifi networks to send out these scareware messages to unsuspecting users. So next time you’re out and about, think twice before clicking on that link!

Tip 9 - Pass these tips on to help your loved ones protect themselves online

While the internet has connected us like never before, it has also created new opportunities for criminals to access our personal information. That’s why it’s important to take steps to protect your loved ones online. Show them you care by introducing them to good personal data privacy practices. Help them understand the importance of keeping their passwords safe, being cautious about what they post online, and being aware of phishing scams. By taking these simple steps, you can help keep your loved ones safe from identity theft and other online crimes. So pass this on—your loved ones will thank you for it!

That’s it for our top nine security tips! We hope you find them helpful and that they will help you stay safe online. Remember, the best way to protect yourself is to be aware of the risks and take precautions. Cybersecurity is a critical issue for everyone, and we hope these tips will help you shore up your defences. If you have any questions or need more information on how to protect yourself online, please don’t hesitate to reach out to us. We want everyone to be safe and secure while they surf the web, so make sure you take these precautions and pass them along to your loved ones!

30/08/2022/by Rob Laurie

How does inflation impact your portfolio?

Hope for the best, plan for the worst. Inflation is back after 40 years – how does inflation impact client portfolios?.

by Brian Long, Lifespan Senior Investment Specialist – Managed Accounts, Lifespan Financial Planning

The return of inflation

The last 40 years has largely been a period of disinflation – falling inflation and interest rates. This is a very favourable investment environment for risk assets (charts below).

Source: Federal Reserve Bank of St Louis

Over the last year, however, most countries have experienced higher inflation (chart below). The world’s major central banks have been assuring investors that this is just a temporary blip or as Jerome Powell, Chairman of the US Federal Reserve, has repeatedly said, inflation is just ‘transitory. It is arguable that at present central banks are prioritising employment objectives over price stability (inflation) targets.

As shown by the diagram below, however, the surge in price increases is becoming broad based, driven by tight global supplies (such as semiconductor chips for the auto industry), longer delivery times, worker shortages in some sectors on the supply side, and increased demand as countries emerge from lockdowns with the benefit of increased savings. The transition away from fossil fuels is a significant factor in energy shortages (especially in Europe).

In recent weeks, in response, many central banks have started to reverse policy. In the US, the Federal Reserve has announced that it will begin to reduce it’s massive $120bn a month quantitative easing programme by $15bn a month and Jerome Powell admitted that inflation is “running well above our 2% longer run goal”. Locally, the Reserve Bank of Australia has ended its policy of yield curve control after a period of turmoil in short-term bond markets.

In addition, as the chart below shows, many governments are winding back their stimulus programs.

Why is the market so concerned about inflation?

Certainly, investors are very interested in inflation. As the chart below shows, there haven’t been this many people searching for inflation since Google began tracking these search trends.

It’s important to understand however that a degree of inflation is a sign of a healthy economy. People spending money increases corporate profits, encouraging businesses to invest, employ more staff and give wage rises. At some point however rising inflation has the opposite impact, prompting increases in interest rates, reducing business investment, slowing economic growth, and reducing standards of living. This in turn reduces expectations of earnings growth which impacts share prices. This is especially the case for growth stocks which are priced based on long-term earnings. When examining S&P 500 returns by decade and adjusting for inflation, research shows the highest real returns occur when inflation is 2% to 3%. Beyond this, returns become very volatile and generally lower.

Markets are also concerned as that the spike in inflation is occurring at the time where we may be at the end of a long secular economic cycle of disinflation, which was prolonged by the government and central bank stimulus measure since the GFC in 2008. The economy has the highest debt since WW2 at a time when interest rates are artificially low which creates vulnerabilities and a conundrum for central banks. There are other complicating factors as well.

The diagram below illustrates this point.

Inflation has largely been ignored by equity and bond markets, as evidenced by the current level of valuations, although the market no longer believes the transitory story as wages growth lifts and supply pressures increase.

Generally, what concerns the market now however is not the likelihood of sustained high inflation (although this is a possibility), but rather unexpected spikes in inflation or stagflation due to central banks not taking action or to the contrary the recessionary consequences of overreacting and lifting interest rates too quickly and governments prematurely increasing taxes to repay debt. It is these “transition” periods that cause dislocations in the market. The end of the cycle is an added complication impacting longer term portfolio construction.

Overall, even the most optimistic outcome is that inflation will remain above pre-pandemic levels.

The problem for conventional portfolios in periods of high inflation

Most portfolios have been constructed during and for disinflationary environments. This means that the dominant contribution to risk and return has been the equity risk premium. In other words, those asset classes such as equities, real assets, and more aggressive credit-oriented fixed income strategies that are linked to GDP growth, performed well. Even the continual trend of declining yields increased discounted values of dividends and coupon payments.

Further, portfolio efficiency was supported by the typically negative correlation between equities and bonds (duration) which dampened portfolio volatility when periods of market stress occurred. With inflation low and transient, rising inflation was associated with economic growth that benefitted equities and hurt government bonds when central banks adjusted monetary policy which stabilised inflation.

The problem is that the market is far more fearful when inflation is already high and especially at current stretched valuations, equity/bond correlations may fail to work just when investors need them to (as was seen in October).

The conclusions are that a less predictable inflation environment, at the current high valuations, increases complexity for portfolio construction and suggests returns are likely to be lower and more variable going forward.

The following diagram illustrates this point:

Portfolio construction strategies in different inflationary environments

Further, while Australia has fared well for many years, periods of high inflation frequently coincide with recessions elsewhere as shown by the following chart:

There are many portfolio construction challenges when deciding how to respond to different inflation regimes. Two major ones are:

The difficulty in predicting the timing and degree of the change, much of which depends on the actions of the US Federal Reserve.
Asset classes perform quite differently in different inflationary environments.

The following chart from Mercer illustrates the latter point for six inflation scenarios. The changing pattern of returns is the point rather than the detail behind each scenario.

The definitions for each scenario are described in Appendix 1.

So how can advisers respond to inflation?

It is a challenging environment for investors: yields are low, spreads are tight, equity valuations are expensive, and the long-term return outlook is depressed. We now have an inflation issue to deal with for the first time in a generation. The market is quite divided on the question of whether it will be transitory, persistent, or even cause a meltdown. Much will depend upon the actions of a few central banks, especially the US Fed, and whether the bond market believes the ongoing guidance.

In the face of such uncertainty, what should advisers do in such an environment? In Lifespan’s view the answer as always comes down to two fundamental points:

The importance of having a robust investment and portfolio construction philosophy, consistently applied, that has been proven through a range of economic cycles
Understanding the needs and goals of the client.

Investment Philosophy

In such an environment, it is not feasible to build an “optimal” portfolio that will constantly shift to outperform at all times as the level of inflation changes. Nor is there a default strategy that works all the time across all possible scenarios. Even inflation-linked bonds, which may appear as the most intuitive solution given their contractual link to inflation, do not perform well in many inflationary scenarios. This is because, in the near term, they are more exposed to changes in real rates than to changes in inflation expectations and in the longer term, investors are locking in negative real rates by investing in inflation-linked bonds.

The core of Lifespan’s Investment Philosophy, therefore, is a pragmatic solution to build robust portfolios that can cater for a variety of economic conditions that can withstand multiple outcomes, supported by a decision-making framework that can quickly adjust portfolios to provide favourable risk/return outcomes. Our recommendation to advisers (reflected in our model portfolios and managed portfolios) is for portfolios to include:

A strategy that is well diversified by asset class; risk premia and investment manager
Active investment managers
Active management of the asset allocation
A blend of managers with a range of exposures to growth, value, cap bias, and region (including emerging markets) in the case of equities and to duration, credit risk, and absolute return in the case of fixed income
The flexibility to introduce new asset classes, such as growth and defensive, alternative assets and real assets (such as commodities, global macro), low volatility equities, long/ short. Care needs to be exercised with assets such as inflation-linked bonds, gold, and commodities that have mixed records over the long term. Alternatives and real assets also tend to have high costs.

For equities, despite their volatility, a well-structured equity portfolio is core to an investment strategy as they are a long-term source of wealth. Our exposure to managers with a growth bias in our managed portfolios has performed well in low inflation. Growth stocks, including income-oriented stocks, however, tend to decline in inflationary periods (as the discount rate on future earnings increases). Accordingly, we also have significant exposure to value stocks, which are inexpensive on an absolute basis hence offer the opportunity to make positive real returns over the long term should inflation return. This is illustrated by the chart below:

Data shows cheapest versus most expensive quintile on price to book using a monthly average of rolling 5-year annualised returns from 1960 to June 2021.

We also think active management is essential in equities, as for example, the continued strength of the FAANGs and Microsoft has created a concentration risk in the S&P 500, not dissimilar to the concentration in the ASX200 for resources and financials.

Care and an active approach need to be taken with emerging markets equities. The underlying inflation driver is critical in deciding which emerging countries to include in the portfolio.

Property may be useful in inflationary environments (both G-REITS and A-REITS). They are currently attractive as they offer the potential for capital growth and they have a positive real yield. They must be managed actively as rentals need to be able to respond to inflation. Policy settings are attractive for REITS as is the reopening of economies.

Likewise, it is important to have a fixed income portfolio that can cater to different inflation environments. This is especially important as people move into retirement and want to preserve capital and secure a reliable income stream. Fixed income however is becoming increasingly complex.

At a time when long term bond yields are very low (and negative in real terms), it is critical to have other sources of return in fixed income portfolios, especially as an increase in real interest rates will cause a capital loss in long term bond allocations. Our managed portfolios have a variety of managers and strategies to deal with this as follows:

Short Duration strategies -These strategies reduce the sensitivity of the portfolio to rising interest rates and seek to deliver excess returns either through a focus on short-dated corporate credit or via a broader set of return drivers, such as rates, spreads, and currencies
Absolute Return Fixed Income (AFRI) strategies provide investors with access to a broad global opportunity set of alpha sources. When combined with flexible investment techniques (e.g., hedging), they are expected to show a low correlation with the overall direction of interest rates and credit spreads, with a greater focus on alpha to help deliver returns
Tilt towards floating rate assets – These strategies can be found in ARFI, multi-asset credit, and securitised credit strategies
Active management of credit quality – it is important to employ managers that are conscious of credit/ default risk and are well diversified in managing fixed income portfolios. This is important for example in high yield and emerging markets debt allocations
Valuation aware with the ability to rotate out of unfavourable asset classes –While rising interest rates are generally positive for short duration strategies, as they are symptomatic of the economy doing well, at some point in the interest rate cycle this can also trigger increased defaults. Further some assets represent a poor risk/return trade-off. As can be seen below some 85% of US high yield securities have a negative real return.

The needs and goals of the client

Just as there is no silver-bullet portfolio that protects against all inflation scenarios, advisers know that no two clients are alike in preferences and financial situation.

Firstly advisers need to look at the starting portfolio and determine under which economic scenario the asset mix (including wealth outside of super) is vulnerable.

Clients that are near or in retirement will be sensitive to inflation in two ways – firstly as their spending power will be reduced and secondly their increased vulnerability to a sequencing risk event. Such an event can significantly reduce the longevity of their portfolio.

Such clients will be sensitive to the time horizon that their inflation sensitive assets – such as equities and real assets, provide protection. They would be more interested in an inflation hedged highly diversified portfolio. Allocations to commodities and natural resource equities and potentially emerging market bonds may be part of such a portfolio. They will also need a fixed income portfolio that provides a good level of cashflow while protecting against capital loss.

Accumulation clients under say 55 on the other hand will be less sensitive to inflation risk and will continue to see equities as the driver of long term wealth.

Also relevant is the type of inflation protection needed, for example, education and healthcare increase in cost at a far greater rate than CPI.

Clients that desire additional potential downside protection than available in a strategic asset allocation strategy may wish to invest in a portfolio that uses tactical asset allocation. Lifespan offers advisers 3 series of tactical asset allocation portfolios (comprising 15 model portfolios) with a range of potential downside risk protection ranging between 25% TAA/ 75% SAA; 50%TAA/50% SAA and 75%TAA/25% SAA. Each of these have five risk profile based portfolios ranging from conservative to high growth.

The client tolerance for complexity and the frequency of changes in the portfolio will be an important factor in responding to all inflationary circumstances.

Conclusion

While it is difficult to predict whether the current levels of inflation will be sustained or transitory, Lifespan believes we are nearing the end of the economic cycle where we need to plan for increased market volatility and structure portfolios for a regime shift away from disinflation.

Whether we like it or not, the possibility of substantially greater inflation as well as a more volatile and low-returning investment and economic climate may be upon us. The consequence will be that people will no longer be able to grow wealth reliably by doing it themselves. Additionally, speculative forms of investments will no longer provide the attractive payoffs of the past. This will create an environment where advisers can demonstrate the value of advice and the benefits of robust diversified portfolios backed by a strong governance framework.

Advisers can take comfort in Lifespan’s experience in supporting advisers through many economic cycles. Our model portfolios and managed portfolios will assist advisers to navigate the road ahead.

Appendix 1

Mercer Economic Scenario descriptions

Balanced growth, where economic growth and inflation both moderate over time, consistent with consensus forecasts. This assumes the current level of inflation is indeed transitory, even if inflation remains slightly elevated. Under this scenario, rates normalize, but the need for an aggressive response is avoided.

Financial repression shares similarities with the 10 years following World War II, the last time government debt was at today’s level. In both cases, an adverse external event (war and pandemic) required large government outlays. Rather than repaying the debt with higher taxes, it is monetized by central banks holding rates low despite sustained high inflation, which supports overall growth.

Hard landing assumes a return to fiscal austerity, not necessarily as a deliberate choice but because of political gridlock. This would likely lead to a sharp slowdown in growth and falling inflation.

Goldilocks is a more optimistic version of the balanced growth scenario, in which a post-pandemic productivity boom, driven by the accelerated digitalization of economies and strong private and public investment, likely leads to sustained growth above consensus and low inflation.

Pandemic stagflation. Is a severe bear case that captures the most worrisome inflation impact. Here, we have a scenario in which the COVID-19 situation deteriorates again because of waning vaccine efficiency and/or vaccine- resistant strains. New lockdowns lead to another growth collapse and simultaneously compound the already severe supply chain stress, driving inflation higher — the nightmare scenario of simultaneous recession and high inflation.

Overheat scenario incorporates the classic reaction function of central banks tightening policy pre-emptively to avoid runaway inflation, which has often triggered recessions in the past.

07/08/2022/by Rob Laurie

The Female Investor

In recent years, an increasing number of women have been retiring in poverty. However, this trend may be about to change as more women are becoming investors and building their own portfolios. In contrast to men, women tend to approach investing differently, which may lead to better outcomes for their retirement savings. This article will discuss the rise of female investors and the differences in their investing strategies compared to men.

The female investors

Traditionally, investment and portfolio building has been a male-dominated field, but in recent years, more and more women have been entering the market and are proving to be successful investors.

In 2020, the ASX Australian Investor Study found that 42% of investors in Australia were women, with 45% of those women starting their investing journey within the previous year.

Next Generation Investors, typically aged 18-25, are beginning to invest in stock portfolios. Their main goals for investing include saving for a vacation (50%) or reducing existing debt (34%).

The ASX report showed that:

Women tend to favour more straightforward investment options, such as Australian stocks (53%), residential property (37%), and term deposits (31%).
Women are less worried about low interest rates and market fluctuations, but do consider factors like trustworthiness, hidden fees, and liquidity.
Typically, men are more willing to take on risky investments (higher risk), while women prefer steady or guaranteed returns (lower risk).

The study found that female investors are typically more successful than men in their investments, which may be because women tend to be more cautious, take longer to research their options, and are willing to ride out market fluctuations. In contrast, men often review their portfolios and trade aggressively, leading to potential additional fees and losses from market movements.

Recently, there has been a growing trend of Australian women supporting other Australian women in start-up ventures. Interestingly, support for Indigenous businesswomen is on the rise as women’s investment networks aim to promote diversity.

According to SmartCompany.com.au, female venture capitalists are aware that entrepreneurial women often face challenges such as limited networking and mentoring opportunities and stereotypes regarding gender roles. In fact, almost 40% of single Australian women who are divorced, widowed, or otherwise will retire in poverty. The gender pay gap is known to be a factor in women having less money saved and/or in their superannuation: women save an average of $598 per month, compared to $839 for men.

To improve their financial standing, many women investors turn to self-education through sources such as magazines, blogs, and podcasts. Some also seek guidance from professionals recommended by friends or family.

A helpful starting point is your local library, where you can find financial literature and publications. Additionally, consider checking out the ASX online education centre, your local TAFE, or the government’s MoneySmart website for short investment courses and resources.

The financial planning industry acknowledges the growing number of women who are taking a proactive approach to investing.

As experienced financial planners, we can provide you with the guidance and support you need to make well-informed decisions that align with your personal goals and needs.

Women are increasingly demonstrating their capabilities as investors, and we are here to help you achieve your financial goals.

02/08/2022/by Rob Laurie

How to go broke trying to get rich quick

Can you really become wealthy from a get-rich-quick scheme? This article addresses the many “investment opportunities”, both legal and illegal, that promise big returns over a short period of time, explaining the risks associated with each, and the importance of professional advice.

How to go broke

According to the Collins English Online Dictionary, a get-rich-quick scheme can be defined as, a promise to make a person extremely wealthy over a short period of time, often with little effort and no risk.

If you think that sounds a bit dodgy, you could be right. Yet ordinarily sensible and cautious people signup to such schemes every day. If it seems too good to be true…well, you know the rest.

Remember those pyramid-style investments we saw back in the 1980s? Fraudulent arrangements where investors’ money was used to pay earlier investors. The plan worked well for those in at inception, but later investors lost out. The most well-known pyramid scheme was created by Charles Ponzi in the 1920s, which is where the phrase ‘Ponzi scheme’ originated.

These days, pyramid schemes are illegal, but there are plenty of legal investment strategies out there that appeal to our desire to earn big returns over a short period of time, like gearing, crypto-currencies, and even gambling. However, being legal doesn’t mean you should throw caution to the wind. All investments come with risk – it’s about how much risk you can afford or are willing to accept.

We understand the risks associated with gambling – after all, casinos and other gambling outlets are not in the business of losing money! But what about the risks associated with other investment opportunities?

Gearing can potentially yield strong returns but can just as easily generate great losses. Let’s say you borrow at low interest rates to purchase an investment property. All this scenario needs is a period where you lose your job, the property is untenanted, or, interest rates increase rapidly, and suddenly you’re unable to service the loan.

You may be forced to sell the property at a loss. Conversely, if selling for a gain, you’re most likely up for capital gains tax (CGT), reducing your anticipated profit.

Cryptocurrencies are quick and easy to transact, but they’re also anonymous, a feature attracting all kinds of investors – including crooks!

The crypto world has been used for nefarious activities like money laundering and illegal dark-web purchases, (think firearms). As online ne’er-do-wells have access to the latest technology, just like the rest of us, it can be difficult to spot an illegitimate scheme, and since there’s no regulator, there’s no claims process if you believe you’ve been swindled.

Additionally, cryptocurrency investments are volatile; their value can sky-rocket overnight, but just as quickly plummet. Of course, such volatility can work to your benefit, but if your investment keeps you awake at night, it’s probably not right for you.

So, is it really possible to get rich quick?

That depends on your definition of quick which is why you should always seek professional advice before making any financial decisions.

Keen to invest capital in a business? Your accountant and financial planner will be able to help.

Fancy borrowing to invest in property or shares? Perhaps you’ve had your eye on a commodity you think is about to take off.

Your financial adviser can help create a strategy that meets your specific needs and attitude to risk.

And as for gambling, well you can ask your financial adviser about that too, just don’t bet on the response!

02/08/2022/by Rob Laurie

What is money?

This article provides an overview of the concept of money and currency. It covers the history of banking and money, and explains the key characteristics of money. Additionally, it discusses the evolution of money from its origins to the current day.

What is money?

The $50 bill in your pocket may only be worth $50 because the government says it is. In reality, it may only be worth the cost of the paper and ink used to create it. Therefore, the money in your bank account and the majority of money in circulation may be better described as currency rather than “real money”. This distinction may not matter in most situations, but there are times when it is important to recognize the difference.

Throughout history, various items have been used as currency, such as shells and tobacco. However, to be considered real money, it must meet certain criteria. The most important are that it is:

Recognised as a medium of exchange and accepted by most people within an economy.
Durable
Portable, having a high value relative to its weight and size.
Divisible into smaller amounts.
Resistant to counterfeiting.
A store of value over long timeframes.
Of intrinsic value, i.e. not reliant on anything else for its value.

Throughout history, gold and silver have been considered the most ideal forms of currency, but they are not as commonly used today. It is important to store these precious metals securely, which led to the creation of paper money and our current banking system.

What started as a good idea...

Centuries ago, goldsmiths provided a safekeeping service for gold and silver, issuing receipts, or notes, to the owners as proof of their holdings. People soon realised that these notes could be used as a form of payment instead of the actual gold. The goldsmiths saw this as an opportunity to issue loans, using the notes as collateral. Since it was rare for people to redeem their notes for the actual gold, the goldsmiths could lend out more money than they had in gold. As long as borrowers paid back their loans on time and only a small number of people wanted their gold at any given time, the goldsmiths were able to transition into bankers.

However, not all situations ended favourably. In the case of an economic shock, people would often demand their gold back from the bank, and if the bank couldn’t fulfil the request, it would go bankrupt. To prevent this from happening, many countries established central banks and some governments even became lender-of-last-resort.

Private banks are still the primary source of currency creation today, though the process has evolved over time and is no longer linked to the gold standard. In the past, goldsmiths played a similar role in creating currency, but this is no longer the case due to the abandonment of the gold standard by most countries in the 20th century.

Although banks may now be more regulated than before, this does not guarantee that financial crises will not occur. The sub-prime lending scandal, which was a major contributor to the Global Financial Crisis, was caused by irresponsible selling of mortgages to individuals who were unlikely to be able to repay them, as well as the creation of complex financial instruments that amplified debt.

When things get real

During periods of economic stability, it may be easy to consider currency and real money as interchangeable. However, there are clear distinctions between the two.

For instance, when a government begins printing money to fund its initiatives, inflation may occur, causing the value of the currency to decrease. In cases of hyperinflation, such as what happened in Germany in the 1920s, paper money and bank deposits can rapidly become valueless.

Additionally, even in stable economies, banks can still fail, as demonstrated by the Lehman Brothers collapse in 2008.

In Australia, depositors are protected by a government guarantee up to $250,000 per person per Authorised Deposit-taking Institution (ADI). However, the value of “real” money such as gold remains constant despite inflation. Therefore, if the value of a unit of currency drops in half due to inflation, the price of gold will double.

Additionally, as long as gold is stored safely, it cannot be impacted by the debts of a poorly managed bank.

The distinction between currency and real money and the concept of intrinsic value are relevant for other investments as well. If you want to learn more, consult with a financial adviser.

02/08/2022/by Rob Laurie

Why invest in index funds Australia

This article provides an overview of index funds, including how to access them, their advantages and disadvantages, tips and tricks on how to get the most out of your index fund investments, and concludes with a recommendation to consult a financial planner for further guidance.

Are you looking for an efficient and cost-effective way to invest in the Australian stock market? Index funds are fast becoming an increasingly popular form of investment, providing investors with a simple and affordable way to take advantage of broader market returns. By investing in a portfolio made up of different index funds, you can diversify your investments across many industries and reap long-term rewards – all while avoiding some common pitfalls associated with other investing strategies. But what exactly is an index fund? How do they work? In this blog post, we’ll discuss the advantages(and disadvantages) of investing in index funds so that you can decide if it’s worth considering as part of your investment strategy.

