Are you over 30? You need to read this…

August 21st, 2017

Superannuation is, and will continue to be, a hot topic in the financial advice industry. No matter what your age, once you begin your working life superannuation should be in the back of your mind, but MoneyTalk magazine have uncovered some confronting statistics that it’s worth thinking about if you’re around the age of 30.

If you’re 30 years old today, you have 35 years left in the workforce and need to save enough superannuation to fund you for 35 years of retirement. Now, many of you may be thinking – ‘Hold on a minute, I don’t need to save for that many years!’ well, with the ever increasing medical improvements you just might. The median age of death is increasing by 0.6 years every year, and currently sits at age 84. If this rate continues, by the time today’s 65 year old’s reach their mid 80’s, life expectancy could have been bumped up to around 94 years old!

If you’re in your 30’s or 40’s today, it’s not unlikely that you could need to fund your retirement until the age of 100 – an intimidating prospect for many. If you’re going to live to 100, and only work until you’re 65 it is estimated that you’ll need a nest egg of $3,000,000 – but how are you going to achieve this?

1. Review your superannuation fund now

When reviewing your superannuation fund, take a detailed look at the investment returns and any fees to be paid. Take special notice of tax being deducted from your account before payment needs to be made, this can equate to thousands of dollars’ worth of lost investment returns over the years.

2. Consider making extra contributions

The younger you start contributing extra funds to your superannuation account, the better off you will be. However, there are strict limitations of how much money you can contribute to your fund, and in what capacity you can contribute- familiarise yourself with these rules so as to avoid any mistakes.

3. Build up non-superannuation investments

Think about bettering your financial situation as a whole, rather than focusing solely on your superannuation. Think of how best to build your investments outside of your superannuation, with a view to eventually transferring them into your super in the most tax efficient way. You Financial Adviser can help you to plan this out.

4. Consider gearing

Borrowing to invest money is not suitable for everyone, be sure to speak to you Financial Adviser if you are considering this as an option to boost your superannuation. If done correctly, gearing can be used both inside and outside superannuation.

No matter what your current age, you must consider and plan for your financial future – invest your time as well as your money into superannuation planning.

Source: Money Matters Magazine, December 2016.

An article by Infocus Securities

Increasing your savings without decreasing quality of life…

August 21st, 2017

It seems not too many days pass in the Australian media without a debate on the savings habits of the younger generation. This seemed to reach fever pitch when last year an article suggested that giving up the café lifestyle such as expensive lunch orders with smashed avocado, can be a useful method to contribute funds towards a housing deposit.

I am sure you have come across numerous savings articles suggesting stopping spending on your takeaway coffees every day. They are often exaggerated and extreme in nature. Suddenly it assumes we all consume a minimum of three cups, they must be large, and the prices are $5.50 or higher. Supposedly there is $6,000 a year there that we are wasting and we need to quit cold turkey as of this afternoon. Other suggested measures often include never travelling outside of the country, and that a “smart” phone is always extravagant. Reading such articles can be a deterrent in making any effort to save and possibly result in giving up altogether.

Many of us love our coffee and it can be a social habit. In some cases, a chat at a café may replace an alternative more expensive form of pastime. Maybe a less extreme measure is to ask ourselves if we are grabbing a second take away cup ourselves each day, are we enjoying that as much, and could we sacrifice this? Regarding overseas travel, are there some cheaper destinations that we haven’t yet considered, that could be just as interesting as what we initially had our minds set out on? When it comes to phones, rather than give up our “smart” phone, have we shopped around for the best deals and data plans before committing? Likewise, with services such as banking and electricity it is generally only after shopping around and asking that you can get a better deal. With other areas that you spend on you may be able to have the savings come to you, by being on email distribution lists that alert you to bargains.

Are there some areas to save that many years ago we traditionally wouldn’t have thought about? Whilst sharing your accommodation may be considered a sacrifice to your lifestyle, Airbnb has at least made the process less of a long-term commitment to try. Classified websites may be a way where we can monetize items that otherwise we wouldn’t have used again. Owning a car has always been a major cost in our budget, but car sharing websites have come along way.

Increasing your savings does not always have to decrease the quality of your life and we don’t have to take an all or nothing approach, some small steps are better than nothing. Finally, automatically redirecting some of your pay over to a bank account where you can’t access as easily, can be a more modern way to help with the discipline needed to improve your savings habits.

An article created by Infocus Securities

Economic Update August 2017

August 21st, 2017

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.

Economic growth improves in key countries
– China economy shows strong signs of strengthening
– Australian employment data continues strength
– Rates on hold in Australia and the United States (US)

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact Michael Berinson or his office.

