Stop resting on your (high income earner) laurels!

Stop resting on your (high income earner) laurels!

Updated on Education, Investing, Superannuation

Achieving a high income is a significant accomplishment. You’ve put in the hard yards, climbed the ladder, and now you’re pulling in the big bucks!  But don’t be mistaken; a high income does not automatically equate to financial security. Just because the money is rolling in today doesn’t mean you’re protected from tomorrow’s uncertainties. Resting on your high-income earner laurels, assuming that a large salary guarantees long-term security without considering long-term financial planning, can be downright risky. So, before you get too comfortable, it’s time for a reality check. When “More” Becomes the Norm Earning more often leads to spending more, a phenomenon known as lifestyle inflation. As your income grows, so does your desire for bigger and better things—a nicer house, a new car, dinners at fine restaurants. This lifestyle upgrade can feel deserved, but without careful planning, it can leave you no better off financially than when you earned less. For instance, imagine a couple earning a combined $350,000 a year. On paper, that sounds like a strong financial position. But between a large mortgage, car loans, private school fees, and regular international holidays, their expenses could easily absorb most of their income. If an unexpected event like a job loss or economic downturn were to happen, they’d find themselves in a precarious situation, with little financial buffer. This is the danger of lifestyle inflation: it’s subtle and easy to justify, but it can undermine your ability to build real wealth. High Income ≠ Financial Security A high income can create the illusion of financial security. It’s easy to assume that as long as the money is coming in, you’re set for life. But without the right safeguards in place, a high income can actually mask financial vulnerabilities. Take Liam, for example. Liam, a 34-year-old marketing executive in Sydney, was earning $250,000 a year and living a pretty comfortable lifestyle. He assumed his high income meant he was financially secure. But when the pandemic hit, his job was made redundant, and without an emergency fund or sufficient savings, Liam found himself in financial distress within months. Liam’s story illustrates a key point: a high income is not a substitute for financial planning. If your finances aren’t structured to handle changes, even a hefty salary won’t protect you from financial uncertainty. How to Future-Proof Your Finances So, how do you make sure you’re not resting on your laurels, assuming that your high income will take care of everything? Here are some strategies to ensure you’re future proofing your finances, no matter how much you earn. 1. Create a Budget and Stick to It A budget is just as important for high earners as it is for those with more modest incomes. Avoid the temptation to spend simply because you can. Instead, allocate funds towards savings, investments, and building an emergency fund. 2. Build an Emergency Fund Even high earners need a safety net. A good place to start is having 3-6 months of living expenses in an emergency fund. This ensures that if something unexpected happens you’ll have the financial resources to cover your expenses without going into debt. 3. Invest Wisely Don’t rely solely on your salary—make your money work for you by building a diversified investment portfolio. The earlier you start, the better, as even small investments can grow significantly over time thanks to compound growth. Don’t wait—time is your biggest asset when investing! 4. Plan for the Long Term Even if retirement seems far away, it’s never too early to start planning. Superannuation is a tax effective structure for building wealth and making contributions to super can be a tax effective strategy for high income earners! 5. Don’t Overlook Insurance Insurance might not be the most exciting part of financial planning, but it’s essential. Income protection, life insurance, and health insurance are vital tools to safeguard your financial future. Take Control Before Life Happens While earning a high salary certainly opens doors to a more comfortable lifestyle, it also comes with the risk of complacency. The belief that you’re financially set simply because you’re earning more is dangerous. Lifestyle inflation, lack of an emergency plan, and failure to invest wisely can all leave you vulnerable when life throws a curveball. It’s not about depriving yourself of the things you enjoy—it’s about ensuring that your financial future is secure, so you can continue enjoying them for years to come. So, don’t rest on your laurels. Take proactive steps now to secure your financial future. You’ve worked hard for that high income. Now its time for that income to work for you!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Is FORO ruining your retirement?

Is FORO ruining your retirement?

