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Retirement Plan

Living comfortably in retirement

It is almost Christmas, so it is time for the present wishes;

  • Lower inflation
  • Lower interest rates
  • Share market bounce back
  • Iceberg lettuce
  • Petrol vouchers
  • Ability to retire stress free in the future.

We would all like to live in a perfect world, unfortunately, this just does not happen. For those looking at retirement, now may be more concerning than ever. In a world of rising costs, volatility and uncertainty, many people fear if they will have enough money to retire and cease work.

There are plenty of risks we face with retirement which can make us all apprehensive. To restate our adviser Cheng Qian’s article from last October, here are some of the key risks.

Sequencing risk

This is the risk of the market facing a severe and unexpected downturn just before you retire. As a pre-retiree, you may not have the time horizon to wait out a recovery. An example would be a retirement nest egg of $1,000,000 falling to $750,000 just as you are about to retire. At a drawdown of 5 percent, this is a reduction of annual income from $50,000 p.a. to $37,500 p.a. and a big hit to anyone’s retirement.

Lower than expected returns

Retirement portfolios are not designed to shoot the lights out but to generate a sustainable level of return with a focus on capital preservation. However, if returns do not stack up for whatever reason, it will lead to a rapid deterioration of your capital and your savings may not last as long as you designed them to.

Longevity risk

This is the risk of retirees living beyond their savings. With improved health care and higher standards of living, life expectancy is higher than ever. Hence, with all else equal, you are more likely to outlive your retirement savings.

The obvious question is “How much will I need?”

There is no single answer, and every one of us have different expectations of what retirement looks like and as a result, we need to look at what kind of research exists.

A good guide lies with the Association of Superannuation Funds of Australia (ASFA) which publishes a ‘retirement standard’.

ASFA have outlined two different living standards (comfortable and modest). These values are updated quarterly to reflect Consumer Price Index (CPI) increases (which have risen more dramatically in 2022). For both options, they assume the family home is owned outright and that the individual is ‘reasonably healthy’.

  • A modest lifestyle is exactly that – a lifestyle higher than solely having the age pension as income but is a basic income for expenditure.
  • A comfortable lifestyle includes a few ‘extras’ around holidays, technology, insurances, and general expenses.

The next question is how much?

Again, the standard shows this in two ways – expenses and savings at retirement. Note the savings amount allows for a part or full age pension to also be received.

The standard is therefore suggesting that a couple looking at retirement is really needing to have at an absolute minimum $70,000 (for a $43,250 per annum expenditure target). Everything over this amount will allow a higher level of lifestyle. The question will then shift towards your personal lifestyle requirements to determine your needs.

If there is one thing for certain, it is that uncertainty will always exist, and markets will go up and down. The thought of retirement will always be somewhat of a scary proposition, due to the loss of regular income and security employment provides. There really is no set guarantee and no defined perfect time for retiring. The ability for humans to be flexible in their approach, wants and choices are what enables us to take up the challenge and to make decisions to move our lives into the next phase. A volatile market does not have to be a roadblock and could be the opportunity for change in our lives being sought. Having some basis of comparison for what might be required to fund retirement to what you have now, can be an excellent way to start planning.

How to live comfortably in retirement

Source: ASFA

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Inflation balancing money

Why is the RBA focused on reducing inflation?

Have you heard the news? Inflation is skyrocketing in Australia and across the globe. Why? Governments have been printing and distributing money like it was going out of fashion for two and a half years (since COVID-19 arrived on the scene). The war in Ukraine and strong consumer demand are all adding to inflationary pressures here and abroad.

Why does inflation happen?

  • Cost-push inflation: the cost to produce goods or services increases (higher petrol prices).
  • Demand-pull inflation: suppliers cannot meet consumer demand needs when something is popular (prices naturally increase).

Why is inflation bad?

Less purchasing power (your money doesn’t go as far), fewer savings (the more you have to spend, the less you have to save) and loss of goods and services (like everything in life there are always winners (supermarkets, fuel suppliers and funeral parlours) and losers (generally discretionary spending).

Economies across the world are now doing everything they can to reduce inflation before it gets out of control (for some countries it may be too late). The main weapon against inflation is to increase interest rates which is commonly referred to as contractionary monetary policy. This reduces the money supply in the economy and by increasing the cost of credit, it reduces consumer and business spending. Higher interest rates on government securities (treasury bonds, bills and notes) make them more appealing to businesses and investors and it guarantees a rate of return. This, in turn, makes riskier investments like equities less appealing to investors.