There were some notable economic growth numbers released in July. After a few years of declining (but still stellar) growth numbers in China, the latest statistic was back up to 6.9%. The new China leadership team is about to be ushered in and the Chinese know how to throw a party. On top of that, the China Purchasing Managers Index (PMI) came in at 51.4 for manufacturing and 54.5 for services – both in the sweet spot. Throw in 11.0% for Retail Sales and 7.6% for Industrial Output and you have what Keating might call, ‘a beautiful set of numbers’.

Turning to the US, the anaemic growth in Q1 was overshadowed by the June quarter coming in at 2.6%. True it’s not the 3% that the Fed is aiming for or the 4% that Trump was dreaming of. But 2.6% is really solid. Unemployment is low at 4.4% and 222,000 jobs were created in June when only 180,000 new jobs were expected. It is true that wage growth was low at just 0.2% but you can’t have everything all at once can you?

Even Australia was looking good. We had some very nice jobs and unemployment data – against the trend of 2016. For whatever reason, the labour force data are looking better. But the RBA chimed in at the start of July saying that 3.5% is our ‘neutral’ interest rate. That is, rates should be at 3.5% when things are chugging along. Since we are sitting on only 1.5%, there are a lot of hikes in the pipeline!

It was a bit silly to advertise that opinion just now and an Assistant Governor had to come out and hose things down. Retail sales did come in at a biggish 0.6% for the month. We’re not cooking on gas but at least we are cooking again.

As we go around the world the United Kingdom (UK) is starting to struggle a little with its latest growth of only 0.3% for the quarter and Brexit looming large. Prime Minister Abe in Japan has gone from rock star status to a meagre approval rating of 29.9% in a few years. The Royal Bank of Canada bumped up rates to 0.75% from 0.5%.

So the dice are still rolling. Fortunes are rising and falling but there seems to be no basket cases anymore and there is lots of good news.

We became aware of a new expression this week. It’s been out but under the radar for a few years. It’s still worth sharing. On asking why stock markets – particularly in the US – remain strong – the new catch phrase is that it is a TINA market. Not as in Turner or Arena, but it is the acronym for ‘There Is No Alternative’. Money has to be invested somewhere when cash rates are so low.

TINA puts a safety net under markets for a while but we must be vigilant for when Tina starts singing.

So where to from her? Trump is floundering but his economy is doing well. The Australian economy seems to have stabilised. To us, it looks like a smooth ride ahead – until we see otherwise.

The current US reporting season has been unusually strong meaning that increases in earnings are supporting recent stock price strength. Can it go on? In a word, yes!

The big Tech Companies are having mixed results but they are looking strong. We should never be complacent but the second half of 2017 doesn’t look too bad at all. Perhaps we all deserve a break after the trials and tribulations of 2008 – 2015.

Asset Classes

Australian Equities

The ASX 200 was flat for the month of July. The Materials sector was the strongest on the back of some very strong commodity price movements. Healthcare took a beating at 7.5% with Utilities ( 5.3%), Telcos ( 4.3%) and Industrials ( 3.2%) not far behind. Financials (+1.2%) put in a creditable performance. A big sector rotation just took place.

Our August reporting season is just getting underway. As always, the companies’ outlook statements will be crucial for the future of our market. We have found some recent softening in broker forecasts of company earnings and dividends. At least that downgrade has resulted in our forecasts for capital gains to be only a tad under the long-run average.

Foreign Equities

The S&P 500 fared a bit better than us in July posting a solid +1.9% capital gain. The London FTSE also did well at +0.8%. Emerging Markets were particularly strong at +4.1% on the rising tide of commodity prices.

Our expectations for Wall Street are for a good finish for the year despite the strong first seven months of +10.3%.

Bonds and Interest Rates

With the “Fed” (US Federal Reserve) on hold again in July, the next chance for a hike is at the September meeting. But most forecasters are not expecting another hike this year. The odds of a rate hike by December are priced in at a little under 50%.

The Fed is widely expected to start its balance sheet repair in September. This amounts to gradually lowering the $4.5 trillion bond debt down to $2.5 trillion over a number of years. Since this policy will gradually raise long rates on its own, there is no reason for the Fed to also raise the underlying Federal Funds rate at the short end.

The RBA kept rates on hold again in July and August. The majority of pundits are expecting the next move to be up but not until at least the middle of 2018 – and possibly 2019.

Our view of needing a cut at home is on the back burner for the moment. We need a little more data to change our call. It all depends upon the next GDP growth number to be posted on September 6.