What are index funds and how do they work?

Index funds are an important tool that enable individuals to diversify their investments and reap all the benefits of the stock market without having to select, purchase, and monitor a variety of stocks. At their core, index funds are portfolios of stocks that track (or index) a certain market index such as the S&P 500 or the Dow Jones Industrial Average index. By investing in one index fund rather than numerous individual stocks, investors get exposure to all of the stocks in the index along with lower risk and lower fees. When done right, index fund investing can be an effective strategy to grow an investor’s portfolio over time while minimising costs and volatility.

What are the advantages of index funds?

When it comes to investing, index funds offer an effective and efficient way to diversify across the stock market with minimal effort and expense. Here are the advantages of index funds:

With index funds, you get the benefits of professional management, lower fees than other types of investments and automatic portfolio rebalancing.
Index funds have high returns since they track a portfolio index of stocks or bonds without the hassle associated with actively managed mutual funds.
Index funds provide tax advantages since index funds typically trade infrequently leading to fewer taxable capital gains distributions.
Index funds are highly liquid. This flexibility allows investors to buy or sell a fund anytime on virtually any day the stock market is open, giving them peace of mind when it comes to their investments.

What are the disadvantages of index funds?

Index funds have become popular in recent years due to their passive nature, low fees, and reliance on the broad indexing strategy. However, index funds have a few drawbacks or disadvantages that should be considered before investing. Here are the disadvantages of index funds:

Index funds are limited by the index they track; therefore, an index fund cannot invest in an individual stock unless it is part of the index it tracks.
Index fund managers cannot make changes to portfolio holdings or adjust weights according to changing market conditions; this limits the manager’s ability to capitalise on opportunities that may arise during times of volatility.
Index funds even come with certain associated risks; for example, if a portion of the index’s holdings decrease in value this will lower overall returns and cause investors to bear losses.

While index funds may be beneficial for those wishing to capture built-in diversification while avoiding excessive costs, they also come with potential risks that need to be considered before making any investment decisions.

Types of index funds in Australia

Investing can be a great way to look after your money and make it work hard for you. If you’re looking for an easy and affordable option in Australia, index funds can be a fantastic choice.

Index funds are low-cost, long-term investments that track specific market indices such as the S&P/ASX 200 index of Australia’s biggest companies by value.

Depending on the index you choose, index funds provide investors with access to hundreds of blue chip stocks across multiple industries. Researching the different index funds available in Australia is an important step when it comes to finding an index fund that offers the right level of risk and potential return for your goals.

Diversifying Your Portfolio with Risk Mix

Investing in a diversified portfolio is one of the most effective ways to safeguard your finances. A good portfolio will include a mix of low-risk investments, such as index funds and bonds, medium-risk investments like real estate, and higher-risk investments, including stocks or cryptocurrency. While these riskier options can offer greater rewards, their potential for higher losses means ensuring you have a balanced mix of investments is crucial to minimising your downside risk.

Creating an ideal portfolio is easier said than done – but by making sure your mix of low, medium, and high-risk investments works together in harmony, you’ll be well positioned to weather any financial storms that come your way.

How can index funds be accessed?

Investing in index funds can help you keep up with the ever changing market. For those looking to get started, index fund access is relatively easy. You simply need to find a broker or financial advisor to make your index fund purchases. Most companies offer index funds in the form of either mutual funds or index exchange-traded funds (ETFs). These index funds often track major markets or provide exposure to different asset classes. This makes them an attractive option for investors who want broad diversification while minimising risks associated with stock picking.

Tips and tricks to get the most out of your index fund investments

If you’re looking to get the most out of your index fund investments, the best way to start is by doing your research.

Become familiar with the index fund’s holdings, fees, and past performance. This will help ensure that our index funds align with your investment goals.
Be mindful of volatility; index funds tend to move somewhat in line with their benchmark index but are subject to market swings as well. Taking a long-term view can mean fewer worry-filled days when it comes to market changes during any given year – this also potentially helps lock in gains from good years and minimise losses from bad.
Index fund investing has become quite popular due to its low fee structure, meaning more of your money stays working for you over time.

Index funds have become popular investments because they offer a low-cost and hassle-free way to build and manage your portfolio. These funds are reliable investments with the potential to generate higher returns than passive investing.

While index funds can be great for some people, it is essential to understand that there are different levels of risk associated with each type of index fund. It is recommended to speak to a financial planner about what type of index fund best suits your risk profile and investment goals. Additionally, building a diversified portfolio is key for long-term stability and sustainability in the world of investing. Finally, with various ways to access index funds such as through a platform or through an investment manager, you can find the option that works best for you.

We hope this blog has been helpful in understanding index funds and how they operate in the Australian market. If you would like further advice on investing with index funds please contact us to learn how they may be used to reach your investment goals.

02/08/2022/by Rob Laurie

Investment Risk Management

Understanding investment risk management and asset allocation

Volatility in the financial markets is nothing new. Asset prices have always experienced ups and downs, and there will always be risks inherent in investing. However, it’s important to remember that investing is a long-term play and the investment risk management is key. Over time, asset prices have tended to rise, despite periods of volatility. This is why the asset allocation is so important.

By diversifying your portfolio across different asset classes, you can help to protect the value of your investments and minimise the impact of market volatility. The asset allocation is not the perfect solution, but it’s one of the best tools we have for the investment risk management in the face of market uncertainty.

In times of market volatility, it’s also important to resist the temptation to try and time the markets. It’s impossible to predict exactly when prices will rise or fall, and even if you manage to make some short-term gains, you could end up missing out on longer-term returns. It’s far better to stay invested and ride out the ups and downs of the market.

Finally, it’s worth remembering that inflation is one of the biggest risks to holding cash. Over time, inflation can erode the value of your money, which is why it’s often better to invest in assets that have some upside potential, such as shares and property.

Market Volatility

The world can be thought of as an interconnected pyramid where promises hold society together—a house built on trust which starts to become shaky when belief fades. Trust in our financial system is essential to maintaining a healthy economy. It’s also what allows people and businesses alike, from all walks of life, to work together for mutual benefit.

Investing can be a tricky business. On the one hand, you want to find assets that are undervalued and have the potential to go up in price. On the other hand, you don’t want to overpay for an asset and watch your investment go down the drain. This balancing act is made even more difficult by the fact that asset prices are constantly changing. Sometimes, it can feel like the market is a roller coaster, with prices going up and down with no rhyme or reason.

In times like these, it’s important to remember that asset prices are only one part of the equation. The other, equally important part is the underlying fundamentals of the asset. Just because an asset has been going up in price doesn’t mean it’s a good investment. And just because an asset has been going down in price doesn’t mean it’s a bad investment. The key is to find assets that are undervalued relative to their fundamentals. And that’s where central bankers come in.

For years, central banks have been pumping money into the economy in an effort to increase economic activity. This “easy money” has found its way into asset prices, driving them up to levels that may not be sustainable in the long run. As investors come to realize this, some panic and sell off assets.

The Bottomline

When it comes to investing, it’s important to take the long view. There will always be ups and downs in the market, but over time, the market tends to go up. If you focus on the short-term noise, you’re likely to make bad decisions that can end up costing you a lot of money. It’s far better to get financial advice, develop a sound investment risk management strategy, and stick to it, even when the going gets tough. By ignoring the market noise and staying focused on your long-term goals, you’ll increase your chances of achieving success.

24/05/2022/by Rob Laurie

Importance of Record Keeping in Small Business

Importance of record keeping in small business

According to the Australian Taxation Office (ATO), poor record-keeping is a common reason for the failure of small businesses. In addition to being a legal requirement, maintaining accurate records can have numerous financial benefits.

It is common knowledge among small business owners that maintaining records can be a time-consuming task. In busy periods, it is often the first thing that gets pushed aside, leading to difficulties catching up on bookkeeping later on.

For instance, if your records are disorganised, it can be challenging to accurately monitor tax, wages, and superannuation payments. Failure to pay taxes, even if it is a result of an innocent mistake, can result in high penalties. However, if you can show that your tax records are well-organised and maintained, the ATO may be more lenient.

Accurate and up-to-date record keeping in small businesses is important not just for tax deductions but also for potentially reducing quarterly income tax payments. If records show that profits have decreased from the previous year, businesses can use this information to adjust their instalments. Without proper record keeping, this data may not be accessible.

There are several benefits to maintaining a healthy financial status, including:

The ability to effectively manage cash flow;
Make timely stock purchases;
Demonstrate financial stability to lenders or potential buyers;
Accurately calculate and submit superannuation contributions: and
Complete and submit activity statements on time.

Having a professional tax accountant manage your affairs is a wise decision. However, it is not efficient for them to spend time organising a disordered collection of invoices and receipts. Properly maintaining these documents will ultimately save your business time and money.

It is legally required to maintain good business records, including account books, expense and purchase records, income and sales receipts, and any other documents relevant to preparing your tax return. These documents must be kept for at least five years, with some needing to be retained for an even longer period.

There are situations where you may need to keep records for longer than the typical five-year retention period. Examples include:

Records connected to an assessment that's amended

It is important to maintain records for the length of the review period (also known as the amendment period) for any assessment that relies on the information in the records.

During the period of review, changes can be made to the assessment by either you or us.

For example, the period of review for:

an income tax return is generally two years for individuals and small businesses and four years for other taxpayers, from the day after we give you the notice of assessment.
a business activity statement (BAS) is generally four years from the day after the notice of assessment is given.
a fringe benefits tax return is generally three years from your date of lodgment.

Records of information used again in a future return

You must keep records containing information used on a tax return for a minimum of three years, as the IRS has the ability to review tax returns for up to three years after they are filed.

Examples include:

If you claim borrowing costs spread over five years, you must keep records from the previous year’s tax return until the review period for the current one is finished.
If you calculate a business loss in 2012-13 and use it to offset profits in a later tax return, you must keep the records used to calculate the loss until the review period for the later tax return is over.

To learn more about the period of review, time limits for amending tax returns, how to correct a mistake or amend a return, and fringe benefits tax return amendments, visit the ATO website.

Records of depreciating assets

You should keep records of depreciating assets for the duration of ownership, plus an additional five years after disposal. Low-value pools and eligible rollover relief have their own time frames and limitations.

Records of capital gains tax assets

It is recommended to maintain records for CGT assets for the duration of ownership and for an additional five years after disposal.

Petroleum resource rent tax records

The ATO website has information on the required retention period for petroleum resource rent tax (PRRT) records, which must be kept for at least seven years.

If you are unsure about the significance of maintaining records in a small business or need assistance in creating a record management system, consult with an expert.

23/05/2022/by Rob Laurie

Whether we want it or not, there is a possibility that we may face a riskier and less profitable economic and investment environment with higher inflation.

What rising inflation means for you

The word “inflation” has been largely ignored by a whole generation until now.

Inflation in the US is currently at 8.5%, while in Europe it is at 7.5%. The Reserve Bank of Australia predicts that our underlying inflation will rise to around 6% in the second half of 2022. But what is inflation and how does it impact you?

The International Monetary Fund states that inflation is a measure of the increase in the price of a set of goods and services over a specified period, usually a year. In simpler terms, it indicates a rise in the cost of goods and services, meaning you need to pay more for each purchase you make.

How does an increase in overseas inflation affect Australia's inflation rate?

It is no surprise that countries in today’s world are highly interconnected. Therefore, an increase in overseas inflation rates will also affect the Australian economy, particularly regarding the cost of imports.

The impact of a rise in labour costs in the US may differ in degree and timing. For instance, the impact on Australians may be limited, but an increase in the price of iPhones or Nike shoes in the US will likely result in a similar price increase in Australia

The markets no longer view inflation as a temporary issue due to higher wage growth and increased supply pressures. Many countries have experienced higher inflation in the past year, leading central banks to reverse their policies and governments to reduce spending.

How will rising interest rates and inflation affect Australia's economy?

Central banks around the world, including the RBA, closely monitor interest rate changes made by the US Federal Reserve (the Fed). In recent years, both the US and Australia have lowered interest rates in an effort to stimulate their respective economies.

As interest rates are near all-time lows and economic performance is strong, it is expected that rates will rise. Typically, when the Federal Reserve raises its interest rates, Australia follows suit. As a result, the cost of borrowing money will increase, leading to higher inflation and making goods and services more expensive.

When inflation rates increase, the value of the Australian dollar may decrease, leading to individuals having less purchasing power. This can make it difficult for people to save money, especially if their income does not keep pace with inflation.

How will investors be affected?

The recent trend of disinflation has created a positive environment for investments in risk assets. However, an increase in interest rates and borrowing costs could significantly impact share prices and cause fluctuations in their value. Additionally, future returns may decrease as higher interest rates often result in a lower valuation of shares.

When interest rates increase, parents who invest face higher home loan interest payments, which lowers their disposable income and ability to invest. Volatility in share prices can slow their progress in building wealth.

Retirees, who have less spending power and are more vulnerable to a sequencing risk event, would be particularly sensitive to rising inflation. For them, an increase in the cost of goods and services coupled with share market volatility could lead to having to sell more of their investment assets, potentially at a loss or reduced profit. Additionally, there may be uncertainty in dividend income, which many retirees often rely on. With fewer years to recover from a drop in portfolio value, retiree investors are at a disadvantage compared to younger investors.

What steps can you take to prepare for an increase in inflation?

To make sure you’re on track financially, it’s crucial to analyse your personal cash flow situation to see where your money goes.
If you have a variable rate home loan that you haven’t reviewed in a while, you may want to consider switching to a fixed rate to protect yourself from potential increases in interest rates. Keep in mind that the market has already started to take potential rate hikes into account.
It may also be a good idea to reconsider taking out new personal loans, such as car loans, as interest rates are likely to rise.
For investors, it can be tempting to invest more money in stocks when prices are falling, but it’s always a good idea to average your position to reduce market timing risk.
Consider having exposure to well-established “blue chip” companies rather than riskier stocks for a more stable investment. These types of companies are known for having strong balance sheets, which can provide peace of mind for investors.

How we can help beat inflation

If the thought of inflation concerns you, consulting with a professional adviser can help ease your worries. Your adviser will evaluate your financial situation and ability to fulfil your financial obligations, and provide strategies to combat inflation.

Advisers have a strong investment philosophy and use a decision-making framework that allows them to quickly adjust portfolios in response to inflation while also considering your individual needs and goals.

23/05/2022/by Rob Laurie

What will a labor win mean for markets?

Labor win

The Labor’s election victory marks the end of the Coalition’s almost decade long reign. This election has seen several successful ‘teal’ Independents, including Monique Ryan, who ran against the incumbent Treasurer, Josh Frydenberg.

With such closely aligned policies between the major parties, the main risk for markets will come if the Labor needs to rely on the Greens to form government, as compromises could push the Labor down a far less business-friendly path than its election platform suggested.

Unlike the election platform of three years ago, the primary policy differences this election were negligible, with the Labor opting for a more moderate approach. The Labor’s election campaign focused largely on repairing the budget through economic growth, with priority areas of energy, skills, the digital economy, childcare, and manufacturing. A platform that except for climate policies, had a significant overlap with the Coalition.

Labor's renewable pledge

In his budget reply in March, Australia’s new PM Anthony Albanese promised to act on climate change and “seize the chance to transform our country into a renewable energy superpower”. The Labor’s Powering Australia plan, unveiled late last year, aims to achieve an economy-wide emissions cut of 43 per cent by 2030, and net zero emissions by 2050.

Mr Albanese also spoke about revitalising Australian manufacturing and powering that manufacturing with Australian made renewable energy. “Exporting resources will always be important to Australia’s economy. But we should also use our resources – like our minerals and rare earths – to make products like batteries here, instead of just shipping them offshore and importing the finished goods.”

What about markets?

In the three weeks following a Labor election victory, the Australian stock market has traditionally risen by an average of 0.6 percent.

Based on the average performance of the All Ordinaries index in the 15 trading days following each election since 1990, CommSec discovered that after a Labor victory, the stock market often performed worse than the average lift of 1.2 percent.

According to CommSec associate stock market analyst Divik Nigam, this pattern continued on the first trading day after the election.

“In elections held since 1990, on the trading day after the poll date, on average, the All Ordinaries Index ticked 0.3 per cent higher,” he said

“When the LNP won, the index delivered a 0.5 per cent increase, but when the Labor won, the index finished flat on average.”

However, the performance disparity was significantly narrower in the week following the election, according to CommSec, with an average rise of 0.1 percent overall and 0.2 percent after a Labor victory.

Since 1990, 11 federal elections have been conducted, with the Labor winning in 1990, 1993, 2007, and 2010.

Eight of the past 11 elections, including each one since 1998, have resulted in the All Ords moving up in the 15 trading days following the results.

“The four strongest post-election rallies happened in the 15 days following the 2016, 2010, 2013 and 2007 federal elections, when the All Ordinaries Index climbed by 4.6 per cent, 3.1 per cent, 3.1 per cent and 2.6 per cent, respectively,” said Mr Nigam.

Meanwhile, the All Ords has climbed by an average of 0.5 percent in the 15 days preceding up to the past 11 elections, including a 0.4 percent drop prior to the Labor victories.

“Even though elections may sway share markets and the currency in the short term, it is important to note that it is the earnings profile of companies and the strength of the economy that play greater roles in determining the long-term performance of the share market and the Aussie dollar,” Mr Nigam concluded.

While post-election market and currency jitters have traditionally been slightly more negative following a Labor win, ultimately economic and interest rate cycles have a more dominant impact on investment markets rather than specific policies under each government. This is because political parties are usually forced to adopt sensible policies if they wish to ensure rising living standards.

Arguably there has also been broad consensus in recent decades regarding key macro-economic fundamentals, being low inflation and free markets.
Regardless of the election outcome, the bigger question will be being able to govern effectively in a world of higher inflation and interest rates.

23/05/2022/by Rob Laurie

How to Save More Money for Retirement?

Are you looking for ways on how to save more money for retirement but don’t know where to start? You’re not alone! Retiring on a budget can be tricky, but with a little planning and some smart saving strategies, it’s doable. In this post, we’ll outline some tips for how to save money when you retire in Australia. So whether you’re just starting out or you’re already well underway on your retirement savings plan, read on for helpful advice!

How to save more money for retirement?

Calculate how much money you'll need to have saved for the retirement

The thought of the retirement can be both exciting and terrifying at the same time. While it is exciting to think about the freedom and possibility that the retirement offers, it can also be daunting to consider how to save more money for retirement and how much money you will need to have saved in order to enjoy the years when you stop working.

There is no definitive answer when it comes to calculating how much retirement savings you will need; this number will depend on a variety of factors, including your current income, projected retirement spending levels, investment returns, and more. However, one thing is clear: for most people, retirement savings will require decades of careful planning and strategic investing.

Whether you are working with a financial advisor or on your own, it is essential that you start saving early so that you can allow your funds plenty of time to grow over the years. With enough hard work and discipline now, you can look forward to a happy and worry-free retirement later!

Decide how you want to save your money

When it comes to saving for the retirement, there are several options to choose from:

Contribute to a superannuation fund, either through your employer or on your own. This type of retirement investment offers several benefits, including long-term growth potential and the ability to make tax-deductible contributions.
Set up a savings account, which allows you to save post-tax income and withdraw money tax-free when you need it. Of course, there are also other strategies that may work better for your financial needs, such as investing in real estate, shares or other growth assets. Consider working with a financial adviser in Toowoomba.

Ultimately, the best approach will depend on your personal circumstances and goals. With careful planning and the right tools, however, you can feel confident about achieving your dreams when you retire.

Set a goal and make a plan to achieve it

When it comes to retirement, the first step is to set a financial goal for yourself. This might involve ensuring that you have sufficient income when you retire, or that you have paid off any outstanding debts. To chart the path to your goal, consider working with a financial adviser in your area, such as those based in Toowoomba.

This professional can help you to create a tailored strategy for achieving your goals, considering your unique financial situation and any other factors that may come into play over the years. With a strong plan in place and committed action on your part, achieving your goals will soon be within reach. So, start setting those plans today and get ready to enjoy your dreams when you retire!

Automate your finances so that you're automatically saving money each month

When it comes to retirement, there’s no such thing as too much planning. The earlier you start saving, the better off you’ll be when it comes time to hang up your work boots. But for many of us, saving for the day when you stop working can seem like a daunting task. Fortunately, there are ways to make the process easier.

One of the best things you can do is automate your finances so that you’re automatically saving money each month. This way, you don’t have to think about it – the money will just be there when you need it. Of course, you’ll still need to monitor your retirement account to make sure it’s on track but automating your savings will take one big worry off your plate.

So talk to your financial adviser and see if automation is right for you. After all, retirement is supposed to be a time of rest and relaxation – not stress and worry. Wealth Factory can help you automate your savings and planning.

Invest in assets such as property or shares that will grow in value over time

Many people think that the key to a comfortable life when you retire is to just invest in assets such as property or shares that will grow in value over time. However, this is not always the best strategy. While it can be a good idea to invest in assets that will appreciate over time, it’s also important to diversify your portfolio and consider other factors such as inflation and taxation.

For most people, the best retirement strategy is to speak to a financial adviser and create a plan that takes into account all of your individual circumstances. In Toowoomba, there are many qualified financial advisers who can help you create a plan that suits your needs, including Wealth Factory.

Live below your means and avoid unnecessary expenses

To live below your means and avoid unnecessary expenses is the key to a successful retirement. Whether you are saving on your own or working with a financial adviser, it is essential to make smart choices about how you spend your money. If you want to be able to enjoy your years when you retire without worrying about money, you need to focus on building up a solid retirement fund as early as possible.

This might mean scaling back on certain luxuries or cutting out unnecessary expenses like shopping sprees, takeout dinners, and nights out at the bar. To be truly successful in the retirement, it may also be helpful to move to an area like Toowoomba, where the cost of living is significantly lower than in major cities like Sydney or Melbourne. With careful planning and a dedication to living frugally now, you can ensure that retirement will be everything you have ever dreamed of.

Start with a budget and track your expenses

When it comes to budgeting and tracking your expenses, the first step is to start with a realistic budget and a clear plan for reaching your financial goals. Whether you are working towards the day when you stop working, paying off debt, or simply trying to increase your savings, it is important to have a firm understanding of what you are spending and where you can make adjustments.

A great way to get started is to work with a financial adviser in Toowoomba who can help you set up budgets and track your expenses, allowing you to take control of your finances. With the right tools and guidance, anyone can achieve financial success – so why not get started today?

Downsize your home or car

If you’re like most people, the thought of the retirement conjures up images of relaxing on a beach or spending more time with your grandkids. But for many Australians, it is also a time of financial insecurity. With rising costs and stagnant wages, many retirees are finding it difficult to make ends meet. One way to ease the financial strain in retirement is to downsize your home or car. By selling your property and moving to a smaller home, you can free up some extra cash each month.

Alternatively, you may want to trade in your car for a more economical model. Of course, downsizing is not right for everyone, so be sure to speak with a financial adviser before making any decisions. But if you’re looking to boost your retirement income, downsizing may be worth considering.

Invest in a good quality mattress to help you sleep better and save on energy costs

A good quality mattress is an investment that can pay dividends in both your physical and financial health. A comfortable mattress will help you to get a good night’s sleep, which is essential for maintaining your health as you age. Good sleep can also help you to avoid the retirement burnout by giving you the energy you need to enjoy your golden years. In addition, a comfortable mattress can help you to save on energy costs.

By reducing the amount of tossing and turning you do during the night, a good mattress can help you to stay warm in the winter and cool in the summer. As a result, it can pay for itself many times over throughout your golden years. So if you’re looking for a way to improve your sleep and save on your energy bills, invest in a good quality mattress. Your body and your bank account will thank you.

