7 steps to financial success

by Steve Nicholas, Financial Adviser

As you move through different phases of your life, it’s important to revisit your financial strategies including your insurances, super strategies, savings and cash flow, debt management and estate planning needs. Doing so could make an enormous difference to your long-term financial situation.

Our 7 steps to financial success  can help you stay on track and achieve your financial and lifestyle goals so you can focus on enjoying life. Continue reading “7 steps to financial success”

What I Wish I’d Known – Financial Advice For My Younger Self #1: Three Golden Rules For Money Management

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by James Marshall, Financial Adviser

If you could go back and advise your younger self on money management, what would you say? What do you wish someone had told you? And which good money habits do you wish you’d picked up sooner?

In this series of articles, we share advice for our younger selves in three core areas of financial knowledge. Article #1 includes helpful tips and what I wish I’d known earlier about day-to-day money management.

#1: Three golden rules to help you manage your money

When I first started earning, I remember the freedom and independence that came with it. I had very few financial commitments and no serious responsibilities, and I spent just about all my income. But before long I was wondering where my money was going. I wasn’t seriously in debt, but I did have a niggling feeling that something wasn’t quite right.

In retrospect, I wish I’d known these golden rules for managing my cash flow:

Rule 1: Never spend more than you earn
Rule 2: Know where your money is going
Rule 3: Save some of it

Using these rules puts you in control and removes the considerable stress of suddenly finding out that you have overspent or won’t be able to afford an unavoidable expense. Using these rules also helps you to develop a financial understanding that will develop further and benefit you in the years ahead as your circumstances become more complex and may involve other people such as your future family.

Rule 1: Never spend more than you earn

It all starts with knowing how much you earn – this is your income including the tax you pay to the ATO.  The tax is your money too and with appropriate financial planning strategies, you may be able to keep more of it than you thought.  But that’s another story …

Let’s assume you earn $100,000 p.a. and pay $26,500 tax. This will leave you $73,500 in hand (your ‘take home pay’) to cover all your expenses over 12 months. Rule number 1 is to never spend more than your take home pay, so you’ll need to review your annual expenses to make sure they come in at less than $73,500.

TIP Make sure you know your annual income. It may be on your payslip or previous tax return.

TIP Setup a direct debit from your transaction account to your savings account so savings happen automatically – as Warren Buffett says ‘Don’t save what is left after spending, spend what is left after saving’.

Rule 2: Know where your money is going

A helpful way to investigate your expenses is to divide them into ‘essentials’ and ‘non-essentials’. As the name implies, essential expenses are difficult to avoid and include things like mortgage or rent payments, utility bills, the costs of running a vehicle, car insurance, home insurance and so on. In contrast, what you spend on non-essentials (entertainment, eating out, travel, hobbies and clothing) is a conscious decision and tends to vary more than your essential expenses.

While I’m not suggesting that you miss out on all the good things in life, conscious decision making is simply good practice so that you don’t spend what you don’t have.

Stratus Financial Group’s cashflow service provides the automatic link of your bank transactions to budgeting software. This allows you to build a personalised spending profile by linking with and tracking transactions in your securely-linked bank accounts. Budgeting in the 21st century no longer means you need to manually download or enter transactions from your online banking. It’s quick, easy and simple to use – you’ll even have the ability to track your spending on the go with iPhone and android apps.

TIP Once you’ve reviewed your spending patterns it’s time to identify where you can save. Found you’re spending too much on clothes? Why not reduce temptation by decreasing your ‘spending money’ by increasing the amount you transfer to your savings account?

Rule 3: Save some of it

Before long your basic cash flow should be under control and you will be spending less than you earn. At this stage, a simple way to jumpstart your life savings is to invest some or all of your surplus income. Putting a little extra away now can make all the difference to your financial future.

TIP Use one of the many free online forecasting tools to plot a savings graph for yourself like the one shown below. It can be very motivating to see what the actual outcome would be of your own regular savings habit. They say you can’t score without a goal, so why not set yourself a savings goal at the same time?

