The pandemic has certainly caused a roller coaster ride for many of us. While some people have endured significant loss of income, others have accumulated surplus cash. There’s been a lot to take in and as we start a new financial year, it’s got many people thinking “Where to from here, financially speaking?”
Many surpluses have been triggered by the pandemic including upturns in revenue for businesses in high demand industries, assets sold at higher-than-expected prices, savings that were put aside for overseas holidays that remained unspent and as a result of other life changes.
Surplus cash-wise, the answer to the question “where to from here?” requires careful consideration. COVID or not, sound financial decision-making should always consider individual needs and when your circumstances change your financial plan may need refocusing to consider different options.
While you can always choose to do nothing, and leave your surplus cash in the bank, among the more proactive financial considerations will be contributing to super, paying down debt or investing in shares or other assets.
Where to with Super
From July 1, 2021 annual concessional (before tax) contribution caps increased to $27,500 and non-concessional caps to $110,000. The three-year bring forward rule has also increased to $330,000, and there’s the 5-year super catch-up contribution rule to consider too. In short, there are numerous opportunities for getting more money into a tax effective superannuation environment. The employer super contribution rate has increased to 10% for most employees and is scheduled to gradually increase to 12% over the period to 1 July 2025. These changes present opportunities to re-focus on your superannuation contribution and investment strategies.
While it’s true that past performance is no indication of future performance, the last 12 months has heralded very positive growth for most super funds. Volatility should always be expected to produce lower returns at some stage, so it’s important for super funds to invest in quality shares and use proven techniques such as dollar cost averaging (often called a ‘regular investment plan’) to make the best of changing market circumstances.
Where to with Investments
Depending on your circumstances, it may be beneficial to use surplus cash for investment purposes.
Here at Stratus Financial Group, we work within the parameters of an approved investment list and we have an investment philosophy that underpins our investment selection and decision-making. Investments particularly those outside super, can offer flexibility should you need to liquidate all or some shares for other purposes, whereas withdrawing from superannuation will require preservation age conditions to be met.
Where to with debt
Low interest rates are a double-edged sword. On one hand they do nothing to embellish your bank balance, but on the other the interest burden on debt is low.
This provides opportunities that include paying down bad debt (non tax deductible) faster, while making good debt (tax deductible) more affordable for purchasing income producing assets such as shares or property.
These are important financial planning considerations that require additional advice from lenders, tax advisers and property specialists in alignment with advice provided by your financial adviser so your overall financial plan is seamless.
Where to for you
For many people, COVID has triggered a reassessment of what really matters. Our clients are more often telling us they are thinking about stepping back from full time work to part time, selling their business, handing over the reins to the next generation, retiring, moving house, and some are moving out of a relationship too.
If you are thinking about making changes in your life, may I invite you to give us a call. Talking through the financial impacts of changes will help you know your options, understand what you need to do next, and of course when you’ll be able to implement those changes – with confidence.
There are two steps you might like to consider if you are contemplating change. Step one, take our confidential and no-strings-attached 5-Minute Health Check (see links below) which will raise a number of important financial considerations. The Q&As are designed to help you self-assess and identify where you have gaps in your financial affairs.
Step two (whether you complete the questionnaire or not) is to take up our invitation to meet and talk through what you have on your mind.
In my experience working with clients, the opportunity to discuss their big financial picture, provide options and answer questions such as ‘where to from here?’ is the heart of the value we, as financial planners offer. Our goal is always to work in our clients’ best interest, help them identify what really matters, and provide the plan that can make it happen.
Please contact Brett Cribb, Steve Nicholas or James Marshall on +61 (0)7 3007 2007 or email email@example.com.
Stratus Financial Group helps professionals, executives, business owners, families and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.