Other Assets

Commodity prices were on a flier in July. Iron ore was up +15.2%, Brent Oil up +9.8% and Copper up +6.2%. Our dollar was up +3.8% against the greenback.

The volatility index called the VIX was down 3.7% in July. This fear index is around all-time lows.

Since we are a commodity producing and exporting country, the restoration of solid commodity prices bodes well for our total exports and GDP growth.

However, not everyone wins from this sectoral rotation. Healthcare and a number of Industrials names are finding stronger headwinds after a good first half to 2017.

For example, our Healthcare sector is up +13.0% for the year-to-date including the poor 7.5% for July.

Regional Analysis

Australia

Our headline CPI inflation came in at only +0.2% for the quarter or +1.9% for the year. Since the RBA’s target range is 2% to 3%, this read gives the RBA no motive to raise rates anytime soon.

With total employment up around 170,000 in the first half of 2017 – with nearly all of them full-time jobs – we are back on track. During that period, the unemployment rate has been stuck at around 5.6% and wage growth is non-existent.

Europe

The focus in Europe is on what the implications of Brexit are for employment and trade. It will be nearly two years before we find out the full story so we cannot expect much good news from that region in the medium term.

However, the underlying economies are so much stronger than in recent times. We don’t have to waste much energy worrying about Greece and the other ‘PIGS’ countries anymore. Can you remember what PIGS stands for? Those days are gone!

China

The China data have been on a roll for quite a while. Without taking sides, it is hard to conclude after recent data that China is not undoubtedly doing well at the moment. Yes, there are political problems with the US and who would want North Korea as a neighbour – let alone an ally.

But what seems to be forming is a view that China has regained its role as a lead player in the world – as solid and dependable – at least in an economic sense.

US

Trump is hiring and firing quicker than he did on “The Apprentice” – but the West Wing is for real.

The US is facing a number of problems in a month or so but these ‘episodes’ on TV have not stopped US jobs and growth.

We don’t think anyone can reliably predict how this scenario will play out but, as annoying as the tweets and press releases are, the economy is marching on!

Rest of the World

With sanctions on Russia being on the front burner, and the woes of the Venezuelan leadership also up there on many news wires, some instability in oil pricing is likely. Both countries are big exporters.

Article prepared by Infocus Securities

Relationship Capital: An Advice Practice’s Most Valuable Balance Sheet Asset

August 21st, 2017

An article from Riskinfo E Magazine that highlights the most valuable asset for any business that is often overlooked when looking at the Value of the business, but in reality is the platform on which any good business should be built. It’s about Trust, integrity, and relationships – something we at Active Wealth Managers firmly believe in and practice.

When we think of business capital, it is done in financial terms, for without this asset it is impossible for an advice focussed enterprise to operate or grow.

Mentor Education argues that ‘relationship capital’ is equally vital. In fact, it is the foundation for developing new markets (and clients) – and a quick glance at the financial statements will reveal how much of this asset a business has.

Business isn’t a spectator sport, and how well you develop and nurture relationship capital will define and play a major role in its financial success…or failure.

Building relationship capital

Developing strong relationship capital is a business strategy that’s often overlooked and even approached in a superficial or tokenistic manner.

It’s the relationship capital of your people that combine to become the reputational capital of your business.

But the effort put into building good relationship capital is one of the most cost- effective strategies with potential to deliver extraordinary outcomes.

It takes thought, practice, and the right attitude to get it right with the key focus being trust, sincerity, honesty, integrity and dependability – that when combined create the business culture, and in turn the reputation capital.

The practice principal and key personnel of an advice business build culture over time, as a result of their daily activities and interactions. It’s the relationship capital of your people that combine to become the reputational capital of your business.

When people think of ‘networking’, they often do so through a very narrow prism of networking events, adding contacts to a database, having meetings, etc.

In order to build relationship and reputational capital, a broader view is required.

With every P2P interaction – client, employee, the local café cashier – you’re engaging with people in your network, and the manner in which you speak and engage with each and every one is either contributing to or deducting from, your relationship capital.

Therefore, choose words, topics, and your thoughts carefully.

How many interactions have we all experienced with people that were lazy, argumentative or patronising in the way they sought or articulated information?  Those people are undermining their personal and commercial capital, one careless and thoughtless interaction at a time.

We are all brokers of information, and the quality of the information is determined by us, and how well we deliver it.

Networking and engaging with other people is something that deserves more thought and preparation than many people give it. To be successful and effective it must be strategic and tactical in its application and purpose.

If you’re going to put time into networking, you must also put in the effort required to maximise the opportunities and outcomes.

