Wealth Creation Blogs Worth Sharing.

The last few weeks have been extraordinary to say the least. We’re battling a world wide health crisis and we face uncertainty in many aspects of our lives.  It’s true that there are simply some things beyond our control and we will more than likely see many changes to our everyday lives for the remainder of 2020 and beyond. So, what can be done?  On the other side of this, many people will be left with dramatic financial stress, whether it be periods of unemployment, depleted cash reserves or battered superannuation balances.  And for many, timing will be an issue. Those who were weeks ago contemplating retirement may now need to change their plans. And those that are still accumulating for retirement have more than likely just seen their investments and superannuation return to levels of 5 or 6 years ago. Essentially the clock has be wound back in one way or another.  It may well be a good time to take stock and lay some foundations for when thing...

Financial planning . That’s for people with lots of money to invest, isn’t it? Not necessarily. Sure, investment planning is an important part of financial planning, but underpinning the whole process of creating wealth in the first place is having a good financial strategy. For many people that strategy is taking each day as it comes and letting the future look after itself; but in a complex and ever-changing world, isn’t a more active approach a good idea? Each of us has specific needs and desires, of course, but there are a number of common challenges that we need to think about when developing our financial strategies. Stage of life. Baby boomers (born 1946-1964) are moving into retirement in droves so Gen X (1965-1976) is taking on the mantle of being the great wealth accumulators. For the most part, this generation has their strategies in place: pay down the mortgage, contribute to super, maybe buy an investment property, and wait for the kids to leave home. Ge...

Ask most 30-year old’s who their financial planner is and the typical response might be ‘huh?’ After all, financial advisers are for older people with plenty of money to invest, aren’t they? Well, yes, people nearing or in retirement will benefit from sound advice. But so will younger people. With the benefit of having time on their side, and with some help from an adviser, a 30-something can easily establish a wealth creation plan that can deliver a big payoff in the future. Harness compound interest It’s been called the most powerful force in the universe, and compounding returns – earning interest on your interest – can deliver dramatic results. Imagine that, at age 30, you commence a simple savings plan. You contribute $2,000 each year to an investment that delivers an after-tax return of 6% pa. After 30 years you will have contributed a total of $60,000, but your investment will be worth $158,116. The magic of compound interest will have delivered you an effortles...

With costs of living on the rise and wage growth stagnating, it’s not hard to see why Australian households are increasingly feeling the pinch.    In fact, a recent Ubank survey revealed 59% of Aussies admit their current financial situation causes them stress or loss of sleep.    Even in the oft-labelled ‘Lucky Country’, this is a worrying statistic.   Financial stress can be constant and at its worst crippling, but with a bit of teamwork, solid communication, and a dash of discipline you can get your finances under control.  Communication Often what aggravates our financial stress isn’t just the lack of funds but the way it affects us interpersonally. In this sense, families, couples and friends all need to work out healthy ways to communicate about cash. People have varying attitudes towards their finances and sometimes differences in approach are hard to reconcile. A good approach, as in most things in life, is to communicate openly and ho...

Most of us are starting to think about getting back into work mode – or perhaps you are back at work already. Don’t worry, this is not going to be one of those “let’s look back over the last 12 months” chats where we remember which celebrities are no longer or who won major sporting events. What should you expect from the next 12 months? Well, nobody knows.  However, there is one certainty.  Markets will go up and markets will go down.   Consider this.  The Australian equities market is still approximately 18% below where it was 11 years ago so there’s plenty of upside just to get back to where it was.  In terms of your superannuation, you need to consider your time horizon, i.e . how long will it be invested for before you can access it. For a 35-year-old, they face another 30 years before they can access their super at age 65. Not only that, once they do retire at 65, they’re not going to take their super and spend it in one go....

The world’s ageing population has recently been described by the World Economic Forum as the financial equivalent of climate change.  A study of the world’s 6 largest global pension schemes (essentially the aged pension that governments pay those who have retired) in the US, UK, Japan, Netherlands, Canada and Australia found that by the year 2050 there will be a shortfall between what needs to be paid and what governments can afford of some $224 trillion. Governments simply won’t be able to afford to fund retirees via age pensions.  The main reason for this is the world’s ageing population, there’s an ever-reducing number of younger people in the work force generating income and taxes to fund the pension schemes that are designed to look after people when they retire. Traditionally, the three stages people would go through is they would become educated, work for 40 years or so, retire at 60- 65 and live off the pension until they died at say 70-75 at best. Mo...

I often get asked about eligibility for long-service leave. There seems to be a little bit of confusion surrounding this topic.  Traditionally, long service leave applies to an employee who has been with the same employer for several years (typically 8-10).    Depending on the industry, an amount of leave is available after that time.  For example, some industries provide 1.3 weeks of long service leave for each completed year of service.   After 10 years they are eligible for 13 weeks. Of course, if you leave that employer prior to the 10 years, it’s unlikely any accrued amount will be paid out and in most cases, it’s not transferable to the next employer. In the Coal Mining Industry, things are a little different.  In 1992, the Australian Government introduced the Coal Mining Industry (Long Service Leave) Administration Act.   It’s a complicated piece of legislation.   However, the idea is to allow eligible employees...

Many of you may have noticed on your post June 2018 superannuation statement that an amount has been deducted for tax.  Many people believe that they pay no tax in their super. Unfortunately, this isn’t true. Each year your employer pays 9.5% of your salary into your nominated super fund in order to meet their Superannuation Guarantee obligations. For every dollar that your employer pays into your fund, 15% of it is taken as contributions tax. It’s worse if you earn over $300k per year when the tax paid jumps up to 30%. If you’re a savvy investor, you’ll have your super invested in funds that earn income throughout the year. Be it interest, rent, dividends etc. These earnings don’t escape tax. They are in fact also taxed at 15%. Of course these tax rates are well below most people’s personal tax rates. So having your money in super does mean you’re paying a lower rate. The trade - off for this is that you can’t access your money until y...

In other posts I have hit on the importance of getting the most out of your superannuation fund returns. So how do you do it? There’s absolutely no shortage of managed funds, investment vehicles and investment styles available to superannuation investors in Australia. The choice can be quite overwhelming. For me it’s all about risk V's return.  You can chase speculative investments in the hope you can increase your returns. You may get lucky even if only in the short term. Reality is, speculating is not investing. It’s gambling with your capital and your future.  On the flipside, you can be completely risk adverse and invest all your superannuation in a cash account. Sure, it will always be there, but it won’t go up.  The spending power of your money will be eroded by inflation. There is also a huge opportunity cost of missing out on gains that can be safely achieved elsewhere.   So, we look at investment styl...