The reality is governments have minimal options in the way of reducing inflation. The most common way is contractionary monetary policy (raising interest rates), but the downside is that it could tip the economy into recession. There is usually a lag of three to four months before the impact of interest rate rises is felt through the economy, so at the moment we are only feeling interest rate effects from April this year.

What does inflation mean for your investments?

Generally, higher inflation is usually seen as a negative for stocks because it typically results in:

  • Increased costs of raw materials and labour
  • Increased borrowing costs
  • Earning expectations reduced.

Usually, due to the increased uncertainty of the value of money in the future, all of the above put downward pressure on stock prices.

In times of high inflation, investments in gold and commodities are generally seen as safe havens for investors. Energy and agriculture producers generally fare better in times of high inflation as people will always need to eat.

No doubt the inflationary and interest rate roller coaster will continue for the remainder of 2022 and well into 2023.

If you require assistance in navigating the coming economic environment, contact our experienced team of financial advisers. We can help you identify strategies to help you reach your financial goals and aspirations.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Man holding superannuation savings

SMSF – six member funds

The pros and cons of a six-member SMSF have been extensively discussed in the financial services industry. One thing we know for sure is that a six-member fund is not for everyone. The majority (more than 93%) of SMSFs in the industry are either single-member SMSFs or two-member SMSFs.

Below are some pros and cons of having a six-member SMSF:

Pros:

  • You can have more money (greater purchasing power). This will allow for greater diversification of assets or investment in higher-value assets.
  • This could allow your children to invest their super in more substantial investments and achieve economy of scale, especially when their super balance is low.
  • Having more members in your super fund will also reduce the cost of managing your family members’ super, i.e., a new SMSF setup cost, ATO levies and other costs, as the fees are spread across more members.
  • If your children make regular super contributions, it will be easier to make your pension payments.
  • The taxation strategies may be implemented more efficiently.
  • Easier to meet Australian Super Fund residence requirements when/if you or your children travel overseas for an extended period of time.

The drawbacks include:

  • Lifestyle considerations. Two sets of investment strategies may be required. However, differing investment timelines between the parents and kids may not be a major issue if all members agree on a range of diversified assets.
  • Disputes and conflicts between members can make the decision-making and fund administration difficult. Who does what and the rules about the fund’s operation will need to be decided and documented in advance.  The SMSF’s Trust Deed will need to be reviewed and updated to cater to the increase in member numbers.
  • Voting rights can be necessary within a six-member SMSF.  The children may outvote their parents, especially when one parent gets old and becomes incapacitated.  Having voting rights based on each member’s balances or any other method may need to be considered.
  • Excessive transparency of the parents’ superannuation balances could cause potential financial abuse.
  • Possible death benefit disputes. Succession planning and future control of an SMSF become more important with more member SMSFs.
  • The forced sale of assets. The SMSF may be required to sell assets to allow for superannuation splitting. Sound planning may be required for situations where children need to move their super benefits to another super fund.

If you are thinking of getting your children into your super fund, a thorough review of your family situation and specialized personal advice are required. Get in contact with our experienced team of advisers so we can help you identify a superannuation strategy that works for you and your retirement goals.

Reference – this article is written in conjunction with Monica Wang @ Moneta Super

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Human brain when investing

The human brain and investing

Although Oreo has his own letterbox next door, he likes nothing more than watching the world from ours. Perhaps it is a better vantage point; perhaps he likes to look at things from different perspectives; or, perhaps he sees an opportunity to seize more territory (or wealth), at Molly’s house while Molly’s asleep at the wheel (inside in front of the heater).

We will likely never know Oreo’s motivation, but here are five things I have learned from watching Oreo and Molly and the choices they are making:

Cats live in the moment

They take time to enjoy the sunshine or a warm fire. We should too. There is a lot of pleasure in life’s small moments, if only we stop, breathe and take it all in.

Curiosity doesn’t kill the cat; it keeps the cat alive

Cats are attuned to changes in their environment. They do not get emotionally invested in catching that mouse if a vicious dog is barking at them. But, if they learn that a fence contains the dog, they may well go back to hunting that mouse. They stay alive to what’s happening around them, making adjustments as necessary, without being consumed by it.