Cut down on eating out and cook at home instead

If you’re looking to retirement and want to make the most of your savings, then it’s time to start cooking at home. That’s according to financial adviser Rob Laurie from Toowoomba, who says that retirees, in particular, can benefit from cutting down on their eating out budget. “If you’re retired and on a fixed income, every dollar counts,” he says. “And when you compare the cost of a home-cooked meal with the cost of dining out, it’s easy to see how cooking at home can save you money.”

Of course, Rob admits that cooking at home isn’t for everyone. “Some people simply don’t enjoy cooking, and others might not have the time,” he says. “But if you’re looking to retire and want to make the most of your savings, cooking at home is definitely more cost effective.”

Make your own coffee rather than buying it from the cafe

Making your own coffee is a great way to save money and enjoy a more personalized cup of caffeine. Whether you’re a self-proclaimed coffee connoisseur or simply prefer your morning brew strong and black, making your own coffee can help you take greater control over every aspect of the process. Not only does this allow you to customize the flavour and strength of your drink, but it also allows you to save money by brewing in bulk.

Additionally, for those seeking an extra boost in their retirement savings, taking control of your daily java habit can be a great way to reduce expenses and increase your nest egg over time. With all these benefits in mind, it makes sense to ditch the cafe and start brewing at home today!

Shop around for the best deals on groceries, utilities, and insurance

When it comes to managing your household budget, it is always advisable to shop around for the best deals on groceries, utilities, and insurance. Not only can comparing prices help you to save money in the short-term, but it can also help you to build your retirement savings over the long-term. To start, be sure to consult with a financial adviser who can help you to identify areas of your budget that may be ripe for cost saving.

From there, you can begin researching various retailers and service providers online or in person, carefully comparing rates and terms. By being diligent in your search for better deals, you will not only save yourself some cash today, but you will also create a more secure retirement fund for the future. So go ahead and start shopping around! You’ll soon see just how much you can save when you seek out the most competitive rates.

Sell unwanted belongings online or at a garage sale

If you’re looking to declutter your home and make some extra cash at the same time, there are plenty of options out there for selling your unwanted belongings. One popular option is to sell them online through sites like eBay or Craigslist, where you can reach a large audience of potential buyers. Another alternative is to host a garage sale, which is an excellent way to get rid of big-ticket items like furniture or electronics, as well as smaller trinkets and knick-knacks. Of course, whichever selling method you choose will depend on factors such as the value of your items and where you live.

No matter what strategy you choose, remember that the key to success is being able to price your items effectively and market them in an engaging way. With some careful planning, you can turn that retirement home clutter into a retirement cash cow! And if all else fails, don’t forget that professional financial advisers who specialize in retirement planning are always available to help you sort out your next steps. So don’t hesitate – start selling today!

The bottomline

If you’re looking for help on how to save more money for retirement, Wealth Factory can assist. We have a wide range of products and services to suit your needs and make the process easy and convenient. Contact us today to find out more about our offerings and how we can help you achieve your retirement savings goals.

17/05/2022/by Rob Laurie

Tax Planning: Forward Planning Reaps Rewards

Tax Planning

The tax planning is often viewed in a contradictory way – a last minute dash to arrange a reduction of the year’s tax bill or maximise the refund. The tax planning is not something which should be done at the last minute; it is an ongoing process which should form an integral part of your overall financial planning. The tax planning is the process of arranging your affairs in such a way as to minimise your tax liability. It involves looking at both your current situation and anticipating any changes that may occur in the future.

The tax planning is not about avoiding tax; it is about making sure that you pay no more tax than you are legally obliged to pay. The tax planning is a perfectly legitimate way of minimising your tax bill and there are a number of strategies that can be employed. The key to effective tax planning is to have a good understanding of the tax system and how it works. The tax planning can be complex, so it is important to seek professional advice if you are unsure about any aspect of it.

Tips To Save Money on Taxes

Tax can be a complex and confusing topic for many people. However, there are some simple ways that taxpayers can save money on their taxes.

Defer income until the following tax year. This can be done by arranging for fixed deposits or other investments to be paid after the end of the tax period.
Bring forward expenses that won’t accrue until the next tax year by paying them this tax year. This can be done by paying interest on an investment loan this tax year.

By taking advantage of these simple strategies, taxpayers can save money on their taxes.

Reduce Tax Bill

Are you looking to reduce your tax bill? There are a number of options available, depending on your employment status. If you’re self-employed, you can make salary sacrifices or personal deductible contributions to superannuation. This can reduce your taxable income and, ultimately, your tax bill. Alternatively, you could consider investing in negative gearing.

This involves borrowing money to invest in an asset, such as property, shares or managed funds. The interest on the loan is tax deductible, which can reduce your taxable income and lower your overall tax bill. Of course, it’s important to weigh up the risks and rewards of any investment before making a decision. But if done carefully, investing in negative gearing can be a great way to reduce your tax bill. In addition, don’t forget the tax incentive for making a contribution toward a superannuation fund in your spouse’s name.

As a small business owner, you know that there are many factors to consider when making decisions about your company’s assets. On one hand, it can be tempting to put off buying new equipment or machinery in favor of investing in other areas of your business. However, if you want to grow and thrive over the long term, you need to make smart investments in order to stay competitive.

One option that is worth considering is bringing forward the purchase of business assets. Not only can taking advantage of tax depreciation incentives help you save money on taxes and reduce your overall expenses, but it also allows you to invest in new equipment sooner rather than later. This can provide an important competitive edge, as newer equipment is often more efficient and effective than older models. Additionally, these incentives offer opportunities for expansion and diversification – giving small business owners like you the chance to bring your company to the next level.

So if you’re thinking about investing in your business’s future, exploring these tax depreciation incentives might just be the right move for you. And who knows – maybe it will be the key ingredient that helps take your company from good to great!

Financial Planning

When it comes to financial planning for the year, there are a number of factors to consider. Your situation and individual needs will influence the strategy you ultimately choose, but one thing that is true for everyone is that the longer you wait, the less benefit you will receive.

If you have any questions or concerns, it is best to speak with a licensed adviser and tax accountant as soon as possible, so that all of your plans are in place by June 30. With careful planning and action now, you can reap the rewards and take advantage of all of the benefits that financial planning has to offer. So don’t wait any longer – start planning today!

16/05/2022/by Rob Laurie

Your Retirement Planning Checklist 2022

The Retirement Planning Checklist

Imagine a world where we can finally quit working — where we don’t have to go to work every day but still get paid and have time to do all the things we never have time for. The opportunity to travel for longer periods of time without having to rush back to work, to pursue hobbies, to experience a sea or tree change, or to spend time with the grandchildren. Sounds like a dream, doesn’t it? This might be your future reality, and all it takes is a well-thought-out retirement planning strategy tailored to your specific requirements.

Some people enjoy their jobs and wish to continue contributing for as long as they can, even if it means working part-time into their late 60s and 70s. Others simply avoid thinking about retirement because they are too busy, find the topic boring, or are concerned that they will not have enough savings to live comfortably.

Whether you’re apprehensive or not, the sooner you start the retirement planning, the higher your chances of making the most of your golden years. In reality, many of us may spend almost as much time in retirement as we did working, and that will only be possible when we do the retirement planning carefully.

The retirement planning may not be the most interesting aspect of financial planning. It is, nevertheless, undoubtedly one of the most important. The retirement planning is a multi-step, time-consuming process. It all starts with considering your retirement objectives and how much time you have to achieve them. Then you must consider the various types of retirement accounts that can assist you in raising the funds necessary to fund your future. You must invest the money you save in order for it to grow.

It’s easy to put off thinking about retirement when attaining the appropriate age seems like a long way off, but with each passing year, it becomes more and more of a reality.

If thinking about the next phase of your life makes you worried or uncomfortable, we want you to know that you don’t have to feel that way. Following this retirement planning checklist will give you peace of mind.

This step-by-step approach to the retirement planning is the first and most important step toward creating a strategy that ensures you’ll never have to worry about it again. Working through these five simple steps in will get you started.

1. Identify your retirement lifestyle

What do you want to do with your retirement years? Consider the retirement planning particularly how you want to spend your retirement, where you want to live, and what kind of home you prefer. Perhaps you’d like to spend your annual vacation overseas while you’re still physically active, or you’d like to buy a van and travel Australia. Do you prefer to eat out frequently, play golf, and maintain an active social life, or do you prefer to stay at home and garden, craft, or tinker in the shed?

Consider the cost of creature comforts like the capacity to upgrade cars, laptops, and cellphones; the ability to buy nice clothes; drink fine wine; and pay for private health insurance. You might also want to help the kids financially or with the grandkids’ education costs.

If you’re married or have a partner, tell them what you’re thinking. It’s best to find out now, while you still have time to change your plans, if you have different aspirations and expectations about how you want to live in retirement.

2. Determine your retirement needs

Knowing your financial situation and the life goals you want to pursue will make the retirement planning much easier.

It will be easier to identify the required size of a retirement portfolio if you have reasonable expectations regarding post-retirement spending habits. The majority of people expect that after retirement, their annual spending will be just 70% to 80% of what it was before. As a general rule, financial planners estimate that you’ll need between two-thirds (66%) and 80% of your pre-retirement income to maintain your lifestyle. This assumption is frequently proven to be unrealistic, particularly if the mortgage has not been paid off or if unexpected medical expenses arise.

Keep track of your current costs in order to create a budget and have a crystal-clear picture of how much money you’ll need to live your dream post-work and comfortable lifestyle. Once you’ve gotten a bird’s-eye view of your current financial situation, it’s time to see where you can save money today to better your financial future. You must also consider how long your money must last in order to accomplish this. For example, rather than spending $1,500 per month on rent, you may plan to buy and pay off a home so that you won’t have to pay rent once you stop working.

On the other hand, do you need easy access to income once you’ve stopped working? You should consider investing. However, before you invest in any financial instrument, you must first determine your risk profile.

The willingness and ability to take risks is assessed by your risk profile, which is an important component of investing. This will also identify the right asset allocation for a portfolio’s investment assets. A common retirement plan investing strategy is to generate returns that cover yearly inflation-adjusted living expenses while maintaining the portfolio’s value. The portfolio is then passed on to the deceased’s beneficiaries. To identify the best solution for the individual, you should speak with a tax advisor.

Identifying your retirement demands also includes determining your retirement timeline. While it may not appear to be significant at first glance, the length of time between your current age and the age you’d like to retire might have a significant impact on how the retirement planning is organized.

For example, if you are in your mid-to-early twenties and plan to retire at the age of 60, you have around 40 years to adopt a variety of financial plans to save more for life after work over a long period of time. A longer timeframe also allows you to consider higher-risk strategies, such as investing your superannuation in a high-growth fund, because the extra time you have will allow you to better weather any financial market volatility.

If you are in your 40s or 50s and plan to retire at 60, on the other hand, you may need to be more conservative with the strategies you use to accomplish your ideal retirement. Depending on your financial situation and the difference between where you are now and where you want to be, you may even have to become more conservative with the lifestyle you want to keep after quitting work.

If you’re not sure where to begin when determining your retirement time frame, your financial advisor can assist you by helping you clarify your retirement goals and determining which path will best help you reach them.

3. Planning your Superannuation Strategy

If you’re a long time reader of Wealth Factory’s blogs or articles, you’ve definitely come across the term “superannuation” – or “super” for short – and have a basic grasp of how it works and what it has to do with retirement.

Beyond that, though, the average Australian is unlikely to be well-versed in the complexities of superannuation. It’s strange that super is often viewed as an afterthought, given how important it is to a successful retirement plan.

However, super does not have to stay a mystery. In fact, there are a variety of financial strategies that may be used to get the most out of your super and attain the post-work future you’ve always desired.

One of these ways is to voluntarily contribute to your super, which comes with several tax benefits — especially for individuals with higher-than-average incomes. Contributing to your superannuation fund on a voluntary basis is undoubtedly one of the most effective strategies to ensure you’re on track to achieving your ideal post-work lifestyle. Consider it this way: by voluntarily contributing to your super through concessional contributions and non-concessional contributions, you are effectively lowering your current tax obligations while also investing in your future by boosting your retirement income.

After all, the idea behind getting the most out of your super is simple and clear: pay less tax now while helping you live out your ideal future.

4. Understanding the factors in your retirement

While super is a key component of your retirement strategy, there are other things that can influence how you spend your time after work. These are some of them:

The Government Age Pension

Citizens aged 66 and 6 months or more are eligible for a pension from the Australian government. However, because the highest pension for a single person is $900.80 a fortnight, the pension alone is insufficient for most people to live comfortably. Your pension may also be lowered as a result of your other investments and income.

Government subsidies may lower out-of-pocket costs, but having money expands your options and gives you access to high-quality care at home or in an assisted living facility.

Creating a Retirement Safety Net

Until now, this guide has primarily focused on making the most of your superannuation to create your ideal post-work life. However, both your super and non-super income and savings have an impact on your retirement savings.

That’s why we’ll now focus on ensuring that you can maintain a pleasant lifestyle after work, even if an unexpected cost arises.

Even the finest financial plans can be foiled by life. What if you acquire a new family member or purchase a larger home or vacation home unexpectedly?

By putting together a financial safety net, you’ll be able to face anything life throws your way with the assurance that you’ll stay on pace to achieve your goals.

5. Understanding Estate Planning

Estate planning is the process of preparing duties to handle a person’s assets in the event of their disability or death. The gift of assets to heirs and the settlement of estate taxes are all part of the preparation.

Estate planning is another important part of the retirement planning, and each aspect needs the skills of different professionals in that industry, such as lawyers and accountants. Life insurance is also a crucial component of estate planning and retirement planning. Having a comprehensive estate plan and life insurance coverage ensures that your assets are transferred according to your wishes and that your loved ones are not financially disadvantaged when you pass away. A well-thought-out plan can also help you avoid the costly and time-consuming probate process.

Another important aspect of estate planning is tax planning. If a person wants to leave assets to family or a charity, the tax consequences of gifting versus passing them through the estate process must be weighed.

The Bottom Line

Action, paired with the knowledge learned from this guide, is the real technique to ensure that the retirement planning is on track to turn your dreams into reality.

As Australians are living longer, healthier lives, many of us may expect to spend nearly as much time in retirement as we did working. Striking a balance between reasonable return expectations and a desired level of living is one of the most difficult aspects of building a comprehensive retirement plan. Focus on building a flexible portfolio that can be modified on a frequent basis to reflect changing market conditions and retirement goals.

It’s generally recommended that you seek independent financial advice well before you retire, but if you go through these five steps in your retirement planning checklist first, you’ll be in a better position to acquire the help you need.

10/05/2022/by Rob Laurie

Five Proven Ways to Decrease Taxes

Benjamin Franklin’s famous quote, “In this world, nothing can be said to certainly exist, except death and taxes,” is just as true today as when it was first said. The only thing that has changed over the years when it comes to taxes is the taxation law-with so many options available, we don’t need any more pain caused by our payments!

For many people, tax season can be a stressful and overwhelming time. However, being organised and prepared can help make it less painful. This means keeping track of your income and capital gains throughout the year. Not only will this make filing your taxes easier, but it may even increase your potential refund. By taking a deep breath and getting organised, you will be thanking yourself in the future.

Ways to decrease taxes you pay

Keep detailed records

In Australia, having proper records is crucial for completing tax returns. This is true whether you are doing your own return or working with a tax professional. To fulfil your record-keeping obligations, you must have appropriate receipts for expenses and accurately track and categorise your income.

To ensure the accurate calculation of capital gains tax (CGT), records must be kept for any assets sold or purchased during the tax year. By maintaining these records, we can fulfil our responsibility to file a complete and accurate tax return in Australia. Let’s prioritise record keeping to fulfil our duty and complete our taxes correctly and on time.

It is crucial to keep receipts for all business or work-related expenses as they serve as proof and documentation of the expenses incurred throughout the year. Without these receipts, it may be challenging to claim tax deductions and exemptions.

It is important to have your tax-related receipts organised and easily accessible in order to properly file your tax returns. Failing to track these receipts can result in incorrect filings and potential fines or penalties from the government. Additionally, if you are in the highest tax bracket, claiming a $100 deduction can save you 47% in taxes.

To report your income and capital gains accurately on your tax return, you must keep track of all sources of income you have earned throughout the year, as well as any financial transactions or assets that may result in a capital gain. This involves maintaining records of all income sources, such as bank statements and pay stubs; tracking purchases and sales of assets that may result in a capital gain; and having receipts for expenses and deductions you plan to claim on your tax return.

Maintaining consistent records throughout the year can help you decrease your taxes and fulfill your obligations as a law-abiding citizen. Using a record-keeping tool such as Mint or Quicken can assist in tracking your income sources and financial transactions. By keeping detailed records, you can stay on top of your tax obligations.

Claim available tax deductions

To decrease taxes in Australia, you can claim tax deductions, which are available for a range of activities, such as donating to charity, investing in education, and paying for work-related expenses. These deductions can help lower your overall tax burden.

One of the most commonly known methods for lowering taxes is by making donations to registered charities or other qualified organisations. This allows individuals to claim a tax deduction for the donated money or goods, providing some relief from the high cost of living in Australia.

In Australia, you can potentially claim tax deductions for continuing education and training programs that help you advance in your career. Another option is income protection, which is a common work-related deduction that can provide financial stability during difficult times. Overall, there are many potential tax deductions available, so be sure to consider all options to maximise your savings.

It is important to note that the allowable work-related expenses may vary greatly depending on one’s profession. For more information, please visit the Australian Tax Office website at www.ato.gov.au.

Consider Salary Packaging

Salary packaging is a tax-saving strategy that allows Australian workers to receive non-cash benefits in place of a taxable salary. This can lower their taxable income and reduce the amount of taxes they owe. In addition, salary packaging can provide tax breaks on commonly used items such as mortgage payments, car loans, and private health insurance. Overall, salary packaging is a beneficial option for individuals looking to decrease their taxes and keep more money in their pockets.

Fringe Benefit Tax (FBT) is a tax on non-cash benefits that is applied at the highest marginal tax rate, which means that receiving these benefits does not lower your overall tax burden. If you are a low-income earner, FBT may even cause your taxes to increase. However, there are some benefits that are treated favourably under FBT rules, so it may still be beneficial to consider these types of benefits when negotiating your salary package.

Beneficial salary packaging options may include obtaining a mobile phone, laptop, or novated lease on a vehicle.

While salary packaging can provide benefits for some individuals, it is not a suitable option for everyone. Additionally, there are certain paperwork and procedural requirements that must be met to establish an effective salary packaging arrangement. It is recommended to consult with a professional adviser before implementing this strategy.

Contribute to Superannuation

Making superannuation contributions can help lower your taxable income and increase your retirement savings. By contributing to your super, you can take a tax deduction for the amount contributed, allowing for less tax on your superannuation and more funds available for your retirement.

Superannuation earnings are taxed at a lower rate than other investments, allowing your money to grow faster in a super fund. This makes superannuation a highly tax-effective way to save for retirement and reduce taxes.

By making superannuation contributions, you can potentially lower the amount of tax you owe on your investments due to the favourable tax rate of up to 15% on investments within a super fund. However, these contributions are subject to certain rules and regulations.

If you make salary-sacrificed or pre-tax concessional contributions into your super, they will typically be taxed at 15%. However, if your income plus concessional contributions exceeds $250,000 in 2023/24, your contributions may be taxed at a rate of 30%. Additionally, some individuals may be eligible to claim a tax deduction for their contributions to super.

In order to claim a deduction for personal superannuation contributions, you must first fill out and submit the Notice of Intent to Claim or Vary a Deduction for Personal Contributions form (NAT 71121) and receive confirmation from your fund. Additionally, there are specific eligibility requirements that must be met.

It is important to consult a financial planner regarding the complex rules regarding tax deductibility and contribution limits for superannuation.

Manage capital gains

If you sell an investment for more than what you paid for it, there is a possibility that you may have to pay capital gains tax (CGT). This should be taken into account if your total capital gains for the year exceed your losses. When you make a profit from selling an investment, it is considered a capital gain. For non-professional investors, capital gains must be reported on your annual income tax return. Assets purchased before September 20, 1985 are not subject to CGT.

If you sell an asset for less than its purchase price, you will have a capital loss. If your capital losses for the year are greater than your capital gains, you will have a net capital loss for the year.

If you are facing a potential capital gains tax liability, there are several strategies you could consider to lower the amount of taxes you need to pay.

Keep an investment for at least 12 months

Holding investments for the long term is crucial for reducing capital gains tax. By owning assets for more than 12 months, the tax rate on profits from their sale is reduced by 50% compared to selling within a year. While this can be beneficial, it is important to exercise caution.

Delay any gains until the new financial year

If you’re thinking of selling profitable assets, it’s worth considering the Australian tax system, which is a little more complicated than others. By delaying the sale until after the end of the financial year or longer, you can avoid paying CGT for another 12 months. However, you will eventually have to pay it, so it’s important to consider whether freeing up short-term cash flow is worth it for your specific situation.

Use carry-forward tax losses to reduce CGT

If you incurred capital losses in previous tax years that have not yet been used to offset capital gains, you may be able to carry those losses forward to future tax years to help reduce any potential CGT liability. It is best to consult with your accountant or tax professional to see if this option is available for your specific situation. You can also review your past income tax returns or ask your accountant for assistance in determining your eligibility for this option.

This information should not be considered as a substitute for personalised tax advice. It is recommended to consult with a professional who can assess your specific situation and provide tailored guidance on tax-reducing strategies. The effectiveness of these strategies may vary depending on various factors.

03/05/2022/by Rob Laurie

Step-by-Step Guide to Retirement Living

The Guide to Retirement Living

Are you getting close to retirement and feeling a little lost about what to do? Or maybe you’re already retired and looking for ways to make the most of your golden years? Whatever your situation, this step-by-step guide to retirement living will help you every step of the way.

With information on everything from pensions to tax allowances, we’ll help you plan for a comfortable, stress-free retirement. So sit back and relax – we’ve got this covered! .

Importance of starting early and making a retirement plan

Retirement planning is important. You’ve probably been told that a million times. But what does that actually mean? Why is retirement planning so important? And how can you make sure you’re doing it right?

If you are nearing retirement and are looking forward to spending your days relaxing and enjoying life, then it’s important that you start planning for your retirement as early as possible by following this guide to retirement living. After all, the sooner you begin saving and strategizing, the better off you’ll be when it comes time to step out of the working world for good.

There are many different things to consider when it comes to retirement planning, but perhaps the most important step is to follow this guide to help you stay on track. This can include mapping out what sources of income you can rely on, setting realistic goals for how much money you want to save each year, and identifying any potential risks or challenges that may affect your plan.

Another key component of retirement planning is understanding how the current economic landscape in Australia may impact your retirement savings. For instance, if you’re approaching retirement in 2022 or beyond, there’s a good chance that interest rates will be lower than they are currently – meaning that your investment returns may not be as high as expected. But by staying up-to-date on current market trends, being proactive about adjusting your plan accordingly, or by following this guide in general, you can ensure that your future self will be able to enjoy all the benefits of a happy retirement.

Know your retirement goals and funding requirements

Are you one of the many Australians who have no idea how much money you’ll need to retire? Don’t worry, you’re not alone. In fact, a recent study found that nearly 60% of Australians have no idea what they need to do to achieve their retirement goals.

If you’re looking for a guide to help you figure out your retirement goals, look no further. In this guide, we’ll discuss everything you need to know about retiring in Australia. We’ll cover topics such as how much money you’ll need to retire, when you should start planning for retirement, and what sources of income you can use to fund your retirement. By the time you finish reading this guide, you’ll have a clear understanding of your retirement options in Australia and be well on your way to achieving your retirement goals.

