In our current COVID pandemic environment, there are many situations that are unprecedented. One of these is the Australian Government's relaxation of the rules relating to accessing superannuation.

Throughout the pandemic period, laid-off workers or those not working are able to access $10,000 of their superannuation funds per financial year, to the value of $20,000, to help them through this tough time.

It sounds like a great idea, but what are the considerations that you should be aware of before you dip into your retirement savings? Let's discuss the pros and cons.

The pros

These might seem blindingly obvious, as having access to your compulsory savings can really help out when money is tight and work is scarce. Accessing this money can help make ends meet and cover the day-to-day bills that keep rolling in, regardless of your work situation.

From an economic point of view, it's also good for the economy when people are spending, i.e. economic stimulus. And, from the Government's point of view, why not let people access their own money to spend and drive the economy? It's cheaper now and places less strain on the tax system and deficit in the future!

The cons

The magic of superannuation is that of compounding interest. This is growing your money quickly by getting interest on interest. This is a great system, until you take money out. Lowering your superannuation by even a relatively small amount now can mean the loss of a significant amount in the future. The younger you are when you withdraw money, the larger the impact will be when you retire, with studies showing that impact of a 25-year-old withdrawing $20,000 from their super will mean www.canstar.com.au/superannuation/risks-access-super-early difference of over $102,000 when they retire</a>. That is a very scary figure!

The conclusion

If you really need it, accessing your superannuation can be a good tide-over until your financial or working situation improves. But be very aware of the long term impacts of this on your balance at retirement. The long term impacts may outweigh the short term benefits.

Two million Australians are in high financial stress. This prevents the average person from paying for emergency expenses, such as home repairs and large bills.

These struggles may have different underlying causes, but most lack of financial planning or the lack of knowledge to prepare for these emergency expenses.

No one likes emergency expenses and bills, but proper financial planning ensures you can handle these expenses when they arise. The first step is putting together a personal financial plan to improve your financial health and create a decent-sized savings account.

Here’s how to build your financial plan and how to build it fast.

Establish a Budget

Overspending is of the biggest causes of financial stress. That’s why one of the first things everyone should do is establish a budget. Track your spending habits to know where your money is going.

Look at each individual purchases and discover which ones you can eliminate. For example, if you buy coffee every morning, make your own coffee instead.

From here, regularly review your budget and your spending. Make sure you’re spending within your means and always save any extra money.

You’ll know where you stand financially and can better plan for your future goals.

Create GoalsAs cliché as it sounds, goals give you a purpose to save and invest. Without goals, you may not feel encouraged to save and will overspend.

Everyone’s goals differ. Of course, retirement is a goal that everyone should work toward. But you may also have some short-term goals you may want to achieve, such as saving up for an emergency fund.

This is why it’s recommended you separate your goals into short-term, mid-term, and long-term goals.

Just make sure your goals are realistic and you can work toward achieving them now. You can also use the SMART method when setting goals. SMART is a framework that sets specific, measurable, achievable, realistic, and time-bound goals.

Cash Flow Management

Whether you work one 9-to-5 or you have multiple investments, proper cash flow management will give you insight on the money you have coming in, how much you can expect, and where that money will go.
The best cash flow management consists of these factors:

• Fixed expenses (mortgage, groceries, etc.)
• All income sources
• Taxes
• Discretionary expenses (buying coffee, etc.)
• Savings

How do you use these factors to manage your cash flow? Use your income sources to know how much money you’re working with over a set period of time.

Before anything, subtract your fixed expenses and the amount you aim to save. If you’re self-employed, deduct taxes from this amount.

From here, see how much money you have left toward your discretionary expenses. Use this plan to improve your daily quality of life while planning for a better financial future.

Calculate Your Burn RateBurn rate is a term in business that means the rate at which a new business is spending its venture capital. You can use this rate in your personal lives. Your burn rate is the amount of money you “burn” to sustain your lifestyle.

When calculating your burn rate, you want to look at more than how much you’re spending on different expenses. You want to know how long it will take to “burn” through your funds. This helps you budget and save better.

Burn rate can include fixed expenses, such as your mortgage. But your burn rate can also include leisure expenses you find necessary, such as your Netflix subscription.

Another reason why calculating your burn rate is necessary because it separates your fixed and discretionary expenses better. Let’s say you were to lose your job. You’ll be able to identify expenses you can let go while keeping the ones you need.

Create a Superannuation StrategySuperannuation (commonly known as “super”) are personal funds you save up to be used in retirement.