You don’t need to lick all four paws at once

Sometimes the right decision is to start smaller and to invest just a little. You may elect to clean just that one paw, or you may decide to make a bigger investment and wash all four. But not everything is an ‘all or nothing’ decision.

Cats land on their feet

Probably not if you drop them from a 30-storey building (please don’t try) but, like walking a tight rope, they move with such precision, grace and steeliness that, even faced with volatility, they get safely to the other side.

Cats do not really have nine lives

They are just good at assessing their risk. Oreo knows that as a strong, young cat, he can be a little braver. He does not need to spend as much time lining up his jump. His inherent strength, agility and balance allow him to take a risk. And, if he does get it wrong, he has a lifetime ahead of him to correct his error. Molly, on the other hand, as a much older cat, knows she needs to play it safe. She adopts a lower-risk strategy, opting to protect what she has, resisting the urge to chase the shiny new object promising high yields (that may not deliver). Like Molly, people generally become more risk averse as they get older meaning that investment strategies that work for a 25-year-old with no dependents probably won’t work for a 75-year-old.

While I draw some wonderful lessons from watching these two felines, for humans, the world is much more complex. Our brain is both amazingly evolved and concerningly flawed. We are filled with cognitive biases (it is estimated there are in excess of 200 biases) which can lead our thinking away from the correct judgement, without us even knowing. There are reasons for this.

Our brain is a slave to speed, efficiency and comfort. It dislikes uncertainty and it dislikes dissonance (two conflicting thoughts). Fortunately, or unfortunately, the brain is also a prediction machine. Where information is unknown, our brain will simply predict. And, to do that, it uses our past experiences. You see, when making decisions, we do not jump forward to a clean sheet of white paper and consider all information anew. No, we travel backwards into our memories and experiences – but not all of them, because not all memories are created and stored equally. And not all memories are real (yes, made-up memories really happen).

We do not store memories as they have occurred. We store them as we interpreted them at the time, which is why two people can have different recollections of the same event both vehemently believing they are right. Plus, we attach emotion to our memories meaning that a more emotional event will feature more heavily in our memory. That stands to reason, but it can also lead us to over-weighting one experience while discarding or ignoring another that may be equally or more relevant to the decision at hand.

In essence, we think, when we make decisions, that we are being rational, objective and well considered. When, in fact, quite often, we have formed the decision in our subconscious and everything else is a rationalisation after the fact. Our brains are almost too smart for us.

No one can completely overcome the flaws of the human brain (thought to be the most complex structure known to man). However, our aim, as your financial advisers, is to bring a balance of this type of awareness, robust analysis and empathy to better understand, identify and help implement a financial strategy that is tailored to you so that if we were all cats, Oreo can enjoy the letterbox and Molly can enjoy the fire.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today

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Person typing on laptop

Quotes to embrace during volatile markets

2022 has been a volatile year for financial markets, with inflation at all-time highs and central banks around the world attempting to play catch-up via steep interest rate hikes. Global supply chain constraints, exacerbated by the war in Ukraine and lockdowns in China have led to fear of a potential recession.

Australian markets have performed better than global counterparts, yet unfortunately, nothing has been safe (except cash). Global markets are down 10-20 percent for the year, bond markets have crashed 10 percent and the ASX is down nearly 10 percent as well. Property prices have also begun to stagnate, especially in the capital cities as the rising cost of borrowing puts a stop to the post- covid property boom.

Investors need to realise that corrections are normal and are part of a healthy market. A steep pullback in the market may provide opportunities to buy good quality companies at a lower price. This makes it even more important to turn down the noise, remain disciplined and stick to a long-term investment strategy. The following quotes should be kept top of mind when investing during volatile market conditions.

ASX 200 performance

*ASX 200 performance over last 12 months to 11/07/2022

1. “The stock market has predicted 9 of the past 5 recessions.” – Paul Samuelson

It does not mean much knowing or expecting an incoming recession as you will always be better off if you remain invested and more importantly, continue to invest during downturns.

2. “Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” – Peter Lynch

The only way to guarantee a loss is to sell during a correction and crystalising paper losses.

3. “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” – Benjamin Graham

Markets are impossible to predict in the short term, however, quality companies will continue to perform in the long term.