Updated on Education, Finance, Retirement

FORO – the fear of running out. I’d never heard the expression until I met Mark and Susan. Of course I’d heard of FOMO, the fear of missing out, but never FORO. As the newly-retired couple sat across from me, explaining how they were so afraid of running out of savings that they were not enjoying the retirement they’d worked so diligently for, I grasped the meaning of FORO immediately. They rarely went out for dinner, bought anything new or – heaven forbid – took a holiday. After a lifetime of saving hard, paying off a mortgage and raising a family, Mark and Susan were naturally frugal, but FORO had left them feeling vulnerable and afraid of the future. After two decades as a financial planner, I’d come across this situation before, although, it is unfortunately becoming more common. Mark and Susan had never sought financial advice before and weren’t sure what I could do to help, but came to see me because they didn’t know where else to turn. When I assured them that there was plenty I could do to help, they visibly relaxed. I explained that the key to overcoming FORO was having a well-structured financial plan. After I outlined my 5-step strategy, they were eager to proceed. The steps we took were as follows: 1. Conduct a financial assessment By thoroughly assessing their current financial position (superannuation, savings, investment and social security entitlement), I formulated a picture of where they were at, and their future cash flow projections.  2. Establish a sensible strategy Working together, we identified essential living expenses and discretionary expenses, then allocated funding that balanced financial security with lifestyle goals. Next, we determined a retirement investment portfolio with a sensible withdrawal rate to support their retirement plans. 3. Create an emergency buffer In my experience, the what if factor is a major concern for retirees. What if…I become ill? What if…the fridge breaks down? What if…the car dies? These questions, and more, play on peoples’ minds to the point where they fall back into a FORO mind set. To ease their anxiety, I recommended they include a contingency fund in their portfolio to ensure that unplanned expenses were covered. That way, if something unexpected pops up, their retirement lifestyle strategy remains on track. 4. Enjoy the early years FORO had been holding Mark and Susan back for too long. I explained that hobbies, travel and social activities are crucial to mental well-being. So once we had established a responsible financial plan, I showed them how they could afford to spend, sensibly, and enjoy themselves. I especially encouraged them to make the most of their early retirement years, while they were fit and energetic. 5. Schedule regular reviews The final step in the process was my ongoing commitment to Mark and Susan. Retirement planning is not a set-and-forget strategy; it’s a journey through every stage of life – physical retirement being one of those stages. By regularly reviewing their financial position, I helped Mark and Susan monitor their spending and investment performance, and made portfolio adjustments that kept them in control of their retirement plan. Last week I bumped into the couple on the street. They were glowing with excitement and told me they’d just booked a Pacific cruise. Of course, I was thrilled for them – it was a big tick off the bucket list! But when Susan said they’d turned FORO into FOMO and were living their best lives, well, I’ll just say it was one of those moments when I absolutely love my job! The information provided in this article is general in nature only and does not constitute personal financial advice.  

6 steps to a Happy New Financial Year

6 steps to a Happy New Financial Year

Updated on Budgeting, Education

The new financial year provides an opportunity for a fresh start for your finances. Make this the financial year you get on top of yours… for good!  We’ve broken it down into six bite-sized, manageable steps for you to tackle over six months, because real change takes time! The below is a suggested path to a New Financial You, however, you can choose your preferred order and pace. July: Goal Setting What is it that you want? I mean REALLY want? As with any goal, your financial goals should be SMART – Specific, Measurable, Achievable, Relevant, Timely. Whether you’re wanting to build an emergency fund, get out of debt, or save for a specific goal, write down your goals in detail and then revisit these regularly to remind yourself of what you’re working towards. August: Set your Budget A budget helps you see what’s coming in, what’s going out and most importantly how much you have to allocate towards your goals. There are plenty of free templates online so find one that works for you and add in your personal income and expenses.  Tip – Go through your last three months’ bank statements to get details of your spending. September: Set up a Savings Plan You can do this by working out how much money you need for a particular savings goal and by when, then breaking it down into regular amounts to be set aside. Example – If you want to save $2,000 for Christmas by December 1st, you’ll need to set aside $154/week from September 1st. Tip – Automate savings by setting up a regular transfer. October: Super Check It’s time to health check your superannuation:  Make sure your contact details are up to date to ensure you’re not missing out on important correspondence. Do you have a current beneficiary nomination in place? A valid beneficiary nomination will direct your super fund on how you would like your super benefits to be paid, if you were to pass away. How much is your super costing future you? There are a whole range of fees that might be funded from your super, including administration, investment, and adviser service fees, all of which will have an impact on your retirement savings.  Do you know how you’re super is invested? Is it Conservative or Growth? How well has it performed over the long term? Some important things to consider when choosing an investment option include your life stage, investment horizon and comfort for risk. November: Insurance Review There are a range of insurances that offer financial security for you and your family, including:  This month, get to know your current insurances and consider whether the types and amounts are suitable for your needs. December: Estate Planning Estate Planning involves documenting what you want to happen in the event you pass away or become incapacitated. It might include Wills, Powers of Attorney, Health Directives and Guardianship nominations.  If you don’t have these in place already, it’s time to build out your Estate Plan.  If you do, it’s time to dig these out for a review. Congratulations, you made it!  If you’d like some extra support on your journey, reach out to your Financial Adviser today for help with achieving your financial goals!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Regaining financial control after a scam 

