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.

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.

Does Your Financial Plan Accommodate The Rising Costs Of Education?

By Brett Cribb, Financial Adviser

With governmental education funding set to fall, you could find yourself paying more for your children’s schooling. In fact, the Australian Scholarships Group[1] recently announced that Australian parents could soon be paying up to $65,829 to educate a child at a government primary and secondary school. For average families of two or three children this represents a significant financial commitment for many Australian families.

Here, we outline some of the likely costs you could encounter and we urge you to tailor a protection plan to shore up your children’s education in case your income stream suddenly ceased. What plans do you have in place to protect your offspring’s primary, secondary and tertiary learning?

Education is among the largest expenses faced by Australian families and one that is about to get even larger. It is critical that parents are prepared and that begins with awareness. For many people, they simply do not realise the significant cost of educating their children and of course, this cost increases dramatically if parents have desires for private school education.

The key is to begin planning early, considering a realistic savings strategy before children begin school and that continues throughout the schooling years. For parents whose children will go on to tertiary studies, there is little chance of the costs abating as they can expect to pay between $6,152 and $10,240 per child per year for the three or four years of an undergraduate degree, depending on location and discipline[2].

Australians would be unwise to rely on government loans to cover their children’s tertiary education expenses. Indeed, the 2015 Intergenerational Report[3] states that government spending per higher education student is projected to fall from $11,800 in 2014-15 to $9,400 in 2054-55.

Furthermore, government funding does not cover the additional costs of books, materials, union fees, participation in clubs and sports, transport or accommodation. Many parents will need assistance in first calculating the likely cost of education for their family and then setting out a financial strategy that will enable them to achieve their education goals for their children in relation to their other financial commitments.

Appropriate strategies may include savings accounts, term deposits and investing in shares and managed funds and implementing specifically designed education financial plans. However, according to our insurance specialist and financial adviser Peter Beauchamp, shoring up children’s education involves more than just savings as parents need to be realistic in terms of catering for the long term commitment of schooling, by anticipating the impacts of future unexpected events.

Peter Beauchamp of Protection Advice

“It is essential for parents to consider unforeseen events that could jeopardise their financial position, such as sudden loss of income through injury or illness or, in the worst case scenario, death or disability of one or both parents. While saving for the kids’ education may sound straightforward, in reality it involves many interrelated factors and this usually requires professional advice.

“Experienced financial planners will recommend strategies for parents to protect themselves and their family from unwanted events that could deprive them of their income and their family’s ongoing financial security, including funds earmarked for their children’s future education,” Peter said.

Indeed, having appropriate personal insurances in place for both parents is important and this needs to be approached in tandem with asset protection structuring and estate planning. In the event of a claim for the untimely death of one or both parents, it is important that financial matters are clearly documented so that the family may recover as quickly as possible and ultimately achieve all their financial goals, not only those for education.

We work with you to assist you to identify and articulate your needs, then – drawing upon a host of resources and tools – we use financial modelling to help illustrate your options as together we tailor a personalised savings strategy designed to sit comfortably within your overall financial plan.

Our team at Stratus and Protection Advice work together to offer an integrated approach to the complexities of your financial life. I invite you to find out more and to discuss education savings strategies within the context of your whole-of-life financial planning arrangements. Contact Stratus Financial Group on (07) 3007 2007.


1. ASICS MoneySmart website, accessed 17 June 2015 at https://www.moneysmart.gov.au/managing-your-money/saving/saving-for-your-childrens-education
2. Indicative undergraduate fees for Australian students, University of Queensland website, accessed 18 June 2015 at http://www.uq.edu.au/study/indicative-fees.html?level=ugrd&nationality=australian&dual_degree=False
3. 2015 Intergenerational Report, Australia in 2055, accessed 17 June 2015 athttp://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/2015%20Intergenerational%20Report/Downloads/PDF/2015_IGR.ashx


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.

 

Surplus Income: 5 Ways Small Amounts Can Make A Big Difference

By Brett Cribb, Financial Adviser

Even the most meagre surplus income can make a difference to your overall financial position… $100 per week could pay down debts, go towards saving for your kids’ education, contribute to your superannuation or perhaps be saved for a lifestyle benefit such as a holiday…

Loosely defined, surplus income is the funds that remain after meeting your expenses and taxation commitments. Brett Cribb says that if your weekly surplus income is $100, the simple maths is that your annual income surplus should be $5,200, however he’s quick to point out that many people are missing the opportunity this unused income could bring..

“The point is, to make the most of surplus or unused income you need to consciously put that money to work. More often than not, it simply disappears into the spending abyss, but depending on your particular circumstances, that $100 per week could pay down debts, go towards saving for your kids’ education, contribute to your superannuation or perhaps be saved for a lifestyle benefit such as a holiday” he said.

Brett urges his clients to consider surplus income as part of their overall financial planning.

“Whilst surplus income can easily be over-looked as an incidental amount not worthy of close examination, when accumulated over an entire year, these surplus amounts have the potential to make a significant financial difference,” Brett said.

Brett and our Team at Stratus Financial Group have identified five ways to utilise surplus income:

1. Put it towards your home loan

Using surplus income to make additional home loan repayments could result in your paying off your loan faster and reducing the total amount of interest otherwise paid. Brett also suggests considering a 100% Offset Account which is designed to hold all your funds together including surplus amounts, which remains accessible but which has the capacity to off-set and therefore reduce the interest payable on your home loan.

2. Pay down debts

If you have a car loan, personal loan or credit card debts, putting your surplus income against these balances will lower interest and contribute to clearing the debt sooner.

3. Invest in your kids

Your children are in the education system for a long time, especially if they aspire to go on to tertiary education. Brett says that it is likely that additional advice will be required for achieving longer term goals but applying surplus income to begin saving for your children’s education is a great starting point. A longer long-term financial strategy may be designed to make the most of compounding interest through long-term investment strategies such as shares, managed funds, term deposits and specifically designed education funding plans.

4. Add it to your super

By the very nature of a surplus, this extra or left over money means that you don’t need it now, so consider putting it to work for the future. Every voluntary contribution to your superannuation fund adds to achieving a retirement nest egg and there may also be tax advantages. Brett says making direct personal contributions to your super fund account or talking to your employer about salary sacrifice contributions may be worthwhile considerations but he recommends seeking financial advice to determine the most appropriate course of action as it relates to individual circumstances.

5. High interest savings account

Allocating your 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.

For more information about how you can make the most of your surplus income, contact Brett Cribb 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.