4. “More money has been lost trying to anticipate and protect from corrections than actually in them.” – Peter Lynch

History has shown that corrections are nothing more than a temporary reset for the market if you remain invested.

5. “Be fearful when others are greedy and be greedy when others are fearful.” – Warren Buffett

The Oracle of Omaha (Warren Buffett) has outlined the importance of avoiding herd mentality. Do not buy during market peaks and add to your positions during steep downturns.

If you need assistance with your long-term investment plan, please reach out to your financial adviser.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Lady getting a haircut

Time for a haircut?

As I write this article, we are now seeing an increase in COVID-19 cases presenting at hospitals and rising workplace absenteeism. The media is now discussing mandates, working from home, vaccine boosters and support measures. It is almost as if we have progressed back three years. Is it a case of Déjà vu?

The world has changed since 2019 and economic conditions globally are now very different. We are seeing global inflationary pressure driving up interest rates and the ability of governments to prop up economies has diminished following several years of borrowing to cover the costs of managing the pandemic. Rising costs of living has seen the passing of increases to the minimum wage and one-off payments to pensioners, but with inflation likely to exceed this rise, some further belt tightening is going to be needed. For retirees, the markets have taken a hit and the majority of superannuation funds have experienced a negative return over the past 12 months. This can be a scary time when there is no income being generated from employment.

So as I line up for my fourth shot and my free flu vaccine, it is time to reflect on my own budget and where haircuts may be required. What do I need to anticipate and review for my overall goals?

Goals

Everyone’s goals are different and prioritising/determining how much to allocate to goals is an individual choice. Let’s look at how you may review some of your goals.

  • Retirement – less superannuation may mean reviewing whether you want to work one more year. Could you save enough from your budget for more salary sacrifice, do you downsize or relocate to cheaper housing?
  • Buy a house – interest rates are rising, so how much of your budget can you allocate to your loan (how does this compare to rent), will prices in your area come down or rise, do you delay a year to save a bit more for a deposit?
  • Holidays – set a budget and maintain it (also, involve the kids). Rising fuel costs and prices may mean some adjustment to expectations.

Needs versus wants

Budgets really are a case of needs and wants.

Needs will consist of fundamental items that are essential – roof over our head, clothing, food and water, essential health. Review your budget, where can savings be made? Have you shopped around on your home loan and general insurances? Challenge them to do better. Do you need the ‘name’ brand clothing or can a basic outfit suffice? Plan your meals and review the catalogues for food savings and plan meals around what is on special, could you grow your own vegetables? Look after your health. Flu vaccines are free so whilst they may not 100 percent guarantee prevention of flu, they will certainly help to prevent it (and with the amount of code reds in Victoria, lessening the load on the hospitals will be a good outcome also).

Wants are items that are great to have, but if they were not there, life will go on. Where can we find savings? With petrol topping $2 per litre, this is a good starting point. Use petrol apps to find the cheapest fuel. Premium versus regular, are you transporting extra weight in the car, could a ride on the pushbike achieve the same goal? Take-away, the morning coffee is the obvious one, but dinners out, take-away foods and pre-prepared meals will cost you more than a family dinner prepared at home. The fitness membership gathering dust, can you sell it or instead of renewing, you could exercise in the park? Streaming services, how many do you have and are they really needed?

Summary

At an individual level, we cannot influence the world around us to stop the conflict in Ukraine, improve trade relations with China or halt natural disasters, but we can focus on managing our discretionary spend and on our personal health. The ideas above are just a sample of how you can help yourself to combat costs of living. Do not assume that the government will provide relief as they manage their own debts incurred through the pandemic and sometimes having a budget haircut can provide a sound financial outcome.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Piggy Banks for saving

Save or invest – what is right for you?

When introducing children to money, we often think of the historical “Dollarmite” and bank programs many of us had through our school days, or perhaps it was giving pocket money to the piggy bank. As we progress to adulthood, we still rely on our everyday accounts to help us save money towards our financial goals.

With the official cash rate still at low levels, the interest rate in savings accounts not meeting inflation, and term deposits locking money away for a return below inflation, do we need to consider investing as the new saving?

Saving

We will define this as investing in an everyday bank account.

Investing

We will say this is the purchase of shares and managed funds.

Why do we save our money rather than invest? The answer is lower volatility (the amount we have does not go up and down), we do not have to change our savings to cash to purchase goods and you need to save first to invest.  However, savings often fall behind the inflation rate and will typically deliver a lower return than investing over the long term.