Regaining financial control after a scam 

Updated on Budgeting, Education, Retirement

A year before retirement, Tess’s superannuation plan was on track, and she was imagining her post-work life. With savings of $34,000 at the bank, she was looking to park it somewhere it could earn better interest while rates were rising.   Considering herself reasonably savvy with money, she began investigating her options.  After hearing about someone who’d made a fortune with cryptocurrency, Tess was intrigued and decided to look into it.   Tess researched crypto-companies and compared what was on offer. When eventually she made her decision, she believed she’d chosen the right investment – how wrong could she be!   Within hours Tess realised she’d been scammed.  Shocked and feeling ill, she reported it to ScamWatch, but over the following days the self-blame settled in.   How could she be so gullible? So naïve?  What was she thinking?! How could she have fallen for such an obvious fraud?   Who knew that financial shame was a thing? But there it was in the form of an empty bank account.  Deeply embarrassed, her financial security shattered, Tess lay awake every night berating herself; through her foolishness she’d lost all her cash savings! She became withdrawn, declined social events and refused to unburden herself, even to close friends.   Finally, in desperation, she decided to speak with a counsellor. Tess discovered organisations like Beyond Blue, ScamWatch and Lifeline offered advice and emotional support. She chose one that felt right for her.  Initially, it was difficult to open up and acknowledge her mistake, but the counsellor explained that part of her recovery was confronting her feelings head-on and realising that victims came from all cultures, backgrounds and levels of education. Feelings of humiliation and shame were normal, although unjustified, as the crooks were highly skilled criminals with access to the latest technology.  Heartened by the counsellor’s words, Tess learned to stop blaming herself and confided in her daughter Louise.  What a relief that was! Louise was gentle and supportive, and introduced Tess to her friend Jarrod, a financial adviser.  Throughout Jarrod’s career, he’d assisted innumerable people who’d fallen victim to scams. Most felt insecure and vulnerable, so his approach was to assist them with practical advice around getting their finances back on track.  He believed that Tess would benefit from a temporary, part-time job. She could rebuild her cash savings, and staying busy would distract her from her worries and help her move on.   When discussing her interests and skills, Tess mentioned she loved animals so Jarrod suggested she consider pet-minding or dog-walking, adding that he could setup the necessary insurance.  Then, Jarrod explained, that while her superannuation was on target, there was a difference between investing for retirement and investing for wealth.  Retirement investing was about saving to fund an income stream that met post-work lifestyle goals. Complying retirement funds offered tax advantages and focused on generating returns.   Conversely, investing for wealth involved accumulating assets beyond what is needed to provide retirement income.   For Tess, financial security was critical, so Jarrod considered her risk tolerance and structured a tax-efficient portfolio of growth assets to support capital appreciation and wealth accumulation.   It also meant that Tess could leave something behind for Louise – a legacy she hadn’t felt was important, until she realised how financially exposed the scam had left her.  Tess’s recovery wasn’t without its challenges. It took time and sacrifice, but along the way she developed a greater sense of independence and resilience.   She delayed retirement by a year, so she could recoup her lost savings and contribute the money from her new side hustle to her wealth portfolio.   In the end, Tess’s Dog Minding and Walking Service continued well after Tess’s retirement, for the sheer enjoyment she derived from hanging out with dogs.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Achieving financial freedom 