TIP Each time you receive a pay rise make sure you increase the regular debit to your savings account.

The following chart helps you consider the potential impact of saving $1,000 per month for five years. Saving $1,000 per month should be comfortably manageable if your income is around $100,000 p.a.

Key Assumptions:

  • Sam has an income of $100,000
  • Sam invests $1,000 per month for five years (commencing with $1,000 in January 2017)
  • Sam reinvests the interest on their account
  • Interest rate of 2.80% p.a. compounded monthly
  • Excludes the impact of tax.

Disclaimer:  The above projection is for comparison purposes only and is not a guarantee.  The projection is not intended to be your sole source of information when making a financial decision. You should consider whether you should seek advice from a licensed financial adviser before making any decision about salary sacrifice.

Get financial advice early

Financially speaking, the sooner you take financial advice, the more you will benefit – both now and later on – from your income. Many young professionals with relatively few financial responsibilities get into the habit of spending most if not all of their income without a thought about their future wealth. Seeking the right advice early is key, but do your homework and choose a professional who feels like a good fit.

Here are some tips on how to choose a firm to advise you:

  • Ask for recommendations from your peers.
  • Check out a firm’s and advisers’ credentials and read their client testimonials.
  • Enquire about their specialisations.
  • Contact them by phone or email, and start asking questions.

If you (or a young person in your life) would like to talk to a financial planner at Stratus Financial Group about cash flow, super, insurance or any other financial matter, please contact us – it will be our pleasure to help. Phone (07) 3007 2007 or email jmarshall@stratusfinancialgroup.com.au


Related Articles

What I Wish I’d Known – Financial Advice For My Younger Self Series

  1. Three Golden Rules for Money Management
  2. How To Pay For Insurance
  3. A Most Important Financial Planning Tool
  4. An Effective Super Strategy for Professionals

    Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.

‘If You Can’t Measure It, You Can’t Manage It’ – 5 Steps To Measurable Improvements In Your Financial Situation

The saying ‘If you can’t measure it, you can’t manage it’ is as true in financial planning as it is in widget production. And it’s especially true if your financial circumstances involve complex interrelationships across your super, insurances, savings, estate planning and so on.

To help you measure, manage and move closer to achieving the financial goals that matter most in your life, we suggest 5 steps for you to take between now and Christmas.

1. Mortgage – make additional home loan repayments of $100 per month

Using surplus income – of as little as $100 per month – to make additional home loan repayments could result in your paying off your loan faster and reducing the total amount of interest otherwise paid. Consider a 100% offset account which is designed to hold all your funds together where they remain accessible but have the capacity to off-set and therefore reduce the interest payable on your home loan.

2. Savings – If you don’t have a loan or offset account transfer $200 per pay cycle to a high interest savings account

Allocating surplus income to a high interest savings account has two potential advantages. Firstly, you may gain the flexibility required to access funds on an ad hoc basis and secondly, your savings may grow further by compound interest earned. This strategy is easy to implement and helpful for individuals and families planning for large expenditures like overseas holidays or buying a new car.

3. Salary sacrifice – salary sacrifice $100 per pay cycle

If you have the possibility of working overseas, taking a break from work or if you are female, temporarily stopping work to raise a family, this chart  illustrates what a difference it can make over the long term when you consistently salary sacrifice small amounts. You should always seek advice before you salary sacrifice.

4. Cash flow – use our cash flow management service to manage your budget

Many of our clients tell us that they are unable to pinpoint their expenses. Some give up on managing their personal budget while others are constantly frustrated by seemingly never-ending expenses and debt repayments.

Our cash flow management service enables you to measure what you spend and to manage your cash flow as the cornerstone of your financial planning.  Furthermore the technology we use makes it easy for you to do this and obtain results quickly and with minimal effort. This makes you more likely to achieve your short, medium and long-term financial and lifestyle goals. Your cash flow situation also influences and intersects with the more complex financial considerations including super, insurances, asset and investment strategies, estate planning, aged care, business and family succession structures and more.