Save as much money as possible

It’s no secret that retirement can be expensive. Between the costs of healthcare, housing, and everyday living expenses, many retirees find themselves struggling to make ends meet. That’s why it’s so important to save as much money as possible before retirement. But where should you invest your money? And how can you reduce your expenses? Here’s a guide to help you get started.

First, consider investing in Australian shares. With our strong economy and growing population, there are plenty of opportunities for growth. Plus, with the recent changes to the superannuation laws, investing in shares can be a great way to boost your retirement savings.

Another option is to invest in property. With the right property investment strategy, you can generate a healthy return on your investment while enjoying the benefits of owning your own home. Plus, with the recent changes to negative gearing and capital gains tax rules, now is a great time to invest in property.

Finally, if you’re looking to reduce your expenses in retirement, there are a few things you can do. First, consider downsizing your home. This can free up some extra cash each month that you can use to cover other costs like groceries or utility bills.

Consider working longer to increase your retirement savings

When it comes to planning for retirement, many people wonder whether they should consider working longer. There are several advantages to delaying retirement, including an increase in your retirement savings and greater flexibility throughout your career. Additionally, working longer may help you stay healthier and more involved throughout your golden years. For example, in Australia, where the average life expectancy is now over 82 years old, many professionals are choosing to guide their careers towards retirement rather than lock in a firm endpoint.

By 2022, experts estimate that roughly 40% of the population will be working past the age of 65 – a trend that represents both immediate and long-term benefits for workers and retirees alike. Whether you plan to work until the last day of your life or only until your late 60s or early 70s, choosing to stay active in the workforce can certainly help guide you towards a more comfortable retirement. So if you’re thinking about hanging up your hat early, why not reconsider and work just a little bit longer? Your future self will be glad you did!

Make use of government benefits and tax breaks available to retirees

As you approach retirement, there are a few things to keep in mind when it comes to your finances. For starters, you may be eligible for government benefits and tax breaks. To guide you through this process, the Australian government has created a Retirement Income Review, which will be released in early 2022.

In the meantime, here are a few of the most common benefits and tax breaks available to retirees:

Seniors Health Card

This card gives you access to bulk-billed GP visits and free or discounted prescriptions. To be eligible, you must be aged 60 or over and meet certain income and asset tests.

Seniors Supplement

This is a fortnightly payment that can help with the cost of living expenses such as utilities, council rates and phone bills. To be eligible, you must be aged 60 or over and receiving certain government pensions or allowances.

Commonwealth Seniors Health Card

This card gives you access to free or discounted medical care, prescription medicines, and public hospital care. To be eligible, you must have reached state pension age and meet certain income and asset tests.

Age Pension

This is a fortnightly payment that can help with the cost of living expenses such as food, accommodation, and anything else you need to survive. It forms a base layer of retirement, meaning if you spend all your savings, you will have this to fall back on. It is measured based on poverty though, so don’t expect a luxurious retirement relying solely on the age pension.

Review your insurance policies and make changes if needed

It’s a good time to take stock of our insurance policies and make sure they’re still meeting our needs. For many of us, our insurance needs will change as we move through different life stages – for example, when we get married, start a family, or approach retirement.

If you’re approaching retirement, you may be thinking about downsizing your home or taking up a new hobby that involves more risk. This could affect your insurance needs, so it’s worth reviewing your policies to make sure you’re still adequately covered. If you’re unsure whether your cover is still appropriate, speak to a professional guide who can assess your situation and provide advice on the best way to proceed.

Similarly, if you have children or grandchildren who are approaching adulthood, they may also need to review their insurance cover. Make sure they’re aware of the importance of having adequate cover in place as they enter adulthood and start building their own lives in Australia.

With all this in mind, now is a great time to review your insurance policies and make any necessary changes. By doing so and by following the guide, you can ensure that you and your family are properly protected in the years ahead.

Make a budget and stick to it

Making a budget is one of the most important things you can do when living on a fixed income. It can be difficult to stick to a budget, but it’s important to be prepared for retirement. The Australian Government’s guide to pensioners’ rights, published in 2022, includes information on how to make a budget and stick to it.

There are also many online resources available to help you make a budget and stick to it. If you’re living on a fixed income, make sure you take the time to make a budget and stick to it. It will save you money in the long run.

Stay healthy

As a retiree, it is more important than ever to stay healthy. Studies have shown that retirees are more likely to suffer from health problems, such as heart disease and arthritis.

To protect yourself and enjoy a happy retirement, here are a few tips for staying healthy:

Firstly, keep up with your guide visits, so that you can stay on top of any potential health issues. In particular, ensure that you get all the necessary screenings for common conditions like heart disease and cancer. Additionally, monitor your diet and make sure that you are getting plenty of vitamins and nutrients through fruits and vegetables.

Secondly, manage your stress levels by taking regular breaks, using relaxation techniques like yoga or meditation, or spending time with friends and loved ones. And finally, get adequate sleep every night so that you can stay energized during the day. With these tips in this guide, you can rest easy knowing that you are taking all the necessary steps to enjoy a happy and healthy retirement in Australia in 2022!

Enjoy your retirement

We all know that retirement is a time to enjoy life without the stresses of work and money, but too often people forget to take their own advice! If you’re looking to make the most of your retirement, here are a few tips to help you enjoy your golden years.

Don't spend all your time worrying about money

It’s important to have a financial plan in place, but once you’ve taken care of that, try to relax and enjoy yourself. There’s no need to count every penny – you can afford to splurge on a special treat every now and then.

Don't spend all your time doing chores

Yes, it’s important to keep your home in good shape, but there’s no need to slave away every day. Delegate some tasks to others or hire some help so that you can relax and enjoy your free time.

Don't spend all your time indoors

Get out and enjoy all that retirement has to offer. Take up a new hobby, travel to new places, or just spend time with friends and family. The world is your oyster – go out and explore it!

If you’re like most people, you probably don’t think about retirement until it’s too late. But with a little bit of effort, you can make the transition to retirement much easier – and even enjoyable! Follow our step-by-step guide to retirement living and planning and take advantage of all the benefits available to retirees in Australia. And if you need help along the way, Wealth Factory is here for you. We can help you save money for the retirement of your dreams. So what are you waiting for? Start planning today!

27/04/2022/by Rob Laurie

Keys to a Successful Retirement

When it comes to retiring in Australia, there are a few things that you need to take into account:

You’ll need to think about how much money you’ll need to have saved up; and
You’ll need to come up with a plan for generating an income stream in retirement.
downsizing your home can free up more money each month, allowing you to save more or enjoy more luxuries with less financial stress

While there are no guarantees in building wealth in retirement, there are certainly a few financial keys to a successful retirement that you can employ to help give yourself the best chance of achieving your financial goals.

In this blog post, we’ll take a look at the keys to a successful retirement in Australia. So read on and see if any of these strategies could work for you.

Start saving for retirement as early as possible

If you’re like most people, retirement is the furthest thing from your mind. After all, you’ve got bills to pay and a life to live. Why start thinking about retirement now when you’re still years away from retirement age? The answer is simple: the sooner you start saving for retirement, the more time your money has to grow. Even if you can only afford to contribute a small amount each month, it’s important to start saving now.

The sooner you start in building wealth in retirement, the more time your money has to grow. And if you’re not sure where to start, there’s no need to worry. There are plenty of resources available to help you plan for retirement, including financial planners and retirement calculators. So what are you waiting for? Start planning for retirement today!

Invest in a diversified mix of assets to help protect your money

When it comes to retirement planning, there’s no one-size-fits-all approach. However, one piece of advice that financial planners often give is to diversify your assets. This means investing in a mix of different types of assets, such as shares, property, and cash. The idea is that if one asset class goes down in value, the others will help to cushion the fall.

Of course, diversification isn’t without its risks. For example, if you invest in property in Australia and the housing market crashes, you could lose a lot of money. However, over the long term, diversification can help to protect your retirement nest egg. So if you’re looking to retirement-proof your finances, it’s worth considering a diversified mix of assets.

Save as much money as possible, especially in tax-advantaged accounts

In today’s world, it is more important than ever to start in building wealth in retirement. Luckily, there are a number of strategies that can help us to maximize our savings and make the most of our money.

We should strive to contribute as much as possible to retirement accounts like superannuation, which offer tax benefits that can help to increase our returns. Moreover, you can withdraw your super after you reached 60.
We can work with a financial planner who can offer expert advice on managing our money effectively and directing us towards the best possible investment opportunities.
We should be aware of Australia’s unique superannuation system, which allows all citizens over the age of 18 to set aside retirement funds in tax-advantaged accounts.

Whether we are just starting out in building wealth in retirement, saving journey or have been investing for years, these strategies will put us on the right path to achieving financial security in the future.

Review your expenses and make changes where necessary

When it comes to managing your finances, it is important to take a holistic approach and review all of your expenses in order to assess where you can make changes. This may involve working with a financial planner who can analyse your spending and help you prioritize retirement savings or other essential costs like mortgage payments or monthly utilities.

Additionally, looking at the big picture landscape of your finances can also clarify things like tax rates and the average cost of living in different parts of Australia. With the right tools and planning, it is possible to get a better sense of where you are spending your money and how you can reduce unnecessary expenses so that you can focus on what really matters.

So why not sit down today and start taking back control of your financial future? With a bit of discipline and self-reflection, there’s no reason why you can’t make real progress in building wealth in retirement and becoming financially secure.

Stay disciplined with your spending habits

As a financial planner, I often see people who are struggling to stay disciplined with their spending habits. Whether it’s retirement funds or just everyday expenses, it can be hard to stick to a budget. However, there are some simple tips that can help you stay on track.

Make sure that you have a clear idea of your goals. What are you trying to save for? retirement? A rainy day fund? Once you know your goals, it will be easier to make spending decisions that align with them.
Set up a budget and stick to it. Track your income and expenses so that you know where your money is going.
Be prepared for unexpected expenses. Having a cushion in your budget will help you weather any financial storms that come your way.

By following these simple tips, you can stay disciplined with your spending habits and reach your financial goals.

Make use of government benefits and tax breaks

To make the most of your retirement, it is essential to take advantage of all available benefits and tax breaks. Whether you are planning for retirement or already in retirement, there are numerous resources and tools at your disposal to help ensure a secure future.

The Moneysmart.gov.au website is a comprehensive resource for anyone seeking financial guidance and information. Whether you’re a young professional looking to start in building wealth in retirement or an experienced investor in need of expert advice, this website has everything you need to make informed financial decisions. With detailed resources on topics like retirement planning and choosing the right financial planner, as well as interactive tools and calculators to help you track your progress, the Moneysmart.gov.au website truly offers something for everyone.

And best of all, it’s tailored specifically to the needs and challenges of Australians, making it the go-to resource for all things money-related. So if you’re looking for information, support, or just a little extra motivation when it comes to managing your finances, visit the Moneysmart.gov.au website today!

Additionally, many financial planners offer retirement planning services that can help you map out your goals and make informed decisions about your finances. So, whether you are just starting out or looking towards the future, be sure to consider all the resources available to you and make use of them in order to maximize your retirement savings. After all, your retirement is too important not to get right!

Review your estate plan and update it as needed

As you approach retirement and look forward to spending more time with your family, it is important to take a moment to review your estate plan. This involves making sure that your assets and goals are properly coordinated in order to minimise taxes and other financial burdens for those you leave behind. A good first step is to work with a qualified financial planner, who can help you assess your current situation and determine the keys to a successful retirement.

Additionally, it is crucial to examine any tax implications that may arise from retirement and other life changes, such as if you move from the US to Australia. With careful planning and an eye towards the future, you can ensure that your retirement years are spent living the life of your dreams. So take some time today to evaluate your estate plan and make any needed updates – you’ll be glad that you did!

Make contributions to your superannuation whenever possible

Retirement planning can be a daunting task, but one of the best things you can do for your future is to start in building wealth in retirement by making regular contributions to your superannuation. Learn how much you can put into super. While it may seem like a long way off, retirement will eventually come, and you’ll want to be prepared.

A financial planner can help you figure out how much you need to save and when you should start contributing, but in general, the sooner you start, the better.

In Australia, there are caps on how much you can contribute each year, but if you’re able to make extra contributions, it can make a big difference to your retirement funds. So if you’re able to contribute to your superannuation, don’t wait – start today and enjoy a comfortable retirement down the line.

Consider downsizing your home to free up more money each month

Many people consider downsizing their homes as they approach retirement and transition into a new phase of life. This can be done for a variety of reasons, from clearing out clutter to making more room for family and pets. And perhaps the most obvious benefit is that it can free up more money each month, allowing you to save more or enjoy more luxuries with less financial stress.

To begin downsizing your home, it is important to consult a trusted financial planner. They will be able to assess your current situation and help you determine which expenses you can reduce in order to make downsizing feasible. Additionally, they can advise you on any tax implications or other considerations associated with retirement planning.

Another important factor is location – specifically, where in Australia do you want to settle? Whether it’s a smaller city or a rural town, there are many options available, each with its own benefits and drawbacks. Ultimately, the decision will depend on your retirement goals and priorities, but with the right guidance from an experienced professional, it can be easier than you think!

Invest in property or shares for long-term growth potential

The age-old debate of whether to invest in property or shares for long-term growth potential shows no signs of abating. Both have their pros and cons, and there’s no definitive answer as to which is the better option.

However, retirement planning expert Rob Laurie has some useful insights on the matter. “For most people, their home is their biggest asset, so it makes sense to use it as a retirement nest egg,” he says. “However, if you have the opportunity to invest in shares or property with long-term growth potential, it’s worth considering this as an option too,” he added.

Ultimately, the decision of whether to invest in property or shares will come down to your individual circumstances and goals. But retirement planning expert Trevor Collins says it’s worth considering both options before making a decision.

Plan ahead and be patient

In building wealth in retirement, to achieve real wealth, you need to be patient and plan ahead. Contrary to what many people believe, wealth doesn’t just come overnight; instead, it takes time and effort to build and maintain. This means that if you want to succeed financially, you need to think carefully about your choices and make a realistic plan for the future.

One of the best ways to do this is by working with a financial planner or advisor. These experts can help you set concrete goals based on your current income and expenses, as well as any long-term dreams or goals that you may have. They can also offer valuable advice and guidance along the way, ensuring that you stay focused on your ultimate goal of building wealth in retirement.

Another thing to keep in mind when trying to grow your wealth is that retirement should always be a priority. By planning ahead and saving regularly as early as possible, you will give yourself more options down the road when it comes time to stop working. So if you want to truly become wealthy over time, remember the importance of being patient and having a long-term plan – it’s all about thinking ahead!

The bottomline

While there’s no one-size-fits-all solution to retirement planning, following the keys to a successful retirement we’ve outlined will help you get on track for a comfortable future. If you need more help getting started, Wealth Factory can assist you with developing a plan that takes your unique needs into account. With our assistance, you can save money for the retirement of your dreams. What are you waiting for? Get in touch today!

27/04/2022/by Rob Laurie

Financial Planning: Looking at the Past to Plan Ahead

Introduction to Financial Planning

Financial planning means planning for the future. If you want to plan for the future, you should take a look at your current situation, assess and then write down what you want to do in the years to come. In professional terms, financial planning means taking a well-rounded look at your current financial situation and building a financial plan to achieve your financial goals. You can do financial planning yourself or you can do it through a financial planner.

Similarly, if you are serious about your personal finances and thereby financial planning, you should also take financial advice. One thing in that is to look at where you have come from and look at your past to see how to make sense out of your future. Looking at your past plan and aligning it with the future plan will help you get by many long years in financial survival than when you don’t look back and plan ahead.

On the other hand, if you do not have a financial plan, you must start somewhere and here is what you can do to get started.

Explore compound interest

One thing to do to invest in the future is to explore compound interest. Compound interest is one of the best ways to generate money over regular investments. Compounding encourages you to invest and reap the incredible benefits of simple investing. It also helps your money to grow exponentially. Once interest is added in the account, it starts earning the interest itself which increases the rate at which your account grows.

Go for personal insurance

To further improve your financial situation, it is also important to see if you have personal life insurance. If you have it, great, if you don’t, you should go for it. Certain personal insurances cover expenses of your loved ones as well so it is not a bad idea to go for those kinds of insurances either.

If you want a stable present and future, it is better to think from all ends to stay protected. If you have a growing family, go for family life insurance. On the other hand, if your children are becoming independent and your savings are growing, go for a simple insurance plan.

The key take away here is that you should keep a keen eye on your finances and think about things such as personal life insurance to keep your finances stable. Financial stability starts with well sought after plans and sometimes, it starts with personal insurance.

Think about the next 5-10 years

Financial planning also involves thinking about the next 5-10 years and how you will spend in those years. Additionally, if you are planning financially, you should look at where you are going to head from the present day till the next 5-10 years. Think about whether you can give yourself a pat on the back on your present and planned future or do you think you haven’t done so well? Nonetheless and irrespective, you must always take a look back at all that you have done to come up with a plan for the next few years to secure a pleasant future.

Conclusively

Financial planning is necessary if you want to succeed financially, both in the present and the future. If you are smart about financial planning, you will triumph greatly. Moreover, while you can plan financially yourself, sometimes, it is better to seek help from a financial planner. Financial planning helps you set goals. It is also a great source of motivation. It also helps you in taking action and in decision making. By the same token, financial planning helps in setting performance standards. It adds to emotional/health benefits and it helps in ameliorating financial outcomes as well.

26/04/2022/by Rob Laurie

12 Important Questions for a Financial Checkup

What is Financial Checkup?

The Financial Checkup is an opportunity to review your financial situation over the past year and ensure that you are still managing your money effectively. It is a good time to take stock of your income, expenses, savings, investments, and debt, and make any necessary adjustments to your financial plan to ensure that you are on track to meet your financial goals. This can help you avoid any potential financial pitfalls and make the most of your money.

Despite its status as a major economic power, Australia faces challenges such as stagnant wages, economic slowdowns, and increasing housing costs that are negatively impacting its economy and the wellbeing of its citizens.

According to the Melbourne Institute’s “Taking the Pulse of the Nation” report, 1/3 of Australians experienced financial stress due to the state of the economy. Additionally, 1/5 of Australians reported mental distress due to the country’s financial situation. The report also revealed a correlation between employment type and financial stress, with those on fixed-term contracts and those who are self-employed being more likely to experience financial distress. On the other hand, those in the hospitality and IT sectors were less likely to feel stress.

Feeling the pressure of economic struggles can be incredibly distressing. This can result in both financial and emotional stress. It can also be unsettling to realize that you are not in control of your finances. In an economy facing financial and personal difficulties, you may end up dealing with additional problems such as a lack of savings, which can have potentially life-threatening consequences.

If you are not in control of your finances, you may experience mental stress. However, even in a challenging economy, you can take control of your financial situation. It is crucial to perform a financial checkup regularly, which is to assess and manage your finances to maintain a sense of stability and happiness despite economic conditions.

In order to maintain financial stability, it is crucial to consult with a financial planner as soon as possible to get the best advice and guidance on managing your finances. The earlier you seek help, the more effective your financial plan will be.

It is advisable to perform a financial checkup on yourself before seeking help from a financial planner. If you are unable to answer “yes” to the following questions, it is likely that your finances are in a negative state and you should consider seeking professional assistance.

12 Important Questions for a Financial Checkup

Are you able to pay your credit card bills in full by the due date?
Do you stick to a monthly budget?
Are you able to sleep easily, knowing you will be able to pay your bills by the due date?
Do you know the total amount of your home loan?
Are you making your loan repayments on time?
Do you know what you will do if you lose your job tomorrow?
Do you have income protection?
Are you sure about your child’s financial future?
Do you have life/total and permanent disability insurance?
Are you sure about your financial position?
Are you and your life partner sure about your finances?
Are you aware of how much you hold in super?

In order to thrive in Australia’s fast-paced economy, it is essential to have a financial plan and regularly conduct financial checkups. The financial landscape is constantly changing, particularly during economic downturns, so it is crucial to take steps to protect your financial wellbeing in order to stay ahead of the game.

To protect yourself in a challenging economy, it is crucial to stay informed and plan your finances carefully. One way to ensure that your financial situation is on track is to consult with a financial planner. These professionals can help you create a comprehensive financial plan to help you survive and thrive in a volatile economy. There are many financial planners available in Australia, so be sure to choose one that is right for you.

12/04/2022/by Rob Laurie

Australian Federal Budget 2022 Summary

With the federal election only a couple of months away, it was no surprise to see an Australian federal budget filled with announcements that will appeal to the life of voters – such as cost-of-living relief payments, tax cuts, improved parental leave, small business incentives, and investing in healthcare and essential services.

While superannuation was largely untouched, there were several proposed changes to both individual and business taxation in the Australian federal budget.

Overall, the government focused on continuing its path to economic recovery through creating job opportunities, spending on large infrastructure projects, and encouraging business investment as stated in the Australian Federal Budget Summary.

Some of the measures stated in the Australian Federal Budget Summary are briefly discussed below.

Extension of temporary reduction in minimum drawn down rates

The government has announced a 12-month extension of the temporary 50% reduction in superannuation minimum drawdown rates for account-based pensions and similar products to cover the 2022-23 income year. This will apply to:

•Account-based pensions and annuities
•Transition-to-retirement pensions
•Term allocated pensions and annuities (also known as market-linked income streams).

Halving the minimum drawdown rates was originally announced in the Australian Federal Budget Summary as part of the response to the coronavirus pandemic.

The government stated that even though Australia has entered a period of economic recovery, there is still significant volatility in financial markets due to the ongoing impacts of the coronavirus and the war in Ukraine.

One-off cost of living tax offset for individuals

The government will provide a one-off $420 cost of living tax offset via an increase to the existing low and middle income tax offset (LMITO) for 2021-22. Combined with the existing LMITO, eligible low- and middle-income earners will receive a tax offset of up to $1,500 for the 2021-22 income year.

Currently, the LMITO amount is between $255 and $1,080 and is available for the 2018-19, 2019-20, 2020-21 and 2021-22 financial years. There was no further announcement to extend the LMITO. Therefore, the LMITO is currently due to end after the 2021-22 financial year.

The LMITO for the 2021-22 income year will be paid on 1 July 2022, when individual taxpayers submit their tax returns for the 2021-22 income year. The amount of offset is calculated by the ATO based on the individual’s taxable income.

Increasing the Medicare Levy and Low Income Thresholds

The government will increase the Medicare Levy low-income thresholds for singles, families, seniors and pensioners from the 2021-2022 income year. This is a routine increase and applies retrospectively from the beginning of the financial year.

Coronavirus tests tax deductible

The government restated its intention to introduce legislation to ensure that coronavirus tests (including PCR and Rapid Antigen Tests) are tax deductible when purchased for work-related purposes.

By making these tests tax deductible, it also ensures that businesses will not be subject to fringe benefits tax (FBT) on tests that are provided to employees for this purpose. This measure is expected to be applicable from the beginning of the 2021/22 tax year.

$250 Cost of Living Payment

The government will provide a once-off cost-of-living payment of $250 in April 2022 to eligible recipients of the following payments and to concession card holders:

• Age Pension
• Disability Support Pension
• Parenting Payment
• Carer Payment
• Carer Allowance (if not in receipt of a primary income support payment)
• Jobseeker Payment
• Youth Allowance
• Austudy and Abstudy Living Allowance
• Double Orphan Pension
• Special Benefit
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Card holders
• Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

Based on the Australian Federal Budget 2022 Summary, the payments are exempt from taxation and won’t count as income support for the purposes of any income support payment. A person can only receive one economic support payment, even if they are eligible under two or more of the categories outlined above. The payment will only be available to Australian residents.

