A self managed super fund comes with responsibilities

A self managed super fund comes with responsibilitiesSelf managed super funds to come under increased scrutiny

Self managed super funds (SMSFs) are being set up at a faster rate than ever before. They’re now the fastest growing sector of the superannuation industry and account for around one third of total superannuation assets in Australia (see chart below).
Click Here To Read More

Is the nation’s financial planning on track?

Is the nation’s financial planning on track?What trends in key financial planning indicators should we expect?

As wealth managers, we spend a lot of time working with our clients to structure their affairs to give them the best chance of achieving their desired financial futures. And we’re not just talking about structuring in terms of setting up self managed super funds, family trusts and the like. We’re talking about the structure and composition of their personal balance sheets. To us, this is the foundation of good financial planning.

We thought it would be interesting to look at the change in the financial position of the average Australian household over the past 20 years. Given the aging of the baby boomers over these two decades and their growing need to prepare for imminent retirement, we were surprised with what we found.
Click Here To Read More

DIY Financial Planning – The real costs may not be evident

DIY Financial Planning – The real costs may not be evidentDIY Financial Planning appears to be a low cost alternative

There are a lot of smart people who make some rather dumb choices with respect to their finances. More often than not this is driven by short term thinking and the desire to save an immediate out of pocket expense. There is often a failure to lift the eyes and see the bigger picture.

An example that highlights this is the use of superannuation. We’ve talked previously about the significant benefits of making pre-tax contributions to super. However, in this article we look at the benefits of making post-tax contributions to super.
Click Here To Read More

Is your Investment Strategy personalised?

Knowledge of investments isn’t everythingIs your Investment Strategy personalised?

The availability of investment news and information has been increasing over time. This has led to an improvement in most people’s understanding of general investment concepts. It has created the opportunity for many to choose to manage their own financial affairs.

Knowing “where” to invest your money is an important part of the financial management equation. However, by itself, it’s far from comprehensive in terms of an investment strategy.
Click Here To Read More

Is Rent Money, “Dead Money”?

Rent is the price of housing accommodation

The home building industry often promotes to potential young home buyers that rent money is “dead money” i.e. money down the drain. It encourages them to stop paying rent and, instead, use the money to pay off the mortgage on their own new home.

I became very aware of the power of this self serving message when my 24 year old daughter proclaimed that she wanted to buy her own property as soon as possible, as rent was “just dead money”. Although impressed by her determination to take on such an obligation, I couldn’t resist the opportunity to give a basic economics lesson.

The reality is that rent is not dead money but the cost of purchasing housing accommodation. It is essentially the same as paying for a hotel room for an overnight stay or for a two week vacation in a luxury holiday resort.

We all pay the cost of housing accommodation, whether we rent from a third party or we own our home. And this is the case, regardless of whether or not we have a mortgage.
Click Here To Read More

The Holiday House Is A Lifestyle Choice

Holiday houseThe holiday house purchase decision: emotional or logical?

You’ve just spent two glorious weeks at the end of January at your friend’s beachside holiday house with your young family. The stress of the past year’s hard work has vanished and you’re feeling great. You’ve reconnected with your partner and your five and eight year olds have been reacquainted with a parent.

It’s about the worst time possible to make a rational investment decision but you decide that you should buy your own holiday house, now. A couple of hours drive from home, so that you and the family can recreate the bliss of the recent holiday every weekend.

Click Here To Read More

Investment Return Volatility – A Potential Wealth Hazard

Volatility: a wealth hazardInvestment return volatility is poorly understood

Most investors understand that in order to increase their expected future return, they have to accept a higher level of volatility (or variability) in the value of their investment portfolios. But beyond that, they do not understand just how damaging volatility can be to their wealth aspirations.

The amount of volatility you expose yourself to affects your probability of achieving a desired wealth outcome. In this sense, it is a forward looking concept. And, as such, it is an extremely important factor to take into account when designing and managing any investment strategy.

But this article reveals some poorly understood aspects of volatility, by looking backwards. That even when you know actual returns and actual volatility, wealth outcomes may vary dramatically.
Click Here To Read More

Why you need a personal cash flow budget

Cash flow budget

Surely the wealthy don’t need to budget …

It is true that some high income earners have no idea how much they spend, simply too busy making money to take the time to work out how they are spending it. And there are some people who consider you are not really wealthy if you ever have to ask how much anything costs. Budgeting is so demeaning.

However, it is no coincidence that all major businesses budget and account for their cash inflows and outflows. It is unlikely any lender or potential shareholder would provide them with funds if they didn’t. They would be viewed as financially irresponsible.

If you’re serious about personal wealth management, we believe that household cash flow budgets are a necessity, not a nice to have or something only the less well off need to worry about.
Click Here To Read More

Maximising Super Contributions – Beware

Super contributions

The super contribution rules changed from July 2007

If you’re planning on maximising your super contributions, it pays to be vigilant when managing and implementing your strategy. There can be a nasty sting in the tail if you’re not careful.

Prior to the introduction of “Simple Super” there was a limit on the amount of pre-tax contributions you could make to super. But after-tax contributions were unlimited.

The “Simple Super” changes not only put a limit on after-tax contributions. They also changed the nature of pre-tax contributions.
Click Here To Read More

Borrowing and Wealth Management

Borrowing and wealth managementAttitudes to borrowing

We all know that many people have become very wealthy through the use of borrowing. These people are often lauded as brilliant entrepreneurs and we are encouraged to emulate their success. But the last couple of years have again starkly reminded us that borrowing also comes with considerable risk and, potentially, financial ruin.

Where does borrowing sit in a wealth management plan? There are many opinions:
Click Here To Read More