5. Will – make sure your Will accurately reflects your current circumstances 

If your Will was drawn up a long time ago, it may be time to check that its contents reflect your current circumstances. Marriage, divorce, de facto relationships, welcoming step-children, adopting children or reuniting with an estranged sibling are just some of the changing family structures that could impact upon whom you wish to include and preclude from receiving entitlements from your Estate.

Check that you have considered beneficiary nominations for your life insurance  and super funds  as part of your current Will. If they aren’t, it could mean that they will be controlled by Government or legal authorities upon your passing. Life insurance and superannuation fund proceeds can be directed to your Will or managed outside your Will. A review of your Will should also include checking the nomination of beneficiaries and control of assets held in companies and Trusts.

Dealing with your complex financial affairs can seem daunting at times. The 5 relatively straightforward steps we’ve outlined here provide a great way for you to start managing your financial future through measuring the things that matter. We have a regular review process where we can help you tailor these strategies to ensure they are focussed and moving you closer to achieving the goals that matter in your life.

If we can help in any way, please contact us today on (07) 3007 2007.


Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.

Get Financially Fit Now With The Stratus Cash Flow Management Plan

By Brett Cribb, Finanical Adviser

The Stratus Cash Flow Management Plan is convenient, efficient and effective and enables you to understand and control your spending.

What is cash flow management?

For many business owners, executives and professionals, high incomes are often accompanied by overspending and limited savings. Despite your financial awareness, the demands of your life can leave you time poor. Therefore, a straightforward method for managing your cash flow can provide the solution you need. In an unpredictable employment landscape, it is all the more important to address your cash flow.

Cash flow in crisis

Our clients often tell us that they are unable to pinpoint their exact expenses. They feel that they have lost control of managing their significant incomes, but at the same time are paralysed by the magnitude of the task of taking back control. Overwhelmed, many just give up on managing their personal budget while others are constantly frustrated by seemingly never-ending expenses and debt repayments.

Saving for retirement or children’s education expenses is a struggle, as you desperately shuffle money around in order to make ends meet. The good news is that through efficient management of your finances you can regain control of your financial position and be confident that the structures you put in place today will help you to achieve financial health and fitness both now and in the future.

Cash flow with clarity

With cash flow as the cornerstone of your planning, you will be more likely to achieve your short, medium and long-term financial and lifestyle goals. Your cash flow situation also influences and intersects with the more complex financial considerations including superinsurances, asset and investment strategies, estate planningaged care, business and family succession structures and more. When these matters are included in your whole-of-life plan, you will feel a sense of financial security and enjoy the confidence and flexibility that come with a clear understanding of your cash flow position.

Xero Cashbook

We provide you with access to Xero Cashbook. This state-of-the-art software allows you to build a personalised spending profile by linking with and tracking the transactions in your securely-linked bank account(s). This means you don’t need to download or enter any transactions from your online banking.   You can use Xero Cashbook on your PC or by downloading the iPhone/Android app.

Initially, Xero Cashbook prompts you to allocate your transactions to categories, such as Groceries, Entertainment, Car, Mortgage, Cash and so on. We make this easier for you by establishing an initial set of rules that assist with the process. After a short period of time, the program will also allocate transactions for you. It ‘learns’, for example, that transactions made at Woolworths or Coles should be categorised as ‘Groceries’, while transactions made at Shell or BP should be categorised as ‘Car’. From here, Xero Cashbook can provide clear records of your spending. You can also fast-track this process by creating your own rules for allocating your spending.

The next stage in our cash flow management service is to provide guidance for setting a realistic budget and entering it in Xero Cashbook. The program will then track every transaction in your account(s) and provide summary reports to show you how well you are following your budget plan. That is, whether you are on target to meet your budget, exceed your budget due to overspending, or create a surplus because you have underspent your budget. It also allows you to quickly and easily measure where and how much you spend.