While retired Australians receive funds from an Australian government pension, this amount will likely not be enough to handle your necessary and lifestyle expenses. And just because you’re retired doesn’t mean you won’t continue falling victim to emergency expenses.

Creating a super is easy if you have an employer. Most employers save a percentage of your funds into a retirement account of your choice. But if you’re self-employed, you’re responsible for your own super.

When should you create a super?
Start as young as possible. You want to ensure you have enough money available for retirement, ideally enough to last you at least 20 years. Saving at a young age will ensure you have enough money saved up by the time you retire.

The biggest issue when saving for a super at a young age is young people have many life goals, such as buying a house. Some supers are flexible enough to be used for more than retirement, such as investing in property.

Are you still unsure which super option is right for you? What if you struggle to save for a super? You can hire a financial advisor who can help you make the best decision for your needs. Here are the best financial planners in Australia.

Plan Your Taxes Correctly

No one likes tax time but creating the right personal financial plan will make your taxes easy. If you have an employer, planning your taxes is easy. But self-employed individuals have to keep a record of their income, deductions, and necessary tax forms they need to report.

Tax time can also be difficult if you have multiple investments, your own property, and even some retirement plans can make reporting your taxes difficult.

But a few best practices can make this process easy. For example, never mix your business expenses with your personal finances. While claiming deductions is perfectly legal, you shouldn’t do anything that falls outside the limits of the law.

If you still struggle with your taxes, you can hire a tax preparer to ensure your taxes are correct while reducing your tax obligations.

Create a Personal Financial Plan Today

Emergency expenses happen to everyone but that still doesn’t make them easy to deal with. A personal financial plan can help you avoid these setbacks and achieve better financial health.
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Are you struggling to calculate your income? Here are a range of different finance calculators you can use.

By Isabella Shoard July 23, 2020

Imagine this: you’ve taken steps on your journey to financial security and have begun to build an investment portfolio you believe will help you get there. However, with tax time and the end of another financial year fast approaching, you find yourself wondering what your next steps should be.

Maybe you’re thinking about diversifying your investment portfolio but aren’t sure which option is right for you and your financial needs, maybe you feel that your money isn’t working as hard for you as it could be or maybe you’re just interested in learning if there’s more you could be doing to lower your tax obligations.

Wherever you currently are in your financial journey, there’s a secret weapon you may be missing when it comes to taking it to the next level: a financial advisor.

Yes, that’s right, having a trusted financial advisor by your side, to provide you with professional support and guidance whenever and wherever you need it, has a number of benefits you may not have considered.

That’s why we’ve broken down just five of the ways having a financial advisor could be the ingredient you need to take your financial world a step further this financial year.
Interested in learning more? Keep reading to find out!

1. They Can Help You Find The Right Path Forward For You

Have you ever found yourself wondering what the right investment for your particular financial circumstances is? Or maybe you can see multiples and options that could benefit you, but can’t quite decide which one to take?

If you’ve ever found yourself facing these kinds of questions, a financial advisor could be the missing factor in your overall financial strategy.

While a financial advisor can play many roles depending on your personal financial needs and goals, a good financial advisor’s aim should be simple: to give you the expert guidance and knowledge you need to make the right financial decisions for you.

This means not only taking your entire financial world into account when providing you with financial advice but also working with you to identify the path towards financial security and success that is right for your particular financial circumstances.

In other words, with a financial advisor by your side, you’ll never have to worry again about whether a financial decision you make is the right one for you. 

Related reading: Should Investors See a Financial Advisor?

2. They Can Help You Reduce Your Tax Obligations 

At this time of year, it’s likely that tax and perhaps your upcoming tax bill is weighing on your mind. A financial advisor can help you turn tax time from something you dread into a stress-free and painless period of the year (yes, it’s possible!). You see, financial advisors are dedicated to ensuring your hard-earned money works even harder for you on your journey to achieving financial success and security. And a part of this involves working with you to lower your tax-obligations as much as possible based on your unique financial circumstances.

Just a few of the strategies a financial advisor might recommend, especially if you have a higher-than-average income, to help you make the most of tax time include:

• Voluntary super contributions
• Debt recycling
• Prepaying any investment loans you may have
• Taking advantage of the instant asset write-off if you are a business owner 

And that’s just the beginning.

The right financial advisor will also be able to connect you to a broader professional network of tax and business accountants to assist you with any specific or niche financial challenges you may be facing. This means that even if you have a question that your advisor themself can’t answer, they’ll be able to point you in the direction of an expert who can.