Time isn’t money – relationships are money

Reflect on those significant client win successes: was it related to the number of hours worked each week on the proposal, or was it the rapport and depth of relationship and trust developed with the client?Developing relationships demands a significant time investment, but it’s the quality of the relationships – and the amount of relationship capital developed – that you’ll be able to take to the bank!

The extent to which positive, trusting and solid relationships are built will ultimately be reflected in the balance sheet.

Remember, people can open doors for you, but you must walk through them to find the opportunity. No matter how many networking events you attend, only you can build relationships with the people you meet.

It’s important to understand the opportunity cost to you of not networking well

The cost of not getting it right

Some might say that it’s difficult to measure the success of networking and building relationship capital. I would argue that measuring your success in these areas is as easy as looking at the financial statements of your advice practice.

It takes time to develop good relationship capital, but it’s important to understand the opportunity cost to you of not networking well and failing to develop that capital.

Relationship capital grows into reputation capital for your advice business over time. If you view this type of capital as an asset, you’ll see the sense in growing and protecting it. And as it starts to increase, you’ll see a corresponding increase in opportunities, and in your financial statements.

If you’re a reluctant networker, let me leave you with these two quotes:

“Life isn’t about finding yourself. Life is about creating yourself.” (George Bernard Shaw)

“Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.” (Norman Cousins)

 

Article from Riskinfo E Magazine

Issued by Mentor Education RTO 21683: www.mentor.edu.au

Helping you navigate this year’s Federal Budget

May 10th, 2017

Last night the Australian Government handed down its Federal Budget for 2017. It’s important that you take the time to understand what the Budget proposals mean – and how they might affect you personally.
According to Federal Treasurer Scott Morrison, this year’s Budget is founded on the principles of fairness, security and opportunity. Mr Morrison claims that the government’s proposed measures will raise almost $21 billion in revenue over the next four years, returning Australia’s budget to surplus by 2021.Here are some of the key Budget announcements. Note that each of these proposals will only become law if it is passed by Parliament.

Additional non-concessional cap for retiree downsizers
From 1 July 2018, people aged 65+ will be able to contribute up to $300,000 into super from the sale of their principal home, if they’ve owned their home for at least 10 years. The existing restrictions for contributions over age 65 won’t apply for these non-concessional contributions.
What this could mean for you
You may be able to contribute an additional $300,000 to super (or $600,000 for couples), over and above your existing concessional and non-concessional caps. However, if you or your partner receives the age pension, this could cause your entitlements to be reduced.

Super savings scheme for first home buyers
From 1 July 2017, individuals will be able to make extra voluntary super contributions of up to $15,000 a year beyond their employer’s Super Guarantee payments, up to a total of $30,000. These contributions will be taxed at 15% and can be withdrawn to go towards the deposit on a first home. Withdrawals will be allowed from 1 July 2018.
What this could mean for you
When you withdraw your extra contributions to pay for a deposit, they’ll be taxed at your marginal tax rate minus a 30% tax offset. While the tax concessions for these contributions may allow you to save a larger deposit, you won’t be able to access your money until retirement if you decide not to buy a home.

A 0.5% Medicare levy increase from 2019
From 1 July 2019, the Medicare levy will increase by half a percentage point from 2% to 2.5% of an individual’s taxable income. The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from the 2016–17 financial year.
What this could mean for you
The increased levy may also result in increases to many tax rates linked to the top personal tax rate, including fringe benefits tax and excess non-concessional contributions tax. Certain lump sum super payments that attract the levy may also be impacted, such as disability benefits paid to people under preservation age.

Extension of the deductibility threshold for small businesses
The government will extend the existing accelerated depreciation allowance for small businesses by 12 months to 30 June 2018.
What this could mean for you
If your small business has aggregated annual turnover below $10 million, you’ll be able to immediately deduct the purchase of eligible assets costing less than $20,000 where they are first used or installed ready for use by 30 June 2018. After that date, the immediate deductibility threshold will revert back to $1,000.

New levy for major banks
A major bank levy will be introduced for authorised deposit-taking institutions (ADIs) with licensed entity liabilities of at least $100 billion (indexed to Gross Domestic Product (GDP)). The levy will equate to an annualised rate of 0.06% – for example, the levy on a bank deposit of $500,000 will be approximately $300 pa. Superannuation funds and insurance companies won’t be subject to the levy.
What this could mean for you
It’s unclear at this stage how the levy will be implemented, and what the impacts might be on clients/customers and shareholders.