Achieving financial freedom 

Updated on Investing

What does financial freedom mean to you? The ability to travel the world and build a dream home? Or to be able to enjoy a simple but active retirement, and support some good causes?   We all have different desires and goals in life, but most of us share the dream that one day we would like to achieve our particular version of ‘financial freedom’. The challenge is that most of us don’t really know what it takes to turn our goals, be they vague wishes or burning desires, into reality.   However, with just a little bit of forethought, some expert advice, and by acting on that advice, we are much more likely to reach that goal of financial freedom.  Making the list  Your key ally in achieving financial freedom is your financial adviser, and amongst the most important things your adviser will need to know is what your goals are. So make a list and prioritise it. Which of your goals are essential, and which ones are you willing to compromise on?  Reality check   Just as we have different goals, so do we have different financial resources. One of the first things your adviser will do is run a reality check. Given your income and expenditure, job outlook, health and family situation, are your goals realistic and achievable?   Your adviser will also check if key goals are missing. For example, life insurance can be an essential tool for protecting your family’s future financial freedom, yet many people overlook it.  With the big picture now clear, your adviser can develop strategies that will bring that goal of financial freedom closer to fruition.   Perfect timing  When’s the perfect time to start your journey to financial freedom?  Today.   Because the sooner you get started, the sooner your goals will be achieved.   So think about your goals and desires. Importantly, write them down. Then make an appointment to sit down with your financial adviser, and take those critical first steps towards achieving your financial freedom.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Building financial resilience 

Building financial resilience 

Updated on Budgeting, Education, Finance, Investing

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience?  Expect the unexpected  Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver.   With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan.  Create buffers  You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments.   Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover.  Cut costs  The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances.   Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun.  Invest in quality  There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers.  This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again.  The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility.  With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal   capital gain triggers a capital gains tax event and consequent reduction in portfolio value.  Take advice  Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Financial Success: More Than Just Money

Financial Success: More Than Just Money

Updated on Finance

When discussing financial success, many people tend to use the terms “rich” and “wealthy” interchangeably. While being rich is often associated with having a lot of money or material possessions, being wealthy is about having financial abundance that is sustainable over the long term. Being Rich Being rich is often associated with having a high net worth, a large income, or significant assets. It’s a term used to describe people who have accumulated substantial money or wealth. However, being rich does not necessarily guarantee financial success. Someone who is rich may have a lot of money, but they may not have the financial stability or security that comes with being wealthy. Being Wealthy On the other hand, being wealthy is a more sustainable form of financial success. Wealth is often created through long-term investments, passive income streams, and wise financial planning. A wealthy person has accumulated enough assets and income-generating investments to provide a steady income stream, allowing them to live comfortably without relying on external factors. Financial success requires more than just having a lot of money… it is about having financial security AND freedom: Financial security means having enough money to cover your basic needs and some comforts. Financial freedom is the ability to make choices based on what you truly want rather than being constrained by financial limitations. The path to financial success requires a good understanding of financial literacy, clearly defined personal values, a long-term perspective, and the ability to establish, and stick to, a strategic plan. Financial Literacy Understanding how money works, including managing, investing, and saving it, is critical to achieving financial success. This knowledge will help you make informed decisions about your finances and enable you to take control of your financial future. Personal Values Successful people achieving financial freedom often clearly understand what is most important to them. They know their values and use them as a guide when making financial decisions. This approach helps them focus on their priorities and avoid impulsive purchases that jeopardise their long-term financial security. Long Term Perspective True financial success and wealth isn’t built on the back of “get rich quick” philosophies. There is no “magic pill” for financial success; it’s a lifestyle, not an overnight fix. Building wealth takes time. It requires focus, discipline, patience, and long-term commitment. Strategic Planning Achieving financial success requires strategies such as creating a budget, investing wisely, and building passive income streams. Again, these are all strategies that require patience and commitment. It is essential to stay focused on your goals and take the necessary steps to achieve them. While the above factors each play a critical role in your journey to financial success, the secret ingredient lies in defining what financial success and wealth mean to you personally, as someone else’s definition of financial success may look very different to yours. Some ways to achieve this are to: Assess your lifestyle – Consider what your ideal lifestyle looks like; where are you, who are you with, what are you doing? Define your values – Figure out what is important to you and define your values based on this. Your values can then provide a framework to make decisions based on what is important. Set Financial Goals – Be clear on what you want to achieve in life. You can then define your vision further by setting specific financial goals. If you are ready to start your journey towards achieving financial success, a financial adviser can help. They will assess your financial situation, identify your goals, and create a long-term financial plan tailored to your individual needs. With their guidance and support, you can take control of your financial future and achieve the financial security AND freedom you deserve. The information provided in this article is general in nature only and does not constitute personal financial advice.    

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