3. They Can Take The Emotion Out Of Making Decisions

Just like most other aspects of your life, your financial world can often feel complicated and may come with heavy emotional implications. This is especially true when making financial decisions that include your partner or family.

A financial advisor can help lighten the load by acting as a neutral party or as a sounding board for ideas when it comes to your financial world. 

While your financial advisor, as your financial partner, is invested in your overall wellbeing and success, their role is to get you on track to achieving financial access and security and make sure you get there.

This means that they’ll take into account every aspect of your financial world when listening to your ideas and be able to give you an impartial opinion on how your suggestions may impact your financial plan.

Your financial advisor will also be able to provide you with a model projection of what your financial future might look like depending on any changes you are considering, such as changing jobs or renovating your house.

For us at My Wealth Solutions, this certainty in periods of heightened emotions is crucial to ensuring a successful and worry-free financial journey.

Related reading: Five Tips to Master Value Investing Approach in New Financial Year

4. They Help With Every Aspect Of Your Financial World – Both Present & Future

We touched on it before, but having a financial advisor should not just be about reaching out for help with a particular financial challenge and then being sent on your way with a single solution. Instead, your financial advisor should act as your financial partner, providing you with professional financial guidance and support over your entire financial journey.

Having a financial advisor at your side means that you’ll never have to worry about whether a decision you make or an investment option you’re contemplating is right for you. Your financial advisor will be able to work with you to review your current financial situation and help you bridge the gap between where you currently are and where you’d like to go.

And a good financial advisor will do this by considering every aspect of your financial world, both now and as you progress towards financial freedom into the future.

This means that no matter what financial challenge comes your way, you’ll always have the professional support and guidance you need to tackle it with confidence.

After all, with a financial advisor by your side, you’ll have access to the advice and guidance you need only a phone call or email away. 

5. They Take Your Whole Financial World and Risk Tolerance Into Consideration It is important it is to have someone by your side who understands your tolerance to risk when it comes to investing.

That’s why we believe your financial advisor should take a comprehensive approach when working with you to develop an ongoing investment strategy that not only considers your current risk appetite but also every aspect of your particular financial situation.

This way, your financial advisor will be able to advise you on whether an investment option you may be considering is right for your risk tolerance by also taking into account every aspect of your financial world.

They’ll also be able to work with you to review your investment strategy if your financial circumstances ever change or if you find yourself wanting to take your investment strategy to the next level.

Don’t spend another minute agonising over whether an investment or financial decision you’re contemplating is right for you.

Reach out to a financial advisor now and let them help guide you on your journey to financial success and security.
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Don’t worry, you can thank us later!

Original article published July 2020 on Canstar.com.au

Good video from the ATO discussing superannuation condition of release (ie when you can access money held in superannuation).

Money Masters program will be coming to Channel 9 this Saturday 14th of October at 12.30pm.

It features the best fund managers in Australia discussing investments and funding an income in retirement.

"Featuring some of the biggest names in finance from Platinum, UBS, Perpetual, Nikko AM, Orbis Investments, AIA Australia and research houses Morningstar, Lonsec and Zenith as well as one of Australia’s top CFP advisers, see what the Money Masters had to say to Aussie celeb Blair McDonough about reinventing his sources of income."

Source: www.nomorepractice.com.au

Over 45% of Sydney and Melbourne properties have doubled in price over the last 10 years.
 
To double over 10 years requires capital growth of approximately 7.20% pa.

Rental income would be in addition to any capital growth.

Source - Corelogic

You can view the full National September 2017 Corelogic property report below.

Corelogic National 2017 Property Report

From 2008 Australian wages have increased on average by $1,404 pa.  This is an increase of only $156 each year over a 9 year period, much less than the cost of living.

Unemployment remains low but we have seen a shift from higher paid work to lower paid contributing to low wages growth.

Wages as a % of Gross Domestic Product (GDP) has also decreased.

High debt and stagnant income is likely to impact consumer spending.

It also highlights the importance to see a qualified financial planner to make sure you are in a strong position and your cash flow is being used as efficiently as possible.

​Source: Bloomberg

Citigroup is planning to hire 100 private wealth advisers in Australia over the next 3 years.

Citi will be targeting the 230,000 Australians with more than $1 million to invest.

Australia's fund management industry is valued at $2.8 trillion with more than $600 billion in self managed superannuation funds.

Link to full article: https://www.bloomberg.com