Incentives for investment in affordable housing
From 1 January 2018, resident individuals who invest in qualifying affordable housing will be eligible for an increase in the capital gains tax (CGT) discount from 50% to 60%. This increased discount will also apply to eligible Managed Investment Trusts (MITs) as of 1 July 2017.
What this could mean for you
To qualify for the higher discount, your residential property must be rented to low-to-moderate income tenants at a discounted rate and be managed through a registered community housing provider. You also need to hold the investment for at least 3 years. If you invest in an MIT, you’ll be eligible for the 60% discount if the trust invests in affordable housing that is available to be rented for at least 10 years, and you hold the investment for at least 3 years.

Restrictions on deductions for residential property investments
From 1 July 2017, depreciation deductions for residential plant and equipment (e.g. dishwashers and ceiling fans) will be limited to investors who actually incur the outlay – not subsequent owners. Also from that date, investors will be unable to deduct travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.
What this could mean for you
If you’re a subsequent investor in a property, the acquisition of existing plant and equipment will be reflected in the cost base for CGT purposes. Grandfathering applies to plant and equipment that forms part of a residential investment property as at 9 May 2017 and will continue to give rise to depreciation deductions under current rules. The new rule around travel expense deductions applies to all property investors, including SMSFs, family trusts and companies.

Tax changes for foreign tax residents and property owners
Foreign or temporary tax residents will no longer have access to the CGT main residence exemption on properties acquired after 7.30pm AEST on Budget night (9 May 2017). Also from Budget night, foreign owners of residential property that is not occupied or genuinely available on the rental market for at least six months per year will be subject to an annual levy of at least $5,000.
What this could mean for you
If you’re a foreign of temporary tax resident and you held an existing property before Budget night, the property will be grandfathered and you’ll be able to continue claiming the CGT main residence exemption until 30 June 2019. However, from 1 July 2017, the CGT withholding rate that applies to foreign tax residents will increase from 10% to 12.5%.

New thresholds for HELP debt repayments
From 1 July 2018, income thresholds for the repayment of HELP debts will be revised, along with repayment rates and the indexation of repayment thresholds.
What this could mean for you
A new minimum threshold of $42,000 will apply, with a 1% repayment rate. A maximum threshold of $119,882 will apply, with a 10% repayment rate. Currently, the maximum repayment threshold for the 2017–18 financial year is $103,766 with a repayment rate of 8%.

Reinstatement of Pensioner Concession Card entitlements
Pensioners who lost their Pensioner Concession Card entitlement due to the assets test changes on 1 January 2017 will have their card reinstated. Those who lost their entitlement were instead issued with both a Health Care Card and a Commonwealth Seniors Health Card. However these cards provided access to fewer concessions than the Pensioner Concession Card.
What this could mean for you
If your Pensioner Concession Card entitlement is reinstated, you’ll have access to a wider range of concessions than those available with the Health Care Card, such as subsidised hearing services. Your Pensioner Concession Card will be automatically reissued over time with an ongoing income and assets test exemption. You’ll also retain the Commonwealth Seniors Health Card, ensuring you continue to receive the Energy Supplement.

Increased pension residence requirements
An individual currently needs to have at least 10 years’ residence in Australia (at least 5 of which are continuous) to qualify for the age pension or disability support pension. From 1 July 2018, they’ll need to have at least 15 years’ residence in Australia or either a) 10 years’ continuous residence including 5 years during their working life, or b) 10 years’ continuous residence and not in receipt of an activity-tested income support payment for a cumulative period greater than 5 years.
What this could mean for you
This measure may impact you if you have less than 15 years’ residence in Australia or less than 5 years’ residence between age 16 and age pension age. However, existing exemptions will be maintained for humanitarian reasons or if you became unable to work while you were an Australian resident.

Other proposals
• A new Jobseeker Payment will replace 7 existing working age payments from 20 March 2020
• Job seekers and parents who receive working age income support will have increased activity test requirements from 20 September 2018
• The maximum length of the Liquid Assets Waiting Period will increase from 13 weeks to 26 weeks from 20 September 2018
• A one-off Energy Assistance Payment of $75 for single recipients and $125 for couples will be paid for those who qualify on 20 June 2017
• Family Tax Benefit rates will not be indexed for 2 years from 1 July 2017
• A new upper income threshold of $350,000 pa will apply to the child care subsidy from 1 July 2018.

Article provided by Colonial First State

Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Supporting you through the changes
Depending on your circumstances, the Budget proposals could have an impact on your financial situation and your financial plans for the future. If you have any concerns, or would like to discuss your financial strategy, please don’t hesitate to get in touch with us on 08 93492700 or admin@activewealthmanagers.com.au to arrange an appointment.