As with many aspects of financial advice, the right answer will depend on your financial requirements. Understanding your goals and your willingness to take on risks will help determine the correct strategy. Another factor is the length of time for your saving/investment.

Goals

If your goal is to hold emergency funds, then cash is the answer. It is there and ready when you need it. Often, a smaller dollar value goal required in the short term will result in saving as the answer (eg. paying rates, household expenses, domestic weekend holidays).  The bigger the goal or the longer duration to achieve it will suggest investing as the preferred medium (eg. home deposit, new car).  For many years, a savings account was the key avenue for these longer-term goals. However, many are now switching to include some investing to ‘speed’ up the goal timeframe.

Saving and investing incur differing levels of risk. Money in a bank account is low risk, whereas investing holds greater risk (with each investment having a different risk level from the next). Of course, the more risk, the more potential for return as per the classic risk vs return graph. So, if you are just starting and have a solid income, you might have higher acceptability of risk, as opposed to someone in retirement mode who wants to preserve their hard-earned wealth.

Risk Reward Chart

Saving and investing can both be sound financial strategies to help achieve your goals. The choice you make should depend on you and your own circumstances.

If you are looking at saving for a short-term goal or investing for your future, our experienced team of financial advisers can help determine the right avenue for you.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Why compliance is important

Why is compliance important?

This is Molly after we spoke to her about the importance of compliance.

For her, the rules are less complicated, do not pee inside! However, there are still consequences if she ignores them. Nevertheless, with one simple compliance statement, she nodded
off.

We get it. For many, compliance can be a snooze-fest. Compliance statements lack the cracking page-turning pace of a John Grisham novel, but the rules we must meet are embedded in those pages. There are a lot of them because there are a lot of risks. Little is more personal to us than our money.

The rules, while necessary, are increasing in complexity, sometimes leaving us to feel that we are made to jump through the hoops of a bored bureaucrat’s design in some sort of bizarre other-worldly circus. Then again, what if we were to re-frame how we think about compliance? Familiar with the names Bernie Madoff and Melissa Caddick? Madoff died in prison about 12 months ago while serving a 150-year jail sentence for defrauding up to US $65 billion from his clients. He fooled some of the best.

Closer to home is Melissa Caddick. Many of us had heard of Caddick in 2020 when the Australian Securities and Investment Commission (ASIC) raided her home, froze her bank accounts and properties, and prevented her from leaving the country. Court documents revealed that Caddick’s fraud had started some 11 years earlier when she set up her financial firm without the necessary AFSL (Australian Financial Services Licence). An AFSL, issued by ASIC, is required for all those providing financial advice to clients or trading in financial products or markets. Among other things, an AFSL imposes ongoing conditions such as legal compliance, training and development as well as sufficient financial resources to carry on the approved business. It is a means of oversight in a complex and changing world.

Unlike advisers at The Investment Collective, neither Caddick nor her company had an AFSL. What Caddick appeared to have was an abundance of confidence, an enviable lifestyle (both leading to an impression of credibility) and a lack of remorse or regret about conning friends and loved ones out of their hard-earned cash. It also appears she played on certain biases, a key one was herd mentality bias (or an ‘everyone else is doing it’ strategy). As humans, we are social animals who want to be part of the herd. Confirmation bias was at play. From what we know, Caddick’s investors took her at her word, accepting Caddick’s after-the-fact confirmation about investments and trades that she had made on their behalf. It is estimated that Caddick defrauded approximately 72 investors of around $23 million. Among these investors were family and friends – people who both loved and trusted her and who perhaps aspired, at Caddick’s urging, to greater levels of financial success, increasing their vulnerability and decreasing their critical thinking. She created the perfect storm of deceit, desire and dependency by carefully controlling the information she disseminated to them. As for Madoff, he fooled some of the best, even when the reported returns were too good to be true.

The saying is true – “if it feels too good to be true, it probably is.” The reality is that investment markets go up and down, our needs change and although we might wish to be part of the herd, that does not allow for strategic differentiation and tailoring. The Investment Collective exists to ensure the integrity of your investments (but not to guarantee the outcome). Anyone who promises high returns with little to zero risk is not telling you the full story. Investment carries risk, but most aspects of our lives do.