Aged care funding to implement reforms in response to the Royal Commission

The government will provide $468.3 million over five years from 2021-22 to further implement the government’s response to the Royal Commission into Aged Care Quality and Safety. This funding is to continue ongoing reforms announced in the 2021-22 Australian Federal Budget.

This will include spending in five key areas:
• Home care
• Residential Aged Care Services and Sustainability
• Residential Aged Care Quality and Safety
• Workforce
• Governance

Temporary reduction in fuel excise

From 30 March to 28 September 2022:
The government has announced that it will reduce the fuel excise (and excise-equivalent customs duty rate) that applies to petrol and diesel by 50% for six months. The excise (and excise-equivalent customs duty rate) that applies to all other fuels and petroleum-based products (including LPG and biodiesel), except aviation fuels, will also be reduced by 50% for six months.

The government says this will result in a reduction in excise on petrol and diesel from 44.2 cents per litre to 22.1 cents per litre, which results in total savings (including GST savings) per tank of fuel of:
• $9.72 for a small hatchback with a 40 litre petrol tank
• $14.59 for a mid-sized SUV with a 60 litre petrol tank
• $19.25 for a large 4WD with an 80 litre petrol tank. It will take a while for this to flow through as current fuel stock will have paid this excise.

Conclusion

When compared to previous Australian Federal Budget years, it was a pretty quiet one in regards to superannuation and social security changes, which I must say is great. Some measures from the last Australian Federal Budget are still yet to be implemented. As usual, these are not all active now and will be brought in via parliament. If you are wondering how any of these might impact you, reach out and I will be happy to discuss further.

03/04/2022/by Rob Laurie

Is the Australian entrepreneur in you calling?

Recent reports show that the number of people working from home and conducting their work online has increased in Australia. It has also been confirmed that working from home can encourage higher levels of creativity and productivity.

In addition, these businesses also enable the creation and availability of an unlimited amount of goods and services. Currently, Australian home-based entrepreneurs, including both micro and small businesses, are driving the production of retail products and construction services, which are highly efficient and productive.

The Australian Small Business and Family Enterprise Ombudsman reported that the number of small and micro businesses in Australia has significantly increased from 2.06 million in 2016 to 2.3 million in 2020. These numbers are quite evident.

Alternatively, the Australian Bureau of Statistics reported that as of June 30, 2021, there were nearly 2.4 million businesses actively trading in the Australian economy, an increase of 3.8% or 87,806 businesses from the previous year.

If you are considering starting a home-based business in Australia, here are some tips to help you get started:

Create a Solid Business Plan

To successfully start a work-from-home business as an Australian entrepreneur, a well-defined business plan is essential. This plan should include a clear business structure and help to differentiate your business from competitors. It should also identify key factors for achieving success.

In your entrepreneurial business plan, it is crucial to include key details about your business, such as its values and goals. Additionally, you should research and outline your competition in the market. Finally, include strategies and plans for growth and development of your business.

The final business plan must be regularly reviewed and once it is finalised, it is necessary to move forward with implementing it.

If you want to start your own home business in Australia, you can apply for funding through the government. This can include grants from the Australian government website www.business.gov.au to help with initial costs.

Find out what business structure is right for you.

One of the factors to consider while establishing an online business in Australia is its legal structure.

It is crucial to determine whether you will establish your business as a sole trader, a company, or some other entity before proceeding.

It is crucial to consider the purpose of your business and seek advice from experts before deciding on the best way to set up your online business. A consultant, solicitor, or accountant can provide valuable insights and help you achieve successful results.

Once you have decided to register your business, it is necessary to register the business name. Similarly, obtaining an Australian Business Number (ABN) is required for starting a business. Additionally, having a Goods and Services Tax (GST) is necessary for your business. However, you can consult with your accountant for assistance with this process.

Apply for insurance

As an Australian entrepreneur, you may need business insurance to protect your company. There are various types of business insurance available, so it is important to educate yourself on the options. You can also consult with a financial adviser for assistance with your business needs.

Assess your office space and equipment needs

To operate a successful home business in Australia, it is essential to have a dedicated office space, an online presence through a website and social media, and a professional email address or business domain. Remember to maintain professionalism in all these areas.

In addition to the necessary equipment, having a dedicated phone line for your online business is crucial. This business phone will not only establish structured business hours, but it will also help establish your business as a separate entity from others.

In conclusion, it is crucial for your Australian entrepreneur business to have a strong brand with a consistent visual identity, including a well-designed logo and uniform colour palette. This will ensure that your business has a distinct and recognizable presence across all of its assets, such as websites and invoices.

Conclusion

Establishing an Australian entrepreneur business online requires dedication of time, space and effort. However, the rewards can be significant once it is successfully set up.

If you want to start an online business in Australia, Small Business Australia, the Australian Securities and Investments Commission, the Australian Taxation Office, and Money Smart can be helpful websites to visit.

Becoming an Australian entrepreneur can bring great rewards, but it’s crucial to follow the proper steps when setting up a business. Don’t rush the process, as setting up a business is not a daily occurrence. Every successful work-from-home business starts with an idea, so start working on yours today and create a steady income stream.

29/03/2022/by Rob Laurie

Financial Resolutions to Start the New Year

Many people set financial goals as New Year’s resolutions in order to achieve bigger and better things. These goals can help you save money and improve your financial situation. Financial resolutions may vary from person to person, depending on their current financial situation. By setting financial targets for the year ahead, you may be able to improve your financial health and achieve your goals.

If you want to set financial resolutions, here are some suggestions that can help.

Four important financial resolutions you should never forget to make

Pre-decide your financial goals

It is important to first determine your financial goals to successfully meet your financial objectives. January is the ideal time to assess your current financial situation and plan for the future. Make sure to write down your goals and review them regularly to ensure that you can achieve them throughout the year. By taking these steps, you will set yourself up for a successful new year.

Set a realistic budget for your household

It is important to establish a practical budget for your household to gain a clearer view of your financial situation and make wiser spending decisions in the future. This can also assist with paying off debt and saving money for both current and future needs.

Clean your filing cabinet

One of your New Year’s resolutions should be to organise your business financial records and keep them for at least five years as required by the Australian Taxation Office. These records should be clearly dated and presented in a way that the ATO can easily access them. You can use the ATO’s record-keeping evaluation tool to help you maintain these records properly.

For proper filing, it is crucial to clean each document. Additionally, it is advisable to get rid of unnecessary financial paperwork. Additionally, it is crucial to keep track of future necessary documents such as bills, bank statements, and invoices.

Regardless of what you have saved for your future financial planning, ensure that your financial plan is easily accessible.

Review the paperwork

When it comes to financial planning, it is important to review all relevant documents, starting with insurance policies. This includes life, car, and house insurance. Ensure that you are adequately covered and that your insurance is up-to-date. Additionally, review your premiums to make sure they are sufficient for the level of coverage you desire.

It is important to regularly review and update your will to ensure that your future plans are successful, as well as do some calculations to find the best mortgage deal. By regularly checking your paperwork and making sure everything is in order, you can avoid potential setbacks and be prepared for what lies ahead.

Business plans should be SMART. SMART stands for:

S– Be specific about your goals and define them clearly

M– Make sure you are measurable in defining and achieving your goals so that you know when you have achieved them

A– Make your goals are achievable

R– Make sure you are realistic in your expectations of these goals so that you can achieve your financial goals easily

T– Set up a time frame for achieving your financial goals.

The bottomline

If you are unsure about where to begin with financial planning, the New Year can be a good starting point. However, it is important to make sure your financial goals are SMART in order to avoid indecision.

If you need help with financial planning, hiring a financial planner can provide guidance and support in achieving your goals. A financial planner can also assist in ensuring a successful financial start and end to the New Year.

14/03/2022/by Rob Laurie

Are credit cards retiring in 2022?

Are credit cards retiring?

Credit cards were first introduced in Australia in 1974 and were met with great enthusiasm. People quickly embraced these convenient cards, which allowed them to pay for purchases with a simple swipe. Credit cards have come to be seen as reliable, convenient, and trustworthy in times of need.

Credit cards provide convenience and allow for immediate payment without the need to wait. They can be used for a wide range of transactions, and the bills are mailed to the cardholder’s home. To maintain their credit card usage, holders must pay their bills each month.

Credit cards have been the dominant form of financial payment for the last 40 years, but recently, there has been a shift towards other financial media to reduce charges and costs. Studies have shown that this trend started in 2015.

For example, in 2015 and after 2015, financial media such as “Buy Now and Pay Later (BNPL)” helped people buy things now rather than later. This provided financial relief and acted as a facilitator for financial transactions, although it is not a credit facility itself.

Observations have shown that “Buy Now and Pay Later” media have decreased the use of credit cards. Similarly, platforms like Afterpay and ZipPay emerged online after 2015. These platforms allow investors to pay off purchases in instalments. Due to the convenience they provide, these media have helped reduce credit card usage and improve the economy.

Credit cards and financial instruments such as “Buy Now and Pay Later” have both gained popularity. However, one key difference is that credit card purchases come with interest charges, whereas BNPL purchases do not. However, BNPL does have fees for maintaining the account, interest on missed payments, and late fees for unpaid fees.

BNPL platforms like Afterpay have gained significant popularity in Australia, with BNPL transactions seeing a 55% increase between 2019 and 2020 and a 3-fold increase in the last 2 financial years. However, data shows that 21% of Afterpay users incurred late payment fees in 2020, indicating a need for better financial management and possibly seeking financial assistance to avoid such fees.

In contrast, younger people tend to use credit facilities such as “Buy Now and Pay Later” more often. These individuals are often not financially stable and many are students who work part-time. Despite this, reports have shown that those who use BNPL are able to better manage their finances. However, those who do not use these services may end up in a downward financial spiral.

However, according to Choice.com, BNPL arrangements are often utilized by individuals facing financial difficulties due to their less stringent requirements compared to other payment options. Similarly, credit cards are often used by the general population for both short and long-term payments, regardless of their financial situation.

Despite the rise of new financial media in Australia, the use of credit cards decreased. In 2019, when BNPL usage increased, the Reserve Bank of Australia reported that the number of Australian credit card accounts dropped from 14.6% in March 2019 to 13.6 million in March 2020.

In order to obtain a credit card, an individual must go through a financial process. However, individuals who have existing debt are not eligible to receive credit cards. As a result, the usage of credit cards is low among the 22% of applicants who already have debt.

In conclusion, poor management of credit cards and financial instruments can result in financial distress. To avoid this, it is important to make regular payments and adhere to credit rules to prevent default.

Despite this, it is still true that the use of credit cards has decreased over time in Australia due to the rise of alternative payment methods.

The Australian government’s helpline offers assistance, advice, and relief for those in financial difficulty within Australia.

Alternatively, if you require assistance with managing your credit cards, you can consult with a financial planner to devise the most suitable financial strategies for you. It is also believed that the use of credit cards will decrease even further if financial payment methods and platforms such as BNPL offer enhanced security, stability, and financial relief.

28/02/2022/by Rob Laurie

How to maintain Strategic Financial Plan

What is Strategic Financial Planning?

Financial planning allows you to assess your present condition and plan for your financial future in life so you don’t make the same mistakes you made in the past. You may have more control over your finances by creating a strategic financial plan. You make money work for you rather than the other way around.

Strategic financial planning is, by its nature, forward-looking. What counts is where you are now and what you will do in the coming months and years. That said; there’s good reason to pause and take a look over your shoulder to see how far you have come. Why? Because taking stock of what you have achieved so far can spur you on to even greater things in the future.

Aside from congratulating yourself for having taken professional advice and working to a plan, pause for a look at where you’ve come from. It also provides an opportunity to review your current circumstances. Even the best laid plans need some tweaking to make sure they are optimised for the next few years.

Don’t have a strategic financial plan in life? In that case, it is well worth looking at what you may have missed out on and deciding to take action and do something positive about it.

Has compounding been working for you?

Much of our future financial planning, particularly financial security, relies on regular savings coupled with the power of compound interest. For example, if you set up a savings plan two years ago with an initial deposit of $10,000 plus weekly contributions of $100, and assuming an after-tax return of 6% per year, by now you will have earned $1,892 in interest.

Underwhelmed? If you’d had that same savings plan running for 10 years, the interest compounded to a more impressive $27,200, saving you a nice nest egg of $89,000. Keep going and the interest component will continue to accelerate.

Maybe you have done better in your financial planning than that, increasing your savings as your income has increased. But if instead you are thinking about what might have been, remember that the sooner you start, the sooner you will reap the rewards.

Are you protected?

A strategic financial plan is about more than savings. Protecting what you have is critical to your family’s security.

Over the years, have you enjoyed the peace of mind of knowing that your loved ones would have been financially secure if you had died or been unable to work? Now may be the time to review personal life insurance and start financial planning. As children become independent and savings grow, you may find yourself paying for insurance you do not really need. Conversely, if your family is growing or you have taken on more debt, maybe your life insurance needs a boost.

Where to from here?

So, how do you feel about the last five, ten, or twenty years? Can you pat yourself on the back, or do you feel like giving yourself a kick in the pants? Are you glad you took advice and started financial planning, or regret that you did not?

Whether it’s time for a review and a tweak or laying the foundation of a brand new plan, as a professional financial adviser, we are ideally placed to help you make the most of the coming years and decades.

11/02/2022/by Rob Laurie

Your future your super bill passed 2022

Your Future Your Super Bill Reforms Provide Opportunities

Significant advice opportunities have been created, particularly for older clients, as a result of the passing of the 2021 Federal Budget super proposals.

We summarise the Your Future, Your Super reforms to help you navigate the new rules as well as highlight key advice opportunities to maximise client outcomes in 2022 and beyond.

From July 1st 2022, the changes provide significant strategic advice opportunities, particularly in relation to older clients and super contribution strategies. The legislated changes include:

removal of the work-test requirement for non-concessional contributions (NCCs) and salary sacrifice contributions, for individuals aged between 67 and 75.
extending eligibility to make NCCs under the bring-forward rule to individuals aged under 75 at the beginning of the financial year
extending eligibility to make downsizer contributions to those age 60 or over, and
an increase to the maximum amount of voluntary contributions made to super that can be released under the First Home Super Saver Scheme (FHSSS).

The amendments may provide a range of new advice opportunities for clients who thought the super door was permanently closed to them. The strategic opportunities surpass simply boosting an individual’s super balance.

Check out my latest Retirement & Money podcast episode for more details around potential opportunities for you. These changes have been coming since Budget Night 2021, but now we can act on them from July 1st 2022.

10/02/2022/by Rob Laurie

Personal Financial Management Plan

It’s true, isn’t it? The complexities of the investment, taxation, home loan, and insurance industries have compounded greatly over the past years. That’s why much of our time at Wealth Factory is spent on continuing education and study so that we can pass on these changes and how they affect you, our client, in your own personal situation.

We believe that the key to prudent personal financial management planning is to conduct regular reviews of our clients’ investment and superannuation portfolios, and, of course, a review of their overall financial planning requirements.

It also provides you with an excellent opportunity to discuss issues such as how you can:

Review your super policies and potentially re-invest them into a more appropriate investment strategy. (Streamline, increase returns, save fees)
Look for ways to increase returns on your hard-earned dollars in a safe, secure, diversified environment.
And of course, look at the performance of your existing investments and how the markets have been performing in recent times.

Create your personal financial management plan

As a financial adviser, I honestly believe that it is my job to maintain regular contact with you and provide you with the ongoing service and advice that you deserve. Isn’t that what you expect from your financial adviser?

I urge you to ring or call the office to make an appointment at a time convenient for you.

01/09/2021/by Rob Laurie

AIOFP Video – state of the financial advice industry

AIOFP Statement

As a member of the Association of Independently Owned Financial Professionals (AIOFP), we are sharing this video that they produced outlining the state of the financial advice industry in Australia. If another political party was in power, they might have done similar things, but the legislators of the changes to financial advice, including having small businesses fund ASIC’s expenses, were put in force by the current Liberal Government.

The cost of providing financial advice has no doubt increased, but it is not because your adviser is greedy and wants to fleece you, but rather the cost of serving has increased significantly through double handling of fee disclosures and doubling the frequency of renewals. In the video released by AIOFP, they explain that financial advisers do a great job helping people with their retirement and money for the most part, and we are sick of being the whipping boys for the big banks who are responsible for most of the failures highlighted by the Royal Commission in 2018.

There has been so much change to regulation over the years, and not enough time to see the effectiveness of the changes before more legislation is introduced. There is an exodus of financial advisers leaving the industry, with the number of advisers expected to be cut in half by 2023. This will result in the goal the government had of making financial advice more affordable and more reliable for the life of Australians having the opposite effect and making financial advice something for the wealthy, further dividing the rich and poor in Australia.

Here’s the transcript of the video:

Australia has endured more than $40 billion of failed investment products since 1980. Financial advisors have taken all the blame. This is unfair. This current liberal government has been treating financial advisors badly over the last seven years. It’s left you paying a lot more for financial advice. Liberal politicians are favouring the big banks, and the banks are getting even richer. Now the banks want to replace financial advisors with telemarketers, robo advice and computers. See the problem with this? It’s going to lead to conflicted advice about their own products. That’s just plain wrong. The Liberals are assisting the banks by forcing advisors out of the industry with unfair measures. Many have lost their business. Others, sadly, have ended their own lives. It leaves the consumer, you, high and dry. The truth is, it’s the politicians, regulators, and the banks that are at fault for product failure. They have avoided accountability by blaming financial advisors. Financial advisors only give advice on the products that have been released by the regulator and managed by banks. Unfortunately for investors, the system has failed them repeatedly, not financial advisors. The federal election is approaching. Financial advisors need your help to send a clear message to all coalition politicians. To voice your concerns and tell them one thing: that unless things change, you will reconsider your vote. If you want to save $7,500 over the next three years with lower advice costs, don’t want to deal with bank telemarketers or computers to get advice; and instead, once your personal financial advisor to survive in business, and look after you. We all need to send a clear message to the coalition politicians. Enough is enough. Listen. Stop supporting the banks or you will lose your seat. We will put you last on the ballot sheet. It’s time for coalition politicians and banks to start acting in the best interest of consumers, not themselves. Your advisor will be in contact with further information shortly.

27/07/2021/by Rob Laurie

Superannuation – The greatest tax avoidance tool

Superannuation - the greatest tax avoidance tool

I’m okay paying tax, but as Kerry Packer famously said, “Of course I am minimising my tax.” And if anybody in this country doesn’t minimise their tax, they want their heads read because, as a government, I can tell you that you are not spending it that well, that we should be donating extra.”

First things first: If you are earning an income or have more complex financial affairs, it’s fine to pay for an accountant to help you. You do not know what you do not know. Their fee can be claimed on your tax return. Let me know if you are looking for an accountant and I can provide some options.

The first change is regarding how you can make superannuation contributions. No longer restricted to business owners, employees too can contribute to superannuation and then claim it back as a tax deduction with the same result as salary sacrificing without annoying your boss. Make sure to complete a ‘notice of intent to claim a tax deduction” form and provide it to your super fund before you complete your tax return. This is extremely important.

The second change is the rollover of concessional contribution caps. From 1 July 2024, you can each contribute up to $27,500 to superannuation per year for all individuals regardless of age, including employer contributions. Now the unused portion of this will rollover from previous years. This is called “Carry Forward Concessional Contributions“.

You can check this yourself by logging into your MyGov and going to the ATO portal. It will look like below, including a highlighted menu on how to find it.

So, in this example, the person could contribute up to just over $45k and claim it back as a tax deduction.

Of course, you wouldn’t do that for several reasons, including:

You didn’t earn $45k over the tax free threshold. There is no point in reducing your income below the tax free threshold, as you will still pay 15% contribution tax on your way into super.
Your superannuation balance was over $500k as of June 30, 2020, making you ineligible.
You can’t contribute if you are over age 67 and don’t meet the work test (working 40 hours or more in a 30-day period in the financial year).
You want to access your superannuation funds before retirement or age 60, whichever is longer. You need to balance your retirement goals with your lifestyle goals.

Another thing to consider is the government’s co-contribution. If your income is lower than average, you may be eligible. This allows up to a $500 co-payment from the government if you contribute $1000. There are more criteria, but you can check this calculator from the ATO website to see if you are eligible.

Check the general advice warning below or the disclaimer and not long until end of financial year, some funds have cut-off times more than a week before.

10/06/2021/by Rob Laurie

2020-21 Australia Federal Budget Overview

Taxation

Tax residency rules in the 2021 Australia Federal Budget

Based on the 2020–2021 Australia Federal Budget, the Australian Government plans to replace the current individual tax residency rules with a simple primary test: a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.

Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable, objective criteria.

The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

Increasing the Medicare levy low-income thresholds

According to the Australia Federal Budget Report, from 1 July 2020, the threshold for singles will be increased from $22,801 to $23,226.

The family threshold will be increased from $38,474 to $39,167.

For single seniors and pensioners, the threshold will be increased from $36,056 to $36,705.

The family threshold for seniors and pensioners will be increased from $50,191 to $51,094.

For each dependent child or student, the family income thresholds increase by a further $3,597 instead of the previous amount of $3,533.

Low and middle income tax offset

The Low and Middle Income Tax Offset (LMITO) will be retained for the 2021-22 Australia Federal Budget.

The LMITO provides a reduction in tax of up to $1,080.

Taxpayers with a taxable income of $37,000 or less will benefit by up to $255 in reduced taxes.

Between taxable incomes of $37,000 and $48,000, the value of the offset increases at a rate of 7.5 cents per dollar to the maximum offset of $1,080.

Taxpayers with taxable incomes between $48,000 and $90,000 are eligible for the maximum offset of $1,080.

For taxable incomes of $90,000 to $126,000, the offset phases out at a rate of 3 cents per dollar.

The LMITO will be received on assessment after individuals lodge their tax returns for the 2021-22 Federal Budget.

Employee share schemes

As stated in the Australia Federal Budget Report, the cessation of employment taxing point will be removed for the tax deferred employee share schemes (ESS) that are available for all companies.

Currently, under a tax-deferred ESS, where certain criteria are met, employees may defer tax until a later tax year (the deferred taxing point).

The deferred taxing point is the earliest of:

Cessation of employment (proposed to be removed)
In the case of shares, when there is no risk of forfeiture and no restrictions on disposal
In the case of options, when the employee exercises the option, there is no risk of forfeiting the resulting share and no restriction on disposal, or
The maximum period of deferral of 15 years.

This change will result in tax being deferred until the earliest of the remaining taxing points.

Self-education expense

The current exclusion, making the first $250 of deductions for prescribed courses of education not deductible, will be removed from the first income year after the date of Royal Assent of the enabling legislation.

Super/Superannuation

First Home Super Saver Scheme

The maximum releasable amount of voluntary concessional contributions and non-concessional contributions under the First Home Super Saver Scheme (FHSSS) will increase from $30,000 to $50,000.

According to the Australia Federal Budget report, eligible contributions made from 1 July 2017 up to the existing limit of $15,000 per year, will count towards the total amount able to be released. This will apply from the start of the first financial year after Royal Assent of the enabling legislation, which is expected by 1 July 2022.

There will also be four technical changes:

Increasing the discretion of the Commissioner to amend and revoke applications
Individuals will be able to withdraw or amend their applications prior to them receiving a FHSSS amount, and allow those who withdraw to re-apply releases in the future
Allowing the Commissioner to return any released FHSSS money to superannuation funds, provided that the money has not yet been released to the individual
Clarifying that the money returned by the Commissioner to superannuation funds is treated as the funds’ non-assessable non-exempt income and does not count towards the individual’s contribution caps.

These measures will apply retrospectively from 1 July 2018.

Downsizer contributions

As stated in the Australia Federal Budget Report, the eligibility age to make downsizer contributions will be reduced from 65 to 60 years of age.