 

Protecting the life (and people) you love

March 13th, 2017

With more Australians having children later in life, starting a second family and carrying significant levels of debt well into their 50s and 60s, life insurance has never been more important.

Life is full of unexpected twists and turns and you never quite know what is around the corner. Protecting your family against the loss of all the things you have worked hard for over the years is the cornerstone of a sensible strategy to defend your wealth and current lifestyle.

Although most people know this, being ‘underinsured’ – or holding insufficient life-related insurance cover – remains common across all age groups in Australia.

The underinsurance problem

Australians are famous for their laidback attitude and, unfortunately, that attitude often extends to taking out life insurance protection for their families. While research shows more than three-quarters of us understand the need for life related insurance, rating it as important or very important, only 52 per cent of those surveyed said they actually held some form of life insurance.i

Consulting firm Rice Warner has calculated that Australians should hold a total of $4,581 billion in life insurance to be considered adequately protected, but the actual figure held is only $1,811 billion.ii

Although the typical middle-income Australian family with two children needs an estimated $680,000 in life insurance cover to be considered adequately protected, Rice Warner found that the median level of life insurance held by these families is only $258,000.

Paying your bills and protecting your dreams

Without adequate life insurance protection, the financial burden arising from a serious illness, accident or death can cause severe financial hardship.

Such an event is not uncommon, with the Lifewise/NATSEM Underinsurance Report noting 18 families in Australia lose a working parent every day of the week. One in five families is affected by the death of a parent, a serious accident or an illness that renders a parent unable to work.iii

Increases in the number of second and blended families and ageing parents also mean many breadwinners now have more people than ever relying on them financially.

Life insurance protection is also essential for singles, as they often have fewer resources to fall back on to pay their debts and ongoing commitments such as rent and mortgage repayments if they become seriously ill or disabled.

Guarding your wealth

When it comes to developing a comprehensive strategy to protect your financial position, life insurance is a key component as it creates a safety net to protect your current lifestyle and the wealth you have accumulated.

Without adequate insurance protection, many families find themselves facing real financial hardship if the main or secondary income-earner, or the primary carer of the children, becomes sick or dies.

It’s important to look at your options in terms of life-related insurance as part of your financial goal setting. These products provide a highly effective way of protecting assets such as the family home, covering commitments such as credit card debts, paying large medical bills and avoiding being forced to sell off investments assets cheaply.

Life insurance benefits can be used in different ways depending on your personal circumstances and health, with the lump sum payment they provide easing the financial burden during what can be a very difficult time.

A tailored approach

For a complete wealth protection strategy, death cover is usually combined with other life-related insurance products such as critical illness and total and permanent disability (TPD) protection.

  • Life insurance pays a lump sum on your death or diagnosis of a terminal illness, 
  • Critical illness (or trauma) cover pays an agreed amount if you are diagnosed with a specified critical illness, such as cancer or heart disease,
  • TPD insurance provides you with a tax-free lump sum if you are permanently unable to work due to accident or illness.
    These life-related insurances are designed to provide protection against the most common adverse life events and provide you with peace of mind so that if the unexpected happens, you and your loved ones have some protection.

If you would like some advice on the right mix and amount of life insurance for your family and financial circumstances, don’t hesitate to give us a call.

i www.tal.com.au/about-us/media-centre/life-insurance-lacking-in-those-with-most-to-lose

ii http://ricewarner.com/wp-content/uploads/2015/10/INFOGRAPHIC-UnderinsuranceinAus2014.jpg

iii www.lifewise.org.au/downloads/file/aboutthelifewisecampaign/2010_0203_LifewiseNATSEMSummaryA4FINAL.pdf

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

New year, new start

March 13th, 2017

how to make New Year’s resolutions that stick

How many of last year’s New Year’s resolutions did you keep? If you can’t even remember them all a year later, let alone whether you stuck to them, you’re not alone. One survey found that 58% of Aussies break their resolutions within the year. And 15% of those do so because they forgot what they promised they’d do in the first place.i

That doesn’t mean that you can’t set and achieve things you actually want. You just have to be smart about the way you do it.

Turn visions in to goals

When someone asks you to picture your ideal lifestyle, what you see in your head is actually a collection of dozens of different goals. It’s important to break it down and articulate those goals if you want your vision to become a reality.

This is easier than it sounds. Just say you want to ‘enjoy life more’. To make a start on this, you could write down a list of social activities and hobbies you love doing or would really like to try. Then turn each one in to a task that fits with your schedule and can be planned ahead of time, like ‘Make a date with a friend twice a week’ or ‘Book in for an evening class every month’. If your schedule is jam packed, set corresponding time management goals like ‘Leave work on time at least 3 out of 5 days’.

