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Archives for July 2017

Understanding Your Super Statement

The financial year has finished. September is commonly the month super fund statements will start arriving in your letterbox, and like many working Australians, you might be getting more than one.

Generally, superannuation is the second largest asset outside of the family home.

Your superannuation, no matter how big or small, is an investment and designed to fund your golden years. Do you spend the time reading through and understanding your annual superannuation statement?

The complexity of superannuation makes reading your statement confusing and stressful. Thus, ignoring and discarding the statement always seems easier.

Understanding your statement should be easy and here is what to look for:

Performance

Firstly, look at your account balance and the historical movement. The investment return is expressed as a percentage and gives the return on each of your investment options over a stated period, generally 1, 3 and 5 years.

Fees

The statement will list administrative and investment fees. The government also taxes employers’ a compulsory 9.5% (before tax) super contributions and earnings by 15%. Reviewing the total amount of fees you have paid will allow you to compare between different superannuation funds.

Contributions

Your superannuation statement will include a transaction history over the past 12 months, detailing contributions from your employers’ compulsory super guarantee. Make sure you are receiving what you are entitled to receive. If you are salary sacrificing or making co-contributions in addition of the super guarantee, check the accuracy of the deposits to your salary sacrifice agreement.

Insurance

Superannuation includes insurance cover, typically life insurance, total and permanent disability and income protection. The standard level of cover might not be adequate for your needs. Please talk to our insurance specialists to review the level of cover that is more suitable.

Beneficiary

Did you know that your superannuation falls outside of your will? For peace of mind, include in your super fund clear instructions as to whom you wish to inherit your superannuation. This can easily be achieved by completing a valid binding nomination, which lasts three years.

Familiarising yourselves with superannuation now, and creating a plan, could help you live a more comfortable and joyful retirement.

This advice is intended as general advice only, and is not meant to be interpreted as personal advice. It was prepared without taking into account your personal circumstances, objectives or personal situation. Please consider the appropriateness of the advice in light of your own circumstances. Should you wish to discuss further, to see if any of it might apply to you, contact us to speak to one of our friendly advisers today.

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Cash Flow is King!

As a financial adviser for The Investment Collective, I need to know a lot of information about a client before being in a position to make appropriate recommendations. One of the key pieces of information I need to know is what cash inflows (or income), and what cash outflows (or expenses) they have.

What’s interesting is that pretty much everyone knows what their income is. They can easily identify their fortnightly or monthly income from their bank statements. However, a surprising number of people can only guess at their expenditures.

This information is fundamental to any recommendation, be it debt reduction or wealth accumulation.

For example, say you have $60,000 of income per year (after tax). Say, you make an educated ‘guess’ that your expenditures are about $48,000 per year. On paper at least, that would suggest that there is a cash flow surplus of $12,000 per year that can be ‘captured’ and applied to debt reduction or investment. However, what if actual expenditures are not $48,000 per year but more like $60,000 per year? You can see the problem here.

In the planning process, we need to do better than ‘guess’ at expenditures. We need to be pretty confident that cash inflow, as well as the cash outflow have been ‘road-tested’ and are reasonably close to reality.

How do you best get a handle on the amount of your expenditures? Well, there are plenty of online budget programs available. If you don’t feel the need to get down to that level of detail, a simple review of your credit card and bank account statements will give you a good sense of your cash outflows. Use a reasonable period, perhaps the last 12 months, and simply tally up all the cash outflows. Remember, in the planning process, cash flow is king!

If you would like to know more about what The Investment Collective can do to help you with your finances, contact one of our friendly advisers today.

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Starting an Investment Plan

Benjamin Franklin, one of the Founding Fathers of the United States, has been attributed as saying; “If you fail to plan, you are planning to fail!”

Whilst foresight is blind and the best-laid plans often go awry, it makes a lot of sense to have a plan, or at least some idea or intention on what you are going to do, or where you want to be in the future, and how you are going to get there.

An ‘Investment Plan’ lays down the pathway or strategy/ies for your finances to provide you with the greatest potential for getting you to your desired destination over the short, medium and long-term.

Before the plan can be implemented, however, you need to:

  • Understand your current finances: establish where and how much of your money comes from, and where it goes, thereby leaving you with an idea of what surplus cash you have at your disposal. You may also want to establish what you own and what you owe.
  • Develop your objectives and goals: what do you hope to achieve over the next 1-3 years, 4-6 years and beyond that? This allows a strategy to be developed, that if it plays out as planned, gives you the greatest prospect of being where you want to be at the end of the short, medium and long-term timeframes.
  • Understand the relationship between ‘risk vs return’: the two are directly correlated in that the lower the risk, the lower the potential return; and conversely, the greater the risk, the greater the potential return. It is crucial you understand this concept and that you are aware of your level of tolerance to risk, because this must align with your objectives and goals.  For instance, if you have no tolerance to risk, but have a high growth return objective on your investment portfolio, there is a mismatch in the ‘risk vs relationship’ which will need to be addressed.  You will need to either: trim your return expectations or take on more risk in order to achieve your desired objective.

Once the above concepts have been grasped and documented in writing, you have started your ‘investment plan’.

The next step in the process is developing the strategy/ies to be implemented over the respective time frames.  This will be driven by the goals you want to achieve for each timeframe.

The above advice is provided as general advice and is not intended to be taken as personal advice. It has not taken into account your personal circumstances, objectives, financial situation or needs. You should therefore discuss with your financial adviser before implementing them to your current financial position. If you would like to discuss options and get more personal advice that is tailored to your current financial situation, please contact us and make an appointment with an adviser at The Investment Collective today.

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