Once you have control of your spending, we can help you set realistic longer term financial goals. These may include debt consolidation, building wealth to achieve financial independence, regular investment in shares or property, contributing appropriately to super or other savings structures, as well as funding your lifestyle goals and retirement.

Our service options

We offer two levels of service for our cash flow management planning advice:

  • Level 1 – we set up Xero Cashbooks on your behalf and provide two hours’ support to help you use it effectively.
  • Level 2 – in addition to the above, we save you time by completing the allocation of your transactions to the appropriate categories (‘Groceries’, ‘Car’, ‘Cash’ etc.) each month and contacting you only where we have unidentified spend items.

At either service level, Xero Cashbooks creates a clear record of your spending habits that then enables you to budget effectively. Level 1 is designed for those who want to do more themselves while Level 2 is for those who are time poor and require our assistance.

Your first step to cash flow management

At Stratus, our cash flow services can help you to identify gaps and opportunities in your financial management plan. We will:

  • plan according to your individual needs, that is we will understand who you are and what is important to you before offering advice that is relevant and achievable;
  • examine your financial strengths and weaknesses and implement a strategy that is appropriate for you;
  • demonstrate that whether you have a little or a lot, good financial management can help you reach your financial and lifestyle goals; and
  • empower you to take control of your finances and make the most of what you have.

Please contact Brett Cribb on 07 3007 2007 to make an appointment and take the first step towards sustainable cash flow management.

View or download the Stratus Cash Flow Management Plan.


Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.

5 Tips For A Whole-Of-Life Financial Plan

by Steve Nicholas, Financial Adviser

Here at Stratus, we are committed to helping you make the most of what you have. To this end, we tailor whole-of-life financial planning advice for singles, couples and families based on five key elements you need to consider in order to create a rewarding and financially healthy lifestyle.

1. Cash flow

There’s no doubt that the ability to spend less than you earn is the key to accumulating wealth.  However there are various ways to approach the allocation of your funds so that they produce the long term results you’re looking for.  At Stratus we assess your capacity to save and help you prepare a plan which allocates regular portions of your available income to investments, paying off your existing debt and spending on yourself. Only then do we consider the best areas to invest your surplus cash, which may be to further reduce your debt or contribute to something like an education fund. By starting out small and building up over time, the end financial results can be extremely gratifying.

2. Debt

We can help you set up debt structures that are appropriate for your personal situation. And as circumstances change throughout your life, we can review your debt structures with the aim of minimising the impact on your overall wealth accumulation goals.

3. Estate Planning

It’s never too early to start planning for the future. This includes preparation of a Will that reflects your current circumstances and wishes, and if required, the implementation of a Power of Attorney. Effective Estate Planning allows your assets to accumulate in a tax effective and protected environment, and determines that your assets are dealt with appropriately when it’s time for them to be distributed.

4. Successful Superannuation

One of the easiest and most effective ways to build wealth is through superannuation. We’ll help you decide upon the superannuation structure that’s appropriate for your needs and how to plan your contributions – how much and how often. We’ll help you trace ‘lost’ funds and consider your options for consolidation. And we’ll explain the benefits as well as any disadvantages of holding insurances within and outside your super account.

5. Life and Income Protection Insurance

Premature death or disablement can seriously impact upon your plans and your family. We can help you protect your family’s future by advising you on personal insurances such as life insurance, income protection and trauma and permanent disablement (TPD). In our recommendations to you, we focus on finding an insurer that matches your individual requirements. And if you’re concerned about affordability, we can help you structure your insurances to suit your cash flow.

 

To find out more wealth accumulation strategyies, view or download my Strategy Paper on Accumulating Wealth, or please contact me at Stratus on (07) 3007 2007 to find out how you can implement a personal wealth accumulation plan.


Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.