All other requirements remain unchanged.

The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which is expected to be prior to 1 July 2022.

Abolition of work test for certain contributions

In accordance with the Australia Federal Budget report, individuals aged 67 to 74 years (inclusive) will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.

These individuals will also be able to access the non-concessional bring forward arrangement subject to meeting the eligibility criteria.

Individuals aged 67 to 74 years will still have to pass the work test to make personal deductible contributions.

The measure will have effect from the start of the first financial year after the date of Royal Assent of the enabling legislation, which is expected to have occurred prior to 1 July 2022.

Superannuation Guarantee Eligibility

According to the Australia Federal Budget report, The government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.

This measure is to have effect from the start of the first financial year after the date of Royal Assent of the enabling legislation, expected to have occurred prior to 1 July 2022.

Legacy retirement product conversions

As stated in the Australia Federal Budget report, members will be provided with a temporary 2 year option to transition from legacy retirement products such as market linked (TAPS), life expectancy and lifetime pensions and annuity products to more flexible and contemporary retirement products such as account-based pensions.

Participation in this option is not compulsory. Retirees with these products who choose to will be able to completely exit these products by fully commuting the product and transferring the underlying capital, including any reserves, back into a superannuation fund account in the accumulation phase. From there, it can be used to commence a new retirement product, pay a lump sum benefit, or retain the funds in that account.

Any commuted reserves will not be counted towards an individual’s concessional contribution cap and will not trigger excess contributions. It will, however, be taxed at 15% in the fund as an assessable contribution to the fund.

The existing social security treatment that applies to the legacy product will not transition over, but exiting the product will not cause a social security debt to arise. Existing rules for income streams will continue to apply, so transfer balance cap rules apply to the new income stream.

The existing transfer balance cap valuation methods for the legacy product, including on commencement and commutation, continue to apply.

The following products are covered under the proposed new rules, i.e., can be commuted: market-linked (TAPS), life-expectancy and lifetime products which were first commenced prior to 20 September 2007 from any provider, including self-managed superannuation funds.

The following products are excluded from the proposed new rules, i.e., they cannot be commuted: flexi-pension products offered by any provider, and lifetime products offered by large APRA-regulated defined benefit schemes or public sector defined benefit schemes.

The measure will have effect from the first financial year after the date of Royal Assent of the enabling legislation.

SMSF and small APRA funds

The central control and management test safe harbour period will be extended from two to five years for SMSFs, and the active member test will be removed for both fund types to allow SMSF and SAF members to continue to contribute to their fund whilst overseas.

Effective from the start of the first financial year after the date of Royal Assent of the enabling legislation, which is expected to have occurred prior to 1 July 2022.

Social Security

Child Care Subsidy

Beginning July 11, 2022, the Child Care Subsidy (CCS) rate will be increased by 30 percentage points for the second child and subsequent children aged five years and under who are in care, up to a maximum CCS rate of 95% for these children.

From 1 July 2022, the CCS annual cap of $10,560 per child per year will be removed.

Aged Care

As part of a multi-faceted response to the Aged Care Royal commission, the release of 80,000 additional home care packages over two years from 2021-22. This will bring the total number of home care packages to 275,598 by June 2023.

Aged Care funds will also be provided to ensure greater access to respite care services and payments to support carers.

Newly arrived resident's waiting period

According to the Australia Federal Budget report, From 1 January 2022, the existing system that applies different waiting periods to different welfare payments will be replaced by applying a consistent four-year Newly Arrived Resident’s Waiting Period across most welfare payments.

Increased support for unemployed Australians

From 1 April 2021, increase the base rate of working-age payments by $50 per fortnight for JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Partner Allowance, Widow Allowance, Special Benefit, Farm Household Allowance and for certain Education Allowance recipients under the Department of Veterans’ Affairs Education Scheme

From 1 April 2021, increase the income-free area of certain working-age payments to $150 per fortnight. This applies to JobSeeker Payment, Youth Allowance (other), Parenting Payment Partnered, Widow Allowance and Partner Allowance

The temporary waiver of the Ordinary Waiting Period for certain payments will be extended for a further three months to 30 June 2021.

Pension Loans Scheme

The government aims to improve the uptake of the Pension Loans Scheme by allowing participants to access up to two lump sum advances in any 12 month period, up to a total value of 50% of the maximum annual rate of the Age Pension.

A “No Negative Equity Guarantee” will be introduced so borrowers will not have to repay more than the market value of their property.

Job Support and Creation

Temporary full expensing extension

Temporary full expensing will be extended to allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.

Temporary loss carry-back extension

The Government will extend the ability for eligible companies to carry back (utilise) tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year when they lodge their 2022-23 tax return.

Companies with aggregated turnover of less than $5 billion are eligible. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry-back does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

Other Announcements

Family Home Guarantee

The Government announced the establishment of the Family Home Guarantee with 10,000 guarantees made available over four years to single parents with dependants. The Family Home Guarantee allows them to purchase a home sooner with a deposit of as little as 2%.

New Home Guarantee

Expand the New Home Guarantee for a second year, providing an additional 10,000 places in 2021-22. First home buyers seeking to build a new home or purchase a newly built home will be able to do so with a deposit of as little as 5%.

Home Builder Extended

The commencement requirement for the Home Builder program will be extended from six months to 18 months for all existing applicants. The extension will only apply to existing applicants who signed building contract up to 31 March 2021 and will provide an additional 12 months to commence construction from the date that the building contract was signed.

For further information of the overview of 2020-2021 Australia Federal Budget, click here.

11/05/2021/by Rob Laurie

The New Income Protection Rules in Australia

The New Income Protection Rules

Do you rely on working and earning an income?

If you had an accident, illness, or injury that prevented you from being able to work (and therefore earn income…), would that loss of income negatively impact your family and/or your standard of living?

Do you have family and loved ones that rely on you and who depend on you to provide an income for them?

If you said “yes” to any of these questions, then you need to act now!

What is the problem?

In October 2020, the Australian Prudential Regulation Authority (APRA) decided that Australians would no longer be able to access proper income protection from October 1st, 2021.

There have been significant increases in both the number of claims and the sums insured being paid out, which has seen losses across the life insurance industry. For instance, over the past 5 years, the industry has collectively lost around $3.4 billion, with $1 billion of that coming in the 12 months to September 2019, and directly attributable to retail income protection policies.

The fact is that income protection and other insurance premiums are not high enough to cover the volume of claims being paid out.

While it is tempting to “scoff” or sit back and think sarcastically ‘poor insurance companies,” the fact is that many of them are losing money and won’t be able to return a dividend to shareholders. This is a serious problem. If insurers keep losing money at this rate, the result could be insurers withdrawing from the market all-together and potentially even collapsing, leaving policyholders high and dry.

What is the government's solution?

To make sure that the retail income protection market remains viable, APRA has proposed several changes that include:

For income protection policies issued after March 31st, 2020, agreed value income protection will no longer be available. This has already happened. If you have an agreed-value income protection policy (instead of indemnity), you cannot replace it with another agreed-value policy. This is similar to car insurance – with agreed value, you know what you will get, whereas with market value, you get your sum insured or what income you can prove (market value, if you will), whichever is less.
For Income Protection policies issued from July 1, 2020, benefits will be based upon the insured person’s income over the preceding 12 months. Current quality coverage usually looks for the best 12 months in the proceeding
The policy’s term cannot exceed five years. This means if you have a change in occupation (say you go into underground mining), past times (start jumping out of planes or racing motorcycles), or financials (business gets tough), your cover can be reviewed, causing premium changes or even potentially withdrawing the offer to provide cover at all. Because life is full of surprises, if you have any medical issues and your current provider no longer wants to cover you, you may find yourself on your own. This is the most important change!

How do these changes affect you?

Firstly, if you already hold a retail income protection policy, you will not be affected by these proposals.

However, if you are considering applying for income protection or making any changes to your existing policy, it is imperative to act now in order to avoid being affected by the changes.

We are very concern about the changes above as we believe that income protection insurance is the cornerstone of a financial plan. Especially if your income is important to you, you have a family or assets to protect in life or significant debt which needs to be protected.

What do you need to do?

If you think this may affect you or you are considering income protection insurance, you need to call to schedule a time and get it in place before the changes come into play in October. After this time, full-coverage income protection will not be available. This is also important if you are thinking of making changes or cancelling your existing cover. You may not be able to re-instate what you had in place after the October cutoff.

Once implemented, these will be some of the most significant changes to the personal insurance industry to date.

For more information or to see how this affects you call the office on 07 4659 5222.

After October, I’m not sure how anyone with an existing income protection policy is going to find alternatives without being disadvantaged.

15/04/2021/by Rob Laurie

Transfer Balance Cap Australia Explained

What is Transfer Balance Cap?

The government introduced a Transfer Balance Cap (TBC) in July 2017, which effectively limits the total amount of superannuation available to be transferred into a tax-free retirement phase pension. 1 July 2021 will be the first time this cap has been increased, in line with the Consumer Price Index (CPI).

One of the main advantages of moving super savings into a retirement pension is that the investment returns in your retirement pension account, as well as any pension payments you get from age 60 onwards, are tax-free.

Depending on personal circumstances, every individual will have their own Transfer Balance Cap (TBC) which is $1.9 million. An individuals’ TBC is equal to the general TBC at the time of commencing a superannuation income stream. If an individual uses a proportion of their TBC, their personal TBC is calculated with a proportional indexation in line with the CPI increases to the general TBC. Details of the level of an individual’s TBC will be available through their myGov account.

Changes to Caps

Indexation of the general Transfer Balance Cap (TBC) will also change the cap that applies to eligibility criteria to make non-concessional contributions and to access the government co-contribution and the super related tax offsets. Commencing 1 July 2024, the new cap for these arrangements will be $1.9 million. For capped defined benefit income streams, the cap will increase to $118,750 (currently $106,250).

There won’t be a single cap that applies to everyone when the general transfer balance cap is indexed to $1.9 million. Depending on their circumstances, each individual will have a personal transfer balance cap of $1.9 million.

Clients who started receiving retirement income (between July 2017 and June 2023) won’t be limited by the new $1.9 million cap. Instead, their cap will be an amount between $1.6 million and $1.9 million, increasing by $1,000 increments.

How might this impact to you?

Individuals may be able to benefit from this CPI increase if they have started using their retirement income stream, but have not fully utilised their current Transfer Balance Cap (TBC) by 1 July 2024.
Individuals who may be considering starting their retirement income stream soon may be better off deferring starting this income stream until after 1 July 2024.
Individuals wanting to make non-concessional contributions to superannuation will have an increased cap to determine their eligibility to make these contributions.
Individuals wanting to access government co-contribution or spouse tax offset government benefits will have an increased cap to determine their eligibility.

If you have any questions about the financial changes to these caps, or believe you may be impacted by these changes, contact us for discussion.

01/04/2021/by Rob Laurie

Let your will legal document speak for you

When you’re here to supervise your worldly affairs, you can ensure your voice and current wishes are heard and heeded. But what happens when you’re no longer here? What voice will be heard? Will it be your most recent voice; an old voice from several years ago; or the voice of government legislation? Unfortunately, it’s often voice number two, or worse, three.

What is a will legal document?

A will legal document or simply “will” outlines your wishes for property distribution and the guardianship of any minor children. Those wishes may not be carried out if you die without a will legal document. Moreover, your heirs may end up spending more time, money, and emotional energy after you pass away to settle your affairs.

If your will and other estate arrangements have not recently been reviewed, you risk your current voice not being heard. If you have overlooked making it altogether, the government decides how your estate is to be distributed. This reinforces the importance of keeping all of your estate arrangements current. That said, even with the best of intentions, the most up-to-date can be challenged. There have been countless court dramas over wills involving claims and counter-claims. It’s important to remember that people can change, form new relationships, and take advice from different sources.

While the will remains the centerpiece of estate planning, there are additional tools you may not be aware of.

The Insurance Option

An insurance policy taken out on your own life and owned by you becomes part of your estate and is subject to challenge.

However, if your life insurance policy nominates someone other than you as the beneficiary, it does not form part of the estate. It is separate from the will legal document and not subject to challenge. This feature can make insurance an important part of sound estate planning. If there’s any possibility your wishes may not be carried out after you are gone, it might be useful to seek a financial advice about the value of a life insurance policy.

The Super Solution

You may think super is included in your estate and dealt with through a will legal document. Not so. The trustee of your superannuation fund determines how your super is paid upon your death. You may identify a “preferred beneficiary”, however, the fund trustee can override this decision. If you don’t want this to occur, you should complete a binding death benefit nomination, and ensure this is kept current.

Binding Death Benefit Nominations

Superannuation legislation allows you to specifically nominate, with certainty, who will receive your super following your death. These nominations must be in writing and clearly state the names of beneficiaries and any split details between multiple beneficiaries.

Some funds offer non-lapsing binding nominations. However, many binding nominations must be renewed every three years and are only valid if you nominate a dependent. You may also nominate your estate. Binding nominations are still relevant if you have an SMSF.

To ensure it is your voice that takes final control of what you have worked hard for, it is important to see professional advice, which may include consulting an estate planning specialist. If you have any questions, give us a call and we’ll be able to point you in the right decision.

You should be aware that having a will legal document has numerous benefits. Without it, you leave important decisions to a local court and the rules of your state. You won’t be able to choose who inherits your property or other assets. Furthermore, not having a will legal document can make it more difficult for your loved ones to deal with your estate when you pass away.

22/03/2021/by Rob Laurie

Things to Consider When Making a Tree Change

Living in the city can be overwhelming, which is why many people are opting for a tree change—relocating to the countryside to enjoy a simpler lifestyle. With the rise of remote work, more individuals are considering this option.

This article outlines important factors to think about before uprooting your life and moving to a small town.

Housing Affordability

Consider the cost of buying or renting a home in the countryside. Properties in rural areas are generally more affordable than in urban areas. For example, a modern 4-bedroom family home in Wodonga can be rented for about $390 per week, whereas a similar home in Glen Waverley would cost around $610. Buying a comparable home in Orange would be slightly over $500,000, while in Hornsby, it could exceed $1 million. Websites like Domain can help you find properties in your search.

However, keep in mind that there are other factors to consider. Some rural towns cover large areas, leading to higher maintenance costs and increased council and water rates due to fewer residents. If you’re in a high-risk bushfire zone, insurance premiums may be higher, and building in such an area could require costly modifications to meet fire safety standards. Additionally, living in the countryside may require adjusting your lifestyle, as eating out and shopping frequently can be more expensive.

Make sure to calculate all costs associated with a tree change. Consult local councils about rates and levies, carefully review the Section 32 when buying land, and understand all zoning requirements.

Work Opportunities

Government incentives often encourage industries and businesses to move to regional areas, resulting in the growth of employment opportunities. Before finalising your decision, it’s wise to check the job market in your desired area and, if possible, secure a job beforehand.

Making It Work

Remember that living permanently in the countryside is different from a relaxing holiday. Consider the following aspects:

Schools: Research the quality of schools in the area you plan to move to.
Medical Facilities: Assess the accessibility and availability of medical services.
Community Infrastructure and Activities: Find out what community resources and activities are available.

In rural areas, access to necessary services may be limited, and you may need to travel long distances. Some areas might lack local water access, requiring rainwater tanks or alternative supplies. Electricity connections can also be unreliable in certain regions. Additionally, investigate internet and phone connections, especially if you intend to work from home.

Before making a tree change, conduct thorough research and create a plan to ensure a smooth transition.

A tree change can be a fantastic experience, but it’s not for everyone. Consider the impact on your lifestyle and finances before deciding to relocate.

Consulting a financial adviser can provide you with peace of mind by exploring various strategies and helping you make an informed decision. If you still feel that a tree change is right for you, embrace the new life and enjoy the experience to the fullest.

14/03/2021/by Rob Laurie

Record Housing Loan Commitments Continue

In December 2020, Australia witnessed an unprecedented surge in housing loan commitments, reaching record-breaking levels. The Australian Bureau of Statistics (ABS) reported a substantial increase in owner-occupier home loans and first home buyers taking advantage of favorable market conditions. This article delves into the details of this remarkable trend, highlighting the contributing factors and implications for the housing market.

Record-breaking Housing Loan Commitments

In December 2020, the value of new housing loan commitments soared by 8.6%, reaching a staggering $26 billion. This represented a remarkable 31.2% increase compared to December 2019. Notably, owner-occupier house finance commitments experienced a significant rise of 8.7%, amounting to $19.9 billion, indicating a substantial 38.9% year-on-year increase.

Government Initiatives and Low Interest Rates

The surge in housing loan commitments can be attributed to the combined effect of various government initiatives and historically low interest rates. Initiatives such as the HomeBuilder grant, which was implemented in June, played a crucial role in boosting the construction industry. The value of building finance commitments increased by a remarkable 17.1% in December, doubling since the introduction of the HomeBuilder grant.

First Home Buyers and Investment Loan Commitments

First home buyers emerged as key contributors to the surge, with owner-occupied first-home buyer finance commitments increasing by 9.3% in December, reaching an impressive 15,205 commitments. This represented a remarkable 56.6% increase compared to December 2019, marking the highest number of commitments since June 2009. Notably, a small portion of first-time buyer loan commitments, 4.2%, were for investment purposes.

Regional Trends and Market Revival

The increase in housing loan commitments was observed across most states and territories. In Victoria, after a 19.6% surge in November, owner-occupied house finance commitments increased by 20.1% in December, indicating a revival in property market activity following the lifting of COVID-19 restrictions.

Insights from ABS Ratios

The ABS previously published first-home buyer ratios, which provide insights into the proportion of owner-occupied first-home buyer loan commitments. Although the ratios no longer accompany the time series spreadsheets, they remain valuable indicators when used with caution. The ABS distinguished two ratios: the proportion of first-time homebuyer loan commitments to total commitments for housing (excluding refinancing) and the ratio of first-time homebuyer loan commitments to overall housing loan commitments (excluding refinancing).

The Australian housing market experienced a historic surge in housing loan commitments, driven by a combination of government initiatives and historically low interest rates. The record-breaking figures in owner-occupier and first home buyer commitments signify increased activity in the real estate sector. As always, seeking guidance from licensed financial advisors tailored to individual needs is crucial when navigating lending financing options.

07/03/2021/by Rob Laurie

The Autumn season 2021 update is here!

Vaccine rollout accelerates as bond yields spike

We talked previously about equity markets rallying in anticipation of the vaccine rollout and the positive impact of the gradual reopening of economies. The global vaccine rollout is now well underway. The one concern is that the new COVID-19 variants (UK, South African) will require updated vaccines.

In Australia, the recovery from COVID-19 is well underway and the economy is not as bad as initially feared. In August, the RBA forecast unemployment to be around 10% by the end of 2020, and still be above 7% by the end of 2021. Unemployment peaked at 7.5% in July 2020 and fell to 6.6% in December.

According to Dr. Stewart Lowe (RBA Governor), the main two reasons for this being:
• Our success in containing the virus which limited the extent of lockdowns.
• Government fiscal policy support has been bigger than expected, at around 15% of GDP.
The massive Quantitative Easing (QE) program continues in the US, while in Australia, the RBA doubled its QE program to $200 billion. The program is due to run until September, but there is a strong possibility it will be ongoing.

Dr. Lowe said the board was not expecting to increase the cash rate for “at least three years “, while the US Fed sees no material movement in US interest rates until 2023. They do not expect the jobs market to deliver strong wages growth to Australian workers until at least 2024. The implication is extremely low yields in fixed interest for the next few years. These settings strongly favour Growth Assets in terms of yield and total return.

Company earnings are on the UP

Economies and companies are rebounding. Brokers are forecasting Australian June 30 earnings to get back to pre-pandemic levels. According to UBS, with around 40% of the ASX 100 having reported, earnings per share growth estimates for the 2021 financial year have been revised up 2.1% to 28.8%.

However, valuation is an issue, particularly in the US. Australian equities (ASX 200) trading at a PE (price-to-earnings ratio) of 19.5x at 31 December 2020 are now trading at over 20 times June earnings. The US (S&P 500) is currently trading around 22.5x, well above long term average levels of around 17 times. Very low interest rates and strongly rebounding economies (e.g. US forecast growth around 6% in 2021) are the main justification for current valuations.

The major issue in markets right now is the sharp rise in long-term bond yields, signalling that markets are worried about future inflation. Higher growth can also lead to higher interest rates. Whatever the reason, higher bond yields normally result in lower PE multiples for stocks.

The US 10-year bond yield has increased from around 0.8% in late October 2020 to over 1.3%, which is about its pre-COVID-19 level. The move in Australia’s 10-year bond yield has been even more dramatic, rising from around 0.8% to 1.68%. The spike in yields has led to underperformance in high PE tech stocks (growth stocks in general) and prompted a move into more cyclical or economically sensitive stocks, such as financials and resources.

This should be positive for Australian equities relative to global equities given the proportion of cyclical stocks in our market. One ‘downside’ to this cyclical recovery has been the strength of the Australian dollar which impacts foreign earnings and is a drag on domestic economic growth and employment growth. One of the major reasons for the QE program by the RBA is to limit the rise in the Australian dollar, a battle it is currently losing.

We will be maintaining our strategic weighting to growth assets but we would be cautious in the short-term. It is natural for bond yields to rise as growth picks up, but we are closely watching the current move. We are still not at a level of interest rates which would significantly impact the broader market, but we would certainly like to see the trajectory of this rise start to flatten out.

07/03/2021/by Rob Laurie

Gamestop – What is happening on Wall Street?

What is Gamestop?

What is GameStop and what on earth does it have to do with us in Australia? Well, the market volatility late last week and likely this week, involves video games an online reddit community and shorting stocks and Robinhood. Brace yourself, it’s going to get weird.

GameStop Corp is an American video game, consumer electronics, and gaming merchandise retailer. The company the world’s largest video game retailer, operating over 5000 stores throughout the United States, Canada, Australia, New Zealand, and Europe, trading under mainly EB games locally.

So, what does shorting a stock mean?

A short position is a practice where an investor sells a stock that he/ she doesn’t own at the time of selling; the investor does so by borrowing the stock from some other investor on the promise that the former will return the stock to the latter on a later date.

A few hedgefunds took out massive short positions on GameStop. There isn’t anything illegal or particularly unethical about that. It is just a bet the share price will drop.

The online community involved is a subReddit called wall street bets. The decided to try and pump the price of GameStop up forcing these hedge funds to make a loss to see if it would work and for a bit of fun. It worked. As of last week the losses are estimated at $20b. No big deal in scheme of things and short positions often fail. AMC Entertainment, a cinema company also benefited from this buying spree.

What is causing concerns is that the price of the stock has been manipulated by social media and online trading platforms. Ultimately the stock is overvalued, but the hedge funds have to buy it back at 30 days regardless of the price. Some investors will make money, many will lose money as the price eventually returns to normal. But from what I can tell from reading Reddit comments, they don’t care about losing a little money each, they just want to win the game. This is a form of protest against wall street it seems.

Most of these trades were done through online trading platform Robinhood, who responded by blocking trades which caused much uproar, and they followed up with limiting trades causing the GameStop share price to crash. This has consipracy theorists blaming Robinhood and accusing them of being in bed with hedgefunds, but they claim it is because the trades need to go to a clearing house for a few days to settle. Robinhood appears to be protecting the hedgefunds. Google removed over 100,000 one star reviews on the app store for Robinhood fro irate consumers.

Supporters even bought a billboard in Times Square New York to further pump GameStop. “$GME GO BRRR,” blared a digital ad on the corner of 54th and Broadway in Manhattan. The ad ran for an hour on Friday.