Tell people

Think of your friends and family as your cheerleaders and supporters in reaching your goals. If you tell them what you’re aiming for and why, they’ll be better able to help you. They might even be able to join you on your way. For example, if you decide you want to lose weight and get fitter, ask around for a gym buddy or someone to join you on walks. Or if you’re ready to make a change in your career, start putting the word out amongst your network, that you’re open to new opportunities.

Give yourself (the right amount of) time

Yearly goals, especially ongoing ones, can be hard to keep track of. Try to work out a reasonable time frame for your goal. Some small things might be quicker, and feel less significant – but you can always build on your results. And some things just take time. For example, you’re unlikely to save up for a new car or lose 20 kilos in a month. But you might lose two kilos, or save X-percent of the amount you need. Consultant Todd Herman reckons the ideal time frame for the brain to plan around is 90 days, and that it’s better to do a series of goals ‘sprints’ rather than one long marathon.

Keep track of your progress

If you’re the kind of person who uses to-do lists – on paper, in an app, or in project management software – you’ll know how satisfying it is to tick something off. If you’re not in the habit of keeping lists, now is the time to start. Your list shouldn’t just be one point – your resolution with a check box next to it. Break it down in to smaller milestones. Say you’ve resolved to improve your diet – set yourself little achievements like ‘went a whole week without eating favourite junk food’. To make it fun, try a smart phone game like Habitica.ii

Don’t wait ‘til December 31st

It might be a New Year tradition, but you don’t have to wait for one particular time of year to set goals and resolve to change your life. With the right attitude and a bit of planning, you can start working your way towards a goal any time.

Speaking of this, we’re here to help you set and achieve your money-related goals. Don’t wait for an annual appointment to chat; drop us a line any time, we’d love to hear from you!

i. finder.com.au, Be a geek and live in Tasmania: How to win at New Year’s resolutions

ii. Habitica

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Keeping your financial partnership on track

March 13th, 2017

“While money can’t buy happiness, it certainly lets you choose your own form of misery.”

Groucho Marx might have been joking when he said this, but there’s no getting around it: money is a prime source of tension in marriages and domestic partnerships right around Australia. A survey by Relationships Australia found that 70% of couples are affected by disagreements about money. 84% of respondents said money troubles would be more likely to push people apart than bring them together. Cooperating on financial matters is well worth it for most couples. It’s not just your bank balance which will benefit from working together. Working through money issues with your partner can help develop communication skills, improve bonding through a sense of teamwork, and set up shared values to pass on to children.

It’s easy to feel as though you’re drifting apart from your partner when it comes to money management. After all, many of us face the same recurring issues and squabbles: furtive spending, disagreements on priorities, and even hidden accounts. But the good news is that there are simple measures you can take to bring yourselves back on track.

Be proactive, not reactive

When tough times strike, it’s easy to lash out and make big decisions based on emotion. Accidents, illnesses and deaths in the family can set you up to make decisions more based on grief, anger or fear than cold hard facts. When you are faced with grave circumstances, it’s a good idea to give yourself a bit of breathing space before you make any binding choices.

Stick to your budget

If your savings are tied together, then your spending should be too. Not agreeing on a household budget is a recipe for disaster. Although it might take some time to agree on everything, having a written budget is essential. To avoid either partner feeling like their freedom is impinged upon, make sure to set aside a small amount each for discretionary spending.

Be conscious of your money personality

Find you’re getting annoyed at your partner’s perceived stinginess or lack of discipline? First, it’s time to step back and acknowledge that you may be a little biased, because we all have our own money management ‘personality’. Being aware of your differences in attitude is the first step towards compromising and changing where necessary.

Keep your Will up to date

This one is not just about the two of you – it’s about your dependants and loved ones. If one of you were to pass away, would everyone be clear on your wishes as to what happens with your estate? It’s worth spending an hour or two with a solicitor to work through your options, and ensure your wishes are enforceable.

Put it in both names

Whether it’s a credit card for bills, a mortgage, or an asset in your investment portfolio, make sure it’s in both names. This way, benefits and responsibilities are split straight down the middle. Neither partner gets to shirk responsibility, overrule the other, or claim all benefits/income in the case of a dispute. It’s an ideal way to generate conversation, communication and cooperation.

Share the fruits of your labour

Being frugal and budgeting well is serious work, so it makes sense to share the rewards of that work with your partner – otherwise, one of you may feel hard done by. When it comes to discretionary spending or saving for big ticket items, think of things you can share: holidays, new vehicles, entertainment etc.