At The Investment Collective, our advisers are registered with ASIC. This means that The Investment Collective holds an AFSL and as a condition of that, our advisers are appointed as authorised representatives. You can find the ASIC registration for each of our advisers at the following website.

Coming back to compliance, and speaking for myself, compliance sometimes makes me want to tear my hair out. There are two ways of looking at it; one is to characterise it as a costly, burdensome, bureaucratic exercise in box-ticking; the other is to consider it as simply ‘good business’.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Pension halving legislation

Pension halving legislation – 4th consecutive year

The Australian Government has announced that the pension halving legislation originally announced on 1 July 2019 will continue for a further 12 months. It is now scheduled to finish on 30 June 2023. The announcement has come as a shock to many people within the industry as it was originally introduced to help retirees cope with market volatility throughout the COVID-19 pandemic. Now the markets have recovered to near all-time highs.

Pension halving legislation

The original legislation states “the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% for the 2019–20, 2020–21, 2021–22 and 2022-23 financial years.” This minimum pension is calculated as at 1 July each financial year and is calculated as a percentage of the pension balance. This is the minimum pension that must be paid to beneficiaries for the fund to remain compliant.

An example of this would be a 65 year old retiree with a superannuation fund in drawdown/pension mode valued at $700,000. Under normal circumstances, the minimum pension drawdown would be $35,000 (5%). With the pension halving legislation in place, this same individual would only be required to draw $17,500 (2.5%).

Benefits

The major benefit to the pension halving continuation is it allows retirees to preserve their super balance which serves as a tax haven. All income from investments and capital gains that are made within this environment are tax free.

Not being required to crystallise losses in volatile market conditions. Although the markets have recovered from the COVID-19 sell off, there is still a lot of volatility in the markets today with inflationary concerns and continuing geopolitical issues in Europe.

Key takeaways

  • Pension halving is not mandatory. Individuals will need to review their situation and assess if pension halving will be of benefit.
  • This legislation will apply to account based, transition to retirement and term allocated pensions.

If you would like to take advantage of this legislation, please reach out to your Financial Adviser.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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Creating stability in an uncertain world

Creating stability in an uncertain world

At times it can feel difficult to get out of bed in the morning. It seems each day the financial landscape changes at a rapid rate. We are continually faced with challenges that seem to be never ending.

Whether it’s COVID-19 and its continual spread (here in Australia and abroad), the uncertainty of the Russian/Ukrainian war and world peace, rapidly rising inflation across the globe, the increasing severity and frequency of natural disasters as a result of global warming or global supply issues increasing the cost of living, it is easy to feel like not getting out of bed in the morning.

However, there is light at the end of the tunnel. There are small measures you can take to protect you and your family’s financial wellbeing. This will ensure that you continue to have a comfortable night’s sleep and are rested and ready to tackle a new day head-on!

There are 5 simple steps to improve your financial resilience:

Spend within your means

Create a budget and spend within your means. Allow for flexibility when big life moments happen (buying a property, having a baby to name a few).

Prioritise your debt

It is always good to clear any debt, however, paying the debt with the highest interest rate will decrease debt faster. If you stick to this principle, the sooner you will pay off the amount borrowed. High interest credit cards are always a good place to start.

The 50/30/20 budgeting rule

Life is short, so you do not want to miss opportunities to enjoy yourself. Using this method, you can use 50% of your salary for essentials (groceries, bills etc.), 30% for wants and 20% to build
your long-term savings.

Build your emergency fund

Life can throw unexpected expenses your way, so it’s always wise to be prepared. Having an emergency fund (usually between three to six months of your salary) will mean you are adequately prepared for life’s unexpected moments.

Use extra cash wisely

Sometimes life provides an unexpected windfall. While it is important to treat yourself from time to time, it is also important to put this extra money to work. Whether it is paying your debt off faster, saving more for retirement or propping up your emergency fund, utilise your money wisely.

How you feel about your finances can play a pivotal role in your everyday wellbeing. Having your finances in order can ensure that you have the extra spring in your step to tackle life and all of its challenges head-on.

Studies have shown, that those who prioritise financial wellbeing are more inclined to be healthy and live happier and more fulfilling lives.

As Guns ‘N’ Roses drummer Steven Adler once said; “You can have all the riches and success in the world, but if you don’t have your health, you have nothing.”

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

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2020