This has put a shockwave through wall street and caused a sell off, and Australia just follows as usual with a $46 billion sell off. Investors like the perception of integrity in the stock markets, whether or not this is true. The media with the news stories has caused fear of more manipulation to come.

It will be an interesting week for sure. I would expect the volatility to be short term.

As always if you have concerns around this volatility and what it means for you, please reach out to us.

31/01/2021/by Rob Laurie

2020 – The year that was Wealth Factory

Quick Overview of Wealth Factory 2020

It’s December. It’s been a massive year!

And I just wanted to take a couple of seconds to reach out, say g’day and do a quick overview of the year that was here at Wealth Factory.

Personally

I adopted another dog ‘Coda’ from a neighbour and spent a bomb on having skin cancers removed from ‘Baxter’ (right). Totally worth it.

I’ve started back at the gym recently (to try and burn these COVID kilos away… haha) and getting back into a routine after all the disruption in 2020. You might know I like to play with cars and motorbikes and this year was no different. I built up the motor in my Honda Monkey for a little more pep and put over 10,000km on my Harley so pretty happy with that. I have some project cars which as usual didn’t get any attention. Hey, I was busy!

I think I must have been lucky timing my US trip last September, as I don’t know how long it will be until it recovers from COVID cases. But other than a trip to Perth in February, I didn’t get away this year. Maybe next year.

On the business side – we’ve worked long and hard this year.

We’ve made some important changes and spent a lot of time working on the ‘back-end’ – the systems and processes side of the business, to make things even more streamlined and increase our capacity…

We love doing what we do and I am now REALLY happy with how the business is setup and out new Licensee – Lifespan Financial Planning. The new office is great, however I have ordered a new slightly smaller table to make things less cosy.

I told you last year big things were on the way. In 2020 we changed:

Our name to Wealth Factory – this one is long term!
Our licensee from AMP to Lifespan
Our address to 300 Ruthven Street Toowoomba

We have great back-office support. We’ve upgraded some of our tech. We installed a brand-new CRM system to help us with end-to-end processing and communication, and we’re currently getting trained up on the latest version of our AdviceOS financial advice software that you may have heard me talking about before.

It’s a seriously big ‘beast’, and we’re getting to know all the additional things we can do with it to help your strategic decisions. Can’t wait to show you what we can do for you.

We helped you – our clients – achieve your goals in 2020.

We had 4 client’s move from working life into full retirement mode, and another 3 transition from full to part-time work… 2 & 3 days a week, instead of 5 & 6 days a week – which is pretty cool.

They’re happier now, and also set up for the years ahead.

Your investments and the markets generally have been ticking along quiet well… Albeit there has been some pretty big swings and fluctuations…, things have played out pretty well according to our expectations and the strategies we’ve put in place have stood fast once again.

We’re keeping a close eye on things so that you don’t have to so much.

Unfortunately (or fortunately – depending on which way you look at it…), we’ve helped clients access paid out insurance claims this year with a total of just over a million in lump sum insurance payments going to our clients who needed it.

We’ve also have settled nearly a hundred thousand dollars of monthly income protection claims as well. People who have got sick or had an accident still have income coming in while not being able to work.

To say it’s been a relief financially is an understatement, and we have some pretty happy clients that chose to have (or keep) these insurance policies going!

We NEVER want our clients to need to claim on these policies, but the peace of mind knowing that they can is ‘priceless’.

It’s been a big year with COVID and everything that has impacted for us all over the year. Thank you so much for your patience and flexibility and we had periods of office closure and transitioned to meeting with many clients online on ZOOM… While it’s may not be ideal, it’s allowed us to continue to serve you and maintain a ‘digital’ relationship at least.

Hopefully things will get back to ‘normal’ really soon.

Importantly, we’re set for a huge 2021 next year!

There is a lot of change happening in the world and particular the financial world.

So much to do and actually a heap of great opportunities…

Interest rates at all-time lows
Banks offering incredible ‘deals’ to get your business
Investment fluctuations present great buying opportunities
Changes to tax thresholds free up additional cash
Insurance companies’ consolidation and providing a great chance for you to re-visit your insurance and save money…

Lots and lots to do. We’ll be in contact to tee up a time to re-visit things and check your progress.

I’m really excited about the next 12 months

The improvements to the back-office I mentioned before mean is that I have opened up capacity to take on more new clients who are:

Retired or looking to retire in the next 5-10 years
Wanting to make sure they’re maximising their superannuation and tax strategies
Needing advice to get themselves setup properly.

If you have any friends, family or work colleges in this position who could benefit from working with me and implementing the strategies we have done, then please introduce us by passing on our details.

I do see a point in the near future where we will be at capacity and I’ll limit the clients we work with to keep up the level of service and the boutique nature, but I do have some capacity now.

We’re incredibly excited and grateful to you. Without our clients, we would not be in business – and there is nothing else I would rather be doing that working with you and helping clients succeed financially – whatever that looks like for you.

We have some exciting things planned for 2021 and we will be in touch in the coming months to go let you know all about that.

Hopefully that all made sense.

I’d love to hear from you about one thing you want to achieve financially in 2021. Let me know by sending me an email and I will ensure we work towards getting that done together.

Anyway, take good care.

Have a wonderful and blessed holiday break and we’ll see you in 2021.

Rob.

21/12/2020/by Rob Laurie

How does long term financial planning work?

Financial planning is a process. This is the reason it is often more expensive than people expect. Some even expect it to be free, but like everything else, there are no free lunches. If your super fund is providing limited free advice, they are likely conflicted and not going to suggest or compare external products, which is basically the role of financial advice-to recommend suitable products and strategies for someone’s personal circumstances. Commissions are banned on all superannuation and investment products, and Wealth Factory does not receive them on products it recommends, except insurance. For an additional fee, it is an option to remove insurance commission; by default, we accept them to keep financial advice more affordable.

The long term financial planning process begins with a fact-finding meeting, which is basically an opportunity to get to know one another and discuss your situation and goals, and decide if there is a mutually beneficial relationship that can be forged. We will discuss the scope of work and quote upfront with no obligation. If you do not feel you can trust us, or want to see another adviser to see what they are offering, be our guest. Our clients value our upfront, no-nonsense approach to all interactions. If you agree to become a client on a one-off or ongoing basis, we will start the advice process.

The long term financial planning process includes developing appropriate strategies to achieve your goals and researching existing and comparable products that can be used to achieve them. We don’t have a philosophy of “if you work with us, you will use X product/SMSF/investments” as this is rarely in your best interests. If this is your current experience (and it is somewhat common) with your adviser, ask why a particular product was recommended and how it helps you achieve your goals. We use a diverse range of products, including industry super, SMSF, wraps, and platforms. We also use a range of investment fund managers. Being product agnostic is important to Wealth Factory, and it should be important to our clients.

In long term financial planning, these recommendations are drawn up in a document called a “Statement of Advice” (SOA). This document explains what the advice is, why it is in your best interests, and also alternative strategies we considered and didn’t recommend. This document is somewhere around 50-100 pages long. While a lot of it is for compliance purposes, there will be valuable information in there for you. You will receive a hard copy to take home with you most of the time. It will also reiterate any fees or insurance commissions payable. We believe commissions can play a part as long as they do not influence the advice. As all retail insurers pay the same amount, and the commission goes to business expenses only, we feel that it is not going to influence any advice given.

In long term financial planning, the time taken to research products and strategies, create a SOA, and implement recommendations is somewhere in the 12–20 hour range. Some of this work is done by a paraplanner (4–6 hours), but mostly by the adviser. A lot of this time is taken up with completing the required compliance documentation to prove that the advice is sound and in the client’s best interest. While many clients may not see the value in this, it forms part of the cost of providing advice.

Other costs that impact the cost of financial advice are the actual costs of being an adviser before any advice is given. I have read articles that claim around $100,000 a year in costs for an adviser. I do feel this is a little high, but the costs are considerable. Professional indemnity insurance ranges from $5,000pa to $10,000pa, but can be higher if you have had previous claims. ASIC now charges a levy to advisers and this varies but is over $1000 a year for me, due to being a mortgage broker as well. The Tax Practitioners Board, the Finance Brokers Association, and potentially another couple of adviser associations have fees of around $500-$1000 a year. To be an adviser, you must be either self-licensed or an authorised representative of a licensee; the costs vary and have multiple fee models, but the first adviser typically costs $40-50k per year, with a discount for the second. Financial planning software is not cheap; it can be easily over $500 a month. Throw a small office lease in and it is easily over $100k a year in expenses.

Realistically, the maximum number of pieces of advice able to be given in a year by a single adviser would be around 80, including annual reviews for existing clients. For an adviser to make the average income for an Australian after expenses, and let’s say they receive the average ongoing service cost of $3300, I read somewhere recently (statistics-take with a grain of salt), they would need 80 ongoing or new clients per year, or a mix of the two. This is why the cost of advice is not a couple hundred dollars for personal financial advice.

We abide by a code of ethics and if we cannot provide value for your situation, we will not offer to work with you. Want to know how to best invest $1000? The advice costs the same for a million, so it wouldn’t be good value. We know our pricing is very competitive, which is why we chose to be transparent as per below. We use the word “from” as it depends on the complexity and number of people we are providing advice for. A couple does not cost twice what a single person does. Discounts are also given when combining multiple areas into comprehensive advice.

We would love to help everyone, but many will have needs that do not justify the cost.

19/10/2020/by Rob Laurie

Budget 2020-2021 Update

2020 Federal Budget

As widely anticipated, the announcement included bringing forward personal income tax cuts already legislated. Together, these changes deliver tax relief to low- and middle-income earners for the 2020-21 income year of up to $2,745 for individuals and up to $5,490 for dual income families.

The Treasurer also announced a range of taxation benefits for small and medium businesses, intended to stimulate the business sector leading to jobs growth.

This summary provides coverage of the key issues of most interest to you.

Highlights

Personal Income Tax

Immediate personal tax relief for individuals
Exempting granny flat arrangements from capital gains tax

Business owners

Extension of the provision allowing small business to instantly write-off asset purchases
Temporary loss carry-back to support cash flow
Covid-19 response package – Victorian Government grants
JobMaker hiring credit

Superannuation

Superannuation reform

Social Security

Covid-19 response package – further economic support payments

The Government will bring forward the second stage of its Personal Income Tax Plan by two years to 1 July 2020 while retaining the low and middle income tax offset (LAMITO) for 2020-21. The changes will provide immediate tax relief to individuals and support the economic recovery and jobs by boosting consumption.

Personal Income Tax

Bringing forward the second stage of the Personal Income Tax Plan

The following changes have been announced:

The top threshold of the 19 per cent personal income tax bracket will increase from $37,000 to $45,000.
The low income tax offset (LITO) will increase from $445 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
The top threshold of the 32.5 per cent personal income tax bracket will increase from $90,000 to $120,000.

Taxable income	Stage 2:Tax payable¹ (residents)
Up to $18,200	Nil
$18,201 – $45,000	Nil + 19%
$45,001 – $120,000	$5,092 + 32.5%
120,001 – $180,000	$29,467 + 37%
Above $180,000	$51,667 + 45%

Supporting older Australians

The Government will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement. The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

CGT consequences are currently an impediment to the creation of formal and legally enforceable granny flat arrangements. When faced with a potentially significant CGT liability, families often opt for informal arrangements, which can lead to financial abuse and exploitation in the event that the family relationship breaks down. This measure will remove the CGT impediments, reducing the risk of abuse to vulnerable Australians.

Business Owners

Temporary full expensing to support investment and jobs

The Government will support businesses with aggregated annual turnover of less than $5 billion by enabling them to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. It will improve cash flow for qualifying businesses that purchase eligible assets and bring forward new investment to support the economic recovery.

Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small and medium sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

Temporary loss carry-back to support cash flow

The Government will allow eligible companies to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

Corporate tax entities with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit. The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

COVID-19 Response Package

The Government will make the Victorian Government’s business support grants for small and medium business as announced on 13 September 2020 non-assessable, non-exempt (NANE) income for tax purposes.

State-based grants such as the Business Support Grants are generally considered taxable income by the Commonwealth. Given COVID-19 and the exceptional circumstances Victorian businesses face, providing this additional concessional treatment will assist in their recovery.

The Commonwealth will extend this arrangement to all States and Territories on an application basis. Eligibility would be restricted to future grants program announcements for small and medium businesses facing similar circumstances to Victorian businesses.

The Government will introduce a new power in the income tax laws to make regulations to ensure that specified state and territory COVID-19 business support grant payments are NANE income.

Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.

JobMaker Hiring Credit

The Government will provide $4.0 billion over three years from 2020-21 to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.

Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years or $100 per week if they hire an eligible employee aged 30 to 35 years. The JobMaker Hiring Credit will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.

To be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.

Superannuation

Superannuation Reform

The Government will provide $159.6 million over four years from 2020-21 to implement reforms to superannuation to improve outcomes for superannuation fund members. The reforms, which will reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members joining underperforming funds, include:

the Australian Taxation Office will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal
an existing superannuation account will be ‘stapled’ to a member to avoid the creation of a new account when that person changes their employment. Future enhancements will enable payroll software developers to build systems to simplify the process of selecting a superannuation product for both employees and employers through automated provision of information to employers
from July 2021 the Australian Prudential Regulation Authority will conduct benchmarking tests on the net investment performance of MySuper products, with products that have underperformed over two consecutive annual tests prohibited from receiving new members until a further annual test that shows they are no longer underperforming.

Social Security

Further economic support payments

The Government will provide $2.6 billion over three years from 2020-21 to provide two separate $250 economic support payments, to be made from November 2020 and early 2021 to eligible recipients and health care card holders. These payments are exempt from taxation and will not count as income support for the purposes of any income support payment.

06/10/2020/by Rob Laurie

Build Wealth And earn a million with $200

Build Wealth

Have you ever wanted to have a million dollars in your bank account?

Today, I’m going to tell you a wealth strategy by which almost everyone can have $1,000,000 in the bank. So, I know what you’re probably thinking. The only way I’ll ever have $1,000,000 is if I win the lottery, I steal it, or I receive an inheritance from a long-lost relative. Now, this isn’t a get rich quick scheme; it’s a get rich slowly scheme.

Okay, so we’re going to base this on an income of $63,000. Now, $63,000 is about 75% of the average income in Australia, and out of that you will pay about $11,000 in tax. Why can’t you pay yourself the same amount? So, based on a 20% of your net income savings rate, which is what we encourage, $200 a week should easily be achievable. $200 saved each week and invested in the stock market for 30 years at an average annual return of 8% yields $1,300,000. Now why do we need 1.3 million when we only wanted $1,000,000? The answer is tax.

Any investment that you own that increases in value will generally be liable for capital gains tax (CGT). Now, in this example, we have estimated it to be approximately $230,000. That’s based on selling it out in one year, which wouldn’t be a smart strategy, but if you did it anyway and paid the highest marginal tax rate, it’s possible you would still have more than $1,000,000 in your bank.

So, what’s the point of this? What I really want to push home is that normal people on average or below average incomes can still build wealth. Just because you don’t have a high income doesn’t mean that you can’t find a way to save 20% of your income, put it away for the future, and build some serious wealth. At Wealth Factory, we believe in automation, and what I mean by that is automating your bank accounts now by automating your bank accounts.

It takes away the human factor, and that’s important because if you have an issue saving money, you will spend whatever you have. If you take the money away from you first, in the same way that the tax office takes away income tax before it’s paid to you, you won’t spend it because you can’t spend what you don’t have. This type of automated and forced saving can have a remarkable increase in building wealth over time.

To build wealth, you need to start as soon as possible, save consistently, and set some financial goals. If you don’t set any financial goals for your life, how would you expect to achieve them? It’s certainly tough times out there at the moment for a lot of people, but it’s not always going to be that way. For anyone who has had a drop in income or has had to shut down their business when they get back on their feet, it’s really important to consider what you want to achieve for the future and take some measures that you haven’t done before to protect yourself against this type of situation happening again.

While building your wealth, you also need to consider that markets are volatile and run in cycles, and this type of downturn was always going to happen at some stage, perhaps not to the same degree as we’re experiencing at the moment, but there are always going to be tough times when you think things are never going to be good again, and then there are always going to be good times when you think things are never going to be tough again. The truth is somewhere in between.

08/09/2020/by Rob Laurie

Why is financial advice expensive?

Why is financial advice expensive? It’s because it’s a long process. This explains why it is often more expensive than customers think. Some people even assume it will be free, yet free lunches don’t exist.

The main purpose of financial advice is to recommend products and strategies for a person’s unique circumstances. If your super fund only offers limited free advice, they are probably conflicted and unlikely to suggest or compare external products. All superannuation and investment products are prohibited from having commissions, and Wealth Factory does not get paid for any of the products it suggests, with the exception of insurance. Insurance commissions are optional; by default, we accept them to keep financial advice more affordable.

Financial Advice Process

The financial advice or planning process begins with a fact-find meeting, which serves as a chance to get to know one another, talk about your circumstances and goals, and determine whether a mutually beneficial relationship can be established. We will go over the scope of work and provide a quote upfront with no obligation.

Please feel free to visit another adviser if you don’t think you can trust us or want to see what they have to offer. Our clients like how we are always honest and straightforward with them. We will begin the advice process once you agree to sign up as a one-time or ongoing client.

Researching available and comparable products that can be used to attain your goals and creating suitable strategies to do so are all part of the advice process. We don’t have a philosophy that if you partner with us, you’ll utilise X product, SMSF, or investment because doing so is almost never in your best interests.

Ask your adviser why a specific product was recommended and how it helps you achieve your goals if this is your current experience (which is rather typical).

Wealth Factory employs a variety of products, including industry super, SMSF, wraps, and platforms. We also use a variety of investment fund managers. Being product-neutral is important to us, and it should be important to our clients.

A document known as a “Statement of Advice” (SOA) is then created with the advice offered by a financial advisor. This document describes the advice and why it is in your best interests, as well as any alternate plans we considered but didn’t recommend. This document is somewhere between 50 and 100 pages long. Although much of it is for regulatory purposes, there will be useful information for you in there.

Most of the time, you will obtain a hard copy of SOA to take with you. Additionally, it will clarify any costs or insurance commissions payable. In our opinion, commissions can contribute as long as they don’t bias the advice. We believe that the commision will have no impact on the advice given because all retail insurers pay the same amount and the money only goes towards business expenses.

It takes between 12 and 20 hours to do product and strategy research, write a statement of advice, and implement recommendations. The adviser handles the majority of this work, with a paraplanner working 4-6 hours per week. Completing the necessary compliance paperwork to demonstrate that the advice was fair and in the client’s best interest takes up a large portion of this time. Even though many clients might not perceive the benefit in this, it’s part of the cost of providing advice.

The actual costs of becoming an adviser before any advice is offered have an impact on how much financial advice will cost. According to articles I’ve read, hiring an advisor costs about $100,000 per year. Although the fees are considerable, I do think this is a bit unfair. The cost of professional indemnity insurance might be as high as $5,000 to $10,000 per year if you have a history of claims. Due to my dual role as a mortgage broker and an adviser, I am now subject to an ASIC levy that ranges in amount but is over $1000 annually for me.

The membership fees for the Tax Practitioners Board, the Finance Brokers Association, and perhaps a few other adviser associations range from $500 to $1,000. You must be either self-licensed or an authorised representative of a licensee in order to act as an adviser. Although there are different fee structures and prices involved, the first adviser typically costs between $40 and $50,000 per year, with discounts frequently available for additional advisers. The cost of financial planning software might easily exceed $500 per month. Add in a tiny office lease, and the total annual expenses easily exceed $100,000.

Realistically, an adviser can provide up to 80 unique pieces of advice per year, including annual reviews for existing clients. I heard that an adviser would require 80 ongoing or new clients every year, or a combination of the two, in order to make the average income for an Australian after costs, and let’s suppose they receive the average continuing service fee of $3300. Because of this, the advice fees are not several hundred dollars.

We follow a code of ethics, so we won’t make you an offer to work with us if we can’t add value to your situation. Looking for the best way to invest $1,000? It wouldn’t be a good bargain because the advice costs the same as a million dollars. We choose to be open since we are aware of how fiercely competitive our pricing is. The price of a couple is not twice as much as that of an individual. Discounts are also offered when several topics are incorporated into comprehensive advice. We want to assist everyone. Many people will have needs, though, that make the price unacceptable.

12/08/2020/by Rob Laurie

$10000 from super: should you do it?

Effect of withdrawing $10K from super on your savings

Hi everyone, it’s Rob from Wealth Factory and I just wanted to run through the disadvantages of withdrawing $10000 from super, some figures I have calculated and, if you have to do it, as some of you are doing it tough at the moment, how to get back to the position you were before.

Look, there are a lot of figures being touted about and some are saying that taking out $10000 from super will cost you $300,000 and all those sorts of things. I’m sure they have done their calculations in more detail than me, but my figures are more conservative, and a lower figure is probably more accurate anyway.

My figures are based on figures from Vanguard showing average returns from 1989 to 2019 for different asset classes: Australian Shares, International Shares, Property, Bonds, and Cash.

What this works out to be for a 70% growth asset allocation is a 7.97% investment return after 30 years. This is just an estimation, not accurate enough to rely on and make changes to what you are doing. Seek personal advice.

Now we need to take tax out of this as well, which is 10-15%, so we round it off to a nice round 7% investment return. Markets never deliver consistent investment returns. If you have followed the markets for the last few months, I am sure you agree.

We will introduce Einstein’s Rule of 72, which says if you divide 72 by the investment return, you will get the number of years it takes to double your investment. People often find this a useful calculation, as it is easy to apply it in the real world.

$10,000 taken out of super compounds the loss over a period of time. If you are 25, the impact might be $150,000, if you are 35, around $76,000, and if you are 45, about half again. If you are 60, the difference isn’t as significant. The younger you are, the larger the impact on your retirement balance and this is the reason you don’t want to take it out of super if you can help it.

This doesn’t take into account super fund fees and insurance, so the difference is probably slightly less. The other calculations are probably using more complex modeling, but the difference is still significant.

How do you get back square with your super if you are in a situation where you need to feed your family and accessing super is your only choice to make sure you survive? Take $10,000 out. How do you repay this? $2000 a year for five years? No, not even close. You will need to know the investment returns you are missing out on before you can accurately calculate what you are down.

We are just going to pick an arbitrary figure that I think will put you in the same position or better. Any money you put back in will have tax taken out of it (assuming salary sacrificing or claiming a tax deduction). Investment returns are likely to be higher in a recovery period, so if we doubled those above average, this would work out to more than $20,000 needing to be put in.

I figure if you put $100 per week for five years, which is $26,000 less tax, still being more than $20,000, you will likely be in the same position or better as you were before you took the money out of super, plus you’d save a bit of income tax over this time as well.

This should only be done as a last resort, and this repayment is probably going to put you in an even stronger position, but saving tax and having a great retirement is a good thing, right?

Just like borrowing from friends, family, and the bank, any money borrowed from yourself needs to be paid back.

08/07/2020/by Rob Laurie

June Update

Financial Update for June

Well what an..er.. interesting month it has been. The US riots in 30 cities and looting, fires, injuries and deaths. You’d have to think the US economy would be in trouble. Not even considering COVID and over 100,000 deaths…

But for reasons I can’t explain US share markets are more than solid. In fact they have nearly returned to pre-COVID levels. Australian markets and the rest of the world are recovering more slowly, but generally heading in the upward direction. Australian share markets are back to roughly where they were in early 2019.

I personally think it is too early of a recovery considering everything else happening at moment, but we will see how it looks after the US election. Typically US election years are good financial return years.

We are still heading for a recession though and many businesses are still in pain and are in for a tough year ahead. The government has attempted to stimulate the construction industry which is great, although I fear the package has missed the mark. I have even heard reference to this stimulus helping with homelessness. I’m not sure they understand the construction industry time frames or homelessness. However, if you are one of the many tradies I look after – I hope this helps with future projects and business growth for all of you!