Ready to implement some of these tips in your financial plan? Make an appointment with us to discuss your shared goals and challenges today.

i Relationships Australia, August 2015: Impact of financial problems on relationships

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Getting By If Your Income Stops

January 9th, 2017

getting-by-if-your-income-stops

Ask yourself this. Would you still be able to pay for your everyday living expenses if you weren’t able to work? A serious injury or illness could put you out of work for months. If you don’t have any other way of earning an income, this could put you and your family under a lot of financial stress.

Your salary may stop but the bills won’t

Without a salary, you may not be able to stay on top of everyday living expenses like mortgage or rental payments, groceries, electricity and petrol.

Not having enough money to pay your bills places an enormous amount of stress on you and your family. Without any other way of earning an income, you may need to fall back on government benefits through Centrelink. While this may provide just enough to get you by, your financial situation will be very strained. And financial pressures are the last thing you need, when you’re trying to recover from an injury or illness.

Protect your income

You can avoid the risk of not having enough money to live on, by having income insurance, also known as income protection. This insurance, replaces your income for a certain period, if you can’t work due to temporary disability or illness.

You may be able to receive up to 75% of your taxable income, plus the 9% superannuation guarantee. This benefit will continue to be paid, until your benefit period expires, or you are able to return to work.

Tax benefits

Income protection insurance premiums are usually 100% tax deductible. This means that if your marginal tax rate is 30%, your overall income will reduce by $31.50, for every $100 that you pay in premium.

For peace of mind, why not book a time to come in and have an obligation free discussion with Michael. This will cost you nothing to start with, as your first meeting with us is absolutely free. 

Centrelink is changing… are you prepared?

January 9th, 2017

centrelink-is-changing

From the 1st of January 2017, more than 300,000 older Australians will be affected by changes to Centrelink’s Age Pension Assets Test. It’s a good idea to be aware of the upcoming changes, because if you will be affected, there are options available to you to reduce your assessable assets for the Assets Test to receive more of the pension. Talk to your Financial Adviser today about protecting your retirement income.

A recap of the changes

From January 2017, the limit to qualify for a full pension under the Assets Test with be raised by the government to $375,000 for couples and $250,000 for single people[1]. That’s a difference of +$83,500 for couples and +$44,500 for singles. Which is great news!

Currently, for a part pension, the pension rate payable reduces by $1.50 per fortnight for every $1,000 of assets you own above the Assets Test limit. For example, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $15 per fortnight ($7.50 per fortnight each for couples). You may know this as the ‘taper rate’.

From January 2017, the taper rate is going to increase to $3.00 for every $1,000 of assets you own over the Assets Test threshold. So, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $30 per fortnight.

It may not seem like much on a fortnightly basis, however, over a year this equates to $780 which could be used to fund a nice weekend away, your budget for family Christmas presents, or even the regular service on your car.

In addition, the Assets Test limit to receive a part pension (and the pensioner concession card) will decrease. For pensioners who own their own home, the Assets Test limit for a part pension will decrease to $823,000 for couples and $547,000 for singles. If your assets exceed these thresholds, you will no longer qualify for the part pension you have received in the past.

You still have options to improve your pension benefit

There are a number of strategies you can implement that may help you maximise your pension benefit. These include:

Contributing to your spouse’s superannuation if they are under Age Pension Age

When funds are in superannuation (in the accumulation stage), they do not count for the Assets Test, whilst below Age Pension age.

Improving your principal home

Your home is not assessed under the Assets Test, so now might be an ideal time to do the home improvements you had planned such as remodelling your kitchen, or building that patio you’ve been dreaming of.

Gifting early

When receiving a pension, each financial year, you are able to gift up to $10,000, with a maximum of $30,000 over five years, without impacting your Age Pension entitlements. Also, if you are more than 5 years prior to reaching Age Pension age, you can gift larger amounts above these limits.

Investing in a lifetime annuity

Investing in a lifetime annuity can help provide a regular income throughout your lifetime. Your Financial Adviser can help you choose the right option for you and your situation.

Purchasing Funeral Bonds

With a Funeral Bond, you can invest up to $12,250 to cover funeral costs. Investment earnings are tax free, and upon your death, the investment is able to be redeemed for cash. Where the funeral expenses are less than the balance of the investment, the remaining funds are then paid to your estate.

As the changes did not come into effect until January 2017, you should have taken action by now. However, don’t sit back and relax, as many of the options available are time dependent, so it’s important to speak with your Financial Adviser about the options available, sooner rather than later.

Speak call us today about how you might be affected by these changes and if so, how we can help you minimise the impact on your Age Pension benefits.

[1] Homeowners