Business as usual for me commences around end July / start of August, where I will be completing reviews for all of you before the end of the year. Looking forward to catching up with you all and reviewing products and strategies.

I haven new financial planning software coming which I am really excited about, and hopefully once you see the benefits to yourselves you will be too. The aim is to increase efficiencies and provide more value. There will be a personal client portal as well where you can log in and check your investment balances for different funds and providers in the one place.

Remember to get your super contributions in before the end of the month if you are wanting to claim a tax deduction – and also need to complete a notice of intent to claim a tax deduction form. If you didn’t do this last year for a contribution, and claimed a deduction – it needs to be done before June 30!

08/06/2020/by Rob Laurie

May Update

Financial Update for May

It’s May finally (feels like it should be Christmas soon!) and it is looking pretty good for Australia at moment in regard to Covid-19. This is great news for us, although the rest of the world is still suffering.

I promised more updates last newsletter, but to be honest not much really changed in the past few weeks. Bit like Groundhog Day. Markets went up, markets went down, back up again and overall (ignoring today’s drop) the Australian share market ended up being the “best month on record” according to the Australian (although it is just regaining losses). The US and UK is still in a world of pain so we aren’t out of the woods yet.

The government’s Jobkeeper and stimulus packages are well underway and applications have been processed for early access to super, with numbers expected to pass a million. Statistics are showing you are twice as likely to be eligible if under 40. If you need to access, just make sure you try and get it back on track in the future.

Home lending seems to have tightened quickly as questions around job security for certain industries are raised, and despite the government attempting to keep credit availability, ASIC has reminded banks they still have responsible lending obligations, which pretty much takes refinancing for many people off the table. Maybe in a few months or so it will return to normal. Also because of so many offshore processing staff in countries that are shut down, some processing has nearly completely stopped causing massive delays in settlements.

Some industry funds with large proportions of unlisted assets have been questioned around potential liquidity issues, so will be interesting see how this pans out. It should hopefully change requirements around disclosure of what funds are investing in with their members money. I’ve always had a rule not to play in funds with more than 30% unlisted assets. Although when you don’t expect to have to make assets liquid at short notice as your average customer age is mid thirties, it’s not entirely their fault.

Tonight the second round of easing restrictions is coming into effect and I am looking forward to dusting off my Harley and blowing some cobwebs out around the district (within 50km of course).

I hope you have a great weekend.

Cheers,

Rob Laurie.

Wealth Factory.

08/05/2020/by Rob Laurie

Managing Retirement Savings in Volatile Times

How much will I need?

Most of us daydream about the day we can finally stop working and retire. Whether you dream of traveling around the world, camping throughout Australia, or simply pottering around in the garden and honing your golf skills, the magic question is: how much money do you need to make your retirement dreams a reality?

Take some of the guesswork out of future planning. Calculate how much super or retirement savings you’ll have when you retire and whether it’ll be enough to support your desired lifestyle. Moreover, estimating how much money you’ll have when you retire depends on things like your current salary, super balance, and assets. With so many factors, it’s clear to see why you would need a retirement calculator to figure out how much you’ll need to retire comfortably.

According to the Retirement Standard of the Association of Superannuation Funds of Australia (ASFA), single people would need $595,000 in retirement savings at age 67, while couples would need $690,000. This calculator can help you figure out how much money you’ll need for a ‘comfortable‘ or ‘modest‘ retirement. The Standard is updated four times a year to reflect rising prices for essentials such as food and utility bills, as well as shifting lifestyle expectations and spending habits. Health, communication, clothing, travel, and household products are all included in the Standard.

It’s never too early to begin making plans for a better financial future.

Here are some tips for managing retirement savings in volatile times. Don’t panic. Things will recover over a long enough time period.

No lump sum withdrawals for cars and holidays.

No panic selling, cashing out, or investment switching.

Reduce the pension from your retirement savings if you have enough cash to live off for a while. There is a minimum, but it is each year, and hopefully things will be less volatile by June.
If possible, your pension payments may benefit from being made fortnightly instead of monthly to allow for dollar cost averaging on the way out. Not at the mercy of the value on one day of the month.

You should know this—we live in a great country and you will always have the age pension to fall back on should your retirement assets drop that far in value. Without debt, it is liveable.

Once things return to normal, consider using an annuity for an additional income layer over just the age pension. This can be useful to address the fear of outliving your retirement savings and has some benefits for the asset test for the age pension.

For my retirement clients, we usually hold two years of income in cash. It makes no money, to speak of, but it means that in times like these, they can still draw an income without selling growth assets and concreting any losses.

Remember that your investments and shares are unitised. Think of it like fuel for your car. You had 100 litres and fuel cost $2 a litre. Now it is $1.50 a litre, but you still have 100 litres and the market has always recovered.

Retirement savings, or, in general, retirement planning, is challenging, because everyone’s situation is unique. It’s never too early or too late to begin planning for life after work. Whether you’re still in the planning stages or have already retired, consider seeking personalized advice from a financial adviser to assist you in making long-term financial decisions.

Finally, please look after your health. This Wuhan virus impacts people over the age of 60 more significantly than younger people. Don’t go to places with lots of people unnecessarily; consider getting groceries delivered; wash your hands regularly; and if you feel sick stay home. Take care.

19/03/2020/by Rob Laurie

5 Financial Challenges that Advisers Solve

What to expect from a financial adviser

You may be on the fence about whether hiring a financial adviser makes sense for you. Today, more than ever, tools are available to help people with financial challenges, particularly managing their money.

That’s great! The more consumers are educated about personal finances, the better off they may be and the less chance you’ll get ripped off by a dodgy sales scheme.

But with Google and Siri for free, is a financial adviser worth the cost? Shouldn’t you just try to read as much as you can, do it yourself, and save some money in the process? It depends.

Maybe I’m biased. I’m a financial adviser who has been practicing for 7 years. But I can’t help everyone anyhow. However, I’m not here to extol the benefits of financial advisers, but rather to provide some insight into what financial advisers actually offer, so you can make an educated decision on whether hiring one is a smart choice.

So, why would someone hire a financial adviser rather than manage their own money? Here are five problems that many consumers face that can be alleviated by hiring a pro.

5 Financial Challenges That Advisers Solve

1. Information overload

Information can empower us to make educated decisions, but it can also overwhelm us, causing “analysis paralysis.”

Information doesn’t always equal understanding, and a little information can be dangerous. The more you learn, the more you realise how little you know. This is the learning curve.

Part of a financial adviser’s job is to help you sort through a variety of information sources, tune out the noise, and make the best decision based on your finances and your personal goals.

2. Too many choices

In Australia there are about 500 super funds that you could join. About 2/3 have over $50 million in funds.

3. Too little time

If necessary, we could all learn to cut our hair, mow the lawn, or change the oil in our cars, but who really has the time? Not to mention, where is your time best spent?

Each of us has to weigh how best to spend our time. If a financial adviser frees up your time so you can concentrate on making more money at work or spending more time with your family, then that may be advice worth paying for.

4. Lack of expertise

There’s a reason a general practice physician may refer you to a specialist if you have an acute pain in your abdomen: the specialist has a particular expertise that you need. The same goes for financial advisers who work in a special niche.

Some financial advisers specialize in times of transition, like selling a business or planning for a divorce, while others focus on an industry, such as working with dentists or teachers.

5. Personal biases

Managing your own money has its advantages and disadvantages. You’re keeping costs down, which is a good thing; you may also enjoy picking stocks on your own.

But each of us has our own personal biases, and you need to be aware that yours exist. An adviser can help you recognize biases you may be overlooking.

You might make rash emotional decisions, too. It’s a known phenomenon that we humans feel the sting of losing money more sharply than we enjoy the euphoria of making money. Some investors can’t stomach the ups and downs of the stock market.

Part of what a financial adviser does is to hold your hand through those tough times in the market and help you make logical and rational decisions rather than hitting the panic button and reacting in a knee-jerk fashion that could come back to haunt you.

What's right for you?

Hiring a financial adviser is not for everyone. If you are the type that enjoys personal financial planning, has the time to do it, and the emotional intelligence to recognize your own biases, then perhaps you’re OK on your own. But if you’d rather spend your time elsewhere, or you require the specific expertise of a professional, then it may be worth considering.

It’s not an all-or-nothing decision, either; you can still manage your own money and have an adviser help with the overall picture, or hire an adviser to manage a separate portion of your money.

If you’re in debt and looking for help, a financial adviser is probably not right for you. Consider finding a non-profit debt or credit counselor instead.

To find the right adviser, start by asking family, friends, and professionals for a few names of potential experts to interview.

Ideally, you’d want someone who is experienced and seems trustworthy.

01/02/2020/by Rob Laurie

Welcome to 2020!

The year can officially start as school has returned, Australia Day weekend is over and we can all get down to business as usual. Great returns for 2019 if you missed it as well.

What a crazy start to the new decade it has been:

Much of Australia has burned (public support was amazing)
Flooding in parts of Australia with recent rains
World War 3 could have started with Iran
Kobe Bryant killed in a helicopter crash
The outbreak of coronavirus (see video below)
Earthquakes and Volcano eruptions around the world

It’s not even February! But how good is it to have some rain again.

For February – March my focus is going to be on reviewing home loans. So I will try and give you a call (I know who doesn’t have a home loan), and checking if there is anything I can do to improve the structure and rate. Both are as important as the other. Plus I will show you how to pay it off as fast as you like as a bonus. Because I’m a money nerd and love that sort of stuff.

The 2020 focus for me is going to be on automation. (Oh, and getting fit.) Automation of bank accounts so that you know exactly where the next dollar is going. Whether you are a retiree or accumulator, setting things up so you know exactly how much money you can spend on lattes and spoiling the kids (or grandkids) and still meeting your goals. If you want to build wealth, automation is key as it deletes behavioural finance related complications. You don’t spend what you don’t have.

This is the last email update under Windmill Financial branding, will be updating name and signage and sending out a bunch of letters in a couple of weeks. Changed name online a month ago. Also updating to a better email system.

Office lease signs are down, staying put to the end of the year at least. Too much happening in the background to move office.

Late last year I completed a 3.5-hour exam for the Financial Adviser Standards and Ethics Authority. This is meant to prove you know what you are doing to stay in the industry. You should be pleased to know I passed without any real study (hey, I was busy!), so you are in good hands.

Now, what do YOU want from me in 2020?

01/01/2020/by Rob Laurie

November Update

November Update - US Study Tour

Hi guys, just wanted to do a quick update as I have been a bit quiet on the newsletter and Facebook fronts lately and I usually put a newsletter out monthly.

Have been to conferences in the US which were great and will probably go again to Fincon next year. They have a largely unregulated financial advice profession – I’d refer to it as the wild west – no advice documents, not much in the way of proving what advice was given, just an email is good enough. They are using our industry as a model to what the future looks like and it was good to see what we do well. They even use the avocado toast analogy for housing affordability taken from our own Bernard Salt. This confuses the Americans though as Avocados are one of few things cheap there.

Now Fincon is about “where money and media meet”. So what I learned is that I need to start a podcast. So as I do I get carried away and have set up a small studio and will start to interview small business owners about the what the why and the how of what they do. Learned some video tips as well, even though this is just being filmed on my webcam so I am clearly ignoring those. So for the small business owners out there, maybe we will talk in the new year.

Also have some great ideas around the future of the business and will be making some innovations over the coming months to really bring together a stronger value proposition for current and future clients.

I sent out a bunch of review letters in September and have been in contact with some of you, and I apologise to those who I haven’t, and to be honest its because I haven’t had the time lately and I will explain the reasons for this, and it is largely coming from the Royal Commission.

I am starting what most advisers will have to completed and is called the “lookback”, and it is basically a review of fee for service to make sure what was promised has been delivered. I am quietly confident this is the case, although I am not sure how this will impact the very basic ongoing service agreements as I am informed AMP would rather just refund these than review them due to cost of reviewing so that could be a refund for some of you, but don’t hold me to that at this point. And to clarify if this does occur, it’s not because I haven’t done what was promised either.

I also have to submit advice for ‘vetting’ to ensure the quality of advice, which is slowing down the review process for many clients as it is nearly 3 weeks in queue before that team even look at it.

There are some new standards coming to effect from next year around a code of conduct and ethics. This is proving to be challenging, some industry experts have described them as unworkable, and while I think it is a good thing overall, there will be some new hurdles.

There is a 3 hour exam around ethics all advisers have to sit in the next 12 months, I’m thinking the December round I might have a go at if I get some time to study.

Now if that isn’t enough distractions I am also investigating the changing of dealer groups from AMP to someone who isn’t aligned to any products, funds, insurance, or loans. This is because even though I try and be product agnostic, ultimately some products I have wanted to use haven’t been approved by their Research team, and I also feel that the separation of product and advice will be more important in the future and I want to make sure any advice given is perceived to be impartial.

Through discussions over the years many of you were genuinely surprised I don’t get kickbacks from AMP and that I was paying them for doing my compliance. I have also been referred to as the AMP guy on the off occasion, and that is not who I want to be, particularly with their current community standing. I will still be able to use their products and MyNorth is quite cost effective since its price drop earlier this year so from your end if this happens, there won’t be any noticeable change, hopefully just an improved in perceived trust from new clients.

As always I am available to answer any questions and just to have a chat, I’ll be doing late appointments and also online appointments as if wanted using zoom which I’m recording on now and I love these backgrounds – clever tech. With the green screen here hiding the rest of the office and any mess. This will be right up and and maybe even through the Christmas period as I had holidays recently anyway. If you want to catch up – please give me a call.

Despite all this I am excited for the future and for financial planning to become a true profession, with increased trust and slowly getting rid of the few bad apples that are left. There are some exciting changes ahead which I feel will be great for all of us and I look forward to speaking with you again over the coming months.

04/12/2019/by Rob Laurie

Protecting Your Super Legislation Australia

Protecting your Super Legislation

The “protecting your super” legislation is aimed at protecting people’s super with adjustments to insurance in super, fees, and lost member accounts. Insurance inside super may be cancelled if you don’t opt in to keep it. Make sure you’re up to date on the situation and know what you should do if you’re affected.

The Treasury Laws Amendment Bill 2019, also referred to as the “Protecting Your Superannuation Package” 2019 received Royal Assent earlier this year. The law introduces a number of initiatives to protect individuals’ retirement savings.

I think most of these things in super legislation are great initiatives, but I’m worried about the consequences of the lapsed insurance and want to bring your attention to it.

Some of the good initiatives in this super legislation are: rolling ATO-held inactive accounts with small balances into active accounts; a maximum fee cap of 3% on small balances; and banning exit fees.

The part that concerns me in this super legislation is the cessation of insurance cover on inactive accounts. What this means is that if you haven’t contributed to super in the past 16 months, from July 1 you will no longer have insurance… Unless you notify your super fund in writing or through their opt-in process,

This super legislation concerns me because, in general, Australians, particularly young Australians, are not engaged with their super fund beyond perhaps knowing the fund’s name. Over the years, I have come across several occasions where someone has died unexpectedly and the only reason the family was financially able to survive was because the deceased had half a dozen super funds with default life insurance. This won’t be the situation moving forward.

Based on this super legislation, if your insurance is cancelled, you may not be able to obtain new cover. What you may do is to have a search on some finance-related Facebook groups for the stories of people who rolled their supers into a new fund without considering insurance and now don’t have any or have exclusions or loadings due to health conditions, maybe your BMI, maybe a full decline due to diabetes or depression or change of occupation or past times.

This is why I think this is so important and want to bring your attention to it.

If you have been on maternity leave or home duties raising a family,

If you are self-employed and haven’t been contributing to super,

If you’ve been unemployed, injured or unwell and have not had any contributions to super,

If your employer hasn’t been contributing to your super, It happens.

Super funds have been sending letters, text messages, and emails. If you’ve been contacted by your super fund, it’s probably for a reason; it’s too early for end of financial year statements.

I’m looking after my clients, but I also want to make sure others in the community are aware and have opened the letter from their super fund, and do what they need to do to keep their insurance.

If you don’t think you need insurance cover, ask the people that would be affected by your death. If you are on home duties, the cost of a nanny, cleaner, driver, or educator in your absence isn’t cheap. If you are the sole income earner, how would you feed your family if you were injured and couldn’t work?

If you have a mortgage, how would your family financially survive and maintain the lifestyle you’ve worked so hard to provide for them? It’s your call at the end of the day.

I can see the good intention of this super legislation to protect the retirement balances of Australians, but there are likely to be huge negative consequences for many people.

If you think you may not have had super contributions since February 2018 or have been keeping a second super fund open just to hold insurance, it wouldn’t be a bad idea to confirm whether you need to act to maintain your insurance cover.

It can be challenging to decide whether or not to keep your insurance due to this super legislation. You should speak with a financial adviser to fully understand the implications and determine the right plan of action for you. Please contact us if you do not have an adviser and we will put you in touch with one.

17/06/2019/by Rob Laurie

Paying off your credit card after the fun is over

The holidays are over, and you’ve had a great time. But, the dreaded credit card statement has arrived, and you wonder how you’re going to pay it off.

The happy holiday memories suddenly disappear. Paying off your credit card debt is hard. It takes a lot of discipline.

Paying off credit card debt requires more than paying off the minimum each month. That barely covers the interest. Most credit card providers require you to repay around 2–4% of the balance each month, although they are required to outline how much more you will pay if only the minimum is paid. With interest rates averaging around 15-20% pa, most of your payments will reduce a portion of the interest with only a small amount applied to the debt. It will take literally years to pay it off! You might have noticed they have to state how long on your credit card statements nowadays.

Here are a few ideas on how to pay off credit card debt quickly:

Hide it before you spend it

Arrange for an automatic transfer from your pay to a separate account so you never see the money. Use that account in paying off your credit card debt. Alternatively, schedule an automatic deduction from your cash account to your credit card every pay day. If the money isn’t there, you can’t spend it.

Save the little bits

Put all the coins you get in change into a savings jar. Preferably one you can’t open, like the piggy bank of your childhood. You’ll be surprised at how quickly it adds up, and every time you add to your pot, you’ll be reminded of your goal. When it’s full, attribute the entire contents to your debt. You could also collect cans and bottles for 10 cents a piece.

Sell something

Everyone has things we really no longer need—forgotten gym equipment, a bicycle we never ride, an unused musical instrument, and so on. Do it online on Gumtree or Facebook Marketplace, or have a big clean out and stage a garage sale. It will feel better anyway.

Spend less

Careful spending doesn’t need to impact on your lifestyle. Try these ideas:

Check the supermarket catalogues and buy the brands on special. What about Aldi?

Cook at home rather than at restaurants or buying take-away. Plan ahead.

Lay-by birthday and Christmas gifts during the store’s sales.

Check out upmarket clothing recycling stores; they often have designer clothes at bargain prices. No-one will ever know.

Use windfalls

Every now and then, a chunk of money comes your way – back-pay, a bonus, or a tax refund. It’s alright to give yourself a treat, but put most of it towards your debts first.

Ask for help

If all else fails, talk to your credit card provider about other ways in paying off your credit card debt. They want to be repaid and may be prepared to make special arrangements for you.

When you allow credit card debt to pile up, you are basically robbing yourself of money in the future. Paying off credit card debt as soon as possible can not only save you money on interest, but it will also help you maintain a good credit score (or credit rating) and credit report.

Then when your next holiday rolls around, your credit card will be squeaky clean, ready for you to have fun without any debt guilt.

Hiring a financial adviser to assist you in developing a debt reduction strategy and a long-term financial plan is an excellent way to bring your debt under control. Their knowledge and experience will assist you in determining the best path to financial independence.

02/06/2019/by Rob Laurie

What is the deal with superannuation?

What is the deal with superannuation? Superannuation is a hot topic at the moment. In this blog post, we’ll explore what superannuation is and how it works in Australia. We’ll also look at some of the key issues surrounding superannuation and provide some tips on how to make the most of your retirement savings.

What is superannuation and how does it work in Australia

Superannuation is the term commonly used in Australia to describe a retirement savings account. It is actually a pool of money that is made up of your own contributions, as well as any employer contributions and the earnings generated by investments. Under Australian taxation law, superannuation has special tax status and is designed to provide Australians with an income in their retirement years; your contributions into super are taxed at 15%, rather than your marginal tax rate, which makes it a great way to save money for later life. In order to access this money when you retire, they must meet certain conditions such as age requirements and be retired from the workforce.

Put simply, superannuation can help people maintain a good quality of life after work, but it takes planning and discipline over an extended period of time – so get started now!

The benefits of having a superannuation account

Everyone needs a financial security plan, and having a superannuation account is the perfect way to start. Superannuation provides numerous benefits that can help you establish financial security and build wealth for your retirement years. It allows you to take advantage of generous tax breaks, start investing earlier with smaller contributions, and benefit from increasing compound interest on remaining funds. What’s more – it helps you save faster than any other savings vehicles because of its potential for larger investment returns. Superannuation also offers valuable life insurance options if you become ill or disabled and need income support during your golden years.

So if you have not done so already, make sure to consider having a superannuation account in order to make thoughtful financial decisions now for a brighter future.

How to make the most out of your superannuation?

Making the most out of your superannuation can be a challenging task, but the rewards for doing so can be substantial. Ideally, you should start early by making regular contributions to ensure that your super balance grows at a steady rate. It is also important to assess any employer contributions that may be available and to ensure these are maximised whenever possible.

There could also be plenty of investment options available in order to increase returns on your balance; however, it can be beneficial to consult with a financial advisor before making any big decisions in this regard. Taking simple steps like these now could end up being hugely beneficial when it comes time to retire, so get started on achieving the maximum benefit from your superannuation today!

The different types of superannuation accounts available

Superannuation is an important part of many Australians’ retirement strategies. There are multiple types of superannuation accounts available, each being tailored for different needs and suited to various life stages. From industry funds to Self Managed Super Funds (SMSFs), from public sector funds to family-owned businesses: the variety of options can seem overwhelming. Researching specific accounts is essential in order to find which best meets your individual requirements and offers you the potential for greatest returns while being subject to minimal risk.

Understanding superannuation products and specifically which account is right for you can range from straightforward to complex depending on your circumstances. Approaching professional advice is recommended if certain complexities cannot be worked through independently.

FAQs about superannuation

Superannuation is a great way to provide for your financial future. With the right information and guidance, you can make sure that your finances are looked after when it matters most. It can be difficult to know where to start when exploring superannuation options, so here are some frequently asked questions about this important savings option.

Do you need to be employed in order to open a superannuation account?

No – anyone over the age of 18 can open an account regardless of their employment status.

How much should I contribute?

This will depend on your financial goals and budget – speak with a professional adviser if needed

Are there any fees involved?

Depending on the type of account you open and the provider you choose, there may be fees associated with managing and investing your money. Talk to your provider to find out more information before deciding which super fund is right for you.

With these answers at hand, explore your options and make sure your superannuation works hard so you don’t have to!

What is the deal with superannuation?

When it comes to planning for retirement, superannuation can be a great way to make sure you are financially prepared. Superannuation is one of the most valuable advantages Australians have when it comes to their retirement, allowing them to accumulate money over their working life. With different types of accounts and options tailored for your personal circumstances, everyone has access to superannuation.

With some basic understanding and with the help from financial professionals, you can make best possible decisions regarding your superannuation and secure your retirement income. Remember that as time passes, your goals could also change so keep your objectives in mind when investing in superannuation. As a final note – no matter what stage of life you are in, regular review and tweaking of your superannuation account will help ensure you get the most out of this essential Australian investment vehicle.

23/03/2019/by Rob Laurie